Scaling telehealth across state lines should open new markets, speed up patient access, and grow revenue. But each new hire in a new state adds another layer of HR compliance risk. Miss one registration or delay a tax account, and providers sit idle while revenue stalls.
But there’s good news in all of this. Most telehealth compliance risks are both predictable and preventable if you plan for them upfront. From foreign qualification and payroll tax accounts to state-specific handbooks, the right systems keep everything on track. While HIPAA and clinical regulations get most of the attention, workforce compliance can stop your telehealth practice just as fast. Below are 10 of the most common HR compliance risks for multi-state telehealth companies and, more importantly, how to avoid them.
1. Delaying Foreign Qualification Until After Hiring
Most telehealth companies don’t realize that hiring triggers “doing business” requirements. You might think entity registration only matters when you open physical offices. Wrong.
The moment you hire your first remote provider in a new state, you’ve likely crossed the threshold for foreign qualification. States consider having employees performing services within their borders as conducting business, even if those telehealth providers work from home. California can fine unregistered businesses $500-$1,000 per month. New York goes even further and can void any contracts made without proper registration.
Imagine signing a physician to a $200,000 contract, only to discover the agreement is legally unenforceable. That provider can’t start seeing patients or conducting telehealth visits, and you’re back to square one with recruitment. Meanwhile, your existing team carries extra patient loads while you scramble to fix registration issues that should have been handled weeks ago.
Successful, forward-looking healthcare organizations build entity compliance into their expansion timelines. Before posting that first job in a new state, they ensure business registration is complete. This proactive approach keeps provider onboarding on schedule and protects against costly legal complications. Unlike HIPAA compliance that follows federal standards, state registration requirements vary dramatically.
2. Missing City or Local Business License Requirements
State registration is just the beginning. Cities and counties often impose their own licensing requirements on businesses with remote workers. This creates a tangled knot of compliance obligations that many telehealth companies miss entirely.
For example, Denver charges $50 monthly late fees for businesses that miss their local license deadlines. Seattle requires business licenses within 30 days of hiring your first employee. Los Angeles can issue stop-work orders, completely halting operations until proper licenses are obtained. Mind you, these aren’t mere suggestions. They’re actually legal requirements with real teeth. Regulatory scrutiny at the local level has increased as remote work becomes more common.
Things get even more complicated when you fully realize each jurisdiction has different rules. A telemedicine company might need licenses in multiple cities across a single state. Your San Francisco-based nurse practitioner triggers different requirements than your Sacramento-based medical assistant. Missing even one local requirement can derail carefully planned telehealth service launches.
3. Failing to Open Payroll Tax Accounts Before Provider Start Dates
Here’s a scenario that plays out too often: You’ve hired a fantastic clinician. They’ve given notice at their current job. They’re ready to start seeing patients through your telehealth platform. Then HR discovers the state unemployment insurance account isn’t set up yet.
Of course, the countless different policies, procedures, laws, and guidelines across the many jurisdictions involved don’t help. Massachusetts takes 3-4 weeks for unemployment insurance approval. New Jersey requires withholding account setup before processing any payroll. Without these accounts, you literally cannot pay your new providers. They sit still, losing income while you lose revenue and credibility. The cost? A $300,000/year specialist sitting idle for six weeks means $35,000 in lost billings, and that doesn’t even count everything else.
The downstream effects ripple through your organization. Patients wait longer for appointments and reduced access to care. Other providers burn out covering extra shifts. Your carefully planned medical services expansion stalls. All because payroll tax accounts weren’t prioritized early enough in the hiring process.
Forward-thinking telehealth companies start account registration the moment they decide to enter a new state. By the time they’re ready to hire health care providers, all systems are go. No delays. No frustrated providers. No lost revenue. This preparation becomes especially critical as the number of telehealth services you offer expands across state lines.
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4. Waiting Too Long to Set Up Workers’ Compensation Coverage: A Critical Telehealth Compliance Issue
Workers’ compensation might seem less urgent for remote telehealth providers than for on-site clinical staff. But this misconception can cost companies dearly.
To illustrate with real-world scenarios, California requires coverage to be in effect immediately upon hiring, with no grace period. Meanwhile, Pennsylvania fines start at $1,000 per day for non-compliance, while Illinois can issue stop-work orders and pursue criminal charges for willful violations. These aren’t idle threats. States actively pursue enforcement actions against non-compliant employers, and penalties accumulate fast.
Once again, the only challenge intensifies since each state has different rules. Some allow you to add telehealth practitioners to existing policies. Others require state-specific coverage. And classification codes vary, where your remote physician might fall under different categories than your virtual care coordinator. Get it wrong, and internal audits can trigger massive retroactive premiums. Thus, proper safeguards include starting the application process weeks before your planned hire date.
5. Overlooking Paid Family and Medical Leave Contributions
The patchwork of state-paid leave programs creates another compliance minefield for multi-state telehealth employers.
Think paid family and medical leave is just another payroll deduction? The stakes are higher than you might expect. These programs now cover over 100 million American workers across multiple states, each with unique rules. Massachusetts mandates 0.5% contributions. Oregon fines $1,000 for late registration. And Washington will hit you with back contributions plus 12% annual interest.
But the real challenge isn’t the money. It’s the complexity. To reiterate a common theme in these risks, your California providers operate under vastly different rules than your New York team. Connecticut, Rhode Island, and New Jersey each have their own requirements. So, the administrative burden compounds quickly when you’re tracking eligibility, calculating deductions, and remitting payments to multiple state agencies. Miss a deadline, and you face both financial penalties and employee relations disasters.
6. Misclassifying Providers as 1099 Contractors
The flexibility of telehealth work makes contractor classification confusing. Unfortunately, misclassification carries severe consequences.
When you assign specific patients to providers, set their schedules, or provide technology platforms, you’re likely creating an employment relationship. And that comes with some powerful rules and repercussions: California’s AB5 test is notoriously strict, New Jersey penalties start at $250 per misclassified worker (and escalate quickly), and Massachusetts can assess triple damages for wage violations plus attorney fees.
The risks extend beyond financial penalties, though. Misclassified contractors can claim retroactive benefits, overtime pay, and expense reimbursements. State agencies may even launch broader investigations into your employment practices and telehealth activities. And of course, your reputation among healthcare providers suffers, making future recruitment harder. All the while, federal enforcement actions can follow state investigations, compounding your legal exposure. While telehealth fraud investigations often focus on Medicare billing, employment fraud through misclassification carries equally severe consequences.
Ultimately, proper classification requires careful analysis of each role. Your telehealth physicians might qualify as contractors under certain circumstances, while nurses or support staff clearly fall into employee categories. The legal considerations vary by state and job function. Therefore, building proper safeguards into your hiring process protects against costly misclassification claims.
7. Using Outdated or Generic Employee Handbooks for Telehealth Compliance
A one-size-fits-all employee handbook is a lawsuit waiting to happen. Each state mandates specific policy language that generic handbooks miss. For telemedicine companies operating across state lines, proper policies and procedures become even more critical.
Your handbook serves as the foundation for employment relationships. When policies don’t match state requirements, you’re automatically non-compliant. It doesn’t matter if you follow the right practices—missing handbook language alone can trigger violations. Unlike HIPAA policies that stay relatively consistent, employment policies and procedures vary dramatically by location.
For instance, clinical staff need policies addressing professional conduct and telehealth activities. Meanwhile, administrative employees require different guidelines. And, as always, each state adds another layer of complexity to documentation requirements. While patient privacy and data privacy get most of the attention, employee confidentiality and privacy rights require equal consideration in your handbooks.
8. Not Registering in New States When Employee Locations Change
Remote work means employees can relocate easily. For telehealth companies, this flexibility too often becomes a compliance nightmare.
Imagine this scenario: Your star provider casually mentions during a team meeting that they’ve been “trying out” Austin for the past month. They still have their Boston apartment but have been conducting telehealth care from Texas. Your stomach drops. Texas requires registration within days of business activity. Worse, Florida can suspend operations entirely. You need new registrations, tax accounts, and potentially new professional licenses—yesterday.
And the consequences hit patient care directly. If providers can’t legally work from their new location, appointments get cancelled. Patients lose access to trusted healthcare providers. Your carefully built telehealth program faces disruption just when consistency matters most. This becomes especially apparent during public health emergencies, when many providers relocate temporarily (anywhere from days to months, depending on the needs) to provide assistance.
Proactive monitoring helps, but employees don’t always communicate moves immediately. Sometimes they’re just “visiting family” for an extended period. By the time you discover the real situation, compliance violations may have already occurred.
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9. Missing Renewal Deadlines and Ongoing Compliance Maintenance
Initial compliance setup is just the beginning. Ongoing compliance maintenance across multiple states creates an administrative burden that overwhelms manual systems.
To use some real-world examples once more, Delaware charges $200 late fees for missed annual reports. Nevada can administratively dissolve your entity for non-compliance. And when dissolution occurs, you legally can’t conduct business. All hiring stops. Existing employees may not be able to work. The disruption to telehealth services and patient care can be catastrophic.
To make matters worse, things just get progressively more complex over time. Registered agent updates, business license renewals, and corporate report deadlines don’t align across states. You might have 50 different due dates scattered throughout the year.
It shouldn’t be a surprise to hear that traditional tracking methods fail at scale. Spreadsheets become unwieldy. Calendar reminders get lost. The human element itself introduces risk, especially when staff turnover means institutional knowledge is lost. That’s why it’s so important to implement safeguards like automated alerts, redundant reminders, and clear ownership of each compliance task. Remember, even the best manual systems eventually break under the weight of multi-state complexity.
10. Using Spreadsheets and Manual Processes for Multi-State Compliance
Some parts of that last risk are so important that we want to use this last risk to take a closer look at them. That said, Excel might handle compliance tracking for one or two states, but manual processes guarantee failure at scale.
Think your color-coded spreadsheet can track requirements across 50 states? Here’s the reality check: That’s thousands of requirements, deadlines, and regulatory changes. One missed update turns into weeks of delays. So, your HR team spends more time managing spreadsheets than supporting your healthcare providers. At the same time, security concerns multiply when compliance data lives in unprotected Excel files scattered across desktops.
But the real damage isn’t the administrative burden. Instead, it’s explaining to your board why market expansion stalled. While competitors leverage automation to onboard providers in days, you’re stuck in weeks-long manual processes. Top talent chooses faster-moving companies. Health plans and payers expect seamless provider onboarding, and delays can jeopardize contracts.
But modern compliance platforms can transform this chaos into streamlined workflows. What takes weeks manually happens in hours with automation. Real-time updates ensure you’re always current with changing regulations. Service alerts notify you of critical deadlines before they become emergencies. And your team can focus on strategic growth instead of administrative tasks.
Ultimately, health care organizations that embrace automation gain competitive advantages in speed, accuracy, and scalability. They onboard telehealth providers faster, enter new markets confidently, and avoid the costly mistakes that plague manual systems. Beyond the cybersecurity benefits of centralized data management, automated platforms ensure nothing falls through the cracks.
Moving Forward with Mosey
Telehealth compliance doesn’t have to be a constant scramble. By tackling these 10 risks early, HR teams can keep onboarding on track, reduce legal exposure, and get providers seeing patients faster.
Multi-state compliance is complex, but it shouldn’t slow growth. While your providers focus on delivering quality care, Mosey can automate registrations, payroll tax accounts, handbook updates, and many other compliance needs, all so you can scale without getting stuck in red tape. In fact, with Mosey helping you tackle these workforce risks head-on, you can actually turn compliance from a barrier into a genuine competitive advantage.
Ready to simplify your multi-state telehealth compliance? Book a free demo today and see what a difference Mosey can make for your team.
What are the risk factors of telehealth?
The main telehealth risk factors for HR involve delays in state registrations, payroll tax accounts, and workers’ compensation approvals. Each delay can leave providers unable to see patients, cutting into revenue and straining existing staff.
What is the regulatory compliance for telehealth?
Telehealth regulatory compliance for HR means meeting each state’s business registration, payroll tax, and labor law requirements before providers can start work. Many states treat telehealth staff like on-site employees, so missing these steps can trigger fines or legal restrictions.
What is the biggest challenge in telehealth?
One of the biggest challenges in telehealth is managing HR compliance across multiple states as teams grow. Different state rules for entity registration, payroll setup, and leave policies make scaling quickly without automation difficult.
What are two legal concerns with telehealth?
Two major legal concerns for telehealth hiring are misclassifying providers as contractors and operating in a state without proper registration. Both can lead to back taxes, penalties, and delays that impact patient care and revenue.
