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Why Telemedicine? Economic Health

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In our “Why Telemedicine?” series we are examining various benefits to telemedicine programs. These posts aim to provide evidence-based mini-reviews across healthcare and of relevance to a wide audience.  Prior posts include Why Telemedicine? Patients Save. This week’s blog post explores how health systems and communities can benefit from telemedicine programs beyond their clinical impact.

The economic health of our healthcare systems is a vital component to improve quality of care and establishing health equity. Local health systems are community resources with unique economic challenges. We believe telemedicine is uniquely positioned to improve the economic health of local health systems. Not only is telemedicine economically feasible and cost-effective, it creates downstream economic benefits that healthcare institutions, communities, and patients benefit from. With changing regulatory and technological environments, the economic entitlements offered by telemedicine programs will continue to strengthen moving forward. 

Telemedicine programs appear to be cost-effective across multiple disciplines. Cost-effective analysis compares the cost of two interventions in relation to their outcome. It estimates how much it costs to maintain similar rates of or improve a health outcome. A systematic review from 2017 looking at twenty two studies found cost effectiveness in telemedicine programs addressing cardiology, pulmonology, critical care, ophthalmology and mental health.

Telemedicine systems and programs can provide local economic benefits through care retention. When smaller health systems and hospitals gain access to specialty care through telemedicine, more patients can receive treatment in their home communities. A review of over 9000 emergency room telemedicine encounters found reductions in transfers from rural hospitals leading to both patient saving and increased revenue generation for the local institution.

Why might this impact be observed beyond the emergency room?  It is likely care retention as described in this study has downstream effects. By keeping care local utilization of services beyond direct patient care such a procedure, laboratory and pharmacy services increases. Increased patient traffic resulting from telemedicine programs result in a more robust throughput for local health care systems, from the cafeteria to the ICU, creating higher utilization of services and healthier local economies.

Over a decade ago, researchers sought to determine the impact of telemedicine on local economies as it extends beyond healthcare providers. By collecting data from twenty four rural hospitals in four midwestern states, they determined a methodology to estimate the extent of such benefits. They found that telemedicine programs can generate between $20,000 and $1.3M annually to benefit local economies. The average economic impact was $522,000. The research also found that the majority of the savings demonstrated came from locally performed lab and pharmacy services.

Rural healthcare providers and systems appear to be more likely to see a stronger return on investment when deploying telemedicine platforms. A recent study from Australia showed a greater impact on return on investment (ROI) for telemedicine when comparing rural to urban programs. By employing telehealth staff directly within the context of existing clinic infrastructure, care provision sites could break even within two patient visits. When compared to traditional care models, the virtual care program was the only one to have a positive ROI for rural sites. Distance traveled, if required to travel to urban areas and thus resulting in travel subsidies and loss of local income, played a significant part in these findings. 

Some of the clearest data on ROI and telemedicine came from the 2017 Telemedicine and Digital Health Survey. The survey included responses from 107 senior-level executives and health care providers at hospitals, specialty clinics, ancillary services and related organizations from across the United States. Forty-three percent of respondents held the title of chief executive officer or vice president. Twenty-nine percent of organizations surveyed tracked ROI, and these groups reported annual saving of 20% of more. Out of all organizations using telemedicine survey 50% endorsed annual saving of 10% or more from employing telemedicine programs.

Regulatory changes in response to COVID-19 pandemic have created further opportunity for economic growth of telemedicine programs. The Centers for Medicare and Medicaid have temporarily approved 80 more services covered by telehealth. Healthcare experts and public leaders indicate it is likely these changes will eventually become permanent.  These changes indicate that 20% of Medicare, Medicaid, and Commercial outpatient care can be conducted and billed via telehealth. This is approximately $250 billion in care spending. Changes amenable to inpatient care and procedures will only add to the growing market share and potential economic incentive for using telehealth. 

The take-home lesson of the above is that, with regards to new telemedicine programs, economic performance does not simply rely on reimbursements. It is important to keep in mind that Increases in revenue often outpace increases in costs. A variety of other factors such as cost savings, increased services offered and, as a result, increased local healthcare utilization, care retention, and increased acuity can have significant economic impacts on healthcare institutions deploying new telemedicine services.  As a result of these downstream captures, an institution’s overall economic health can improve. At Beam Healthcare, we are excited to be a part of this process to use telemedicine to improve the health of patients, healthcare systems and communities.

 

References

1. Delgoshaei, B., Mobinizadeh, M., Mojdekar, R., Afzal, E., Arabloo, J., & Mohamadi, E. (2017). Telemedicine: A systematic review of economic evaluations. Medical journal of the Islamic Republic of Iran, 31, 113.

2. Natafgi, N., Shane, D. M., Ullrich, F., MacKinney, A. C., Bell, A., & Ward, M. M. (2018). Using tele-emergency to avoid patient transfers in rural emergency departments: an assessment of costs and benefits. Journal of telemedicine and telecare, 24(3), 193-201.

3. Whitacre, B. E. (2011). Estimating the economic impact of telemedicine in a rural community. Agricultural and Resource Economics Review, 40(2), 172-183.

4. Eysenbach, G., Navarro, P., Dinesen, B., McKinstry, B., Snoswell, C., North, J., & Caffery, L. (2020). Economic Advantages of Telehealth and Virtual Health Practitioners: Return on Investment Analysis. JMIR Perioperative Medicine, 3(1).

5. https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/telehealth-a-quarter-trillion-dollar-post-covid-19-reality