The Economics of Telemedicine

The number of patients using telehealth services is expected to jump from the 350,000 in 2013 to about 7,000,000 by 2018.

Telemedicine, or the provision of healthcare services using information and telecommunication technologies, is one area that has the potential to transform the relationship between provider and patient, and in the process improve outcomes and decrease unnecessary costs. Telemedicine includes a range of applications and services using two-way video, email, smart phones, wireless tools and other forms of telecommunications technology. Historically, telemedicine was offered by hospitals to deliver care to patients in remote areas, however now the utilization of telemedicine has intensified and has been integrated into various operations of hospitals, specialty departments, home health agencies, private physician offices as well as the homes and workplaces of consumers. Some of the leading benefits are improved access for both rural and older populations, enhanced quality of care with access to specialized providers, quicker diagnoses, enhanced senior wellness and preventative care through remote in-home monitoring and improved administrative efficiency.

Most importantly, Telemedicine can be an extremely cost-effective method of care. By treating patients remotely, Telemedicine allows providers and patients to bridge the distance and time barriers that separate them which in turn reduce expenses for both parties. In a study conducted by the Center for Information Technology Leadership, it was revealed that Telemedicine is influential in reducing overall healthcare costs and by generating an increase in revenue. The study estimates that widespread use of telehealth systems to promote preventive care, early intervention and effective information sharing could save the United States $3.61 billion annually. Telemedicine reduces travel expenses, especially for those living in rural communities, where they would need to normally travel hours out of their way to access key health services. In addition, the number of days off work people take for routine visits have a significant negative financial impact particularly with regard to lost wages.1 According to that recent study, 92% of patients saved $32 in fuel costs; 84% saved $100 in wages; and 74% saved $75-$150 in family expenses. Even more astonishing, $1.2 billion could be saved by video consultations between doctors and patients in cases where office visits are not practical. In addition, many providers actually charge less for a telemedicine consultation than they do for a face-to-face visit.2

Another economic benefit of telemedicine is its ability to improve revenue. If time and distance obstacles to health care are eliminated, service utilization is likely to increase and the additional volume typically generates incremental revenue. According to a recent study in Telemedicine and e-Health, hospitals that utilized telemedicine technology and referred patients to other hospital facilities, specifically children’s facilities, saw their revenue significantly increase. The research looked at the billings from 16 hospitals before and after they implemented Telemedicine tools. Before the implementation of telemedicine, the 16 hospitals recorded 143 transfer patients. After deployment the number jumped to 285, resulting in a revenue jump, going from $2.4 million to $4 million.3

Telemedicine has also been shown to reduce the need for hospital re-admissions, which can be costly for both patients and healthcare facilities. Besides the compelling economic benefits of Telemedicine, it also provides adjunct benefits which some say far outweigh the cost considerations. For example, due to easier and increased access, patients are also able to see specialists who are specifically trained in the patient’s condition. This allows for greater personalized care and consequently enhances provider-patient communication leading to higher levels of patient satisfaction. Moreover, Telemedicine aids in creating a more robust network of healthcare practitioners, allowing the global connection of providers for patient consultation and diagnose with just a click of a mouse. This creates incredible value for both providers and patients.

Telemedicine has continued to grow as a unique way of delivering care to patients, while greatly improving access, reducing cost and positively impacting quality. In fact, the number of patients using telehealth services is expected to jump from the 350,000 in 2013 to about 7,000,000 by 2018. As with any change, there will be some growing pains and inefficiencies. However, the end result of a widespread implementation of telemedicine as a supplement of the current medical care system is that it will provide both public health and systemic economic benefits.