cost of telemedicine

Health IT

The High Def ER: How Telemedicine Can Cut Costs and Boost Revenue for Hospitals

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cost of telemedicine

On a recent Saturday night, Dr. James Marcin, a pediatric critical care specialist, saw a 7-year-old girl with a bad case of pneumonia. Two and a half hours later, the patient and her mother arrived at UC Davis Children’s Hospital, where Marcin works.

“Hey, I just talked to you on TV,” the mother said to him.

Marcin had examined the girl via videoconference, connecting to the emergency department of a remote community hospital with no specialized children’s services. After observing the patient and consulting with the ER doctor at her bedside, he dispatched a specialized pediatric transport team to transfer her to the children’s hospital.

“If she got worse, which she did, they don’t have any of the therapies like a breathing machine or an ICU,” he explained, referring to the community hospital. “The kid was really sick and we definitely did things the other hospital couldn’t have.”

Thanks to telemedicine—a term that refers to medical information exchanged electronically between sites—Marcin had performed a thorough assessment of the child, witnessing her respiratory distress with his own eyes. He also established a relationship with her mother, who felt unsure about moving her daughter to a tertiary hospital.

“I wouldn’t have been able to give my opinion had I not been able to see the child and talk to the mom,” he told HealthBiz Decoded. “My impression was that it was reassuring to her that we wanted to do the safe thing.”

Telemedicine extends care to remote or underserved areas that lack certain specialists and services.

Before the existence of his hospital’s pediatric telemedicine program, which Marcin runs, he would have merely spoken over the phone with the ER doctor treating the girl. Marcin likened that system to examining a patient with your eyes closed.

“It’s that big of a difference,” he said.

Across the United States, hospitals are increasingly turning to telemedicine to consult with off-site specialists, submit medical imaging for review and monitor patients. More than 50 percent of U.S. hospitals now use at least one telemedicine service, according to the American Telemedicine Association (ATA).

In the hospital setting, telemedicine extends care to remote or underserved areas that lack certain specialists and services. For instance, rather than having to travel or rely on non-specialists, stroke patients in community hospitals can gain access to intensive care neurologists who can direct their treatment via videoconference, said Dr. Herb Rogove, president and founder of C3O Telemedicine, a provider of virtual coverage to metropolitan and rural health facilities.

“Right now, access to care is a major flaw in our healthcare delivery system,” Rogove said. “Patients are being jeopardized because of their geography. The great leveler is telemedicine, where access to immediate care is not delayed nor is the risk of transfer and its delay.”

Delays in care lead to poor outcomes, he said.

Some hospitals also use telemedicine to care for their sickest patients, whose vital signs and appearance are monitored around the clock by remote physicians.

“Many hospitals can’t afford to have specialty ICU care, so they contract out to an intensivist or an ICU specialist that can work with many hospitals,” explained Jordana Bernard, ATA’s senior program director.

Doctors and administrators are under increasing pressure to show that telemedicine can be profitable.

Studies have shown that telemedicine improves patient satisfaction and quality of care, Bernard said. But as more hospitals invest in the technology to provide these services, doctors and administrators are under increasing pressure to show that telemedicine can be profitable, Marcin said.

Last month, the journal Telemedicine and e-Health published a study evaluating the financial impact of the telemedicine program at UC Davis Children’s Hospital. Researchers found that the average number of patients transferred per year from 16 remote hospitals to the children’s hospital doubled after the implementation of telemedicine. As a result, the average annual revenue from these patients increased from $2.4 to $4 million.

“In a competitive health care region with more than one children’s hospital, deploying pediatric telemedicine services to referring hospitals resulted in an increased market share and an increased number of transfers, hospital revenue and professional billing revenue,” the study concluded.

In other words, telemedicine gave UC Davis a competitive edge over other children’s hospitals in the region, leading to more patients. But experts point to a more significant financial effect of telemedicine: It has the potential to cut healthcare costs.

“Often, we’re able to say, hey, that kid may not be so sick; he can actually be taken care of locally,” Marcin said. “Or we don’t have to send out a $10,000 helicopter; we can send out an ambulance.”

“As providers are more incentivized to maintain health, the increased use of technology will go along with it.” — Dr. James Marcin

For critically ill patients, the vigilance afforded by telemedicine helps them recover faster and require fewer expensive services, Rogove said.

“By immediate intervention by a trained tele-intensive care specialist, the chance of survival is enhanced as well as a reduction in complications and a costly length of stay in an ICU bed,” he explained.

With the Affordable Care Act shifting healthcare’s focus toward outcomes and performance, these savings could help hospitals make more money, Marcin said. “As providers are more incentivized to maintain health, the increased use of technology will go along with it,” he said.

For integrated delivery systems that serve as both the payer and the provider, lower expenses translate directly into more revenue, said Dr. Andrew Watson, the executive director for telemedicine at the University of Pittsburgh Medical Center (UPMC).

“Telemedicine actually drives profit through care coordination and cost avoidance.” — Dr. Andrew Watson

“What we’re seeing is that telemedicine actually drives profit through care coordination and cost avoidance,” he said. “Big hospital chains make money by bringing in new revenue. Folks that have an insurance arm make money by using less hospital services.”

Although it is gaining ground in hospitals, most telemedicine is still practiced on an outpatient basis.

The need to demonstrate profitability may explain why other countries, including Canada and Australia, are adopting telemedicine faster than the United States. Other challenges include the state-by-state licensing requirement for doctors, the hospital credentialing system, regulations limiting remote services, and inconsistent reimbursement, said Bernard.

One trend that is on the rise stateside is employers providing telemedicine services to their employees, who can consult with doctors by telephone or videoconference, said Leah Malof, a principal and national clinical practice leader for Buck Consultants, A Xerox Company. Telemedicine can save employers money by curbing emergency room use, keeping people healthier and limiting loss of productivity, she said.

Telemedicine’s success will also depend on doctors’ and administrators’ willingness to embrace new technologies and redefine patient interactions, said Watson.

“If you look at where healthcare is going, this is the time when you have to own up to practicing consumer-friendly healthcare,” he said. “A face-to-face visit to use as the standard of care—that was invented by Hippocrates in 400 B.C. It’s a little hard to justify a standard of care that’s 2,000 years old. The world has evolved, and healthcare has got to evolve too.”

Although it is gaining ground in hospitals, most telemedicine is still practiced on an outpatient basis, Marcin said. For instance, it serves a preventive role by allowing chronically ill patients to transmit their data to doctors and nurses. Problems can be identified and addressed before they worsen, keeping people in their homes and out of emergency rooms. Telemedicine also brings care to nursing home residents, prison inmates and daycare attendees, avoiding costly or dangerous transfers to medical facilities.