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| Telemedicine has been shown to reduce the cost of healthcare and increase efficiency through better management of chronic diseases, shared health professional staffing, reduced travel times, and fewer or shorter hospital stays. |
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| The Centers for Medicare and Medicaid estimated the total national expenditure for health care at $1,311.1 billion in 20001. Since 1993, the rate of growth in health spending has roughly matched growth rates in the economy as a whole leading to a relatively stable 13.2 percent share of the gross domestic product attributable to health spending. Health spending grew at an annual rate of 4.8% in 1998 and 5.6% 1999. The projected growth in health spending over the next decade (2000-2010) is fueled in part by rapid increases in spending for prescription drugs. Other factors contributing to the projected faster health spending growth include rising provider costs, insurers' inability to negotiate increasing price discounts as obtained in the recent historical periods, and greater income growth2. |
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The high cost of healthcare is borne by federal, state and private payers, employers, consumers and providers themselves.
The following are documented examples of how telemedicine has reduced costs: |
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The Health Care Financing Administration estimates total spending for home care was $34.5 billion in 1997 and declined to $33.1 billion in 1999. Of growing concern is the human and financial cost of coping with chronic diseases, especially diabetes and congestive heart failure:
- Type II diabetes mellitus is quickly becoming the most common chronic disease in the United States. It affects more than 7% of the adult population. Nearly 16 million people in the United States have been diagnosed, but an additional 8 million do not yet know they have the disease3. With America's obesity rate increasing, the incidence of Type II diabetes is expected to increase as well4. Diabetes can lead to several secondary complications including blindness, kidney failure, coronary artery disease, stroke, nerve damage, and infections.
- Congestive heart failure affects about 5 million Americans each year. About 20 percent of hospitalized patients who are over 65 have heart failure. Each year, another 550,000 people are diagnosed for the first time. It contributes to or causes about 300,000 deaths each year.
Home care providers, care givers and consumers are turning to telemedicine to reduce home visit rates and to continuously monitor chronic medical conditions with the goal of reducing costly hospital utilization. Home monitoring programs for the elderly are particularly cost-effective. Telemedicine can provide effective patient monitoring for a cost of only $30 per day in the U.S., less than half the cost per day of home care and one-third the cost per day for nursing care. The cost savings are most dramatic when compared to the $820 per day cost for inpatient hospital care5.
- A demonstration of telemedicine used in over 1,000 patient encounters in Tennessee showed significant savings. More than 62,000 miles of travel were saved by using telehealth. This translates into a savings of $16,191 (62,274 miles at $0.26/mile) in mileage that did not have to be reimbursed in the 39 months since the program began. Additionally, nurse driving time that did not have to be reimbursed totaled $33,042 (97,181 minutes at $0.34/minute). Overall this represented a savings of $50.29 per home visit. Cost savings for the first 15 months of the program were $49.33 per home visit. The more visits that are done through telehealth over time, the greater the cost savings per visit.
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- In a recent study by Wakefield et al.,6 the results indicated that 72 percent of telemedical consultations conducted to skilled nursing facilities resulted in the avoidance of a transport for health care evaluation. In the cases of avoided transport, 52 percent of the consults resulted in a change in the course of treatment for the resident. The State of Florida published its 1999-2001 transportation savings for a Florida Diabetes Telemedicine Program. The cost savings with averted transportation costs were $4,699 (15 visits in 1999), $5,122 (24 visits in 2000), and $4,895 (17 visits in 2001).7
- Pringle-Specht et al (2001) conducted a study of a wound care program in a long-term care facility. The objective of the study was cost analysis. The cost perspectives of the consulting agency, the referring agency and the patient were all examined. The average cost of a chronic wound teleconsultation was $136.16 (acute care). Cost for an in-person traditional visit with transportation was $246.28.8
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In a report published by AHRQ and the Harvard School of Public Health, 37 percent of hospital stays for children across the U.S. were paid by Medicaid with respiratory conditions the most frequent diagnosis for one to nine year olds. Mental disorders accounted for one in seven stays for the age group of 10-17.9
- The University of Iowa College of Medicine conducted a study of specialized interdisciplinary team consultations for children and youth with health and developmental disorders including four groups of children: children with severe behavior disorders, children with swallowing, disorders, children needing assistive technology, and children and youth with unmet health needs-primarily traumatic brain injury (TBI). The results indicated a high degree of satisfaction between parents, children, health care providers, caregivers and teachers. The telemedicine network provided access to high quality health care and was a time saver for both the providers and the family. The cost savings to the local district equaled $971 per session. The travel and time costs to the parent for out-of-pocket expenses equaled $125. As a result of the study, the telemedicine clinic for children with special needs was adopted as part of the regular clinical venue at University of Iowa Hospitals and Clinics and participating schools.10
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State and federal authorities held 1,470,045 prisoners as of December 31, 2003 On December 31, 2003, State prisons were estimated to be at capacity or 16% above capacity, while Federal prisons were operating at 39% above capacity. The nation's prison population is becoming more middle-aged. From 1995 through 2003, inmates between the ages of 40 and 54 accounted for more than 46 percent of the total growth in the U.S. prison population. Although the number of older inmates has been increasing, two-thirds of all prisoners were younger than 40 at the end of 2003.
Spending on medical care for State prisoners totaled $3.3 billion, or 12% of operating expenditures in 2001. The reasons for the costs vary: 12% of State inmates and nearly 6% of Federal inmates reported having a learning or speech disability; 21% of State inmates and 22% of Federal inmates said they had a medical problem (excluding injury) after admission; 7% and 10%, respectively, said they had a medical problem that required surgery and nearly half of State inmates who had served 6 or more years said they had been injured after admission. Fewer than 20% of those in prison less than 2 years reported an injury. Aging is another problem of prison care. 40% of State inmates and 48% of Federal inmates age 45 or older said they had had a medical problem since admission to prison.
Prisons have used telemedicine to lower the cost of health care delivery, principally through elimination of security and transportation costs and unnecessary emergency department utilization.
- In a 7-month cost/benefit analysis of telemedicine subspecialty care provided for HIV positive inmates at the Powhatan Correctional Center of the Virginia Department of Corrections it was found that the use of telemedicine enabled the Department of Corrections to achieve transportation and medical savings of $35,640 and $21,123, respectively. The operating costs for the telemedicine services totaled $42,277. The net benefit, which is the difference between cost savings and total operating costs, was $14,486.11
- A study of the use of telemedicine within a facility of the Ohio Department of Rehabilitation and Corrections focused on costs associated with telemedicine and those incurred without telemedicine on per-consult basis for comparison. The study found that the use of telemedicine resulted in a savings of $8.48 per consult.12
- A study by the National Institute of Justice found that the cost of instituting a telemedicine system inside a prison can be absorbed by the resulting cost savings within 1,500 consults with a net monthly saving of $14,200 thereafter.13
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| It is not uncommon for telemedicine to achieve cost savings in multiple departments of an organization, or for the benefit of multiple parties. In the prison example, savings may be achieved on both medical and transportation costs, often affecting two different departments or cost centers. Because the savings achieved through use of telemedicine often effect multiple departments within an organization, or even multiple parties (e.g. insurer, patient, employer, etc.), a program sponsor should seek to monitor all savings produced by the telemedicine program, not just medical benefits, to assess the cost effectiveness of the telemedicine solution. |
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Using Telemedicine to Increase Productivity in the Workplace
Ben Raimer, MD, FAAP, University of Texas Medical Branch
Telehomecare: Making A Difference in Home Care CHF Patients
Rhonda Chetney, RN, MS Sentara Home care Services
Economic Assessment of Delivery Models for a Tele Homemonitoring Service
Karl A. Stroetmann PhD MBA, Institute for Communications and Technology Research
Cost Savings by Florida Diabetes Telehealth Program
Toree Malasanos, MD, Florida Department of Health, University of Florida
The Value of Interactive Home Telehealth in a Disease Management Program
Sandra Young, MSN, RN BC, Adult Medicine Clinical Nurse Specialist
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