Friday, December 20, 2013

Financial Impact of Telemedicine Programs on Health Care Organizations

Excerpts from my managerial case study report.

Telemedicine provides specialty medicine consultations to hospitals and clinics in remote areas through the use of telecommunication technology. The use of telemedicine has greatly expanded in the recent years and health care organizations are using it to increase health care access and thus revenue. High up-front costs and subsequent cost-effectiveness of telemedicine programs are central concerns of decision makers in large healthcare organizations. This article presents results of various studies and academic research articles that focus on various financial impacts of a tele medicine program on a tertiary care health care organization and concludes with specific recommendations.

Background-

Telemedicine has a long history. The first reported telemedicine consult was done in 1922, in Sweden, for sailors in the Swedish merchant fleet. It has come a long way since then, with a medical consultations being in operation for 100 or more types of types of diseases. Although, health economists believe that the introduction of new technology often leads to increased cost and very few technologies are cost-reducing. Telemedicine is one of them. It has been shown to reduce health care costs in Some European countries(1). But, in order to utilize its full potential its full integration with the traditional health care has to be accomplished. Tele medicine requires financial and personnel resources. In addition to that it requires a strategic and technological partnership between the tertiary care center and remote health care center. Referring patients to hospitals results in an increased market share, an increased number of referrals and therefore an increased hospital revenue. Health care organizations are showing an increasing trend in utilizing telemedicine services. In spite the growth of telecommunication technology in the recent years health care organizations have been reluctant in adoption of telemedicine program. The general attitudes of physicians and decision makers to wards telemedicine has neither been encouraging nor discouraging. There is a lack of research on economic evaluation models for telemedicine in spite of good reimbursement rates by private insurers, Medicare and Medicaid.

Costs:

Calculation of total costs should be done upon considering all the costs incurred by all parties. The total costs should incorporate any waste or duplication of services. They should also factor in savings and increase in productivity. Capital costs should include cost of: new building or remodeling of existing structure; new equipment; communication software; electronic health record etc. For operational projects variable costs which are likely to change with the expansion of the projects should be considered.Such costs would be provider-payments, medical supplies, overhead and utility costs etc. (2) To make the system financially viable, maximum utilization of resources should be achieved, which means that a busy tele medicine program will generate higher revenue(3).

Costs for a particular technology, in general, decline with time. As new vendors emerge, better yet cheaper equipment alternatives become available. However, as technology advances and electronic medical equipment become outdated and need replacing, in that case the costs may not decline as predicted. To calculate the profitability of the project over time, one must calculate discounted value of future stream of costs. Summation of all the discounted values will provide the net present value or NPV of the project. (4) When calculating cost of services, health care organizations often use payments instead of service charges. This is based on the fact that charges are highly negotiable whereas payments are actual financial transactions that occurred. Another preferred approach is to calculate per unit cost of all combined resources to provide a particular service. (5)

Cost benefit analysis;

The concept of doing a cost benefit analysis is to match the costs incurred with the benefits of the intervention for e.g. reduction in morbidity, or as in our case, increase in hospital revenue. An important consideration when doing a cost benefit analysis is that all telemedicine programs are different and thus give different outcomes. A generalization of all telemedicine programs for different specialty applications should be avoided. Similarly, geography and demographics of the location covered under tele medicine program should be kept in mind.

When considering a return on investment analysis, break even analysis is not deemed appropriate for the tele medicine program as- Firstly, it is difficult to find out a break-even year due to the inherent complexity of the revenue stream. Secondly, the variable equipment useful life which ranges significantly and does not have much salvage value in the end. A detailed sensitivity analyses that incorporates proficiency related cost reductions may better predict future revenue. The risks and best possible outcomes considered in the sensitivity analyses can also be changed over time.(6)

Reimbursements-

Health care organizations can bill private insurers as well as Medicare/Medicaid for the services they provide through telemedicine. In a research study, it was found that private insurers do not follow the Medicare lead, but follow Blue Cross Blue Shield reimbursement rubric. Very few if any have devised their own reimbursement rubric if any. Many private payers do not use special CPT codes assigned to tele medicine and continue to bill according to traditional codes. (7)

With the Medicare shared savings program for accountable care organizations, emergence of new Health care Maintainance organizations (HMOs), the future reimbursemens for telemedicine services may increase.(8) Health care organizations will be able to save more by decreased emergency rate admissions, decreased readmissions, better quality of care for chronic diseases. In the Accountable Care Act of 2012, provisions have been made to provide better reimbursements for telemedicine services.

Various studies and academic papers point out the cost effectiveness of the tele medicine program in United States. In an tele intensivist program designed to cover Intensive care to remote locations in support to the already existing care, lower variable costs per case and higher hospital revenues (from increased case volumes) generated financial benefits in excess of program costs. (9) Various research studies on tele medicine programs on the effectiveness of tele medicine in the prison inmates. Three studies (out of four) about telemedicine in American prisons also found a positive economic result. The fourth reported preliminary data and concluded that telemedicine is likely to be cost – effective.(10)

In another study on inmates, cost effectiveness comparisons with traditional care demonstrated that tele medicine outperforms traditional care on financial grounds. The research showed $16,514/18.73 QALYs for tele ophthalmology and $17,590/18.58QALYs for non tele ophthalmology.(11) Experience of UC Davis health system also provides proof of tele medicines’ cost effectiveness. From new patients covered by the tele medicine program, the organization was able to increase its average hospital revenue from $2.4 million to $4.0 million per year and average professional billing revenue increased from $314,000 to $688,000 per year. (12) In another report from kalorama information (a medical decision support company) telemedicine market revenue has increased from $4.2 billion in 2007 to $10 billion in 2012, representing a 237 percent increase. (13)

Physician attitudes to tele medicine:

Contrary to popular belief that physicians are reluctant in adopting tele medicine, the research indicates otherwise. There is lack of research data on attitudes of health care providers towards tele medicine, and so the results on one study cannot be used to form a consensus.

1. Research has shown that Health care providers approach new technology initially with positive attitude focusing on the usefulness of the technology in providing patient care. (14)

2. Often drawing form their personal beliefs and experiences, health care providers are not easily persuaded by external influences.

3. They often assess the incorporation of the new technology in their routine patient care. The medical field has kept pace with the technological advances in various means and hospitals continually invest in latest medical technology. (15)

4. It is true that the traditional image of a physician at the bedside is being challenged with the advent of tele medicine and some health care providers and even patients cannot fully assimilate it.



All in all-

Telemedicine program can increase revenue, access and quality of care in a health care organization. Better utilization of human resources- Physician shortage is a barrier to access of health care in rural and underserved areas. Telemedicine program helps address that problem. It allows health care organizations to provide access to remote areas in the community. Continuum of care improved quality and lower costs. As seen in the case of advanced ICU care programs, telemedicine consulting has shown to decrease stress among house physicians and improve their work- life balance. It can prove as a powerful recruiting tool for health care organizations. Monitoring of patients of chronic diseases through tele medicine can help reduce morbidity. Timely evaluation and treatment of acute clinical conditions e.g. stoke, can reduce complications and improve outcomes. Health care organizations are also utilizing tele medicine services to secure the market and continue to serve their patients. In the face of constant mergers and acquisitions, tele medicine is a part of the strategy to keep the present patient pool. University of Iowa healthcare deployed robots in local hospitals in the local towns of Clinton and Grinnell to secure its patient pool in the rural communities of Iowa. (16)

Despite the obvious advantages of the tele medicine program cannot be supported at all health care organizations. Some barriers to tele medicine program exist such as indifferent attitude to new technology by patients, providers and decision makers. Upfront costs of equipment and software prevent smaller health care organizations to invest in tele medicine. Continuous technical support staff is also a requirement that requires hospital funds. Strategic and financial partnerships between two participating health care organizations also difficult to achieve at times.

Despite certain barriers that are specific to tele medicine programs, opportunities to establish them should be actively sought out by health care organizations. A detailed analysis of cost benefit and risk sensitivity can help reduce the risk of such an investment, with assurance of guaranteed positive financial outcomes.

Recommendations-

It is apparent that both telemedicine practitioners and Medicaid personnel at the least would benefit from:

• Standardized utilization figures from all states, with standard codes.

• Cost figures for amounts being reimbursed under Medicaid.

• Availability of reports on types of services and volume covered under Medicaid, as well as savings in patient travel.

• Standardized billing procedures

• NPV analysis

• Research of various funding resources for initial start-up costs.(17)

• Study of referral patterns for returning patients.

• Setting a fixed hospital facility and equipment cost

• Considerations for accommodating dissimilar return for various diseases and specialties.



References-

1. (1999) Holm-Sjögren L, Sandberg C, Törnqvist H. Telemedicine in Sweden: a diffusion study. Journal of Telemedicine and Telecare ;5 (suppl. 1):63–5

2. (1996) Institute of Medicine (US) Committee on Evaluating Clinical Applications of Telemedicine Telemedicine: A Guide to Assessing Telecommunications in Health Care. Chapter 7- Evaluating Costs and Cost-Effectiveness of Telemedicine. National Academy of Sciences. Bookshelf ID: NBK45438

3. (1996) Institute of Medicine (US) Committee on Evaluating Clinical Applications of Telemedicine Telemedicine: A Guide to Assessing Telecommunications in Health Care. Chapter 7- Evaluating Costs and Cost-Effectiveness of Telemedicine. National Academy of Sciences. Bookshelf ID: NBK45438

4. (1998) Andrew E Cameron et al. Simulation methodology for estimating financial effects of telemedicine in West Virginia. Telemedicine Journal, Volume 4, November 2 1998.

5. (1996) Williams, RM. The costs of visits to emergency departments. New England Journal of Medicine, 1996 Mar 7; 334(10):642-6.

6. (1996) Institute of Medicine (US) Committee on Evaluating Clinical Applications of Telemedicine Telemedicine: A Guide to Assessing Telecommunications in Health Care. Chapter 6- A Framework for Planning and Improving Evaluations of Telemedicine

National Academy of Sciences. Bookshelf ID: NBK45438

7. (2006) Sate Medicaid and private payer reimbursement of telemedicine : an overview Journal of Telemedicine and Telecare, 2006,12:32

8. (1996) Institute of Medicine (US) Committee on Evaluating Clinical Applications of Telemedicine Telemedicine: A Guide to Assessing Telecommunications in Health Care. Chapter 7- Evaluating Costs and Cost-Effectiveness of Telemedicine. National Academy of Sciences. Bookshelf ID: NBK45438

9. (2005) Jason R. Leong, Carl A. Sirio, and Armando J. Rotondi. eICU program favorably affects clinical and economic outcomes. BioMed Central, 2005 9E:22

10. (2000) Steven Hakansson, and Carlin Gavlin. What do we really know about cost effectiveness of telemedicine, Journal of Telemedicine and Telecare 200 6:133

11. (2004) Noriaki Aoki et al. Kim Dun, Heleln K Li, J Robert Beck, William Schull, and Tsugua Fukui. Cost effectiveness analysis of telemedicine to evaluate diabetic retinopathy in prison population. Diabetic care. Volume 27 Number 5 , May 2004

12. (2013) Scott Mace. How Telemedicine Drives Volume, Revenue. HealthLeaders Media , October 22, 2013

13. (2013)Kalorama Information. Advanced Remote Patient Monitoring Systems Mar 28, 2013, 380 Pages - Pub ID: KLI4997661 Retrieved fromhttp://www.kaloramainformation.com/Advanced-Remote-Patient-7450566/

14. (2002) Patrick Y.K. Chau, and Paul Jen-Hwa Hu. Investigating healthcare professionals’ decisions to accept telemedicine technology: an empirical test of competing theories. Information & Management Volume 39, Issue 4, January 2002, Pages 297–311

15. (2002) Patrick Y.K. Chau, and Paul Jen-Hwa Hu. Investigating healthcare professionals’ decisions to accept telemedicine technology: an empirical test of competing theories. Information & Management Volume 39, Issue 4, January 2002, Pages 297–311

16. (2013), Jennifer Brown. Stroke Robot Helps to Provide Immediate Care. University of Iowa Healthcare. Retrieved from http://www.uihealthcare.org/stroke-robot/

17. (2012) Hcureton. University of Iowa Telehealth Project. Great Plains Tele Health Recourse and Assistance center. September 22, 2012. Retrieved from http://www.gptrac.org/wpcontent/uploads/2011/10/Financial_Overview_0820111.pdf

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