Like most technologies in the health and human service space, return-on-investment (ROI) depends on the stakeholder and the situation. The recent ROI studies of telehealth are a great example. On the plus side of the ledger, rural health care, transportation costs, and readmissions cost offsets. On the negative side of the equation, increased costs due to increased access to care. The data is interesting.
Telehealth decreases costs for hospitals in rural health settings
According to a March report from NTCA–The Rural Broadband Association, the ROI for telehealth in rural communities is good (see Anticipating Economic Returns Of Rural Telehealth), and it can save hospitals in rural parts of the country an average of $81,000 annually, while saving consumers $24,000 in travel costs and $17,000 in lost wages. The national average estimates for annual cost savings include:
- $5,718 in consumer travel expense savings
- $3,431 in consumer lost wages savings
- $20,841 in hospital cost savings
Traveling savings were estimated using average distance traveled per consumer, the average cost per mile, and the number of encounters per year. Lost wages were estimated using the average cost per mile and distance with the average hourly wage rate and time spent raveling, per consumer. For hospital savings, estimates were made by applying rural specialists’ salaries from the Physician Compensation and Production Survey to the reduced number of days per week specialist would work once replaced with telehealth. ROI for telemedicine was assumed based on telemedicine involving mainly upfront costs that are mostly one-time expenditures, and cost savings are ongoing over time.
Telehealth decreases transportation costs for provider-to-provider care
A study from the Center for Information Technology Leadership (CITL) found that provider-to-provider telehealth supplied saving by eliminating the need for inter-emergency department transfers ($1.39 billion), correctional transfers ($270.3 million); and nursing transfers ($806 million) — see The Value Of Provider-To-Provider Telehealth Technology.
CITL projected the costs for telehealth adoption over 10 years, including acquisition costs, recurring costs (20% of capital costs), occurring in years one through 10. CITL also assumed that stakeholders realize 50% telehealth benefits in the first year, and reached 100% benefits by the sixth year. Costs for transportation between provider organizations included travel between emergency facilities, and from nursing homes and correctional facilities to both emergency departments and physician offices. Savings were estimated on the reduction of transports from one emergency department (ED) to another emergency department, thanks to the use of telehealth.
Telehealth reduces costs for hospitals by decreasing readmissions
Results in recent years have shown telehealth as a way to reduce hospital readmissions. Essentia Health, a 16-hospital and 68-clinic system, has successfully used telehealth to reduce readmission rates for consumers with congestive heart failure to just 2%. Nationally, this percentage is 25% (see Essentia Health Slashes Readmissions With Population Health Initiative, Telehealth).
Essentia achieved this reduction by giving tele-scales to 300 consumers in the hospital’s congestive heart failure program – these scales cost $70-$110 per month and “digitally report via landline or cellular phone service a patient’s weight every day as well as how that person responds to questions the scale literally asks aloud.”
Teleahealth increases costs for the California Public Employees’ Retirement System by increasing utilization
But the news on telehealth ROI hasn’t been all good — namely because like any new health care tool, you have to know how you are using it, along with how you’re calculating ROI. Case in point: A couple of recent reports in Health Affairs (see Analysis Of Teladoc Use Seems To Indicate Expanded Access To Care For Patients Without Prior Connection To A Provider and Direct-To-Consumer Telehealth May Increase Access To Care But Does Not Decrease Spending) found that in some circumstances, telehealth can increase costs.
In a study of the telehealth services provided to the California Public Employees’ Retirement System, beneficiaries showed increased annual spending on acute respiratory illness by $45 per telehealth user. Considering that spending per episode for this group was actually lower for direct-to-consumer telehealth visits ($79) than for either physician office ($146) or emergency department (ED) visits ($1,734), it begs the question: Why did annual costs go up? The answer was that most of the consumers who used the telehealth were what the report called “new utilization” — that is, they used telehealth, but not as a substitute for in-office visits. In this case, telehealth caused people to use additional services.
I think the lesson executive teams need to take away is that telehealth is proving itself as a powerful cost-reduction tool, but you need to figure out how it can replace (if only partially) other, more expensive options. This is a challenge you should meet head-on with a well-crafted strategic plan (see From Strategic Planning To Tech Strategy), a method for gauging possible ROI (see More Tools For Tech ROI), and analytics to monitor adoption efforts (see Provider Organization Tech Investments Predicted To Double – What Tops The List & Why?).
For more on calculating ROI, join OPEN MINDS senior associate Dr. Jennifer Magnabosco for a free webinar on April 17 on developing the right ROI approach for your organization and how to translate outcomes into improved value – ROI Check-In: Balancing The Value Of Quantitative & Qualitative Approaches.