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Telemedicine's value proposition

UPMC talks about the ROI of telemedicine

Ironically, Andrew Watson's first telemedicine procedure was with a rural patient who was a Mennonite. At first, the patient and physician looked at each other warily. 

"He didn't have a TV," said Watson, a colorectal surgeon and vice president at Pittsburgh-based UPMC, with a wry laugh. "And I'd never done this."

[See also: Telemedicine: The cost effective future of medicine?]

But the procedure worked. And it was worth it. "He didn't drive," Watson said. "And I spared him an expensive trip to Pittsburgh."

But that's far from the only value derived from telemedicine. In a session Monday at the American Telemedicine Association's 18th Annual International Meeting & Trade Show titled "The Telemedicine Value Proposition: ROI & Sustainability," Watson laid out the numbers, so far, for UPMC's forays into virtual care since 2009.

He cautioned that his is not a "boil the ocean" tale – it's simply the perspective of a single surgeon at a single medical center based in a single area of the country. But UPMC's experience, he said, offered an example of "how one model can work for telemedicine."

UPMC Bedford Memorial is a 59-bed acute-care community hospital based in tiny Everett, Pa. (population: barely 2,000), about 115 miles from Pittsburgh. Travel time between Bedford and UPMC's main campus takes about two hours, and many patients aren't willing to make the trip.

It's not because they're lazy. There's a financial cost, too. Telemedicine has helped alleviated that burden. 

Watson crunched the numbers and found that the past four years or so have seen a total patient benefit of some $25,000.

That's based on multiplying the total of 173 telemedicine encounters so far by a conservative back-of-the-envelope cost of $145 per four-hour round-trip (factoring in gas, tolls, meals and less tangible costs such as lost wages and child care).

"It's right for the patients," said Watson.

It's also proven worthwhile to rural hospitals. He calculated revenues accrued via telemedicine encounters since 2009 for Bedford to be about $32,000, thanks to ancillary services, procedures, admissions, etc. 

Deduct the not-insignificant $25,000 capital expense of one Polycom Practitioner Cart, and the facility is left with a profit of some $7,000.

"It's small numbers," Watson admitted. But when one considers that typical critical access hospital margins might hover around 2.5 percent, "this adds up."

For the urban hospital – "the exact opposite of the rural hospital" – the ROI is worth noting, he said.  

Through the telemedicine program, UPMC's tertiary center captured 38 colorectal cases, Watson said. At a profit about $5,000 per case, that's $190,000 or so in revenues.

And that doesn't account for other upside, he noted, such as ancillary and consultative, avoidance of the physician's need to travel and the prevention of patients being lost to other health systems.  

Finally, for the physician there's value, too, said Watson. Given 38 cases of rural telemedicine, with an average relative value unit per case of 20, that's 760 RVUs – or roughly $34,000, he said. 

And that, he added, doesn't even account for intangibles such as positive word of mouth (there was a 94 percent satisfaction rating for telehealth).

Long story short? "Everyone" – the large hospital, the small hospital, the patient, the physician – "had a good piece of this," said Watson.

Not long ago, "This is care that would have been driven out of the rural communities into Pittsburgh and done the old-fashioned way."

Nowadays, things are changing fast. 

Doing telemedicine in a fee-for-service environment, "You can make a little money, like I showed," said Watson. "The real horsepower and juice is when you enter the virtual world. You cannot have a hospital system without virtual."

In this new era of shared risk, he said, "You'll see nursing homes (where) you'll pull up an iPad or video device to make sure the nurse can actually see the patient before they get transferred. Handoffs will be done with a combination of video and EHRs. Codes will be done with video. The OR will be surgical telemetry networks. All of these are going to be payer gain-share models.

"You will see insurers creating, to some degree, narrow networks through portals, benefit designs, incentives to get people to the right level of care," said Watson. "It's not just accessing care, it's accessing the right care. And video – or virtual, is a better way to say that – is the way it's going to be done. We're certainly seeing it on the ground. It is absolutely fascinating to watch."

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