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Telemedicine Can Make Money for Tertiary Centers

May 3, 2012 (San Jose, California) — Providing services through telemedicine can make money for a tertiary medical center, researchers reported here at the American Telemedicine Association 17th Annual International Meeting.
After the deployment of telemedicine, pediatric transports increased by 142 patients per year at the University of California at Davis (UCD) Children's Hospital, resulting in a jump in hospital revenue of $1.6 million and in professional billing of $374,000, according to Madan Dharmar, MBBS, PhD, who is an assistant professor there.
"If you invest...by deploying telemedicine to a rural hospital, then your annual increase in hospital and professional revenue, based on the increase in the number of transfers, is quite substantial," said Dr. Dharmar.
Many studies have found benefits from technology, such as video cameras, that allows specialists to diagnose and treat patients who are far away. But most of this research has focused on patient and provider satisfaction or health outcomes.
Relatively few studies have examined cost effectiveness; the ones that have have looked at the issue from a variety of perspectives — patients, providers, and society as a whole.
"We have never talked about whether there is a benefit for a hospital to invest in telemedicine," said Dr. Dharmar. He and his colleagues were forced to look at the question when his department's video conferencing unit broke.
The department's chief administrative officer said the $15,000 to replace the unit was not in the department's budget.
"We had collected data where patients were very satisfied," Dr. Dharmar told Medscape Medical News. "We had data showing better provider satisfaction.... We had data showing better outcomes. The response was: 'It's not in the budget'."
So Dr. Dharmar and his colleagues set out to show that telemedicine could make money for the hospital. They evaluated 13 rural hospitals that had begun telemedicine relationships with their hospital in 2003.
They found that 2056 children were transferred to UCD Children's Hospital after telemedicine consultations began. The number per year increased from 143 to 285, and the average hospital revenue per year increased from $2.4 million to $4.0 million during that period, said Dr. Dharmar.
The researchers defined hospital revenue as total revenue resulting from the transferred patient minus direct costs related to that patient.
Still, the chief administrative officer pointed out that increased revenue for the hospital as a whole did not equate to revenue for the department.
So Dr. Dharmar and his colleagues looked further and found that average professional billing revenue increased from $314,000 to $688,000 per year. They defined professional billing revenue as the total reimbursement from insurance providers for the transferred patients.
The increased income from each hospital was about $23,000 per year, Dr. Dharmar said.
Even these figures did not convince the chief administrative officer to pay for the new unit out of the department budget, but the hospital as a whole finally picked up the tab, Dr. Dharmar said.
The study raised questions from session moderator Ricardo Muñoz, MD, chief of the cardiac intensive care unit at the Children's Hospital of Pittsburgh in Pennsylvania.
In the first place, the increase in transfers could be due to other factors. "How do you know it's telemedicine?" he asked.
Dr. Dharmar admitted that the data he has now don't answer that question. The researchers are looking at patients' zip codes to establish more clearly that the increased transfers came from hospitals that established new telemedicine relationships with UCD.
He thinks they will be able to show that association. "There are hospitals from which there were zero referrals before we started the telemedicine relationship; after we started the relationship, they started to transfer patients," he said.
That prompted Dr. Muñoz to raise another issue. Telemedicine is supposed to prevent the need for transfers by providing services remotely, he pointed out.
"In the ideal society, that's how it should work," Dr. Dharmar acknowledged. "But our healthcare system is broken and it depends on a fee for service. If a tertiary hospital invests in something like this, they have to make money off it."
Dr. Dharmar and Dr. Muñoz have disclosed no relevant financial relationships.

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