The Economic Impact of Telemedicine
Service in a Rural Hospital
Brian Whitacre
Oklahoma State University
SERA-19 Meetings
Sep. 10-12, 2007
The Issues
• Telemedicine has been hailed as a saving
grace for rural health care
• Noted benefits include:
– Larger variety of services offered
– Improved perception of health care quality
• Some rural hospitals have been slow to
adopt
• Documenting the impact to local
economy may speed adoption
Introduction to Telemedicine
• Typical Definition:
– “the delivery of medical services and information by
telecommunications technology.”
• Dominant applications:
– Teleradiology: sending x-rays to be read remotely
– Telepsychiatry: communicating with a psychiatrist
located elsewhere
– Telecardiology: reading heartbeats (echocardiograms) from another location
Telemedicine Locations in Oklahoma
Oklahoma State University Telemedicine Network
-“Hubs” in Oklahoma City, Tulsa
-15 sites throughout the state
-13 potential future sites
Site Visits / Data Collection
Monthly Encounters
Number of Community
Beds
Population
Poteau
Bristow
Waurika
Hugo
Idabel
Waurika, OK
76
26
25
34
90
Bristow, OK
8,000
4,300
2,000
5,500
7,000
Teleradiology Telepsychiatry
2,300
550
145
800
8
125
Poteau, OK
Methodology
• Typical multiplier methodology will not work
– No additional employees hired for telemedicine
startup
• Economic impact occurs through the opportunity
cost of not having telemedicine:
–
–
–
–
Potential hospital cost savings
Transportation savings to patients
Missed work savings to patients
Increased lab / pharmacy work performed locally
Hospital Cost Savings
• Some (not all) hospitals pay specialists to come
to their location
• Average salaries (all for rural areas):
– Non-invasive radiologist
– Psychiatrist
– Non-invasive cardiologist
$202,000
$130,000
$210,000
Source: Physician
Compensation Survey,
2000
• In contrast, rate per encounter for hospitals to
outsource these services:
– Radiology
– Psychiatry
$10
$120
Source: Averages for
four Oklahoma
Hospitals
Hospital Cost Savings (cont’d)
• Examples:
– Hospital A replaces 2 days / week radiologist, 1 day / week
psychiatrist
– Hospital B replaces 2.5 days / week radiologist, 1-2 days / week
psychiatrist
Before Telemedicine:
Hospital
A
B
Job
Salary
After Telemedicine
Monthly
Rate per
Hospital Pays: Encounters Encounter Hospital Pays:
% FTE
Radiologist
$202,000
0.4
$80,800
230
$10
$27,600
Psychiatrist
$130,000
0.2
$26,000
10
$120
$14,400
Radiologist
$202,000
0.5
$101,000
500
$10
$60,000
Psychiatrist
$130,000
0.3
$39,000
30
$120
$43,200
Total Savings:
$64,800
$36,800
Transportation Savings to Patients
• One of the largest benefits cited: Quick
turnaround time for patients
– Teleradiology: patients wait 24 hours instead of 1
week
– Telepsychiatry: patients drive to local hospital
instead of closest location (usually an urban area)
• Estimate savings using:
– Distance to closest substitute
– Typical mileage cost
– Approximate number of times used
Transportation Savings to Patients
• Example:
Site
Nearest
Radiology Site
One
Way Total Travel
Miles
Miles
Total Number
Mileage cost of Reads per
per trip
Year
% Needing
Service
Total Cost
Savings
Poteau
Ft. Smith, AR
31
62
$30.07
27,600
5%
$41,497
Bristow
Sapulpa
30
60
$29.10
6,600
5%
$9,603
Waurika
Red River, TX
54
108
$52.38
1,740
5%
$4,557
Hugo
Durant, OK
53
106
$51.41
9,600
5%
$24,677
Site
Nearest
Psychiatry Site
Waurika
Lawton
Idabel
McAlester
One
Way Total Travel
Miles
Miles
Total Number
Mileage cost of Reads per
per trip
Year
% Needing
Service
Total Cost
Savings
60
120
$58.20
96
100%
$5,587
116
232
$112.52
1,500
100%
$168,780
Note: $0.48 per mile travel cost assumed (2007 IRS rate)
Missed Work Savings To Patients
• Average Wages
–
–
–
–
–
Poteau (Le Flore County): $11.30 / hour
Bristow (Creek County): $13.85 / hour
Waurika (Jefferson County): $10.13 / hour
Hugo (Choctaw County): $10.56 / hour
Idabel (McCurtain County): $13.41 / hour
Source: BEA Average
Wage per Job, 2005
• Average Income Missed
– Round trip driving distance to nearest metropolitan
hospital
Source: Google Maps,
discussion with
– (Driving TimeHours)*hourly wage
hospital personnel
Missed Work Savings To Patients
• Example:
Site
Average
Hourly
Wage
One Travel Time
Nearest
Way
Saved
Radiology Site Miles (minutes)
Poteau
Bristow
Waurika
Hugo
$11.30
$13.85
$10.13
$10.56
Ft. Smith, AR
Sapulpa
Red River, TX
Durant, OK
Site
Average
Hourly
Wage
Waurika
Idabel
$10.13
$13.41
Nearest
Psychiatry
Site
Lawton
McAlester
31
30
54
53
94
62
142
122
One Travel Time
Way
Saved
Miles (minutes)
60
116
144
230
Cost
Saved
per trip
$17.70
$14.31
$23.97
$21.47
Cost
Saved
per trip
$24.31
$51.41
Number of
Trips per
year
27,600
6,600
1,740
9,600
Number of
Trips per
year
96
1,500
% Needing
Service
5%
5%
5%
5%
% Needing
Service
100%
100%
Total
Savings
$24,431
$4,723
$2,086
$10,307
Total
Savings
$2,334
$77,108
Local Lab / Pharmacy Work
• If patients travel to other sites for X-rays /
psychiatric visits, they typically get lab &
pharmacy work done there as well
– X-ray follow-up:
•
•
•
•
•
Blood work
MRI
CT scan
Biopsy
Pain medication
– Psychiatry follow-up:
• Aderall / Xanax monthly prescription
Local Lab / Pharmacy Work
• Example:
Monthly cost per
prescription
Telepsychiatry
Aderall
Xanax
Number of Yearly
Encounters
84
84
% of Patients
Using
50%
20%
Low
High
$85
$60
$350
$300
Test cost
Teleradiology
Blood Work
MRI
CT Scan
Biopsy
Pain Medicine
Number of Yearly
Encounters
2400
2400
2400
2400
2400
% of Patients
Using
10%
2%
5%
2%
30%
Yearly Costs
(assuming 3 months)
Low
$10,710
$3,024
High
$44,100
$15,120
Yearly Costs
Low
High
Low
High
$100
$400
$400
$300
$1,200
$4,000
$2,000
$1,200
$24,000
$19,200
$48,000
$14,400
$288,000
$192,000
$240,000
$57,600
Monthly Cost
Low
High
$50
$300
$36,000
$216,000
Opportunity Cost Summary
Monthly Encounters
Number Community
of Beds Population
Teleradiology
Monthly Cost Savings
TelePersonnel
psychiatry
Costs
Missed
Work
Travel
Time
Pharmacy
/ Lab
Bristow
26
4,300
550
$3,417
$4,723
$9,603
Hugo
34
5,500
800
$12,200
$10,307
$24,677
$47,200 $1,132,600
Idabel
90
7,000
$77,108 $168,780
$5,313 $3,094,400
Poteau
76
8,000
2,300
Waurika
25
2,000
145
125
8
$6,667
$10,667
$24,431
$2,040
$4,420
$32,450
ANNUAL
TOTALS
$602,310
$41,497 $135,700 $2,547,526
$10,144
$8,895
$305,988
• CAH, < 200 encounters per month: ~$300,000 year
• Larger facility, >2,000 encounters per month: ~$2.5M / year
Other Issues
• Equipment / Infrastructure Cost
– Teleradiology:
• Digitizer: $7,000 - $30,000
– Vidar Sierra Plus: $10,995
– Intelemed CR-500: $8,000
• Digitizing Software: $5,000 - $10,000
– Vidar all-inclusive: $7,000
• Standard PC: $1,500
– Telepsychiatry:
• Videoconferencing system: ~$16,000
– High-speed data line: $200-500 / month
• Medicare / Medicaid Reimbursement
– Medicare reimburses for:
• Remote face-to-face services (live videoconference)
• Store and forward services (X-rays)
– Medicaid does not reimburse for videoconference