The Economic Impact of Telemedicine Service in a Rural Hospital

1
The Economic Impact of Telemedicine Service in a
Rural Hospital

• Brian Whitacre
• Oklahoma State University
• SERA-19 Meetings
• Sep. 10-12, 2007

2
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

3
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
  (echo-cardiograms) from another location

4
Telemedicine Locations in Oklahoma

• Oklahoma State University Telemedicine Network
• Hubs in Oklahoma City, Tulsa
• 15 sites throughout the state
• 13 potential future sites

5
Site Visits / Data Collection
Waurika, OK
Bristow, OK
Poteau, OK
6
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

7
Hospital Cost Savings

• Some (not all) hospitals pay specialists to come
  to their location
• Average salaries (all for rural areas)
• Non-invasive radiologist 202,000
• Psychiatrist 130,000
• Non-invasive cardiologist 210,000
• In contrast, rate per encounter for hospitals to
  outsource these services
• Radiology 10
• Psychiatry 120

Source Physician Compensation Survey, 2000
Source Averages for four Oklahoma Hospitals
8
Hospital Cost Savings (contd)

• 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

9
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

10
Transportation Savings to Patients

• Example

11
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
• (Driving TimeHours)hourly wage

Source Google Maps, discussion with hospital
personnel
12
Missed Work Savings To Patients

• Example

13
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

14
Local Lab / Pharmacy Work

• Example

15
Opportunity Cost Summary

• CAH, lt 200 encounters per month 300,000 year
• Larger facility, gt2,000 encounters per month
  2.5M / year

16
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