High Costs, Low Reimbursements Hobble Rural Telehealth Expansion

Rural hospitals with low patient volumes cannot easily absorb the upfront costs of establishing a telehealth network and potentially see no financial benefit from it. 

Writing this month in JAMA Health Forum, researchers from Harvard Medical School said that smaller, rural hospitals with low patient volumes cannot easily absorb the upfront costs of establishing a telehealth network and potentially see no financial benefit from it.  

A separate 2015 study found that telehealth upfront costs can rage from $17,000 to $50,000, with annual subscription fees of up to $60,0000 and annual maintenance costs of up to $8,000.

"Whether telemedicine is associated with a reduction in the number of transfers at smaller hospitals is less clear because a transfer may still be required after a telemedicine consultation (ie, for additional diagnostic testing and treatment)," the JAMA researchers said. "Reimbursement for a handful of consultations does not cover the full operating expenses of telemedicine."

Low volumes are also an issue for the consulting telemedicine organization, be it an academic medical center or a private company, because it's difficult to recuperate the upfront costs, such as contractual expenses, credentialing, maintenance, the analysis said.

Another barrier is the reimbursement system, which pays the telemedicine provider, even though emergency departments pay for the telemedicine service.

"While EDs can bill on behalf of clinicians, which would defray subscription costs, few do so because the administrative barriers of credentialing and licensure are prohibitive across multiple insurers, especially given the low volume of consultations and the amount of reimbursement per visit," the analysis said.

Another barrier is the lack of experience and comfort with telehealth technology by rural clinicians.

"Although telemedicine equipment (eg, the camera, software) is becoming more user friendly, if only 1 (or fewer) telemedicine consultation is necessary per month, clinicians may be less inclined to use the technology," the analysis said.

Solutions

The researchers offered a handful of suggestions to fix the problem.

"First, for acute care services, reimbursement could be made directly to the ED where the patient was seen," they write. "This payment model is more consistent with how hospitals pay for programs and would enable a more straightforward cost-benefit analysis for sites that are considering deploying telemedicine."

"Second, payment for telemedicine consultations at smaller hospitals could be increased," they said. "Given that many costs are fixed, the average cost per patient of a given telemedicine consultation at a small rural hospital is much higher than at a higher-volume center. Expanding on existing programs, smaller hospitals could also receive subsidies to defray costs of infrastructure and contracting."

The researchers also suggest that smaller hospitals could pool demand and consolidate their telehealth initiatives, copying the strategy used by vaccine-purchasing groups.

"The upfront costs of the technology would remain for each site; however, contracting services as a collaborative may generate a cumulative volume and demand that would be a more worthwhile venture for the telemedicine-providing organization," they write.

The coordination model could be built in consultation with academic medical centers and built into the Health Resources and Services Administration's 12 regional resource centers.