Who Bears the Costs and Receives the Benefits of Telehealth?

April 7th, 2020 /
Vikram Maindan
/ 5 Min Read
virtual communication through telemedicine app

Let’s talk telehealth. Telehealth is healthcare delivered over telecommunications technology, using combinations of internet, phone, cellular text, or audio/video streams. Telehealth delivery could take place on a fifty-year-old rotary dial telephone or using a modern mobile device with a patient portal or physician app. Telehealth can potentially ease the administrative burden of the medical practice by allowing the patient to self-schedule their time with a doctor. It makes healthcare more accessible by eliminating the need to be in the same room as the physician, allowing the patient to visit virtually from any location to connect to their preferred network technology.

In rural or underserved areas, telehealth brings quality healthcare to people who wouldn’t ordinarily have access due to the time required to travel or inclement weather conditions. The media has recently taken an interest in telehealth because of its benefits as a possible solution to our national healthcare costs and the innovation it could bring to improve the quality of care for patients. There has also been a discussion about whether the cost savings promised by telehealth are realistically attainable.

For example, NPR published an article last month entitled “Telehealth Doctor Visits May Be Handy, but Aren’t Cheaper Overall.” At a glance, this article provides a skeptical perspective about reducing cost by providing telehealth services to a specific and large group of California State employees. The headline alludes to the idea that telehealth visits are more expensive than office visits for the entire healthcare ecosystem.

Telehealth Increases Costs for Whom?

The RAND Corporation conducted the study referenced by NPR. In the Appendix section of the study, the researchers acknowledge a selection bias of the study group used in conducting their research. They explain that there are specific differences between the group who used telemedicine and the group who did not, but they could not precisely identify what this difference was. They applied a “propensity score,” a weight, to the individual subjects to compensate for this unknown variable. From the perspective of a company that provides population healthcare management tools based on well-understood healthcare data, it seems tenuous for NPR to encourage a national healthcare conversation based on a study with acknowledged sampling bias.

The study examined claims from 981 individuals who sought telehealth, specifically for respiratory infections (such as bronchitis, pneumonia, sinusitis, or an ear infection), which makes up a relatively small section of the users of telemedicine nationwide.

The study was initially published in Health Affairs, a health policy journal funded by major health insurance providers. The study subjects were taken from CalPERS, a group insured by Blue Shield of California, which means the study is related to the insurance industry with issues also provided by the insurance industry.

The researchers also provide a table comparing acute respiratory infection episode spending by the site of care. The total cost of a telehealth visit was $79, compared to a $146 visit to the physician’s office and a $1,734 visit to the emergency department.  Based on this, NPR has the idea that, for insurance providers, telehealth did cost more during the period covered in the study—not for the patient, nor for the provider. In light of that, the title of the NPR, “Telehealth Doctor Visits May Be Handy, but Aren’t Cheaper Overall,” is a misleading simplification.

The True Value of Telehealth


Telehealth has been shown in various other studies to provide overall cost benefits to the provider and the patient. Telehealth benefits the physician by helping to ease the administrative burden on medical practices. Because physicians can practice medicine independently of the patient’s physical location, the costs of running a medical practice are lower.

The American Telemedicine Association’s case study of Baystate Health analyzed telehealth services in rural community hospitals in western Massachusetts, connections to the academic medical center and Level-1 trauma center located in Springfield. These services increased access to patients in rural areas “right where they live.” For physicians and the hospital system, telemedicine delivered “reduced the costs and time resources associated with delivering patient care at rural, community-based medical centers.” 100% of patients reported they were “satisfied” or “very satisfied” with their medical treatment.

Also Read: Telehealth Use in Rural Healthcare

Another benefit of telemedicine is early detection. Because the patient can access health care in a 24/7 time frame, more preventative measures can be taken early in the process. Early detection and preventive measures are the right strategies to arrest the progress of a disease in the early stage before it becomes difficult and costly to treat. In the RAND study, the people who used telemedicine represented higher costs because they represented “new utilization.” In other words, they might not have gone to the doctor until the later stage, when more expensive treatment could be required. The researchers concluded that an increased volume of treatment (at earlier stages) means higher costs, which is counter to prevailing industry ideology that earlier access for preventative means is an overall lower cost for patients, physicians, and payers.

Also Read: The Changing Landscape of Telemedicine Billing, Payment, and Reimbursements

Moving Forward with Cost-Effective Telehealth

As more people use Telehealth App for current utilization, we may first see higher costs to insurance companies. This means, though, that patients can access healthcare more efficiently, which allows for the early arrest of the progress of the disease. The most efficient and cost-effective manner to provide healthcare for the patient and the physician. Suppose more people have access to high-quality treatment at a lower cost. In that case, they can detect illnesses early on and prevent them from progressing, requiring fewer costly procedures in the future. Investing in telemedicine provides early access and convenience, which results in lower healthcare costs for patients, doctors, and insurance companies.

For more tips on telemedicine software, sign up for our newsletter and stay updated with the latest Prognocis News here.

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