What’s the ROI for telehealth in rural communities?
Telehealth can improve access to care in rural communities, and adoption is increasing. But as rural and critical access hospitals face daunting financial challenges, wise leaders are asking: What’s the return on investment (ROI) for telehealth?
Rural hospitals are in a precarious financial position
According to a 2018 GAO report, 64 rural hospitals closed between 2013 and 2017. It represents more than the 49 urban hospital closures during the same period, and more than twice the number of rural closures in the previous five-year period. Most often, these closures were caused by financial distress.
For the rural facilities that remain open, 44% are operating in the red. Some areas of the country are worse than others; independent government-owned hospitals in the mid-South region report a crushing negative 41.9% operating margin and $26.6 million operating loss.
In the face of these financial obstacles, even the most promising technologies require a sound business case. To make an investment in telehealth as a means of providing access to care – especially access to specialty care – there needs to be clear evidence of cost savings and revenue opportunities.
Real-world financial returns
The Veterans Health Administration experienced significant financial benefits after it implemented telehealth services to help patients manage their own health. In a pilot program with the VHA, about 900 patients used home telehealth services between 2000 and 2003. It resulted in a 40% reduction in emergency room visits, a 63% drop in hospital admissions and an 88% decrease in nursing home bed days of care. The VHA estimated the cost per patient in the telehealth program to be about $1,600 per year, which is significantly less than the $13,121 average annual direct cost per patient for the traditional home-based primary care.
Based on the experiences of rural hospitals, The Rural Broadband Association released “Anticipating Economic Returns of Rural Telehealth” in March 2017, which provided national average estimates of the financial impact of telehealth, including:
- Savings for the patient – Rural patients often must travel greater distances to receive care. The study estimates that telemedicine could save rural patients $9,149 annually per facility, in travel costs and lost wages.
- Savings for the hospital – The study found that hospitals converting radiology and psychology consultations to telehealth services have the potential to save $20,841 per facility every year.
- More local revenue from lab work and pharmacy – When telehealth is available locally for psychiatric and radiology specialties, revenue for those services tends to remain in the local economy. The study estimates:
- Bloodwork $ 39,882
- MRIs $ 26,997
- CT scans $ 36,814
- Biopsies $ 9,204
- Pain meds $ 32,212
$145,109 – Total annual revenue per facility that remains in the local economy with telehealth-enabled psychiatric and radiology services
Obviously, these numbers will vary based on each facility’s patient population, cost structure and cost-of-living adjustments for each region. But there’s no mistaking the financial opportunities that telehealth can help provide.
Evolving reimbursement models signal that payers recognize the value of telehealth services, too. Traditionally, virtual and telehealth services have not been reimbursed at the same rate as in-person visits. However, that is changing; the 2019 Physician Fee Schedule final rule expands the list of Medicare reimbursable telehealth services and physicians can receive payment for “virtual check-ins” by phone or other technology.
Telehealth is revolutionizing the patient experience, giving consumers more convenient and affordable access to care. For rural communities weighing the financial costs and benefits, there is a growing body of evidence that telehealth makes good economic sense.
Visit here to learn more about our work with providers in rural communities.