the economic impact of telemedicine service in a rural hospital brian whitacre oklahoma state...
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The Economic Impact of Telemedicine Service in a Rural Hospital
Brian WhitacreOklahoma State University
SERA-19 MeetingsSep. 10-12, 2007
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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
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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
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Telemedicine Locations in Oklahoma
Oklahoma State University Telemedicine Network
-“Hubs” in Oklahoma City, Tulsa
-15 sites throughout the state
-13 potential future sites
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Site Visits / Data Collection
Waurika, OK Bristow, OK Poteau, OK
Monthly EncountersNumber of
BedsCommunity Population Teleradiology Telepsychiatry
Poteau 76 8,000 2,300Bristow 26 4,300 550Waurika 25 2,000 145 8Hugo 34 5,500 800Idabel 90 7,000 125
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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
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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
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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: After Telemedicine
Hospital Job Salary % FTE Hospital Pays:Monthly
EncountersRate per
Encounter Hospital Pays: Total Savings:
A Radiologist $202,000 0.4 $80,800 230 $10 $27,600 $64,800
Psychiatrist $130,000 0.2 $26,000 10 $120 $14,400
B Radiologist $202,000 0.5 $101,000 500 $10 $60,000 $36,800
Psychiatrist $130,000 0.3 $39,000 30 $120 $43,200
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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
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Transportation Savings to Patients• Example:
SiteNearest
Radiology Site
One Way Miles
Total Travel Miles
Mileage cost per trip
Total Number of Reads per
Year% Needing
ServiceTotal 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
SiteNearest
Psychiatry Site
One Way Miles
Total Travel Miles
Mileage cost per trip
Total Number of Reads per
Year% Needing
ServiceTotal Cost Savings
Waurika Lawton 60 120 $58.20 96 100% $5,587
Idabel McAlester 116 232 $112.52 1,500 100% $168,780
Note: $0.48 per mile travel cost assumed (2007 IRS rate)
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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 wageSource: Google Maps, discussion with hospital personnel
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Missed Work Savings To Patients
• Example:
Site
Average Hourly Wage
Nearest Radiology Site
One Way Miles
Travel Time Saved
(minutes)
Cost Saved per trip
Number of Trips per
year% Needing
ServiceTotal
Savings
Poteau $11.30 Ft. Smith, AR 31 94 $17.70 27,600 5% $24,431Bristow $13.85 Sapulpa 30 62 $14.31 6,600 5% $4,723Waurika $10.13 Red River, TX 54 142 $23.97 1,740 5% $2,086Hugo $10.56 Durant, OK 53 122 $21.47 9,600 5% $10,307
Site
Average Hourly Wage
Nearest Psychiatry
Site
One Way Miles
Travel Time Saved
(minutes)
Cost Saved per trip
Number of Trips per
year% Needing
ServiceTotal
Savings
Waurika $10.13 Lawton 60 144 $24.31 96 100% $2,334Idabel $13.41 McAlester 116 230 $51.41 1,500 100% $77,108
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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
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Local Lab / Pharmacy Work• Example:
Monthly cost per prescription
Yearly Costs (assuming 3 months)
TelepsychiatryNumber of Yearly
Encounters% of Patients
Using Low High Low High
Aderall 84 50% $85 $350 $10,710 $44,100Xanax 84 20% $60 $300 $3,024 $15,120
Test cost Yearly Costs
TeleradiologyNumber of Yearly
Encounters% of Patients
Using Low High Low High
Blood Work 2400 10% $100 $1,200 $24,000 $288,000MRI 2400 2% $400 $4,000 $19,200 $192,000CT Scan 2400 5% $400 $2,000 $48,000 $240,000Biopsy 2400 2% $300 $1,200 $14,400 $57,600
Monthly Cost Low High
Pain Medicine 2400 30% $50 $300 $36,000 $216,000
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Opportunity Cost Summary
• CAH, < 200 encounters per month: ~$300,000 year• Larger facility, >2,000 encounters per month: ~$2.5M / year
Monthly Encounters Monthly Cost Savings
Number of Beds
Community Population
Tele- radiology
Tele- psychiatry
Personnel Costs
Missed Work
Travel Time
Pharmacy / Lab
ANNUAL TOTALS
Bristow 26 4,300 550 $3,417 $4,723 $9,603 $32,450 $602,310
Hugo 34 5,500 800 $12,200 $10,307 $24,677 $47,200 $1,132,600
Idabel 90 7,000 125 $6,667 $77,108 $168,780 $5,313 $3,094,400
Poteau 76 8,000 2,300 $10,667 $24,431 $41,497 $135,700 $2,547,526
Waurika 25 2,000 145 8 $2,040 $4,420 $10,144 $8,895 $305,988
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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