What will finally break the back of health care costs? Telemedicine

Nobel Laureate Vernon Smith paints a simplistic and overly pessimistic view of the health care cost crisis, focusing on the need to align incentives and the difficulty in doing so.

Doctor, Can You See Me Now? in today’s Wall Street Journal explores telemedicine applications, which are increasingly allowing specialists in academic institutions provide advanced diagnostic services to rural hospitals. Thanks to technology –especially high definition video and high quality audio– telemedicine has become feasible even for critical situations, such as deciding whether a stroke patient can safely receive tPA or whether a newborn needs to go to the ICU.

The technology costs tens of thousands of dollars or more per installation, and of course doctors and hospitals are looking at it as a potential new revenue stream. Payers –with few exceptions– areĀ  resisting because the application is unproven and they fear rising costs.

It’s possible telemedicine will raise costs in the near term, but I foresee a day in the not too distant future –maybe 10 years– when widespread telemedicine will enable a highly competitive marketplace for health care delivery, so that doctors and hospitals from around the country or around the world will compete on price and quality to serve patients wherever they may be. As telemedicine is coupled with robotic surgery and similar technologies, it will be possible to reengineer the delivery system and overcome local provider monopolies that exist today.

We can already see this start to play out in teleradiology. But there’s no reason for progress to stop there.

If you think the insurance companies are putting up fierce resistance to a public option, just way to see how providers react in 5 years or so when serious consideration is given to allowing Medicare to reimburse telemedicine services provided by overseas physicians and hospitals.

October 20, 2009

9 thoughts on “What will finally break the back of health care costs? Telemedicine”

  1. >>tens of thousands of dollars per site:
    Well, it depends on what you’re looking for. We have a solution consisting of a set-top box which attaches to the patient’s home television for bringing telemedicine into the home. We’re still in the R&D phase but expect that our unit will be under USD$2000 or so. We have used our unit to deliver exercise programs to senior patients in their homes with a class of 11 patients, all of whom can see and hear the instructor and each other.

  2. Lawrence Keyes,

    Assuming your figures are right, where it would cost $2,000.00 per home (which I would think is a little low), what would the cost per use of the device. That is, how much would it cost me to talk to a doctor? Would insurance cover this? Would insurance cover the device?

  3. It is obvious how out of date David Williams information is. The cost of utilizing telemedicine in the delivery of healthcare has been spiraling downward yearly. But of course this uses the term so generally that it is impossible to tell specifically exactly of what he speaks. By example, in several studies nationwide where telemedicine devices have been placed in the homes of chronically ill patients upon release from the hospital.The use of such equipment has reduced the re-admittance to the hospitals by 75%. With these devices costing less than $4000( a one time purchase) the potential for significant savings is evident. Certainly telemedicine is not the great panacea for all ills, but there are certainly enough examples nationwide of the ability of this technology to significantly reduce the cost of healthcare especially in rural areas.

  4. Sorry Mr Williams. I responded too quickly. I was reacting to the first part of your article and should have finished it before responding.

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