Telehealth’s popularity may hurt its ability to cut costs

telemedicine
The popularity of telehealth services and pent-up demand for virtual access to doctors may mean less cost savings than expected for providers.

The convenience of telehealth services for patients may mean they solve access issues long before they bend the cost curve.

A new study published in Health Affairs tracked three years of commercial claims data on acute respiratory infections and found that nearly nine in 10 telehealth visits represented new utilization, as opposed to substitutes for in-person encounters. That's good news and bad news, since a part of the attraction for healthcare plans with regard to telehealth services lies in potential cost savings from reduced hospitalization rates and lower outpatient care costs.

The other major benefit providers and payers have seen in telehealth involves increased access to care. For example, the Centers for Medicare & Medicaid Services began testing a telehealth pilot project last summer seeking to boost access for Medicare beneficiaries in rural areas. Convincing providers to reimburse the practice has been the key hurdle to reaping its benefits more widely.

According to the study’s authors, the per-episode cost of a telehealth visit represents about half the cost of an office visit, but a lot more of those visits represented new utilization, rather than substitutions for regular office visits.

“The savings from substitution were outweighed by the increase in spending for the new utilization, and per enrollee spending on acute respiratory infection treatment was higher among telehealth users compared to nonusers,” the authors write.

In practical policy terms, the authors suggest strategic considerations for providers in light of these findings:

  • Since telehealth services save patients costs on travel time, payers may be able to raise patient costs to reduce the impact of increased utilization.
  • For some patient populations, greater utilization may provide more of a cost benefit than it does to the population in the study, particularly for undertreated conditions. “An increase in utilization for patients with diabetes or mental illness might be perceived as a net positive,” the authors note.
  • As telehealth becomes a more widespread, payers may need to look at ways to limit the potential for unnecessary use of the service.