Is telehealth worth the investment? Look beyond reimbursement to calculate ROI, Manatt Health says

Businessman video-chats with doctor on laptop
The most significant financial benefits of telehealth programs will likely be the result of changes to patient acuity levels and increases in patient volumes. (Getty/AndreyPopov)

Hospitals and health systems are ramping up investments in telehealth programs, and they're doing so for diverse reasons—to extend services to patients in rural areas, to provide better follow-up care for patients with complex conditions and to cut down on unneeded in-person visits.

Eight-five percent of hospitals and health systems have adopted telehealth, up from 54% in 2014, according to a Definitive Healthcare report. And, among hospitals looking to invest in telehealth services, 90% plan to do so in the next 18 months.

Telehealth programs require upfront investments in technology, program design and staffing. While payers, including the Centers for Medicare & Medicaid Services, are increasingly expanding coverage for telehealth services, receiving reimbursement across all payers at a level commensurate with costs continues to be a challenge. 

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

RELATED: Study: Telehealth can cut down in-person visits in the short term. Its long-term benefits remain murky

What is the true return on investment (ROI) of telehealth programs? It depends on the size and clinical capacity of the organization, according to a white paper from legal and consulting firm Manatt Health. The firm outlines a framework for calculating a telehealth program's ROI, and it goes beyond just direct reimbursement revenue. 

"Reimbursements tend to get a lot of attention but, in my view, it’s a bit of a red herring in terms of the overall economics of telehealth programs. Reimbursement is a small piece of the financial puzzle," Jared Augenstein, senior manager at Manatt Health Strategies and an author of the report, told FierceHealthcare.

The most significant financial benefits will likely be the result of changes to patient acuity levels and increases in new or retained patient volumes, according to the paper.

Hospital and practice leaders need to evaluate the program’s impact on improving revenue, health outcomes and patient experience relative to cost, Augenstein said.

Other factors need to be taken into account such as cost savings as a result of delivering care in a lower-cost environment, leveraging automation to reduce professional costs and using midlevel providers to provide telehealth services instead of more expensive providers, according to the report.

"Each clinical use case or telehealth program is going to have a unique value proposition that needs to be evaluated," Augenstein said. Remote patient monitoring will have a different value proposition compared to a direct-to-consumer urgent care telehealth model, for example.

RELATED: Most healthcare executives plan to invest in telehealth—here's why

The structure and payment model of each organization also needs to be considered, he said. Because different types of providers have different characteristics, their ROI considerations around telehealth investments also are fundamentally different.

"A hospital that is living in a value-based care world is going to have a real incentive to reduce overall medical spend whereas a hospital still operating primarily in a fee-for-service world may also focus on revenue generation and driving volume. Each hospital needs to think about how their core business operates," Augenstein said.

The white paper presents a rural community hospital as one case study. The hospital implements a telecardiology program that remotely connects physicians to cardiac specialists at a local academic medical center. As a result of this program, the hospital sees an increase in patient volumes as it's able to retain more cardiology patients who would have otherwise been transferred to another facility. The estimated positive financial impact of the telecardiology program is $1.6 million per year, largely due to increases in volumes and patient acuity rather than new reimbursement revenue.

The telehealth program also allows patients to receive care in more convenient and accessible community settings, which helps improve the patient and family experience as well, according to Manatt.

Suggested Articles

Hospitals are already signaling a legal challenge to a final rule from CMS on price transparency, but the agency is ready.

The former health IT employee at a New York hospital was charged with compromising dozens of coworkers email accounts and stealing information.

Aleksandr Pikus, 44, of Brooklyn, was found guilty of one count of conspiracy to commit money laundering and two counts of money laundering.