How Telemedicine Drives Volume, Revenue

Not only is health information technology helping to control costs, it's also creating new opportunities for revenue.

This article appears in the October issue of HealthLeaders magazine.

Healthcare systems find that telemedicine can help grow their volume and drive out inefficiencies, but new methods of care delivery require thoughtful planning to avoid hiccups.

The UC Davis Health System now offers access to 30 specialty care services ranging from behavioral health and dermatology to audiology and ophthalmology for both children and adults.

Recently, the system reported it was able to grow its pediatric medicine practice through telemedicine. In a study published in the July 2013 issue of Telemedicine and e-Health, authors from the UC Davis Health System reported 2,029 children transferred to the hospital from 16 surrounding hospitals connected via telemedicine between July 2003 and December 2010.

From these patients, average hospital revenue increased from $2.4 million to $4.0 million per year, and average professional billing revenue increased from $314,000 to $688,000 per year.

The Sacramento, Calif.–based system, which has 619 licensed beds and reported total operating revenue of $1.3 billion in 2012, has the benefit of being in a state that has long recognized the practice of telemedicine.

"Our experience has been positive with private payers in California," says Shelley A. Palumbo, chief administrative officer for UC Davis Health System's Center for Health and Technology and the Center for Virtual Care. "In fact, several payer organizations have attended the UC Davis Telehealth Education Program to better inform themselves about telehealth and the benefits for their membership."

Since starting its telemedicine program in the early 1990s, UC Davis Health System has provided nearly 37,000 consultations that way. This represents synchronous (real-time communication) and asynchronous (recorded and stored for another time) telehealth consultations to more than 100 sites spanning 44 of California's 58 counties, Palumbo says.

"Patients and their physicians can connect with UC Davis doctors from many different locations, including rural hospital emergency rooms, community clinics, and Native American healthcare sites," she says.

Integrated delivery networks have been able to sidestep reimbursement issues due to the fact that they own their own insurance companies.

In Utah, Salt lake City–based Intermountain Healthcare enrolled about 77,000 Medicaid participants under full capitation in January, says Wesley Valdes, DO, telehealth services medical director at the 22-hospital system.

"Once you're capitated, you're freed up from thinking like fee-for-service, and now you can look at what we jokingly say is how we really want to take care of patients without having to worry about justifying everything as a single encounter," Valdes says.

"We have recently been discussing how to best obtain information from this population regarding the technology that they have access to and what obstacles, if any, they face. This effort is still in the formative discussion phase, but we felt it to be necessary to accurately design an approach to this group in an effective and sensitive fashion," he says.

Intermountain's alternative to the ACO model, known as shared accountability, is leading to interface cost reduction (admission to discharge) and is allowing the system to invest in telemedicine infrastructure in every single inpatient room and ambulatory exam room, which will allow consultations among any physicians in the system.

"We decided to take those cameras and point them inside first," Valdes says. "By doing that, and looking at the infrastructure and process that would require that, we started to realize additional cost savings and additional efficiencies that we previously couldn't have realized without that infrastructure. For example, if I were to run a monitor and microphone and speakers in a room, sure I can bring a consultant into that room virtually, but I can also bring an interpreter into that room, a case manager, a pharmacist, a nutritionist, a chaplain, and I could leverage these resources across my system very efficiently."

Intermountain also realized that when the infrastructure was not in use by staff, patients could use it. "Grandpa comes out of hip surgery and wants to chat with the grandkids, say, 'Hey, doing okay.' We'll let him do that. We can make that available."

The interactive patient room design now in progress at Intermountain includes a touchscreen-enabled device that allows the patient to request interpretation services or other video services, Valdes says. "Patients have a better idea of when they need an interpreter than we do.

"This infrastructure is the exact same infrastructure that the organization was looking at to roll out patient entertainment to all the rooms," Valdes says. "That was about a $12 million to $14 million investment. It's also the same infrastructure that they were looking at to roll out patient education to all the rooms. That was about an $8 million investment. So by committing to this infrastructure, we were able to roll all those projects into one and save the organization about $22 million of proposals right off the bat."

Intermountain will roll out the new telemedicine infrastructure, including all 2,800 hospital beds in its system, during the next 12 to 18 months, "faster if we figure out how to do it," Valdes says. "We're prioritizing things like the ED and the intensive care units first."

At this year's American Telemedicine Association meeting, Intermountain demonstrated its latest telemedicine technology for neonatal intensive care as well. A prior implementation at Intermountain's McKay-Dee Hospital Center was supposed to allow parents to be able to view infants in neonatal bassinets, but the cameras were embedded in fixed ceiling positions. Bassinets were too often covered by blankets, and nurses had to be mindful of where the bassinets were placed. By placing the new cameras within the bassinets themselves, those problems go away.

The newer cameras also reflect the plummeting cost of such technology for telemedicine. "We're actually leveraging consumer-grade Web cams, $70 Web cams you can go pick up at any local electronics store, which again reduced the cost of the implementation, and it was a wild success at the ATA conference," Valdes says.

Another healthcare system that continues to see its telemedicine business grow is nonprofit HealthPartners, a Bloomington, Minn.–based integrated system that reported more than $1.3 billion in total revenue in 2012. Earlier this year, the system reported savings of $88 per office or emergency department visit, compared to the typical office visit or urgent care visit, which can fall in the $120–$140 range. Part of the strategy of this offering, which has resulted in 68,000 treatment plans since it launched in 2010, is attracting visits for certain straightforward conditions, says Kevin Palattao, vice president of patient care systems at virtuwell, the online service front end for HealthPartners' telemedicine services.

He describes the straightforward conditions as those that "behave really well according to rules and protocols, [for example,] bladder infection, sinus infection, pinkeye," Palattao says. "We treat the flu, allergies, and even minor skin rashes. We have a pretty simple picture upload capability, so consumers can share images with us that help increase the accuracy of the diagnosis. Any time the standard of care calls for a physical exam or a lab test, those are the types of things that we stop in the interview process and redirect you to in-person care."

At Mercy Health in metropolitan St. Louis, clinicians are monitoring 450 beds spread across Arkansas, Oklahoma, Kansas, and Missouri, with plans to expand to a fifth state. All told, Mercy Health has more than 70 telemedicine projects in development, "anything from doing e-consults from any specialty to inpatient to outpatient and then in the remote home monitoring field and then even consulting in the home via video," says Wendy Diebert, vice president of telemedicine services at the 32-hospital system, which includes 300 outpatient facilities.

"Some of it is direct fee-for-service," Diebert says. "Some of it, we're paid a service fee to provide the service, so then the hospital can bill for that service. But once the physician's paid a service fee, they cannot bill for it."

Still other telemedicine services are funded on a population management model, where Mercy is paid a set fee to keep a population of patients healthy, Diebert says.

With telemedicine reimbursement issues still unsettled in various states, Diebert says the system has spent the past year trying to come to grips with the issue.

"Each model of service that you deliver, you have to develop a template for reimbursement around that, then it all ties into scheduling and where you draft the fees at," Diebert says. "It seems so simple, because everybody just says just bill it. Absolutely you can just bill it, but you also have to have certain things in place to do that."

One of those things is that the healthcare system has to have a license in the state where the patient receives the telemedicine services, Diebert says.

"The second thing is you have to have privileges at the hospital" where services are delivered, she adds.

"The third thing, which everybody underestimates, and we clearly underestimated, is that you have to have those credentials with every plan—whether it's managed care, government plans, and that could be anywhere from five to seven applications per physician after you've already completed all the other applications."

At this point, Mercy Health has created "a centralized hospital privileging agreement across our health system, and now we're working on a centralized managed care contract so that if I get them in this plan and this community, that they're accepted in all plans in all communities," Diebert says.

For those just beginning their telemedicine efforts, it is essential to convene a multidisciplinary team from the start, Diebert says. "We ended up pulling in our Epic [EHR] builders. We pulled in our finance team. We pulled in the managed care team. We pulled in the government plan team. We pulled in the clinical team. Just because it hit every aspect and has a ripple-down effect into everything you do.

"It comes down to even how I schedule the patient, how I refer the patient, [how we] work to follow each transaction to see if you're going to get paid and if you're not getting paid by that managed care company."

In the process, Mercy Health officials would discover existing contracts where a particular company covered telemedicine but not in particular communities, Diebert says. "It was just so unknown that nobody really did a good job around negotiating contracts around telemedicine, not from a managed care standpoint," she says. "Medicaid, Medicare, if you're in a rural community, that becomes a whole different thing, but we have a mix of metropolitan, urban, and rural communities, so we're hit with all the different kinds of scenarios."

The scheduling issue also sneaks up on telemedicine programs. "You have to schedule the patient, you have to schedule the physician, and their schedule is their office area, because you're taking a slot of their time away from their regular schedule," Diebert says. "You have to make sure that they're in a telemedicine room, and that the telemedicine room has the right type of equipment," which these days includes a growing variety of scopes attached to computers and the Internet. "So it is much trickier than just saying I'm going to schedule this patient in this office room."

The telemedicine boom also puts pressure on hospitals to standardize their technology platforms from clinic to clinic. "I have a physician coming in, and he's going to do telehealth in four different hospitals or four different clinics. I don't want him going to five different applications to get to all of those things. It needs to be streamlined, because the other side of it is, from a scheduling perspective, you cannot impact their schedule, because it impacts their productivity if you don't have that room and that patient in that room ready to go. You can't be saying, 'Wait, the camera's not working or this isn't working.' You have got to be ready to go so that 20-minute visit goes on like clockwork."

In this upcoming HLM webcast, learn how specialists and specialty services are reaching outside hospital and clinic walls to engage patients via the Internet, and how telemedicine innovators are overcoming challenges such as billing, scheduling and contractual agreements. November 19, 2013, 1:00–2:30 p.m. ET. Register today.

Reprint HLR1013-5

This article appears in the October issue of HealthLeaders magazine.