1. The Economic Impact of Telemedicine Service in a Rural Hospital Brian Whitacre Oklahoma State University SERA-19 Meetings Sep. 10-12, 2007

2. 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

3. 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

4. Telemedicine Locations in Oklahoma Oklahoma State University Telemedicine Network -“Hubs” in Oklahoma City, Tulsa -15 sites throughout the state -13 potential future sites

5. Site Visits / Data Collection Waurika, OKBristow, OKPoteau, OK

6. 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

7. 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

8. 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

9. 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

10. Transportation Savings to Patients Example:

11. 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 Time Hours )*hourly wage Source: Google Maps, discussion with hospital personnel

12. Missed Work Savings To Patients Example:

13. 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

14. Local Lab / Pharmacy Work Example:

15. Opportunity Cost Summary CAH, < 200 encounters per month: ~$300,000 year Larger facility, >2,000 encounters per month: ~$2.5M / year

16. 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