Telemedicine Can Generate Savings by Reducing Hospitalizations of Nursing Home Residents

Switching from on-call to telemedicine physician coverage can reduce hospitalization rates and generate annual savings of about $120,000 per nursing home per year, study says.

According to a research published in Health Affairs, using telemedicine at nursing homes for after-hours care can reduce unnecessary and avoidable hospitalizations for their residents.

However, the savings generated from the reduced hospitalizations accrued to the healthcare insurers rather than to the nursing homes.

Nursing home residents who need medical care after regular hours are usually sent to hospitals.

The absence of physicians during off-hours often leads to inappropriate hospitalizations which may result in medical complications, increased incidences of diseases and unnecessary expenditures to health insurance organizations.

It is estimated that these avoidable expenses amount to more than a billion dollars annually in the United States alone, increasing the interest in the telemedicine option.

Real life study to investigate telemedicine savings

David C. Grabowski of Harvard Medical School and A. James O’Malley of the Dartmouth Institute for Health Policy & Clinical Practice at the Geisel School of Medicine studied 11 nursing homes belonging to a Massachusetts-based for-profit nursing home chain to see if telemedicine is a feasible way to reduce unnecessary hospitalizations.

The nursing homes under study switched from on-call to telemedicine coverage wherein patients could visit physicians ‘virtually’ via a two-way video conferencing using a high-resolution camera.

While 5 of the 11 nursing homes served as control group, the remaining 6 were randomized to initiate telemedicine.

When the records of nursing homes for the period of October 2009 to September 2011 were studied, researchers found that:

• The rate of hospitalizations declined by 5.3% in the control group
• 9.7% decreased in the treatment group which did not amount to a statistically significant effect

However, upon further analysis, they discovered that most of the telemedicine calls originated from 4 of the 6 treatment facilities. The rate of hospitalizations in these “more engaged” nursing homes declined significantly by 11.3%.

The rate of the two “less engaged” nursing homes turned out to be 5.2% which is almost the same as 5.3% reduction rate in the control group.

Based on the findings from the “more engaged” nursing homes, the researchers calculated that Medicare, the national social insurance program administered by the US Federal Government, could expect average savings of $151,000 per nursing home per year.

After subtracting the annual costs of telemedicine systems, which amounts to $30,000 per nursing home, the net savings could be $120,000 per nursing home per year.

Interpreting the results of telemedicine in practice

The researchers say that engagement is the key to make effective use of telemedicine technology. The availability of telemedicine without deep engagement is as good as not having the system at all.

Telemedicine providers and nursing home administrators need to sell the case and secure buy-in from frontline staff members and physicians to benefit from the technology.

Another interesting conclusion from the study is that the regulatory mechanism needs to create a financial incentive for nursing home owners to invest in telemedicine services.

At present, the nursing home owners pay for the costs of the telemedicine service while the savings generated will go to the Medicare.

The researchers conclude that unless innovative healthcare payment and financing models are adopted, the business case for telemedicine services remains weak.

However, lack of incentives from the regulatory framework aside, the research proves the effectiveness of telemedicine systems in reducing avoidable hospitalizations and unnecessary costs in nursing home settings.