Telemedicine Policy Brief: Healthcare Delivery Reform

Overview of the Issue

In today's healthcare environment — characterized by a shortage of healthcare providers, an increased prevalence of chronic ailments, and mounting healthcare expenses — telemedicine is a promising tool for improving the efficiency of healthcare delivery. The necessity for telemedicine is compounded further by the following factors:

• A significant rise in the U.S. population — growth of up to approximately 363 million (20%) is predicted from 2008 to 2030
• A shortage of educated, licensed, and trained healthcare professionals
• Growing global prevalence of chronic ailments, including diabetes, obstructive lung disease, and heart failure
• Demand for effective care of homebound, physically challenged, and elderly patients
• Adverse events, illness, and injuries occurring at physicians' offices and hospitals
• Need for improving population and community health
• Lack of health facilities and healthcare specialists in rural localities (Hein, 2009)

These challenges may be addressed effectively through telemedicine. For example, telemedicine can maximize the utilization of available healthcare providers by enabling remote diagnoses, monitoring, and treatment recommendations for patients residing in rural parts of America. Additionally, telemedicine reduces patients' risk of contracting infections by limiting or completely eliminating the need for patients to visit physicians' offices or hospitals to receive care (Hein, 2009).

Population Affected

Obstructive lung disease, heart failure, diabetes, and other chronic illnesses require long-term treatment, together with the services of several specialists — all of which considerably increases healthcare expenses. Patients suffering from these chronic conditions account for approximately 75% of overall healthcare expenditures. Extensive adoption of telemedicine would facilitate frequent vital sign monitoring and information gathering, rather than limiting these activities to sporadic physician visits. Consequently, updates can be forwarded concurrently to a patient's treatment team, enabling potential early intervention — such as a visit to a doctor or hospital — in the event a patient's condition worsens.

Telemedicine adoption aimed at decreasing the number of emergency room and physician office visits can result in improved compliance and convenience for homebound and elderly patients. By reducing hospital and physician visit frequency through e-mail and remote monitoring, timelier patient intervention becomes possible before acute care is needed (Hein, 2009).

Reimbursement and Coverage Barriers

The current business case for widespread telemedicine adoption hinges upon acquiring acceptable reimbursement from one of the following key sources: the Department of Health and Human Services' Centers for Medicare and Medicaid Services (CMS), private insurers, and Medicare contractors at the state level. State-level contractors are responsible for making the majority of decisions pertaining to Medicare reimbursement and coverage — up to ninety percent of decisions.

Organizations with new services or products generally apply for state coverage initially, primarily because coverage by a state contractor generates a return on investment and may eventually lead to a favorable CMS reimbursement and coverage decision. Organizations may alternatively pursue CMS coverage if they are denied sufficient reimbursement at the state level. However, if a procedure or technology is rejected by CMS, the possibility of receiving state-level coverage ceases to exist.

A key complication of this arrangement is that, due to limitations in contract language, CMS is unable to exchange reimbursement- and coverage-related information with state-level contractors. This prohibition on information exchange between state contractors and CMS hampers the adoption and diffusion of novel, innovative technologies — including those central to the concept of telemedicine — by healthcare organizations (Hein, 2009).