Is telemedicine a low-cost alternative to expensive emergency-room and urgent-care visits?  Or will it drive greater utilization rather than a way to lower spending trends? 

The promise of telemedicine lies in its ability to become a true care delivery option or practice extension for managing patients, particularly seniors, with chronic medical illnesses and behavioral health co-morbidities.

There are several factors that will decide telemedicine's future as an innovative alternative care delivery model that serves all stakeholders.

The Challenges

1. Margin

One concern is margin. Is it a race to the bottom? Will the member/employee per month fee charged to payers and employers fade away due to market forces? Can you make compelling profits charging $40 for a text or video consult and perhaps another $100 for a house call? After considering operating costs, the cost of marketing to and acquiring each patient as a customer and most importantly paying the clinician, how much is left?

We're not far from the point at which decent providers won't do telemedicine for much less. Significant gains will need to be made on the cost of patient acquisition or providers will need to have salaried clinicians dedicated to the job in order to make the stand-alone telehealth model sustainable.

2. Utilization

Another concern is how patients are using telemedicine. Many patients who now use telemedicine services aren't that sick. They are logging in with symptoms like headaches, fevers, sore throats, earaches, runny noses and rashes for themselves or their kids. Treating them over the computer, tablet or smartphone is undoubtedly more convenient than a costly trip to the ER or to urgent care and keeps them away from the other sick people waiting there.

However, the big, system-wide savings aren't there unless telemedicine visits truly replace visits that otherwise would have actually happened at these more expensive locations. If you can corner an actuary, they will likely tell you that, in theory, telehealth will reduce costs, but we are still anxiously awaiting the data that prove it doesn't create incremental utilization.

3. Misdiagnosis

Telemedicine may drive up costs in other ways. If a patient's symptoms persist or can't be adequately diagnosed, a virtual doctor will likely tell them to go to the ER or urgent care center. Telemedicine may also lead to unnecessary prescriptions. A telemedicine visit often concludes with a prescription for an antibiotic written to treat a patient's symptoms. Is that antibiotic really necessary? Or, will it lead to more antibiotic-resistant strains of bacteria that will result in more people getting sick?

These issues are real but I believe that telemedicine has the potential to be a core part of our health care delivery system infrastructure and a strong lever to bend the cost curve and make our system easier to navigate.

The Opportunities

1. Providing Front-Line Care

One way telemedicine can reach its full potential is when it's offered as a covered benefit in a health plan. Plans can educate and incent enrollees to use telemedicine or house calls for front-line care. The plans can then leverage the knowledge or experience of clinicians to help patients access or navigate additional care if necessary. Some more forward-thinking employer-sponsored plans and individual plans are showing encouraging signs that this is starting to happen. However, for a variety of reasons, the providers should ideally be in-network health systems and clinicians rather than virtualists unaffiliated with a local provider or health system.

2. Monitoring Discharged Patients

Another strategy with promise is health systems leveraging telemedicine capabilities as a service that complements their traditional health services. For example, telemedicine could be used to check on or monitor patients post-discharge to reduce avoidable hospital readmissions.

3. Addressing Behavioral Health

Telemedicine can be an effective way to deliver some aspects of behavioral health services. That's a clinical area in which telemedicine can have one of its greatest positive clinical and financial impacts. Unaddressed mental health issues can exacerbate an existing chronic health problem (known as comorbidities), leading to high-cost emergency room visits, hospitalizations and readmissions, not to mention loss of productivity in the workplace.

Behavioral health telemedicine consults that reduce those instances can generate big system savings. The availability of telemedicine reduces or avoids any perceived stigma attached to in-person visits with clinicians and can increase the consistent quality of and compliance with behavioral health treatment programs.

4. Treating Chronic Conditions

Most importantly, telemedicine is a powerful modality for chronically ill patients. These patients consume the most expensive medical services, and they are usually not the patients logging into today's wave of telehealth apps or “instagramming” their kale and quinoa salads. These patients drive cost trends for the entire health system and are the central focus of those at financial risk for their care.

Telemedicine services that offer a multidisciplinary team of caregivers to a payer's sickest enrollees, for example, have the potential of creating big savings. Other tactics include remote monitoring of compliance with treatment plans and medication regimens and digital health coaching or concierge-like services to patients with chronic conditions.

There are some compelling examples of this starting to happen, but it won't become mainstream until the patient's incumbent care team is financially motivated to embrace telehealth, either as a result of the shift to value-based payments or, more realistically in the near team, if they can receive traditional fee-for-service reimbursement.

Telehealth must evolve from a standalone consumer and acute care model, outside of the continuum of care for patients. It must become a recognized and valued segment of the care continuum, connected to all the other links in the chain of delivering care. That's where the long-term clinical and financial return on investment can be found. And, by the way, the customer acquisition cost for an existing patient is $0.

This blog originally published on September 24, 2015 as Telehealth That Matters: 4 Ways Healthcare's Flavor of the Month Can Become Chicken Soup on

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About the author

Tom Rodgers leads McKesson Ventures. He spent more than a decade in health care venture capital, most recently leading strategic investing efforts for Cambia Health, and before that with Advanced Technology Ventures. Before his venture capital career, Rodgers had significant operating experience in the health care industry. He held various strategy and commercial roles at leading technology companies such as McKesson, Genentech, FitLinxx and The Wilkerson Group.