Making the Business Case for Telemedicine

An Interactive Spreadsheet

Telemedicine is used to provide remote health services to patients in a growing number of medical disciplines. Three common applications are: telemetry that allows remote measurement and monitoring of patients; store-and-forward digital image interpretation such as radiographs or retinal pictures; and interactive patient-clinician encounters such as psychotherapy, patient education and specialty consultations.

The objective of this study was to demonstrate the business case for telemedicine in rural areas. The existing literature suggests that telemedicine is only profitable where the cost of traveling to the hospital is very high, but the researchers wanted to show a better business case. They explored the investment decision to instigate a telemedicine program by a freestanding rehabilitation hospital in an urban area. They investigated whether a financially self-sustaining project could be established in a nonrural location, one that did not rely on grant funding and other subsidies. The researchers assumed a cost of capital of 10 percent to finance the project. The figures showed that a total of 340 telemedicine visits will generate a positive net cash flow each year and that a program of this nature would recoup its initial investment by the fourth year, produce a positive present value dollar return of more than $2,000 and earn a rate-of-return of 20 percent. In this way, the researchers were able to demonstrate a successful business case for telemedicine using an urban scenario that mimicked a rural setting.

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