Constant improvements in computing and networking technology have enabled industries such as financial services and retail to enjoy lower costs and new revenue streams with remote services. But discovering whether the same paradigms work in healthcare — in the form of telemedicine — is still a work in progress.

“A lot of times, we hold telemedicine up as if it's some unique application facing unique constraints, when really the same issues and problems apply across the spectrum of healthcare services,” says Pamela Whitten, a professor and telemedicine researcher at Michigan State University, East Lansing. “There's great ambiguity and complexity in terms of payment for all kinds of things. I've been in telemedicine long enough to remember when there was no reimbursement, so we've come a long way. Having said that, we have a long way to go.”

Whitten's “long way to go” includes coming to grips with different constituencies that have different definitions for what telemedicine is and how it should be reimbursed; leaving the industry with a confusing range of “reasonable and customary” payment schedules for similar services by disparate private payers; and a shortage of established telehealth architectures demonstrating successful business models.

These obstacles have not deterred industry observers from predicting extremely robust growth for telehealth. A recent forecast by analyst firm Datamonitor, London and New York, states that by 2012, the overall telehealth market should exceed $8 billion, up from $1.2 billion today. The study's author, Christine Chang, says reimbursement issues aren't “the most difficult” problem facing organizations thinking about installing telehealth networks, but are “the biggest,” affecting the industry more widely. Chang thinks overcoming telephobic thinking among some providers worried about disrupting existing work patterns might be harder to overcome.

One major issue facing reimbursement for telehealth is the possible clash of perceptions between providers and payers over the relative value of telehealth. Those services that might be most prolific and valuable for physicians and acute care centers seeking to reduce in-patient costs — remote health monitoring services — have yet to receive widespread approval from the Centers for Medicare and Medicaid Services under the classification of telemedicine.

For instance, CMS will not pay for telehealth services provided by a registered nurse in a patient's home; only consultations performed when a patient is at CMS-approved “origination centers (a physician's or practitioner's office, a hospital, a critical access hospital, a rural health clinic or a federally qualified health center) are covered. Additionally, no telehealth services provided by R.N.s are covered by CMS.

However, some observers believe those restrictions will relax over time.

“Our prediction is that telemedicine will be treated as another tool and be reimbursed along pretty much the same standard as face-to-face services,” says Will Engle, executive director of the Association of Telehealth Service Providers, Portland, Ore. “CMS, as any payer would, wants to make sure it isn't going to be paying for something that would be cheaper face-to-face. It's just been a matter of letting the data build up and then speak for itself. As the data supports the idea that telemedicine does save money among large populations, then CMS will steadily reimburse for it.”

That data is starting to emerge. A recent study by the Center for Information Technology Leadership found that by reducing face-to-face visits and redundant and unnecessary tests alone, a hybrid provider-to-provider telehealth system combining both face-to-face and store-and-forward models can save $3.61 billion annually. In addition, of the 142 million referral visits in the United States each year, a reduction in patient travel from mileage costs alone could save $912 million. The study estimates nationally implemented hybrid systems could save $4.28 billion annually.

There are other cost-saving incentives that could emerge. Presenters at a recent webinar conducted by the American Telemedicine Association, Washington, D.C., for instance, recommended that hospital executives consider implementing unreimbursed home telehealth capabilities for recently discharged patients who, if re-hospitalized, would not be covered by CMS, as well as for ongoing monitoring that may enhance reimbursement under pay-for-performance guidelines. Whitten says home health organizations might also consider using non-reimbursed telemedicine if it reduces nurse turnover and recruiting costs.

And, although there are few examples of successful telehealth architectures from which executives can learn at this point, Whitten is currently conducting a nationwide study and says hospitals and organizations considering telehealth networks should first figure out whether they want to use telehealth as either something to predominantly generate new revenues, or to save expenses. “And then, whichever one of those two approaches is the rationale from which you're implementing, then develop an appropriate business strategy to actually match that goal.”

She says researchers have realized that successful telehealth efforts will be multidisciplinary.

“Here at Michigan State, we have really merged the computer science and telecommunications and medicine and nursing faculties, and we're going into these projects together,” she says. “We're finding that's the only way we're going to figure out how you're going to make it work. And we've really identified what are the key questions we should be asking — and that's no small thing.”