Estimating the economic value proposition of Intermountain Healthcare’s Telemedicine/Virtual Care Program.
Warbird Consulting Partners working in close coordination with Intermountain Healthcare (HC) Telemedicine team designed a methodology and related financial models to enable Intermountain HC to quantify internal economic benefits generated across the health system and potential financial benefits for the local communities served by Intermountain HC.
Intermountain HC Telemedicine/Virtual Care generated a positive return on the significant investment made by Intermountain HC into developing, growing and maintaining this program. Additionally, by enabling local access to high quality specialty care, the program continues to create financial value for patients and enhance local economies across the service area.
By designing the operating and financial model of Intermountain HC’s Telemedicine/ Virtual Care business unit as a profit center instead of a cost center, benefits generated across the system could be quantified. While the data regarding economic returns to Intermountain Healthcare is proprietary, this comprehensive analysis determined that even though the investment in the program is relatively large, the actual and realized economic benefits, (conservatively calculated,) were in excess of the annual investment by 32%. In other words, the real economic benefits to Intermountain HC as a system were, on an annualized basis in the current fiscal year, more than 132% of the comprehensive investment. Warbird helped to determine that there were economic benefits far in excess of the current methods of reimbursement for this type of care delivery.
During the ongoing Covid-19 pandemic, value of such services would be greatly enhanced.
Intermountain HC has been a pioneer in Telemedicine/Virtual Care services. Intermountain HC continues to rapidly expand Telemedicine/Virtual Care Telemedicine/Virtual Care services in Intermountain HC’s defined 8-state service area. Though relatively young, Warbird Consulting Partners believes that Intermountain HC’s Telemedicine/ Virtual Care program is significant in terms of reach and impact (both current and future). The commitment by Intermountain HC to continue major investments has advanced the program dramatically. It is a superior program with tremendous upside potential for impacting the Intermountain HC Brand, patient loyalty, business generation, and potential for mergers and acquisitions. The significant healthcare cost reductions resulting from the program have only just begun to be realized. In addition to benefit for the hospitals and provider network of Intermountain HC, Telemedicine/Virtual Care also has the effect of reducing the average cost of care for the 900,000- member Intermountain Health Plan, called Select Health.
While Telemedicine/Virtual Care has the effect of both driving up Net Patient Service Revenues (NPSR) as well as reducing the cost of delivery for both the inpatient and outpatient modes of care, it is also the next evolution of care delivery system. As opportunity for direct reimbursement and/or gainsharing becomes available for Telemedicine/Virtual Care, its technology evolves and influence grows, Telemedicine/Virtual Care, (rather than being only a shared support service), could become the third mode of care delivery for Intermountain HC: Inpatient, Outpatient, and Remote via Telemedicine/Virtual Care.
During the ongoing Covid-19 pandemic across the world, the importance of preserving patient access and delivering healthcare while managing risks for all stakeholders can hardly be overstated. The clinical as well as economic benefits to the patients, the community and Intermountain HC network would be certainly enhanced across Intermountain HC’s service area.
Intermountain HC has recently established a centralized “command center”- a single physical location to provide space for consolidation of all Telemedicine/Virtual Care services along with consolidating the financial statement of the programs. The command center/consolidated Telemedicine/Virtual Care business unit provides a broad range of clinical and central support services including Connect Care Urgent Care, Tele-Hospitalist, Tele-Critical Care, Tele-Infectious Diseases, Tele-Oncology, Tele-Stroke, Tele-Neurology, Tele-Pediatrics, Tele-Neonatology, Tele-Crisis, Patient Safety Monitoring, along with support services such as Patient Placement and Transfer center, technology for Scheduled Video Visits, post discharge patient communications and physician communication services. The commitment of Medical leadership of these programs is crucial to the success and growth of these programs.
Centralization of Telemedicine/Virtual Care services and its management structure and co-location of such services has enhanced provider-to-provider interactions as well as better coordination of patient flow. Combined with economies of scale and ability to provide expert/specialist services throughout the health system efficiently, the program continues to make great progress in “bending the cost curve” for Intermountain HC while enhancing the vision of providing as much care as possible at local venues close to patients’ homes and using virtual technology. Of significance, and still evolving is the importance of Intermountain’s Telemedicine/Virtual Care program in enhancing the competitiveness of its own 900,000-member health plan.
Reimbursement for Telemedicine/Virtual Care in Utah (and in most other states as well as at the Federal level) lags far behind the economic and qualitative medical benefits of such a program (as the Covid-19 pandemic will surely illustrate). This will eventually catch up as the program grows in importance as the third mode of care delivery (inpatient, outpatient and remote or virtual) and as the value proposition of such programs, especially in cost reductions, becomes more apparent. Clearly, this need will be underscored by the current pandemic and its impacts on the healthcare system and on patients’ need to practice social distancing – even for healthcare services. Intermountain’s program has already proved itself in its ability to manage all types of patient flow within the serious context of Covid-19.
In addition to direct reimbursement from payers, the broad array of high quality and specialized clinical programs already included in the Telemedicine/Virtual Care program continue to make the Intermountain HC’s Telemedicine/Virtual Care services attractive to non-Intermountain HC facilities and organizations thus opening doors for new partnerships, revenue generation, and risk sharing opportunities while driving down overall cost of care.
A challenge with assessing the true value of such a multi-faceted program such as Intermountain HC’s Telemedicine/Virtual Care business unit is that the value can be generated for and retained by a health service provider unit, (both within and outside the system, other than Telemedicine/Virtual Care business unit), while costs are consolidated under Telemedicine/Virtual Care. The traditional approach has been to reallocate the cost back to the health system which greatly underestimates value of such program. Treating Telemedicine/Virtual Care as a “cost center” rather than “profit center”, stifles creativity and growth of this modality of care.
During this engagement, an alternative methodology was used to quantitatively and specifically calculate the value generated by Telemedicine/Virtual Care which can allow the program to receive appropriate credit for generating such value in large part, without allocating cost back to the health system.
Rather than taking a traditional income statement approach to assessing the economic value of Telemedicine/Virtual Care to the system, the approach was to use a modified, but still financially relevant format which is illustrated below:
Primary Economic Value to the System
The final finding of this value assessment was that the economic benefits to Intermountain Healthcare as a system we 32% greater than the investment (which in Intermountain’s case, is significant and both deep and broad.) This does not include the economic value to the local communities illustrated below nor necessarily all of the potential economic benefits to the health plan, Select Health, which was beyond the scope of this work.
In addition to financial benefit to Intermountain HC, the program also has clear impact on improving quality of patient care. The value of ready availability of specialists to consult on complex cases at remote facilities can hardly be overstated.
Secondary Economic Benefit the System and Community
General Local Hospital/Clinic Community Benefits
The financial impact of Telemedicine/Virtual Care can extend beyond Intermountain HC. By enhancing abilities of local facilities to provide care for patients, significant financial benefits for the patient and community benefits are generated. While an accurate quantification of all such benefits was beyond scope of this report, high level estimates can be summarized as follows (again, the following is for illustration purposes only as the actual numbers are proprietary to Intermountain HC):
Community economic impact can be partially calculated by using an approximation of local revenue generation at local healthcare facility using Telemedicine/Virtual Care services multiplied by a relevant Economic Multiplier factor such as that provided by American Hospital Association. While not a direct financial benefit to Intermountain HC, there was clear local community benefit and significant goodwill for Intermountain HC. This was likely enhanced during the current Covid-19 crisis.
Maximizing the use of Telemedicine/Virtual Care and centralized services will create inpatient bed capacity; improve access to physicians whose practices may currently be over-scheduled (particularly among specialists). This helps avoid future capital and operating costs and may reduce the need to recruit specialists in these programs (especially if there are shortages). This can be effective when certain specialists are hard to find and are expensive additions to the medical staff.
The current and wide range of potential opportunities for growth in the centralized management and efficiency economies of clinical services via Telemedicine/Virtual Care will continue to lower the overall costs of care provided by Intermountain HC. With reduction in overall cost of care resulting from operational and capital cost savings on the healthcare delivery side, Select Health can control or even reduce the premium costs to employers, as well as co-pays and deductibles for patients. This can act as a key differentiator enabling greater competitiveness and the growth of Select Health market-share. The engagement generated several recommendations on how to best advance this potential.
Economic tracking and metrics reporting are critical to the success of Telemedicine/Virtual Care going forward, especially so growth can occur in a prioritized, logical and controlled fashion. A more stylized form of consolidating financial statements to include credit for value created across the system along with the use of traditional Net Present Value, ROI and Payback Analyses for new and existing Telemedicine/Virtual Care programs can be tracked using dashboards at a program and at a consolidated level. Ease of access to such information will enhance the role of Telemedicine/Virtual Care in emerging as the third modality of care.