Mary Jo Condon, Freeman Healthcare

Does the Long-Term Future of Telehealth Mean Lower Healthcare Costs?

By Mary Jo Condon
Mary Jo Condon, Freeman Healthcare

To better understand the future of telehealth, it is important to understand what the costs look like over time and whether telehealth offers advantages in cutting healthcare costs overall.

Prior to the COVID-19 pandemic, use of telehealth was more of an outlier in the healthcare industry, but the pandemic and ensuing quarantines forced rapid implementation of virtual healthcare visits across all practices. This has left many in the industry guessing as to whether virtual doctor visits are the new norm or a temporary stop gap measure. A recent survey from indicates that healthcare consumers believe that telehealth will outlive the pandemic, with 83% of patients expecting to continue utilizing telemedicine after the pandemic is over.

Perhaps a better measure for predicting the future of telehealth will be understanding its impact on healthcare costs.

When the pandemic first struck, CMS approved federal waivers allowing states to expand coverage of telehealth and telemedicine services, as well as broadening the list of providers authorized to deliver these services. Before COVID-19, providers charged in the range of 80% for a telehealth visit versus in-person due to reduced overhead costs. To spur on the use of telehealth during the height of the pandemic, providers were told to charge a full rate for a telehealth visit. Records show that insurers have paid out in the range of two to 10 times more per month for telehealth services in 2020 as compared to 2019.

To better understand the future of telehealth, we must ask ourselves what these costs look like over the long term and whether telehealth offers advantages in cutting healthcare costs overall.

To answer these questions, healthcare analysts are increasingly turning to claims data available through All Payer Claims Databases (APCDs). APCDs are state databases that break down the siloes of healthcare data and collect and aggregate health care claims from public and private payers, including Medicare, Medicaid, and private insurers. Aggregated into databases, this data allows researchers to follow patients over time, typically using de-identified alphanumeric codes. This ability to track care, costs and outcomes over time is important in quantifying the true value of healthcare services.

Currently, 25 states have legislation that mandates APCDs and several more are exploring establishment of an APCD. APCDs can not only track increases in telehealth claims by specialty, as well as declines in in-person visits, but can also identify longer term trends in spending.

For example, a cost comparison estimates the average telehealth visit at $40–$50, as compared to $136–$176 for in-person acute care. But do those numbers tell the whole story?

A study from Health Affairs provides further context. It found that spending for colds and other types of acute respiratory infections was actually higher when a patient first met with a healthcare provider virtually in a “direct-to-consumer” telemedicine visit versus when the initial visit was in-person. The problem was not the cost of the initial virtual interaction but rather that the patients who first received a virtual visit were more likely to have a follow-up visit within seven days for the same complaint than those who first received care in person.

The article found that another important consideration in potentially higher telehealth costs is the concern that patients may seek more visits based on the convenience of telehealth than they would have otherwise, thus increasing patient visits and costs.

In December 2020, the Minnesota APCD used its claims data to develop a groundbreaking report on telemedicine usage during COVID-19. They found that behavioral health services utilized telemedicine services at a higher rate compared to non-behavioral health. Behavioral health visits are less likely to require the follow-up in-person visits needed for acute care. Their data showed “the use of telemedicine in behavioral healthcare is especially likely to endure, and national trends seem to support this.”

These findings were corroborated by The Center for Improving Value in Health Care (CIVHC), using data from the Colorado All Payer Claims Database (CO APCD). In their Telehealth Services Utilization analysis, they found that behavioral health providers served the most people via telehealth services as opposed to primary care providers. From March to July 2020, Medicaid patients used telehealth services the most (2,929 visits/1,000 members) and Medicaid paid the most for those services ($30 Per Member Per Month).

The important takeaway from these claims data points to the efficacy and cost-cutting of telehealth in some practices where in-person interaction with a physician is less critical, including behavioral health, mental health services and some substance use disorder treatments.

The other critical question is whether providers will adjust telehealth rates back to the pre-pandemic levels or will develop new rates that reflect the hybrid between telehealth and in-person visits that may emerge across specific practice areas.

Claims data can help answer that question as we begin to navigate the new post-COVID-19 normal. The time is now to tap into these data sources to understand real opportunities to reduce healthcare spending while ensuring access to quality care over the long term.

About The Author

Mary Jo Condon, Freeman Healthcare