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Related Experiment Videos

Making the business case for telemedicine: an interactive spreadsheet.

Michael J McCue1, Susan E Palsbo

  • 1Department of Health Administration, Virginia Commonwealth University, Richmond, VA 23298, USA. mccue@hsc.vcu.edu

Telemedicine Journal and E-Health : the Official Journal of the American Telemedicine Association
|April 20, 2006
PubMed
Summary

Telemedicine in urban areas is a sound business investment. This study shows urban telemedicine programs can be financially self-sustaining, demonstrating a strong business case without needing grants.

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Area of Science:

  • Health Economics
  • Health Services Research
  • Telehealth

Background:

  • Demonstrating the financial viability of telemedicine in nonrural settings is crucial for widespread adoption.
  • Urban healthcare delivery models require innovative solutions to remain cost-effective.

Purpose of the Study:

  • To establish the business case for implementing telemedicine services in urban, nonrural areas.
  • To analyze the financial feasibility of telemedicine for poststroke rehabilitation in an urban outpatient setting.

Main Methods:

  • Development of an interactive financial analysis spreadsheet.
  • Application of the spreadsheet to urban poststroke rehabilitation scenarios using historical financial data.
  • Calculation of financial breakeven points and internal rate of return (IRR) with a 10% cost of capital.

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Main Results:

  • A total of 340 telemedicine visits annually are projected to yield positive net cash flow.
  • The initial investment is expected to be recouped by year four.
  • The project demonstrates an IRR of 20%, exceeding the hospital's cost of capital, with a positive present value return.

Conclusions:

  • Urban telemedicine programs can be financially self-sustaining and a sound business investment.
  • Financial viability does not rely on reduced provider/patient travel time or external grants.
  • Strategic decisions regarding clinic expansion are key to optimizing breakeven points and ROI.