One managed-care plan, PacifiCare, found that hospital costs dropped 61 percent among patients using the Alere device. Figuring that translates into a 174 percent return on investment, PacifiCare signed on with Alere in January. Of the 42 managed-care plans interviewed for a recent Forrester Research report, about one-quarter said they had experimented with home monitoring devices; more than half expected to be using the new technologies within three years.
Telehealth companies are also targeting the more than 10,000 home care agencies that dispatch nurses to patients' residences. Home care spending is expected to grow from $36.6 billion last year to more than $61 billion in 2005, according to the HCFA. A 1999 University of Kansas study concluded that home monitoring devices could cut in-person nursing visits by nearly half. "Even if 10 percent [of home visits] can be averted, it's an immense number," says Ace Allen, lead physician on the Kansas study.
But so far, home care agencies have been reluctant to adopt the new technology. Industry watchers blame the 1997 Balanced Budget Act, which capped Medicare reimbursements and drove thousands of those agencies into bankruptcy. Says Allen: "The home care industry [is] afraid to spend a dime to save a dollar."
A bigger obstacle to telemedicine's widespread adoption is HCFA, which administers Medicare. Under current rules, HCFA won't pay health care providers to install and use home telemedicine devices. That situation won't likely change until the government sees more evidence of long-term savings. According to Audrey Kinsella, who runs Information for Tomorrow, a telemedicine research business, the few existing studies have been too small (at least by federal standards) and too focused on short-term outcomes.
Telehealth revenues are still developing, but the costs are here now. Cyber-Care, which burned nearly $29 million in 2000, announced pay cuts and other cost-cutting measures in July. Although Alere now serves 2,000 patients, up from 200 a year ago, its annual revenues are less than $5 million. Dale Kubasak, Alere's VP of sales and marketing, doesn't foresee profits until 2002. American Telecare is one of the few moneymakers in the field. The company expects revenues of $7 million to $8 million this year - double last year's take, yet far from the billions its founder envisioned.
While short-term projections have been tempered, the long-term prognosis is still rosy. Health care costs are expected to soar with the aging boomer population, and providers may soon be desperate for anything that can contain those expenses. If telemedicine vendors can hang on, the opportunity could still be huge.
"Home telecare is the great unexploited efficiency in health care today," says Allen. "But I've been saying that for five years, waiting for the logjam to break, and it still hasn't."
