Table of Contents

Highway to Health: Transforming U.S. Health Care in the Information Age

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Foreword

Executive Summary

Chapter 1. Setting the Stage

Chapter 2. Remote Care

Chapter 3. Personal Health Information and Management

Chapter 4. Integration of Health Information Systems

Chapter 5. Health Care Research and Education

Bibliography

Acknowledgements

ENDLESS FRONTIER, LIMITED RESOURCES

U.S. R&D Policy for Competitiveness

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FOREWORD

Now, more than ever, research and development (R&D) drives the process of innovation that underpins our nation's economic well-being and national security. Together with the federal government, the members of the Council on Competitiveness -- private sector companies, academic institutions and labor unions -- are key participants in the U.S. R&D enterprise.

At no time in the last 50 years have there been so many forces and changes affecting the R&D enterprise as those that exist today. The most salient ones include:

• the unprecedented mobility of capital and technology and use of human resources that have helped othernations develop their own R&D capabilities;
• the rapid ascent of computer, information and communication technology to a level from which entirely new industries have evolved;
• the emergence of civilian and commercial interests as the primary drivers of leading edge technology, rather than the defense sector;
• the accelerated pace, increasing complexity, and new disciplines in science and technology that have transformed the innovation process itself; and
• the mission to balance the federal budget.

These forces have overtaken the post-1945 system of innovation that developed and sustained U.S. technological preeminence. A new paradigm of R&D partnerships is emerging, based on the collaboration rather than the separation of key participants in the R&D enterprise. This new pattern is one in which the roles of the private and public sectors overlap in their missions to provide a viable science and technology infrastructure. It is based on concurrent technology processes, instead of the time-consuming, step-by-step procedures that in the past have transformed fundamental science into products for the market.

This report by the Council on Competitiveness provides guidelines for industry, government and academia that will enable the United States to make the paradigm shift that is necessary in the post-Cold War era. The Appendices of the report are in-depth assessments of R&D in six industry sectors that are central to U.S. competitiveness: Aircraft, Automotive, Chemical, Electronics, Information Technologies, and Pharmaceuticals.

While the lessons of these individual sector studies helped shape this report, the major findings emerged from the deliberations of a distinguished advisory committee of experts from academia, government and industry. We owe special thanks to the members of this group for their invaluable insights, although the Council assumes responsibility for the conclusions of the report.

The title itself, Endless Frontier, Limited Resources: U.S. R&D Policy for Competitiveness, makes a key point. The promises and expectations of R&D are increasing, but the resources needed to sustain the R&D effort are decreasing. In this environment, priorities not only need to be set, but knowledge and resources must be shared through wide-ranging collaborations involving companies, universities, and government agencies and laboratories.

This report contributes to the current assessment of the future of U.S. R&D but stands apart from other reports, not just by putting special emphasis on the need for partnerships but by framing guidelines for policy that are equally demanding for the industrial, government and academic sectors. Endless Frontier, Limited Resources also calls for a reasoned end to the unproductive ideological debate over the federal government's proper role in R&D.

The Council on Competitiveness and its members have a unique role to play in forging national consensus over the future of the R&D enterprise. The institutions from which our members are drawn operate at the cutting edge of innovation. They have first-hand experience with the new realities of the laboratory, and they provide the foundation in science, technology and education upon which U.S. competitive strength rests. In addition, the Council serves as a nonpartisan reservoir of expertise from which both the executive branch and Congress have drawn.

The Council feels an obligation to act on our recommendations and conclusions by:

• convening a national discussion on the future of the R&D enterprise that will focus attention on the need to set priorities, foster partnerships and shape policies to position the United States for technological leadership in the 21st century;
• stimulating our members to address the guidelines for industry and academia; and
• working with Congress and the administration in a nonpartisan way to arrive at R&D strategies and programs that further the United States' competitiveness and standard of living.

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Paul Allaire

Council Chairman

Chairman and Chief Executive Officer

Xerox Corporation

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Jack Sheinkman

Council Vice Chairman

Amalgamated Bank of New York

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Thomas E. Everhart

Council Vice Chairman

President

California Institute of Technology

Chapter 1 - Setting the Stage

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Highway to Health: Transforming U.S. Health Care in the Information Age

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INTRODUCTION

With the increase in health care costs, the graying of the American population, and the shift toward managed care, few people are unaffected by the changes sweeping the health care industry. Attempts to reduce costs yet deliver quality care to as many citizens as possible have prompted those involved in providing health care products and services to look to technologies inherent in the national information infrastructure (NII) for solutions. A brief description of the market drivers for incorporating NII-related technologies into health care delivery is given followed by a conceptual framework for envisioning the interactions among the elements involved in creating an NII-based health care system.

MARKET DRIVERS

Cost of Health Care

Health care costs are the fastest growing segment of government expenditures (federal, state, and local). The United States was expected to spend more than $1 trillion on health care in 1995, or a full 14 percent of the U.S. gross domestic product (GDP). This percentage is expected to grow to 16 percent of the GDP by the year 2000 and to reach 18 percent by 2005. This increase is being fueled by both a rising standard of living, which allows more to be expended for health care, and a faster rate of price increases for health care than for other segments of the economy (CBO 1995). (See Figure 1-1.)

As a nation, the U.S. leads the world in health care spending yet does not have the best outcomes overall. U.S. employers spend, on average, 8.2 percent of their payroll on health insurance while their counterparts in Germany and Japan spend approximately 6.4 percent and 4.2 percent respectively. Not only are governments and employers spending more on health care, so are patients. (See Figure 1-2.)

Shift to Managed Care

In an attempt to control escalating costs, the nation's private and public third-party payers have turned to shared-risk strategies, including managed care plans. Managed care, the most rapidly growing of these approaches, can be characterized as a health care delivery system that "integrates the financing and delivery of appropriate medical care by means of the following: contracts with selected physicians and hospitals that furnish a comprehensive set of health care services to enrolled members, usually for a predetermined monthly premium; utilization and quality controls that contracting providers agree to accept; financial incentives for patients to use the providers and facilities associated with the plan; and the assumption of some financial risk by doctors, thus fundamentally altering their role from serving as agent for the patient's welfare to balancing the patient's needs against the need for cost control." (Iglehart 1992). In order to balance care and cost, managed care companies are pursuing wellness and prevention programs, as well as disease management programs, to improve health outcomes. Managed care and other risk-sharing approaches to care delivery are evolving into capitation, where practitioners are paid to deliver primary care on a per member per month basis, and where they share hospital and specialty care costs with the managed care organizations. The feasibility of capitation depends on the use of data to predict lifetime health care costs based on outcomes.

The growth in managed care has been explosive. In 1976, only 6 million people were enrolled in a health maintenance organization (HMO). By 1992, that figure had risen to an estimated 41 million. Data from 1993 indicate an increase to 45 million enrollees with projections for 1995 topping 50 million (HIAA 1994). (See Figure 1-3.) The number of managed care plans has also increased, from 174 in 1976 to 551 in 1993 (Merrill Lynch 1995).

Despite the proliferation of managed care plans, data on their effectiveness in controlling costs have been mixed (Iglehart 1992). Larger employers seem to be benefitting more than smaller companies from the cost savings. Companies with 500 or more employees reported an average 1.9 percent decrease in benefit costs in 1993, while smaller employers saw their costs rise 6.5 percent (Currents 1995).

Aging Population

The changing age distribution in the U.S. is illustrated in Figure 1-4. The over-65 population is increasing, with the over-85 group increasing the most rapidly. Life expectancy rates have increased as well due to changes in public health and medical technology. As shown in Figure 1-5, they are expected to continue to increase. And as the population ages, its need for health care increases. This is compounded by the fact that women make up greater portions of the more advanced age groups. At present, women constitute 51 percent of the U.S. population, yet they account for 60 percent of the population over age 65 and more than 70 percent of the population above age 85 (HHS 1995b). This is significant because "women face health problems that accompany old age--such as osteoporosis, depression, Alzheimer's disease--in greater numbers than do men. Moreover, throughout their lives, women tend to suffer far more illness and chronic, debilitating conditions than do men. In fact, women's activities are limited by poor health approximately 25 percent more days each year than are men's activities, and women are bedridden 35 percent more days than men because of infectious diseases, respiratory problems, digestive disease, injuries, and other chronic conditions." (Blumenthal 1995)

Not only are Americans living longer, but they are requiring more care that is not covered by insurance plans. The Health Care Financing Administration (HCFA) reports that nursing home care costs were $66.3 billion in 1992, up 11 percent over 1991. Medicare accounted for $2.7 billion while Medicaid's portion was $34.4 billion. Private, long-term care insurance contributed about $700 million. That means that the remainder, over $26 billion, was paid for by patients and their families.

LOOKING TO THE NII FOR SOLUTIONS

The NII can be thought of as four interdependent parts: a set of widely accessible and interoperable communications networks; digital libraries, information databases, and services; easy-to-use information appliances and computer systems; and trained people who can build, maintain, and operate these resources. (For a comprehensive overview of the NII, see Council on Competitiveness 1993, 1994.) The U.S. NII is robust and rapidly evolving. Telephone, cable, and wireless delivery systems are linking together and new applications are being introduced in many markets. The use of the NII in the delivery of health care has the potential to transform the current health care system into a prototype telehealth model. Although the promise has yet to be realized, the convergence of the NII and the health care system is creating new market opportunities to deliver better, more cost-effective health care to every American.

For the purposes of this report, telehealth is defined as the provision of remotely located health information or services. The convergence of information and services within the telehealth model is intergal to the four market sectors covered in this report. Although remote care, personal health information management, systems integration and research and education are not the only examples of where markets are being influenced by the NII, they are illustrative and constitute significant market potential. Multimedia databases and information resources for patients, practitioners, health care delivery organizations, medical researchers and payers are some of the areas discussed in the context of information based products. Services reviewed include consulting, monitoring and providing decision-support software where the individual, as patient or consumer, is not physically located in the same place as either the resource or the practitioner. Figure 1-6 is a conceptual picture of a telehealth system made possible as the NII and the health care markets converge. It illustrates the components necessary to ensure that health-related information and services are available anywhere, anytime.

Beginning at the center of the concentric ring diagram and working outward, the first ring represents the technologies involved in creating a telehealth system Basically, any telehealth system such as telemedicine--the provision of remote care--consists of two components: (1) the equipment necessary to create the interface between the patient or individual requesting information or service and the practitioner or information resource, and (2) the infrastructure that allows the interchange to take place. The equipment, including computer-based, is comprised of a variety of hardware and software for audio, video, and data devices ranging from telephones to full-motion, interactive video devices. The NII provides the information and telecommunications infrastructure. Information focuses on such items as patient record keeping, scheduling, creation of health information databases, and tracking administrative/business transactions. Telecommunications is the means of transferring that information by wireless (e.g., microwave, satellite, and cellular), cable, or wireline-telephone systems.

Ring 2 consists of the stakeholders in telehealth, who all interact in a variety of complex ways to determine the composition, availability, and cost of telehealth systems. Stakeholders are the major participants in the health care system and consist of: patients, including individuals who seek information for wellness; employers who are involved in determining health care benefits for their personnel; practitioners, such as doctors and nurses; health care delivery organizations such as hospitals, clinics, outpatient facilities, and managed care organizations; payers who are the private and public insurance plans; medical researchers; and vendors who provide both infrastructure and interface hardware and software including integrated, turnkey systems.

Ring 3 represents the legal, regulatory, financial, and policy components that affect telehealth system design, development, and deployment. The legal environment deals with such issues as malpractice, liability, licensing, privacy, and confidentiality. The regulatory environment is driven by such agencies as the Food and Drug Administration (FDA), HCFA, and the Federal Communications Commission (FCC), whose regulations govern the manufacture/sale/distribution of health care and communications products and services. The financial environment drives the availability of funds to pay for infrastructure and services. The policy environment is created by federal and state administrative and legislative bodies. But standards-setting bodies such as the American Medical Association (AMA), the American College of Radiologists (ACR), and the Joint Commission on the Accreditation of Health Organizations (JCAHO), and the American Telemedicine Association (ATA) for the medical profession; and the National Electrical Manufacturers Association (NEMA), the Electronic Industries Association (EIA), and the Health Industry Manufacturers Association (HIMA) for equipment manufacturers also create important policies and greatly influence the government's policymaking process.

Ring 4 depicts the telehealth markets. If the necessary interface and infrastructure equipment and services are available, if principal stakeholders perceive benefits, and if suitable legal, regulatory, and policy environments exist, so should a viable marketplace. Moving inward from Ring 4 back to the center, each ring represents the barriers that must be overcome to move from market potential to a viable telehealth market.

Chapter 2 - Remote Care

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Highway to Health: Transforming U.S. Health Care in the Information Age

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INTRODUCTION

The provision of health care to medically disenfranchised patients, those who for reasons of distance or circumstance do not have ready access to medical care, presents both a challenge to the medical community and an opportunity for the use of the NII. Telemedicine--the combined use of telecommunications and information technologies to link medical practitioners with their patients for consultation--is an emerging application of the NII that is addressing this challenge. Through telemedicine, remotely located patients, such as those residing in communities with limited medical resources, inmates in isolated correctional facilities, soldiers in the field, or patients in their homes, can access health care services that are currently unavailable to them. Telemedicine also offers the promise of better health care by providing more timely access to specialists and vital medical information, benefiting all health care delivery system stakeholders and society as a whole.

This chapter examines scenarios combining NII-related technologies and the delivery of remote health care in three settings:

• Traditional rural/urban markets.
• Markets that are immune to certain regulations and economic considerations, such as the government, correctional facility, and international markets.
• The home.

It also explores the differences in applications of telemedicine within different health care delivery environments, including managed care and fee-for-service. For illustrative purposes, aspects of the development and diffusion of teleradiology are compared with other telemedicine sub-specialty applications. The market today and the market potential are analyzed, including the cultural, regulatory, legal, psychological, and economic implementation barriers that stand in the way of increased utilization. Finally, ways are suggested for overcoming existing barriers and realizing a robust commercial market.

SETTING THE PARAMETERS FOR REMOTE CARE

For the purposes of this report, the concept of "remote" is defined as a patient and health care practitioner separated by distance, regardless of the amount of that distance. It includes, for example, interactions among health care facilities co-located in urban environments (e.g., inner city clinic and academic medical center); tertiary medical centers consulting with rural hospitals; academic medical centers providing medical expertise overseas; contract medical service providers consulting with practitioners located in correctional institutions; Department of Veterans' Affairs (VA) or Department of Defense (DOD) facilities; health care providers monitoring and consulting with patients located in their homes; and regional centers providing a particular type of expertise such as radiology to other providers in that region.

Three practitioner scenarios are common in telemedicine interactions: (1) a physician at one location seeking consultative help from a specialist at another location; (2) a non-physician practitioner consulting with a remotely located medical practitioner; and (3) a patient consulting with a medical practitioner such as a primary care provider, a specialist referred by a primary care practitioner, or a monitoring nurse. The technologies for linking the participants in these scenarios can range from the most simple and available of telecommunications connections based solely on audio links (such as telephone voice mail) to two-way, interactive, full-motion, high-definition video requiring wide bandwidth communication capability. The interactions can involve a range of transmission options, from store-forward technology, where the consulting physician calls up previously recorded information for review and forwards recommendations to be processed at a convenient time by the practitioner initiating the request, to a scheduled real-time, interactive, full-motion video accompanied by a variety of medical instrumentation linking all participants simultaneously. The necessary telecommunications infrastructure, depending on the type of telemedicine scenario, can include telephone lines (standard, T-1, DS-3, ISDN), cable systems, wireless systems, or any combination of these. Although the telephone is used routinely to conduct consultations, consultations via audio links alone will not be considered for purposes of this report.

The types of telemedicine consultations conducted in remote care scenarios are limited only by the range of medical problems to be addressed, the availability of the required practitioners, and the appropriate equipment, including telecommunications infrastructure. Consultations have already been documented in all sub-specialties. In addition, several projects under way are demonstrating telemedicine's potential for providing home care services to two distinct populations: (1) individuals who are receiving treatment or require monitoring on a time-limited basis for a particular episodic illness, and (2) patients suffering chronic illnesses who require frequent re-hospitalizations for emergency care and/or frequent nurse visits. Currently, teleradiology is the most common form of telemedicine. Lessons learned from the extensive use of teleradiology by both government and commercial health care delivery organizations offer valuable insights into the use and market potential of telemedicine in general, and are highlighted throughout this chapter.

THE MARKET TODAY

Historically, what we are seeing today marks the second wave of telemedicine initiatives. From the late 1950s through the 1970s, several telemedicine applications were launched. But even though they were viewed by some as successful from both clinical and patient perspectives, the projects were terminated because of the elimination of government funding, the high cost of complex, technically immature systems, and/or their lack of widespread acceptance by and integration into the medical community. Other stifling factors were the lack of a robust communications infrastructure in some locales and high operational costs. More than 20 years later, the resurgence of interest in alternative delivery systems, such as telemedicine, and an explosion of applications has been sparked by a variety of tensions in the health care industry, including: competition among providers prompted by the need to become profitable, the need to reduce the cost of care, the desire to increase access to care for those who have none, and/or the need to improve the quality of care. Advances in technology that enable the transmission and remote display of images and information over digital communication pathways are also contributing to renewed interest.

The assessment of the market for telemedicine was based on literature searches, interviews, surveys of products in development or already on the market, anecdotal reports, and the experiences of Council Advisory Committee members in the health care marketplace. Because the use of telemedicine is in the early adoption/implementation phase, it lacks robust program evaluation (as do other medical systems more mature in terms of time in use). Therefore anecdotal and personal reports were particularly valuable sources of information. Several extensive reviews on the state of telemedicine today (Allen 1995, Grigsby et al. 1994, Scott and Neuberger 1994) were consulted for background information. Also, a number of the existing U.S. telemedicine sites listed in the Medical College of Georgia database Telis and an on-line telemedicine database maintained under government contract (TRC 1995) were contacted.

Although this site survey data seems reasonably complete, there is no commercially available market analysis that details the number of public or private dollars currently being spent to establish or maintain general telemedicine applications, either nationally or internationally. Estimates of telemedicine and related technology funding by government organizations suggest that several hundreds of millions of dollars in grants and contracts might have been available in fiscal 1995 through various federal agencies and individual states. At least one estimate, from the Koop Institute, puts today's U.S. market at $20 billion (Banks 1995). However, a breakdown of this funding for services, equipment, and infrastructure is unavailable.

The one telemedicine application that has been tracked extensively is teleradiology, with an estimated 7,000 X-ray film digitizer units in place. Annual market estimates exist for both medical imaging systems and picture archiving and communication systems (PACS), both of which depend on teleradiology (TMG 1995, Frost & Sullivan 1994). The 1995 U.S. commercial market for all medical imaging products has been sized at $473 million (Frost & Sullivan 1994). The market for teleradiology has matured more rapidly because of several characteristics of this speciality: practice patterns of physicians consulting with distant radiologists have been established; radiologists are familiar with digital technology and accept its use for a number of diagnostic procedures (CT and MRI) that are amenable to rapid transmission and archiving; radiologists are relatively high-cost specialists and hospitals need to maintain their productivity; favorable medical-effectiveness evaluation data exist for the use of digital techniques for some applications; and reimbursement is available.

Business strategies behind the establishment of teleradiology sites are propelled by a desire to increase patient volume, lower cost, and obtain a greater market share. For example:

• Telequest, a for-profit consortium of academic radiology departments, intends to connect regional diagnostic imaging centers across the country with its members to provide cost-effective radiology reading services. The first imaging center in Columbus, Ohio, was connected to radiology departments at the University of Pennsylvania, the University of California at San Francisco, and Brigham and Woman's Hospital in Boston in the last quarter of 1995.

• Teleradiology Associates in Durham, N.C., uses a central facility to provide radiology services to 20 rural sites.

• A radiology practice in Los Angeles provides teleradiology services to four hospitals during the night shift at a lower cost than in-house, on-call staff.

• Oklahoma is in the process of installing more than 40 film digitizers throughout rural areas of the state. The digitizers send images to radiology reading sites in the state, which then send diagnoses back.

• To reduce the cost of radiology service for its many employees and their dependents, Harris Corporation of Melbourne, Fla., has designed its own teleradiology system linking it to the University of California at Los Angeles (UCLA). UCLA receives the images and performs all requisite radiological services under contract.

• In rural Yakima Valley, Wash., radiology services are now provided among small hospitals through digital links.

These enterprises are demonstrating how telemedicine can contribute significantly to the effective delivery of quality services. In addition to the numerous teleradiology practices, hundreds of telemedicine projects involving many hundreds of individual sites are operating in the U.S. today. These projects are providing a variety of specialty consultations regionally, nationally, and internationally by using a number of telecommunications strategies for transmitting data. The sites encompass five broad categories: (1) domestic commercial initiatives including both fee-for-service and managed care, (2) government initiatives, (3) international commercial initiatives, (4) correctional facility initiatives, and (5) home care initiatives.

Domestic Commercial Initiatives

Health care delivery organizations in fee-for-service and managed care environments in the U.S. are employing telemedicine systems for a variety of reasons. The adopting sites range from system wide approaches, such as Allina Health Systems in Minneapolis, to application-specific sites, such as the ultrasound program at the Methodist Hospital of Indiana. Both are profiled in this chapter. Allina recently installed a telemedicine network linking 22 separate campuses. (See Case Study 2-1.) Statewide systems in Georgia, Louisiana, Oklahoma, West Texas, and Iowa were initiated to deliver health care to their populations that were far removed from a health care facility, or in some cases, had no access at all. The Mayo Clinic initially conceived of its telemedicine system as a means to address specialty staffing issues opened new clinics in other regions in the United States. Additionally, as more hospitals merge and consolidate to manage costs, duplication of services could be eliminated through the use of telemedicine links between the facilities.

Case Study 2-1: Allina Health Systems

Background	Allina Health Systems, a large managed care provider in Minnesota and Wisconsin, formed a telemedicine network with the Rural Health Alliance (R.A.), a group of rural communities in central Minnesota. The network is designed to support consultations, teleradiology, medical education, administration, and community education and development; although specific use is expected to vary from site to site. The network became active in May 1995, with three rural and five urban sites. In September six more rural sites were added, and in January 1996, an additional six rural and two urban sites completed the initial network. Allina anticipates adding three to five additional sites per year.
Drivers	The network was originally developed as a tool to reduce costs in preparation for a capitated environment and to expand market share into the rural communities not part of Allina's existing plan. Currently, the Blue Cross and Blue Shield insurance plans are uncontested in rural areas. Allina hopes the telemedicine network will generate referrals and potential insurance sales there.
Funding	Initial funding was provided through a combination of grants and investment from Allina. R.A. received a $642,000 grant to purchase the equipment located at each rural site. This funding provided the necessary justification for Allina's investment for the link to their tertiary care campuses and other ancillary costs. Allina pays for the T- I telephone lines-Creating the hub center and links to other Allina sites; the rural alliance members pay for the spokes to the hub and divide the costs equally among themselves.
Reimbursement	Allina's insurance division agreed to reimburse specialists for consultations conducted over the network. It has established a fund to pay for any MediCare/Medicaid patients because HCFA has not approved reimbursement for telemedicine consultations. Allina believes that HCFA may eventually change this reimbursement policy. However, if a capitated market exists, HCFA reimbursement will not matter.
Results	Because the Allina system is new, cost-benefit data is sl im. Allina reports, however, that the system is generating new referrals and demonstrable administrative savings. Participating physicians accept the technology. In addition, early trials report that patients are very accepting.
Barriers	Allina views its principal remaining barriers as lack of reimbursement while in the fee-for-service arena and lack of wider physician acceptance.

Government Health Care Initiatives

The DOD, the VA, and the Office of Indian Health Services have all used teleradiology to provide services to their members, both nationally and internationally. The VA has been transferring computer-based patient radiology records for some time using a PACS modeled after the successful DOD installations at Madigan and Brooke Army Medical Centers. The Office of Indian Health Services, in conjunction with the National Aeronautics and Space Administration (NASA), has used telemedicine to deliver care to Native Americans in rural locations. DOD has invested heavily in research and development on the use of telemedicine to provide earlier intervention for combat casualties and thus reduce morbidity and mortality rates. DOD has also used telemedicine for care of geographically dispersed beneficiaries deployed far from a military clinic or hospital.

Military telemedicine systems benefit from having an extensive communications network already established, including the latest in technology. In addition, these systems have not been constrained by licensing and credentialing regulations, HCFA regulations for reimbursement, or profit motives. DOD has pioneered the development of digital PACS, including teleradiology, and the use of telemedicine to care for soldiers in distant war zones. In December 1994 the DOD Telemedicine Testbed was established by the Army, Air Force and Navy to synchronize their efforts to rapidly exploit emerging technologies. The Medical Advanced Technology Management Office (MATMO), located at Ft. Detrick, MD, oversees the combined forces initiatives which include aggressive use of the Internet for medical information, development of ruggedized health data storage for medical use in the field (Project Meditag) and use of multi-media E-mail to coordinate care among central and remote sites. Walter Reed Army Medical Center, Tripler Army Medical Center, the National Naval Medical Center at Bethesda, and the Naval Medical Center in San Diego have been engaged in telemedicine projects to Europe, Somalia, the Pacific Islands, Japan, and ships at sea, as well as within the U.S. The Air Force has also established the Medical Defense Performance Review (MDPR) to evaluate the delivery of medical care within the military. MDPR is rapidly developing technological initiatives to enable a wide range of applications, including video conferencing, administrative networks, and telemedicine.

International Commercial Initiatives

In addition to DOD, some health care delivery organizations within the private sector are initiating international telemedicine consultations to export their medical services. WellCare Holdings, N.V. provides consultations primarily in the Middle East. (See Case Study 2-2.) Stanford University Hospital has a link to Singapore for continuing medical education. The Johns Hopkins Oncology Center is making preparations to link with Gleneagles Hospital in Singapore to provide clinical consultations, medical education, and research opportunities for health care providers at Gleneagles and affiliated hospitals in Southeast Asia. The Mayo Clinic has a link to Jordan and is establishing a link with a hospital in Greece.

Case Study 2-2: WellCare Holdings, NV

Background	WellCare Holdings, NV (WellCare) was founded in 1992 by Pillar, a Paris-based international business development group, and Medical Science Partners, a venture capital group in Wellesley, Mass., that specializes in the development of new health care ventures. In August 1995, WellCare purchased MD/Dx from Massachusetts General Hospital (MGH). MID/Dx had developed, in conjunction with MGH, a robust international teleradiology business linking MD/Dx-MG trained radiologists with hospitals primarily in the Middle East.
Drivers	NM/Dx and MG saw an opportunity for the export of medical expertise, partly in response to the shrinking domestic market due to capitation, cutbacks in government funding, and pressures to enhance revenues. An international outreach activity could also sustain funds for reaching, education, and research, as well as provide care delivery. Governments and patients in this market were seen as the driving forces for using telemedicine, not physicians.
Funding	MD/Dx-WellCare was partially funded by the venture capital firm Medical Science Partners, and by funds from WellCare and Allstate Venture Capital.
Reimbursement	Reimbursement is not an issue. WellCare operates as a fee-for-service provider and customers pay for the serv ices rendered.
Results	The majority of international patients who would have had to travel for medical consultations can now stay in their local environments, resulting in huge savings for both the foreign government and the patient. If additional treatment is needed, patients are referred to Massachusetts General. WellCare is expanding its relationships to include leading medical centers in other parts of the world with special expertise in radiology, pathology, dermatology, and other medical sub-specialties.
Barriers	Barriers to international telemedicine are market oriented and reflect the difficulties any company encounters in establishing new operations, particularly in a foreign country cultural differences, differences in business practices, and die challenges of creating a new market. WellCare does not face the interstate licensing and reimbursement issues that inhibit U.S. telemedicine projects.

International markets are attractive for a number of reasons. They can generate fee-for-service referrals; they may provide requisite commercial offsets for foreign military sales; they are not hampered by the lack of clear-cut insurance reimbursement policies; and they are not constrained by the interstate licensing requirements that are frustrating many domestic commercial telemedicine projects.

U.S. health care organizations are not alone in initiating international telemedicine projects. Foreign health care delivery organizations are also investigating telemedicine activities, often in partnership with U.S. telecommunications providers. Hughes Electronics Corporation and the Mexican government are sponsoring a pilot telemedicine program that connects the General Hospital "Dr. Belizario Domingues," a full-service, regional medical facility in Chiapas, Mexico, with the Centro Medico Nacional "20 de Noviembre" Hospital in Mexico City. In addition, Mexico's National Academy of Medicine, the Mexican Academy of Surgery, and the Medical Faculty of the Universidad Nacional Autonoma de Mexico have been invited to participate in medical education and research applications of the pilot telemedicine system.

Correctional Facility Initiatives

The U.S. correctional facility population consists of approximately 1.5 million inmates and continues to grow. They are housed in more than 300 locations, many of them in non-urban areas. In general, the average age of the inmate population is increasing, resulting in the need for more frequent health care services. Major medical concerns include accidents, orthopedics, problems associated with drug use (hepatitis), and infectious diseases (tuberculosis and AIDS). All of these conditions can require multiple consultations with specialists over extended periods of time. This population's right to health care is guaranteed under the Constitution, and recent litigation established strict guidelines for inmate access to primary and specialty care. Medical treatment outside the facility, however, can involve risks and is seen as an opportunity for temporary release. It is also expensive to provide because inmates must be accompanied by guards and transported in specially secured vans. Screening, and treatment of medical conditions through consultations with remotely located physicians can greatly reduce safety concerns, as well as associated transportation costs.

Telemedicine is currently being used successfully in several states to deliver health care more efficiently to incarcerated individuals. A partnership between the University of Texas Medical Branch in Galveston and Texas Tech University is providing telemedicine links to two-thirds of the Texas correctional system (the second largest in the U.S. with 127,654 inmates as of January 1996). At least one national contract provider of correctional facility health care services has also used telemedicine to deliver quality medical services at a lower cost, thus gaining a competitive edge in this cost-driven services marketplace. The East Carolina University telemedicine system had its origins in the delivery of health care to inmates and now has expanded its services to other, non-correctional sites.

Home Health Care Initiatives

The need for home health care is being driven by several factors, including: demographic trends; the shift in health care to more cost-effective approaches such as managed care and other risk-sharing systems; and the desire of patients, health care delivery organizations, practitioners, payers, and employers to dramatically curtail costs while still providing quality care. Not surprisingly, a survey of 59 home care chains showed that revenues increased 47 percent from 1992, to $5.1 billion in 1993, with the average chain growing from $83 million to $123 million a year. This is occurring in conjunction with major acquisitions as health care delivery organizations move into new lines of the home care business (Scott, L. 1994).

Integrated Health Services (IHS) of Owings Mills, MD, is one example of a health care delivery organization aggressively expanding into the home care market. IHS has built a $2 billion dollar business in post acute care, with over 280 facilities in 30 states. It is rapidly expanding into the home health care arena through Symphony, its recently launched home health care services division. Based on the purchase of seven home health care companies, Symphony now offers home health care and home medical equipment services to managed care organizations in 17 states. The emerging importance of home care and the move toward seamless delivery within managed care were primary motivators for IHS to enter this arena.

Home care practitioners can make, on average, only four visits a day due to the time spent in transit. Telemedicine offers an effective means of increasing the efficiency of their services while maintaining high-quality personal care for patients, often at a reduced cost. Several testbeds are exploring the feasibility of using telemedicine to provide care to patients in their homes. The Medical College of Georgia, in conjunction with the U.S. Army's Center for Total Access Program, the Georgia Institute of Technology, and Jones Intercable, is developing the "electronic house call." The project will link 25 homes of patients with chronic illnesses to practitioners via the local cable television infrastructure, using a personal telemedicine system with two-way interactive video, audio, and medical diagnostic instrumentation.

The Home-based Electronic Link to Professionals (HELP) Innovations Project in Kansas employed a regional cable television company to link four patients with chronic diseases to practitioners for daily monitoring. The system is now being fielded at the Hays (Kansas) Medical Center's Home Health Agency for additional market testing, with near-term plans for commercialization. Another project, Home Health-Telecare, has been funded by the California Research and Education Network (CalREN) to establish interactive data and video links between individuals with chronic obstructive pulmonary disease and a remotely located nurse or physician. Sutter Health is leading this project in conjunction with Fujitsu. Figure 2-1 provides additional information on other emerging home telemedicine products.

Figure 2-1: Emerging Telemedicine Products for Home Health Care

Several companies are introducing commercial telemedicine systems to address the home market.

American Telecare, Inc., in Minneapolis was the first to develop and test a home telemedicine system that provides around-the-clock nursing, allows for more complex care to be delivered outside of hospitals and nursing/extended care facilities, prevents and shortens stays at such facilities, and significantly reduces health care costs. The system relies on standard telephone lines for the necessary infrastructure to connect homes with the monitoring center, and equipment is leased on a daily fee basis (Mahmud and Lenz 1995).

Another commercial telemedicine, the Home Assisted Nursing Care (HANC) Network, is scheduled to enter the market in July 1996 pending FDA approval. Developed by HealthTech Services Corporation in Northbrook, IL, HANC is designed to facility 24-hour patient monitoring by health care professionals located at a central monitoring station within a home health care agency, hospital, or physician's office. The HANC network uses a combination of data, voice, and video transmissions that allow the practitioner to view the patient, monitor the patient's vital signs (e.g., blood pressure, temperature and pulse), administer up to 10 medications over a two-week period, and present self-care training screens.

HealthNet of Lubbock, TX has developed a briefcase-sized portable system, TeleDoc Junior, for ambulances, remote clinics, or in-home health care requirements. Several other companies are also testing prototype products.

One vendor estimates the immediate market for these types of personal telemedicine systems to be several hundred thousand units. Still, actual sales data will not be available for some time. Because demand has not yet consolidated, these systems are being marketed primarily to managed care organizations to gain critical mass. Therefore, they are generally not available to the 40 percent to 60 percent of the population not covered by such organizations.

MARKET POTENTIAL

Because telemedicine is in the early implementation stage, there are no firm data by which to estimate market potential. Early predictions by some organizations suggest the market opportunity may be as large as $100 billion (Banks 1995), but there is little to substantiate this claim. Nevertheless, two market drivers have emerged that will force serious consideration of commercial telemedicine to provide health care: (1) the need for providers to lower their costs while maintaining quality service, and (2) the need for health care delivery organizations to expand their market share in a competitive environment to increase profitability (this includes increasing access for patients in under served areas). The need for an updated telecommunications infrastructure in some locations will drive the pace of implementation. Financing issues will also influence the application of telemedicine. These activities affect each of the five market segments highlighted in the previous section.

The Need for Providers to Lower Costs

Even without an official national health care reform movement, the nation's health care industry is undergoing tremendous restructuring. Concern for accurate and timely use of health care resources, the movement toward capitation and other risk-sharing mechanisms to contain costs in the commercial health care market, and the trend toward discharging patients from hospitals earlier, even when they may still need monitoring, are causing many to examine the potential benefits of telemedicine.

According to a recent study by the Sachs Group of Evanston, Ill., the total number of hospital inpatient days was expected to decrease by 34 percent from 1994 to 1995. Total discharges were expected to decline by 26 percent, with the average length of stay also declining 11 percent, from 6.1 to 5.5 days. (Sachs Group 1995). In this environment, the market opportunity for the use of telemedicine to monitor complex medical conditions while patients are at home is easy to appreciate.

Several home health care agencies have conducted independent evaluations of the effectiveness of HealthTech Services Corporation's HANC telemedicine system, profiled in Figure 2-1. An evaluation of hospital readmissions found that 29 of 43 patients (67 percent) were suitable HANC candidates and that use of HANC could have saved approximately $5,000 per patient/admission. The average length of stay for these 43 patients was 11 days, at an average cost of $800 per day. For this group, total potential savings could have reached $255,000. Thirty percent of intravenous therapy/AIDS patients reviewed (9 of 30) could have been assisted by HANC with a resulting savings of $473 per episode. An additional retrospective chart review study reported similar potential savings for intravenous therapy, wound care, diabetes, stroke, and orthopedic cases. Clinical trials have begun at six sites to further quantify the potential of this telemedicine tool as a cost-saving device for a variety of home care patient populations.

Some view telemedicine in risk-sharing environments as a way to deliver quality health care at the lowest available cost point (Siwicki 1995, Goodall and Murphy 1995). The movement toward capitation, where health costs are paid by a predetermined fee and a single insurer/provider cares for a given person across a particular period of time or for management of a particular disease, may also accelerate the use of telemedicine for clinical as well as preventive applications. Health care delivery organizations in a fee-for-service environment already are competing with those in managed care settings. Now managed care organizations are also competing with one another, forcing them to consider new delivery mechanisms, such as telemedicine, that can lower their fixed costs by using practitioners more efficiently. The health care industry will continue to evolve to include different competitive approaches, such as the entry of medical practice groups that seek to reduce the role of third-party payers and that may also further the development of commercial telemedicine systems for remote care applications.

Preliminary data from the Hughes-sponsored testbed in Mexico, described earlier in this chapter in the section on international commercial initiatives, also illustrate telemedicine's potential to reduce costs. Figures 2-2 and 2-3 indicate some of the cost-savings that are being realized. Based on this initial feedback, Hughes believes that it will be possible to amortize the telemedicine system installation costs for the linked hospitals in the first quarter of use.

Figure 2-2: Cost Savings Associated with Patient Transfers

Month (1995)	Reduction in Number of Patients Transferred	Savings Associated with Reduced Transportation Costs
May	46%	$6,300
June	34%	$4,900
July	58%	$11,200
August	59%	$8,100

Figure 2-3: Continuing Medical Education

Course	Subjects Covered	Hours of Instruction	Estimated Savings
Course 1	Chemotherapy, Overall Treatment Applicability, Patient Care, Drugs	46 hrs.	$12,000
Course 2	Pediatric Nephrology, Overall Treatment Applicability	20 hrs.	$20,000

The increasing health care costs associated with the aging of the population are also creating market opportunities for telemedicine. In 1993, the nation spent $80 billion on long-term care for approximately 7.3 million people. Nursing home care accounted for approximately three-quarters of this spending, with home care making up the bulk of the remainder. Spending in this area is expected to continue its rapid pace as an estimated 10 million to 14 million people will require some form of long-term care by 2020, climbing to 14 to 24 million by 2060. With nursing home care averaging $35,000 per person per year, home care is becoming an attractive alternative, particularly as telemedicine permits the delivery of more sophisticated and less expensive care to the home (CRS 1995).

It should also be noted that a significant number of people who reside in nursing homes are there more for health "security" reasons than for health care "needs." For example, market data suggest that of the two million residents in extended care facilities, perhaps as many as 10 percent could be cared for at home at significantly reduced costs if the appropriate telemedicine tools were available to enable remote monitoring. Additionally, many of the home health visits conducted today are based on the need to observe or monitor a patient's status, a function that could be accomplished through interactive video systems coupled with the appropriate instrumentation and a simple-to-use interface. Figure 2-4 illustrates the potential cost-savings that could be realized by delivering care to the home through telemedicine.

Figure 2-4: Average Cost of Care

SERVICE	AVERAGE COST/DAY
Hospital Inpatient*	$820
Nursing Home**	$100
Home Care Visit***	$74
Telemedicine to the Home****	$30

*Average expense of community hospital per inpatient day in 1992 (HIAA 1994)

**Average expense of nursing home facility per day in 1993 (CRS 1995a)

***Skilled nursing visit (CRS 1995a)

****Estimate for NANC (HealthTech Services Corporation)

Securing or Expanding Market Share

In addition to containing costs, health care delivery organizations must also secure or expand market share to maintain the revenue stream necessary to provide health care services and to finance advanced medical research and education. Given the emphasis on health care delivery as a revenue generator, and the fact that telemedicine often lessens the need to refer patients away from their local medical institutions, rural facilities are embracing this new technology as a means of maintaining their market share. By using telemedicine consultations to provide access to specialist care they can retain patients who otherwise would be referred to larger, regional medical centers. The ability to maintain and profitably operate these small hospitals in today's expensive health care environment is a genuine concern; on average, 10 to 12 close each month. Yet not only do these facilities provide much-needed care at lower costs for their patients; they are also often economic anchors in their small communities, providing jobs and attracting and maintaining other businesses that want to ensure access to health care services for their employees. In fact, some telemedicine providers, like HealthNet, see this mission as their most vital function. A rural hospital in Louisiana has experienced positive results through telemedicine, increasing its bed census and adding an additional physician. (See Case Study 2-3.)

Case Study 2-3: Louisiana State Health Care Authority

Background	The Louisiana Health Care Authority (LHCA) operates 10 hospitals within the state. It began the "TELEMEDicine Project" in the fall of 1994 and modeled it after the Georgia system.
Drivers	The Louisiana State University (LSU) Medical School, Department of Health and Hospitals, and other health care providers were interested in creating a statewide telemedicine network to enhance the quality of health care available to the rural and under served residents of the state. Louisiana has the highest infant mortality rate in the country (18 percent), as well as higher-than-normal accident victim mortality. Since 1979, 39 small hospitals have closed in the state.
Funding	The emphasis on reaching rural populations resulted in funding from the state's Department of Rural Development. The project is still running on state funding because an anticipated federal grants rescinded. Louisiana State University (LSU) provides system management, expertise, and the participation of every clinical departmental the university medical center. Recommendations include a plan to move away from government funding, as well as exploring the lease rather than the purchase of equipment. If one additional rural hospital bed was filled each day for the year, the system would be self-sustaining.
Reimbursement	Reimbursement is currently handled through a special reimbursement fund established by LHCA to pay urban physicians the current Medicaid rate. The funds available will allow operation to continue for another year, after which time LHCA will have to seriously address the reimbursement rate.
Results	A recent intense evaluation of telemedicine consultations involving a rural hospital, a regional LHCA facility, and the tertiary facility associated with LSU Medical School has been completed. Patient savings are potentially significant the rural hospital charges, on average, $600 per day, compared to$1,200 per day in the urban hospital. Three additional rural facilities are currently being added to the TELEMEDicine system. The effectiveness of the system is being judged by physician usage rates rather than fixed equipment costs. Costs per clinical encounter appear high. However, the "aura of excellence"perceived by patients and the increased reputation of those connected with the system are considered significant payback. Education/counseling appear to be significant benefits bit are difficult to quantify. The system allows physicians to participate in weekly/monthly conferences presented by various LSU clinical departments.
Barriers	Although patients were enthusiastic about the system, physicians were initially skeptical. Concerns about being able to interact with the patient face-to-face were largely alleviated once a telemedical consult was attempted. Rural/regional practitioners were initially concerned that their practices would be negatively affected by telemedicine. Guidelines and principles were implemented that alleviated their fears. These policies protect the practice of the rural and regional physicians while making available referrals to LSU specialists.

Large regional/academic medical centers also benefit from telemedicine links to rural facilities. These health care delivery organizations can increase revenues through additional referrals by extending services to under served populations via telemedicine, thus expanding their patient volume and achieving a more efficient use of resources, such as physician time. Practitioners participating in the telemedicine consults also receive the benefit of enhanced revenue.

An example of the use of telemedicine to potentially secure and expand market share comes from the state of Georgia. Preliminary findings from the first rural hospital linked to the Medical College of Georgia indicate that 85 percent of the patients examined by telemedicine, who otherwise would have been transferred to a secondary or tertiary care facility, were retained locally following the introduction of telemedicine. The projected increased bed census translates into more revenue for the rural hospital ($1,100 per day per bed), reduced hospital costs for patients ($1,100 per day versus $1,850 per day at a larger medical center), and referral of appropriate patients to the Medical College. A study is ongoing to assess whether this has increased revenue for the Medical College.

Less easily quantified, but just as important, are the additional benefits that patients experience, such as elimination of travel time and associated travel costs, more rapid care, closeness to family, and reduction in lost wages. Additionally, businesses experience less productivity loss when patients and their families do not need to take time from work to travel. The primary care practitioner also benefits. The consultative process can become a valuable educational opportunity for the local practitioner and, over time, should translate into reduced need to obtain referral expertise. The increased access to colleagues through the consultative process also reduces the professional isolation many of these practitioners experience.

Preliminary data from the Hughes-supported pilot in Mexico also illustrate how medical facilities can secure and maintain their local market share. Figure 2-5 shows the reduction in the number of patients transferred from the regional medical facility in Chiapas to Mexico City after the telemedicine linkup was installed. In addition to helping Chiapas treat its patients locally, the reduction in transfers to Mexico City also helped reduce overcrowding at the "20 de Noviembre" Hospital.

Several health care delivery organizations are seeking to expand market share through international telemedicine linkages. As mentioned previously, the Mayo Clinic, Massachusetts General Hospital, Stanford, Johns Hopkins, and for-profit corporations such as WellCare all are developing relationships with overseas medical facilities. These efforts should be encouraged since they promise to be "win-win" opportunities for both the U.S. health care providers and the international recipients of their services. The telemedicine linkups permit the U.S. health care delivery organizations to provide medical services which these international populations lack. In turn, the revenue these services generate can be an important source of additional funding to help support valuable medical research and education at U.S. academic medical centers, as well as contribute to bottom line profitability. Thus, exporting U.S. medical services will help contribute to U.S. economic growth and competitiveness.

Infrastructure

For telemedicine to achieve its full market potential, it must be as easy to use and pay for as a telephone or automated teller machine (ATM). In most statewide, regional, and international systems, telecommunications providers are strategic partners and are involved throughout all stages of development and operation. They provide the infrastructure that allows the consultations to occur, and they also account for and underwrite a significant portion of the day-to-day operational costs for telephone/cable/wireless transmission. Some, such as NYNEX, GTE, Sprint, AT&T, Southwestern Bell, Ameritech, and US West, even offer turnkey telemedicine systems through agreements with vendors. Project Total Access, a DOD initiative, seeks to lead the way in creating a medical infrastructure that will allow the military and their dependents instant access to their records and personal physicians whenever and wherever they might require them (Blakeslee 1995). Hughes entered the telemedicine market as a means to sell satellite communications offered by its Spaceway program, and is now using its technical expertise to capture international telemedicine opportunities.

Unfortunately, current telecommunications costs and the need for an updated telecommunications infrastructure in some rural areas (some communities are still dependent on rotary-style telephones) are inhibiting the delivery of telemedicine services. The recently passed federal telecommunications legislation should result in decreased infrastructure costs as competition among cable companies, telephone companies, and wireless communication providers increases. With increased competition, there should be a larger array of services to select from at competitive prices. Strategic partnerships between the health care and infrastructure providers should speed the development of advanced telemedicine systems.

Unfortunately, while those who currently do not have access or enjoy only limited access to quality care may stand to benefit the most from telemedicine, they also may be the least able to pay for these services. Without some form of payment-support mechanism, infrastructure or health care providers may not consider telemedicine alone to be capable of delivering a sufficient return to justify their investment. However, if multiple applications are available to use the infrastructure, such as those related to education or entertainment, the infrastructure costs can be shared among them and the overall investment return could be increased.

Reimbursement and Funding

The most significant factors in determining market potential may be whether services provided via telemedicine are reimbursable and whether funds are available to initiate telemedicine projects. Reimbursement varies depending on the insurer, and it is often unclear which types of telemedicine interactions, as well as which health care providers participating in these events, are covered. Although HCFA routinely reimburses teleradiology and telepathology consults, it does not reimburse other telemedicine consultations for Medicare patients. At least one estimate projects that Medicare reimbursement for telemedicine consultations could increase that budget by $30 billion to $40 billion over the first three to five years of use (Grigsby 1995). Private insurers are, for the most part, following HCFA's lead. However, some self-insured health care systems are providing coverage, and in cases where managed care organizations are self-insured, reimbursement is being paid to physicians and facilities. Also, some physicians participating in telemedicine projects are providing consultations without reimbursement because it decreases their need to travel to conduct consultations, they gain experience, and they can gather data on telemedicine's effectiveness and potential for increasing referrals.

Herein lies the public policy dilemma. On the one hand, telemedicine can significantly enhance the availability of medical care to people who currently do not have adequate access and can decrease the individual cost of care. On the other, it could also increase the number of patients filing claims for reimbursement and thus increase private insurance and Medicare payouts. This would be true for any delivery systems that increases access to care. And although patients would receive the benefits of earlier and better care, and save on costs associated with travel to distant medical facilities, the government may have to adjust its budget or its rates for Medicare to finance this social objective.

Given these scenarios, telemedicine may be available more quickly in the less traditional market segments such as the military, correctional, veterans, Indian Health, and international arenas, where cost containment and access are the drivers and telemedicine technology is seen as an investment that leads to lower cost in the long-term. Telemedicine applications may also develop more quickly in HMOs operating on a capitated basis within a single state. These organizations have strong incentives to treat patients effectively at their lower-cost clinics rather than at their tertiary care hospitals. But the lack of adequate reimbursement mechanisms may also cause telemedicine to be viewed as "gold-plated" health care and restrict its application to those populations that can pay for the service "out-of-pocket."

In addition to reimbursement issues, the ability of organizations to obtain sufficient funding for equipment and operations will also influence the growth of the commercial telemedicine market. Although the technology is migrating to the desktop and equipment costs are dropping, start-up costs for some telemedicine systems are not insignificant (ranging from $50,000 to $100,000 for individual site equipment to $8 million for a statewide system). Thus some view the ability to obtain local, state, or federal grant money as a necessary first step.

A survey of non-teleradiology sites conducted during the summer of 1995 revealed that the majority were subsidized in their initial phases by some form of grant or contract. Only a few of the sites had used internal funding. However, these sites had based their operations on becoming financially self-sustaining. (See Case Study 2-4.) In contrast, few of the sites dependent on external funding had detailed plans for supporting operational costs after their funding ends. These trends seem to be borne out by the site information contained in the reviews and databases mentioned previously. This is causing concern within the medical community because the previous wave of interest in telemedicine in the 1970s was sustained only so long as government funding was available. With reliable evaluation data two to three years away, some of these early adopter sites may not have sufficient volume and payment strategies in place to become self-sufficient within the time frame allotted in their grants. Thus, the best opportunity for assessing market potential may come from those sites which initiated projects to address a well-defined need, that considered business realities prior to implementation, and that are not reliant on external funding sources.

Case Study 2-4: Methodist