Employer-Sponsored Telehealth Cost 23% Less Than In-Person Care

June 09, 2023 - Published in the American Journal of Managed Care, new research from the Perelman School of Medicine at the University of Pennsylvania (UPenn) showed that the cost of providing pre-pandemic employer-sponsored telehealth was lower than in-person care when treating Penn Medicine employees.

Increasingly, employers are offering direct-to-consumer (DTC) telehealth services to their US employers. According to the study, over 95 percent of employers with an employee base exceeding 50 people were providing coverage for DTC telehealth in 2021. Simultaneously, telehealth continues to occupy a much higher share of medical claims since before the start of the COVID-19 pandemic.

Despite this growth, uncertainties surrounding reimbursement rates exist. This is largely because of insufficient clarity regarding the economic value of telehealth.

Thus, Penn Medicine researchers aimed to better understand how DTC telehealth impacts the economy of an academic health system when offered to its employees. They did this by analyzing de-identified data from a copayment-free telehealth program known as Penn Medicine OnDemand.

The study focused on the period from July 2017 through the end of 2019. The reason behind selecting this timeframe was to eliminate any influence of policy changes due to the COVID-19 pandemic. Including a total of 10,826 visits from 7,793 separate employee beneficiaries, the primary units of measurement were the differences in per-episode unit costs within seven days. The researchers compared visits that took place through Penn Medicine OnDemand and in person.

READ MORE: Telehealth Saves Healthcare Costs for Some Cancer Patients

Visits that took place through Penn Medicine OnDemand had a mean seven-day per-episode cost of $379.76 among employees and beneficiaries. This figure is far lower than the mean seven-day per-episode cost of $493.49 for non-virtual encounters. This represents a difference of $113.73, or 23 percent.

"I think our study provides clues that telehealth, well integrated with in-person care offerings, can provide longitudinal, lower costs of care for these clinical conditions," said study co-author Krisda Chaiyachati, MD, an adjunct assistant professor of medicine at Penn Medicine and former medical director of Penn Medicine OnDemand, in an email. "The nurse practitioner-based program in our study could see patients for acute conditions and could either manage the conditions promptly or streamline patients' connection to in-person care locations. In this model, even with the additional in-person visits, when clinically recommended, resulted in an overall lower total cost of care than in-person care alone."

"At face value, this would feel like a no-brainer for a payer or provider who is on the hook for total costs of care for a population of people," she added. "The problem is that we still pay for episodes of visits, so-called fee-for-service. For these low-acuity conditions, fee-for-service creates a hesitancy for insurers to pay, drives providers to see more people, and costs the US health system more."

Researchers also noted that the demand for Penn Medicine OnDemand increased by 10 percent throughout the study period. These findings led them to conclude that DTC telehealth resulted in lower costs overall within the academic health system.

David Asch, MD, a professor of medicine and the senior vice dean of strategic initiatives at the Perelman School of Medicine at UPenn, also emphasized the study's implications for providers and the financial impact of this type of telehealth.

READ MORE: Cigna: Virtual Care Reduces Healthcare Costs by About $100 Per Visit

“We weren’t too surprised, but we suspect some people might be," he said in an email. "After all, if you are paying for healthcare for your employees, it’s not obvious how you’d save money just by moving from face-to-face visits to telemedicine. And you might think it would be even more expensive because by making care so much easier, you might induce more care." 

“We went into the study in the face of many analyses and opinions that telemedicine wouldn’t save money," he continued. "However, what’s important to recognize is that this approach fundamentally lowers the cost structure — no offices, no high overhead.  If you are a provider organization, which was the perspective of this study, those savings go right to your bottom line. If you’re not a provider but are paying for services, then hopefully you can get lower prices based on lower provider cost.”

Prior evidence has supported the claim that telehealth can lower healthcare costs.

A report released in April indicated that expanded telehealth access could lower rural healthcare costs by several million.

Analyzing data for ten counties in rural Alabama, Georgia, and Mississippi, this report noted how telehealth could help lower costs across the care continuum. These include avoided emergency department visits, avoided transportation costs, avoided preventable admissions, avoided preventable readmissions, and avoided lost productivity.