PURVEYORS OF TELEMEDICINE SAY THEIR TECHNOLOGIES COULD SAVE THE HEALTH CARE INDUSTRY BILLIONS. SO WHERE ARE ALL THE RE VENUES?
Each morning, 37-year-old Mark Ricktor steps out of the shower and onto a scale next to his dresser. “Good morning,” says a cheery female voice. “Your weight is 308 pounds. You are four pounds over your target weight.”
Lots of people have talking scales, but Ricktor’s may be keeping him alive. A father of two living in Menlo Park, Calif., Ricktor has cardiomyopathy, or enlargement of the heart — a rare condition in someone so young. Symptoms include an abnormal heartbeat and fatigue so extreme Ricktor used to drift off to sleep in midconversation. The disease is treated with a laundry list of medications — Coreg, Digoxin, Lasix, Zestril — and careful monitoring. Doctors must keep track of small changes in weight and fluid retention — changes that can lead to congestion in the lungs, low oxygen levels in the tissues and even cardiac arrest.
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Which is where the talking scale helps. After weighing Ricktor, the DayLink monitor — a product of Reno, Nev.-based Alere Medical — quizzes him: Are you short of breath? Are your ankles swollen? Did you sleep with an extra pillow last night? Ricktor answers by pushing Yes or No buttons on a box the size of an answering machine that sits on his desk; the scale plugs into the box, which in turn plugs into a nearby phone jack. The DayLink transmits his weight and responses to a nurse’s station at the Palo Alto Medical Clinic. If anything seems amiss, a nurse alerts his doctor.
Alere’s interactive scale is just the latest manifestation of “telemedicine.” At its simplest, telemedicine means a doctor conferring with a patient via video conferencing (a technology that’s been in use for four decades). There’s also teleradiology, in which X-ray and MRI images are wired to a specialist for analysis.
But the big story in telehealth lately is home monitoring. wellbutrin. The plummeting cost of hardware and the availability of high-speed telecom services have made it feasible for doctors to keep closer track of patients likely to require costly hospitalization. Alere and a handful of other medical equipment companies — peddling devices that can keep an eye on all sorts of chronic conditions, such as heart disease, diabetes, asthma and depression — see remote monitoring as a potentially huge business opportunity.
According to the federal Health Care Financing Administration, annual health care spending in the United States is expected to hit $1.4 trillion this year and $2 trillion by 2005. About a third of that will go to caring for the sickest 1 percent of the population. If remote monitoring can keep even a small percentage of those patients out of the hospital, vendors figure it’ll save insurers billions — and earn the vendors a handsome return.
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. CyberCare, 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.