Rowena Cullen Victoria University of Wellington (Friday, 11.00, Telehealth/mHealth) In the evaluation of many technology-based interventions in the health sector there is a lack of information about the costs and benefits of the application. This is markedly so in the case of telemonitoring of home care patients with chronic diseases such as Chronic Obstructive Pulmonary Disease (COPD) and Heart Failure (HF). This paper provides a brief overview of the effectiveness of such systems as reported in the literature, and identifies a lack of rigorous cost benefit analysis in such reports. The paper investigates some issues related to cost benefit analysis where there are multiple levels of care providers involved in the delivery of care, and suggests that these issues need to be resolved in order to gain a better understanding of the true costs and benefits of telemonitoring chronic care support systems. This would assist the government, as the social planner, to identify the most cost effective solution, as well as the optimal clinical solution, for all stakeholders involved in telemonitoring programmes. It would also help identify the contribution of new telecommunications channels in optimising the returns on telehealth initiatives.

1. Assessing the Return on Investment in
Health IT: an exploration of costs and
benefits in relation to the remote
monitoring of chronic diseases.
Rowena Cullen
Bronwyn Howell
Greg Martin
Victoria University of Wellington

2. Technology-based health interventions are
rarely evaluated in terms of costs and benefits
This paper focuses on:
• Remote telemonitoring of home care patients with
Chronic Obstructive Pulmonary Disease (COPD) and
Heart Failure (HF).
–Offers promising alternative for domiciliary care warranting
significant investment in systems and infrastructure.
• Investigates where true costs and benefits lie, which of
the stakeholders receives the actual return on
investment.
• Identifies a key role for government, as social planner,
to take account of all relevant perspectives.

3. The impact of chronic diseases:
COPD and heart failure (CHF)
• A heavy burden on patients, families and society, and
excessive use of healthcare resources;
• As the population ages, incidence of chronic conditions
increasing;
• In some healthcare systems, expenditure highly
skewed: 5% of patients responsible for 55% of costs;
• COPD affects over 200 million people worldwide, WHO
predicts third leading cause of death by 2030;
• In NZ COPD affects as many as 32% of those aged
over 70 years; CHF a leading cause of mortality,
morbidity and hospitalisation for over 65s;
• Creates significant demand for inpatient beds and
services with substantial associated costs.

4. The clinical effectiveness of chronic care
systems using telemonitoring
Systematic reviews show:
• impact on specific outcomes (hospital visits, admission,
length of stay) consistently observed;
• data transferred by telemonitoring as reliable as those
collected through face-to-face patient examination;
• reduction in rates of hospital admission 20-21%
• reduction in all-cause mortality by 20-34%, and CHF-
related hospitalisations by about 20%;
• improved quality of life and reduced costs
demonstrable outcomes in several studies.

5. Most studies flawed in method and scope (fail to
look at the system the service is part of)
• EU Health Unit Directorate, UK’s NICE claim studies
inadequately randomised and do not address
costs/benefits;
• Wide variety of metrics used to assess costs/benefits
show savings ranging from 1.6% to 68.3%;
• Direct cost savings (e.g. hospitalization avoided,
reduced outpatient or physician/nurse visits) favoured
over indirect cost savings (e.g. nurse/technician travel
time, patient travel costs, laboratory or pharmaceutical
costs, etc.)

6. Range of factors critical to assessment of
economic impact of an intervention
• Need to be clear about time frames over which the
relative costs and benefits of both telemedicine and
usual care interventions are expended and accrued.
• Need to look across the entire system to identify
changes in workflow, hidden costs such as training,
tasks not done, flow-on effects on other parts of the
operation.
• Can’t just analyse the costs of the technology, must
take these complementary costs into account also.
• Need to identify the objective function, the core function
that is to be optimized

7. Whose objective function is being optimized?
• The focus on direct costs partly explained by two
factors:
– availability of data collected by health care providers
– interests of funding stakeholders (insurance companies,
government agencies) in reducing their own direct costs.
• A project designed to optimize returns for a funder of
services will require analysis only of factors which fall
within that funder’s budget area.
• Costs and benefits accruing to the patient (e.g. travel
costs) are ignored.
• Care deliverers will optimize only on factors affecting
their own operations, ignoring factors beyond their
budgetary responsibility (e.g. pharmaceuticals,
laboratory tests).

8. The social planner’s perspective
In a state funded healthcare system the social planner is
usually the government.
• Govt must attempt to achieve the best result for all
parties involved.
• The objective function for the social planner should
assess the total costs and benefits accruing across the
system, regardless of where they fall.
• Where services are partly delivered by commercial
enterprises subcontracted to government
organisations, the social planner is not always in a
position to optimize the return on investment.

9. In New Zealand context state funding is
distributed to a variety of providers
• Unclear which stake-holding group best internalizes the
social planner’s objective function.
• Ministry of Health has a statutory obligation to take
social planner’s view, but is also the ultimate budget-
holder for the government share of sector funding.
• Not obligated to take into account additional resources
expended by other parties (e.g. patients, or voluntary
sector).
• Ministry’s objective function will most closely resemble
the social planner’s perspective
– it crosses multiple boundaries (care delivery, pharmaceuticals,
etc.).
– it has stronger incentives to optimize across longer time periods.

10. Other stake-holding groups likely to have objective
functions that exclude elements that should be considered
in a comprehensive analysis
• DHBs
– population-based funding, includes pharmaceutical and lab
costs, and domiciliary care, but funded on annual basis
– leaves them less able to address timing of cost and benefit
accrual - prefer short term cost savings
• PHOs
– Funded on capitation model through DHB budget
– DHBs face no penalty in shifting costs to PHO
– domiciliary telemonitoring of patients, which reduces hospital
stays shifts the costs of treatment from a hospital physician onto
a GP and nurses
– Increases PHO staff workload with little compensation
– Some costs shift to patient
– Further, low income patients prefer hospitalisation, avoiding GP
fees

11. Cost benefit analysis of telemonitoring
systems remain problematic
• Systems have real potential but cost/benefit issues hold
back widespread adoption.
• A comprehensive analysis should seek to optimize
economic outcomes over a wide range of economic
variables and over an extended time period.
• Ministry of Health-centric or DHB-centric objective
function is more likely to be a good proxy for the social
planner objective than a PHO-centric or Home care
deliverer-centric objective.

12. Lessons learned . . .
• The use of technology changes the way care
is delivered;
• Positive and negative impacts, e.g. brings
new demands, changes work and information
flows, involves losses as well as gains;
• The ability of the MoH to take social planner
perspective across the entire sector more
likely to identify costs transferred from one
stakeholder to another;
• Responsibility of government to drive
research in this area.