Companies Plan House Calls for Telemedicine Dollars

Companies Plan House Calls for Telemedicine Dollars

By Andrea Novotny
Staff Writer

A new, multimillion-dollar federal program that will provide telecommunications service discounts to eligible rural health care providers is drawing keen interest from telecom and telemedicine companies.

The discounts are designed to provide telecommunications services to health care providers in rural areas at rates compatible with those in urban areas.

The higher costs typically borne by health care providers in rural communities have stymied the growth of telehealth programs in those areas, officials said. The aim of this program is to increase rural communities' access to the latest information and treatment techniques and to lower health care costs.

"There is a groundswell of interest in telemedicine around the country, and one of the early barriers has been cost," said David Balch, director of technologies for Greenville, N.C.-based Telemedicine Technologies Co.

The federal program could "knock off as much as a third of the cost of providing telemedicine links," said Balch, whose company designs, builds and integrates telemedicine systems and provides telemedicine training for practitioners.

Telemedicine covers a broad range of applications, including the image transmission of X-rays, software-recorded data and robotic surgery. But recent technological advances in fiber optics, satellite communications and compressed video are combining to rapidly transform the way doctors treat patients, industry officials said.

Under the federal program, an outgrowth of the 1996 Telecommunications Act, a Universal Service Fund will reimburse telecommunications companies for the discounted services they provide to eligible rural health care providers. Among the telecommunication services covered are Internet access and certain wireless and video services, as well as telephone and other services necessary for health care programs.

The Rural Health Care Corp., a not-for-profit entity established by the Federal Communications Commission, is administering the program with money from the Universal Service Fund in reimbursements paid for by telecommunications providers. Seven categories of health care providers are eligible for support, including state and local health departments or agencies, rural health clinics and not-for-profit hospitals.

The amount telecommunications pro-viders contribute to the fund is based on a portion of revenues they receive from their customers. In the end, these customers will likely pay more for their telephone services.

For the program's first year, the FCC has reduced the amount telecommunications providers must contribute to the fund to $100 million because the demand for services is not yet known. Earlier plans called for $400 million annually to be spent on the program.

On May 1, the Rural Health Care Corp. will begin accepting applications from health care providers for the telecommunications services they wish to receive at a discounted rate. The amount of discounts will depend on the telecommunications services selected by the health care provider.

"Telemedicine is an industry on the verge of taking off," said Lee Bailey, president of the Rural Health Care Corp. in Washington. "It's an area where there has been technology available for years, but few good applications."

It is difficult to gauge the size of the telemedicine market, experts said, but it could reach $3 billion by 2002, said Jay Sanders, president of the American Telemedicine Association based in Washington. Changes in reimbursement laws, regulations and programs, such as the one being administered by the Rural Health Care Corp., will partly determine how quickly the field grows, he said.

"This program will be a shot in the arm for the whole industry, not just telecommunications [companies]," said Sanders, whose organization represents about 1,000 individual, corporate and government members.

Already, heavy-hitter players such as San Antonio-based SBC Communications Inc. and smaller local exchange carriers like Monroe, La.-based Century Telephone Enterprises Inc. are anticipating a wealth of business from rural health care providers that lack the infrastructure to streamline their businesses and improve patient services.

But improved access to health care also will help boost sagging rural economies that have been plagued with declining populations, industry officials said.

"This [program] is not [just] an opportunity for our company to make money, but an opportunity to protect the investments we've already made [in rural communities,]" said Chuck Jones, director of telemedicine for Southwestern Bell, a unit of SBC.

Declining populations cause the company's customer base to suffer, he said. Once a telecommunication infrastructure has been put in place, there is no way to dig up the cable or recover that investment, he said.

In addition, the Universal Service Fund gives telecom companies incentives to pursue business in rural communities where they traditionally would have donated services and lost money.

"The [fund] gives telecom companies a chance to be made whole, and also opens up rural entities as entirely new customers that are able to buy new goods and services," said John Jones, director of government relations for Century Telephone, which has 2 million customers and serves 21 states.

As those telecommunications networks are put in place, the use of teleconferencing and other telemedicine products is likely to grow.

"This [program] is great news for PictureTel," said Ken Greenwood, director of health care marketing for Andover, Mass.-based PictureTel Corp. "When those networks come up, it will enable us to [pursue] more creative kinds of tele-medicine," he said. For instance, such technology used in rural areas could allow parents of premature infants to view their child in a hospital via videoconferencing.

PictureTel provides audio, camera and other tools needed to provide videoconferencing for government and private industry. The company has aligned itself with companies such as New York-based Bell Atlantic Corp. to pursue the use of videoconferencing in telemedicine, and it is considered a top competitor in telemedicine, industry observers said.

For other telemedicine competitors, like Austin, Texas-based VTel Corp., many potential new customers created by the rural health care program will be state and local government entities, such as correctional facilities, said Kimberly Lain, manager of VTel's channel marketing programs.

Already, VTel is using telemedicine for Ohio's Department of Corrections. Rather than have two armed guards transport a patient to an overnight facility, and then to a practitioner located in an urban area, telemedicine allows those patients simply to be taken down the hall to a videoconferencing room, she said.

"State governments are looking to cut health care costs," Lain said. "Increased awareness and programs like the [Rural Health Care program] contribute to a bright outlook for telemedicine programs."

Officials in Texas said the state has saved more than $500,000 in transportation costs during the past two years by using telemedicine to care for prison inmates.

Health Care Providers Eligible for Support:
  • Post secondary educational institutions, teaching hospitals and medical schools.

  • Community health centers or health centers providing care to migrants.

  • State and local health departments or agencies.

  • Community mental health centers.

  • Not-for-profit hospitals.

  • Rural health clinics and Native American health care facilities.

  • Consortia of health care providers consisting of one or more of these entities.

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