Remote health care delivery, often referred to as telehealth or telemedicine, has become increasingly beneficial for patients who face challenges visiting their preferred health care providers in person.
The use of telemedicine was growing steadily even before the COVID-19 pandemic, and it has now become a common practice. This advancement allows patients to receive medical care remotely, which is particularly advantageous for those in rural areas who can access superior care from urban hospitals without the need for travel.
A recent study by Zihan Ye from the University of Tennessee, Knoxville, along with co-authors Kimberly Cornaggia and Xuelin Li, investigates the financial effects of telemedicine on long-term access to acute care.
The research, set to be published in the Review of Financial Studies, reveals that while telemedicine provides convenient services, it also has unforeseen consequences for rural health care access. Specifically, rural hospitals are losing patients to urban hospitals that offer telehealth services, affecting their financial stability and operations.
The study highlights that urban hospitals are more equipped to provide telehealth services due to their better infrastructure, workforce, and profit potential. Rural patients often prefer these services for initial consultations and recovery monitoring, even when they receive surgical care locally.
This preference leads to a significant patient drain from rural to urban hospitals, which negatively impacts the financial health of rural hospitals. Consequently, these rural facilities face divestments in essential medical staff and intensive care units, exacerbating their financial struggles.
Telemedicine has also intensified competition among hospitals, often leading to price wars. Urban hospitals, with their higher charges, tend to dominate the market, while rural hospitals, unable to attract as many patients, face indirect price reductions.
Insurance reimbursement plays a critical role in this dynamic, with hospitals serving many Medicare and Medicaid patients facing reimbursement risks. This financial uncertainty influences their decisions on whether to offer telehealth services.
The financial strain on rural hospitals results in lower net income, higher leverage, and downgraded credit ratings for their bonds. These hospitals must offer higher yields to attract investors, translating into a heavier financial burden.
The study suggests that while telehealth offers superior care access, patients and policymakers need to consider its long-term financial impact on rural hospitals. The shift towards telemedicine, driven by technological advancements, brings significant benefits but also challenges that need to be addressed to ensure the sustainability of rural health care facilities.
