American College of Physicians: Internal Medicine — Doctors for Adults ®


Telemedicine faces questions about costs, licensing

From the July/August 1996 ACP Observer, copyright © 1996 by the American College of Physicians.

By Edward Doyle

KANSAS CITY, Mo.-Telemedicine is entering a period of rapid growth, but nagging questions remain about whether the technology is cost-effective and how physicians practicing across state lines will be regulated.

While telemedicine has been used for years to transmit X-rays to radiologists hundreds of miles away, physicians are beginning to use the technology to transmit live video images of their patients to specialists in fields like dermatology for instant consults. In rural America alone, nearly a quarter of hospitals now have telemedicine capabilities and spend $60 million a year on the technology.

But experts at a meeting of the American Medical Informatics Association (AMIA) in June said that despite the huge growth in capacity, many hospitals are not taking full advantage of their high-tech tools.

Gary Gaumer, PhD, from Abt Associates in Cambridge, Mass., presented data showing that most rural facilities equipped to receive consults from large medical centers use their telemedicine technology about 24 times a month. However, while many of these hospitals have gone beyond teleradiology and offer routine consults in specialties like cardiology, orthopedics and dermatology, only half of the total uses are for patient care; the rest are for uses like administrative functions and staff education. "Telemedicine capacity is building rapidly, but utilization may actually be falling," Dr. Gaumer said.

Is it cost-effective?

This dramatic underutilization makes it difficult to assess telemedicine's cost-effectiveness-a big goal of administrators. Several projects are under way to measure the overall costs of telemedicine and how much it can save, but none has been very successful. Project organizers explained that hospitals and other facilities use so many different types of technology that it is often difficult to compare costs accurately. Additionally, many telemedicine programs are so new that they have not begun collecting cost data.

Abt Associates' data indicated that rural hospitals that only received consults from larger medical centers using telemedicine technology incurred an average cost of just over $300 for each use. While this cost seemed high to some, one speaker noted that in rural Alaska transporting a patient to a major medical center generally equals the cost of nine seats on a commercial flight.

But several other speakers pointed out the real question over costs may not be how much money telemedicine saves, but who is saving it. If a health plan does not cover the kind of expenses being saved-transportation costs, missed time from work, etc.-payers may not be interested in paying for telemedicine technology. Data from Abt indicates that the most popular source of funding for rural telemedicine ventures is government grants and local hospitals and that very few payers, if any, reimburse for telemedicine.

Out-of-state licenses

Perhaps even bigger obstacles in telemedicine's move to the mainstream are the complex legal and licensing requirements. In New York, for example, when a patient sued her family physician for misdiagnosing a lesion on a mammogram, the court ruled the physician was not liable because the HMO had sent the film to an out-of-state physician. When the patient tried to sue the out-of-state physician, the court ruled the case was out of its jurisdiction because the practitioner was not licensed in New York.

Some states are responding to this type of situation by drafting legislation that makes it difficult to practice telemedicine. Kansas was the first state to require out-of-state physicians who electronically treat its residents to have a Kansas license, and other states are beginning to follow.

To allow physicians to "telepractice" without having to be fully licensed in more than one state, the Federation of State Medical Boards of the United States has proposed a special-purpose license. Under the plan, which states would enact voluntarily, physicians with a full, unrestricted license in one state would be able to get a special license to practice in other states with a minimum of paperwork and fees.

Leroy Buckler, MD, a member of the Federation's telemedicine committee, said any regular activity-reading X-rays, consults, prescribing medicines-that crossed state lines would require the special-purpose license. "We feel that if a practice is frequent or formal, it should be regulated," he said. While the Federation defines "frequent" as 10 to 12 patient encounters a year or more than 1% of a physician's practice, Dr. Buckler said the proposal would allow each state to define the term on its own.

Though the Federation's proposal would make it easier for physicians to get licenses in multiple states, not everyone favors the idea. Leo Whelan, JD, an attorney with the Mayo Clinic, for example, complained that the proposal would force physicians to keep track of their consultations, a complicated task if each state had a different definition. "If it's the second telemedicine consult in that month from that state," he said, "they're going to have to decline because they will have already performed too many consultations from that state that month."

Mr. Whelan and several other speakers questioned why physicians practicing telemedicine across state lines would need any special license. He noted that licensure laws traditionally have not required out-of-state physicians who provide consults and second opinions to be licensed in the patient's state; the rationale is that the referring physician, who is responsible for the patient, is also responsible for evaluating the consulting physician. "We should take into account the fact that a local physician is mediating the exchange," Mr. Whelan said. "They're the ones that control the role of the out-of-state physician and if they're not satisfied with the quality, they have every incentive to work with someone else."

Mr. Whelan said the real motivation behind the push for licensing telemedicine has less to do with protecting patients than protecting the interests of local physicians. "With telemedicine you get greater competition in the market, particularly with specialty services," he said. "What we've seen is states taking positions that restrict the ability to practice interstate medicine."

But managed care also may be a driving factor. As one audience member pointed out, legislators who realize that physicians in large managed care networks often don't know physicians they refer patients to feel the public needs more protection.

And another audience member said legislators in his home state of Kansas voted to require out-of-state physicians to be licensed locally because they feared a huge managed care organization would set up a network of solo practices that would provide specialty care only through telemedicine. As the man explained: "They had this fear that if we don't do something, our physicians will be replaced by a faceless network of physicians."

Telemedicine resources: where to get started

For more information on telemedicine, try these resources.


  • The American Telemedicine Association is a membership organization that publishes a monthly newsletter. Information: 202-408-1400.
  • "Telemedicine 200" ($249) and "The Health Communications Directory" ($75) are both available from A.J. Publishing. Information: 717-624-8418.

Web sites

  • Cyberspace Telemedical Office ( offers information about internal medical telepractice.
  • Department of Defense Telemedicine Testbed Info ( allows visitors to take a tour of telemedicine projects in the military.
  • Telemedicine Information Exchange ( offers articles and abstracts from telemedicine journals and newsletters, as well as lists of active telemedicine projects, bibliographical references, and a schedule of telemedicine meetings and conferences.
  • Telemedicine Web Page at ( provides telemedicine resources and links to other sites.

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