The total cost of establishing and using telemedicine capabilities at the four demonstration sites was approximately $778,000 for 16 months of operation.¹ This included the equipment and its installation costs, salaries of dedicated telemedicine coordination staff, an estimate of the value of labor contributed by BOP employees, payments to consulting specialists at FMC-Lexington and the VA Medical Center in Lexington, and the cost of the communications line carrying the telemedicine sessions. Some of these costs, however, were associated with gathering data for the evaluation and for other nonclinical purposes (see below). These latter costs were estimated and excluded from the calculation of costs attributable to health care alone.

For purposes of analysis, fixed monthly costs associated with the telemedicine demonstration were distinguished from per-patient costs that varied according to the volume of usage. That is, the telemedicine demonstration imposed some costs on the system even before the first patient saw a specialist (see Table D.1). The largest cost was the monthly lease for the telemedicine equipment itself. During 1997, the equipment lease for the four-site network averaged nearly $25,000 per month, 90 percent of which was charged to the demonstration’s clinical care.² In addition, the demonstration incurred about $1,400 each month in other site operating costs.³ Fixed plant, equipment, and training costs for the demonstration were $23,664 per month, after allowing for nonclinical uses of the telemedicine resources.

Telemedicine coordinators were hired for each site. At Lewisburg and Allenwood, these coordinators worked 40-hour weeks. The coordinators at the hub medical centers each worked an average of 35 hours per week. After making several adjustments to pay rates and hours billed, it was estimated that staff spent 68 percent of their time for telemedicine coordination, at a cost of $10,939 across the network.⁴

The demonstration incurred additional costs associated with each discrete encounter that were not fixed (see Table D.2). Most of these costs depended on the length of the encounter. Data recorded during telemedicine sessions were used to compute the average length of each encounter for each specialty. Across all specialties, encounters lasted an average of about 15 minutes per patient. Most of the per-patient cost of an encounter was for the communications lines, which averaged $4.85 per minute, or $70 per encounter. The demonstration arranged advantageous billing rates with VAMC in Lexington so that the average cost of a specialist over all telemedicine consultations was only $74 per hour. At this rate, specialists cost an average of $18 per-patient encounter.

Besides the specialist, a physician assistant was used to present the patient, and correctional officers were needed for escort security; these employees cost $6 and $4 per patient, respectively.

¹ Tracor Systems Technologies, Inc., supplied cost data.

² The research team excluded 10 percent because the equipment was sometimes used for other purposes.

³ These include installation costs of various kinds that were amortized over a 20-year life, office equipment that was amortized over a 10-year life, and training amortized over 5 years. The procedures of OMB Circular A–76 were followed in these calculations. The same 10-percent discount for other nonclinical uses was applied to these site operating costs.

⁴ These employees spent some of their time in duties associated with evaluating the demonstration, rather than running it; the research team deducted 8 hours per week for the coordinators at the remote sites and 3 hours per week for the hub coordinators from the time charged to the demonstration.