During 1997, telemedicine sessions averaged $431 per patient or encounter. Offsetting this cost were savings associated with expensive external consultations and air transports to Federal Medical Centers that did not occur as a result of telemedicine’s use.⁵ If telemedical encounters were always substitutes for these more costly events, telemedicine would have reduced expenditures for specialist care substantially.

Most telemedical encounters were not used in lieu of these relatively rare types of consultations and treatment, however. Instead, a proportion was conducted in place of a conventional in-prison consultation with a visiting specialist. Other patients would not have seen any specialist at all if the new technology had not been available at little or no cost to the prisons. Each time telemedical consultations were used as substitutes for conventional, internal (that is, in-prison) consultations with specialists during the demonstration, the Bureau avoided approximately $108 in direct payments to physicians.⁶ To avoid spending $108 for these consultations, however, the demonstration spent about $431, on average, for each telemedicine encounter.

When telemedicine resources were used for patients who would not have seen a specialist otherwise, no savings at all would have accrued to offset even a fraction of telemedicine’s costs. Because the proportion of telemedicine patients who would not have seen a specialist at all in the absence of the telemedicine resources cannot be estimated, the total savings and, thus, the net costs of telemedicine cannot be estimated with complete precision. In the best case, however, assuming that all patients would have been seen by a consulting physician inside or outside the prison (that is, in a local hospital or transferred to a Federal Medical Center), the net cost of each telemedicine encounter would have been approximately $267.⁷

The reasons for these significant cost differences are apparent in table D.3. This table compares monthly costs and associated savings for 100 telemedical consultations that replaced internal consultations plus 4 telemedicine consultations that replaced trips to specialists outside the prisons or transfer to Federal Medical Centers. This was close to the 97 consultations that the demonstration experienced during the April-December 1997 period.

What made this telemedicine demonstration costly was the expenditure for the communication lines, leased equipment, installation, and telemedicine coordinator -- approximately $34,600 per month.⁸ These accounted for 78 percent of telemedicine’s monthly costs, and all were fixed, not dependent on the number of patients seen.

Other costs associated with telemedical consultations were about the same as costs that would have been incurred for conventional in-prison consultations: approximately $9,800 per month, compared with $10,800 per month for conventional consultations (see table 3.1). Payments to physicians were much lower in the telemedicine demonstration. For example, during 1995-96, prior to the demonstration, psychiatrists were paid an average of $61 per encounter for in-prison consultations. Once the demonstration began, telemedical consultations with remote psychiatrists were available at a cost of $17 each.⁹ Payments to other types of specialists were similarly lower during the demonstration -- less than $25 per encounter, on average. Prior to the demonstration, these prisons were paying substantially higher per-encounter costs, ranging between $160 for an orthopedist or dermatologist to $350 for a cardiologist.¹⁰

Despite these significantly lower payments to specialists who consulted remotely, telemedical consultations incurred other high costs, apart from the equipment and fixed personnel costs. Physician assistants billed some portion of their time to presenting the patients (averaging $6 per encounter), as did correctional officers who escorted inmates from FCI-Allenwood to the telemedicine suite at USP-Allenwood ($4 per encounter). What overwhelmed all these expenditures were payments for using the communications lines. Each encounter incurred $70, on average, for the communications lines.¹¹

Given such high fixed costs of equipment and the high per-minute costs of communications lines, telemedicine was far more costly than the preexisting practices of consulting specialists. Even counting estimated savings of $2,300 per month for averted external consultations and an estimated $4,900 per month saved as a result of averting air transfers, the net cost of each telemedical encounter after the startup phase of demonstration was about $267 more than a conventional in-prison consultation with a visiting specialist. Such cost was incurred because this was a demonstration, not an operational system configured to minimize unnecessary costs. In the operational system projected for the Bureau of Prisons operation, the average cost per consultation is dramatically reduced to $71 per encounter.

⁵ Health services administrators report that telemedicine averted an average of 2.8 trips to local hospitals each month for prisoners to see specialists. At 1996 average costs, these trips would have cost the Bureau of Prisons $2,200 per month, all of which is saved by telemedicine. Transfers of psychiatric patients to FMCs declined from 2.2 per month in the predemonstration period to 1.2 per month in the demonstration period. The associated savings of such averted transfers averaged $5,900 per month. This calculation ignores the possibility that housing these prisoners at FMCs costs more than incarcerating them at their regular prison. The average daily cost of incarcerating patients at FMC-Springfield is $140, compared with an average of $62 per day at the three prisons in this demonstration. If it is assumed that telemedicine saved 30 days of incarceration at FMCs, then this would increase the savings of averted transfers by about $2,323 each.

⁶ Internal consultations during the predemonstration period averaged this amount. The prisons also incurred various other costs associated with internal consultations, but most of these significant costs were also incurred when specialists were accessed remotely, using the telemedicine capacity. For this reason, these common costs were not counted for either conventional or telemedical practice.

⁷ This assumes that 35 would have gone to local hospitals, 13-14 would have been transferred to an FMC, and all of the remaining encounters would have been conducted by consulting specialists inside the prisons, in the conventional manner. Researchers assume that these averted internal consultations would have produced savings of $108 each.

⁸ As discussed in chapter 2, discounts were applied for nonclinical uses of the equipment and staff time.

⁹ Although the hourly rate of the remote psychiatrist was $67, the average consultation lasted only about 15 minutes.

¹⁰ These specialists were engaged at favorable rates between $72 and $100 per hour, and telemedical sessions for all types of specialists other than psychiatrists averaged 15 -- 20 minutes.

¹¹ The demonstration used communications lines for 314 hours of telemedical communications, at an estimated total cost of $91,000.