A new Medicare payment model will likely spur telemedicine adoption and reduce costs

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The US Department of Health and Human Services (HHS) plans to pilot a payment model that could help reduce Medicare and Medicaid patient transports to costly emergency departments by steering them toward alternative forms of care, like telemedicine or urgent care, instead, according to The Associated Press.

more us patients are visiting nontraditional healthcare servicesBusiness Insider Intelligence
Under the HHS' pilot, ambulance providers will have equal financial incentive to deliver patients to the ED or connect them with urgent or telemedicine care, which should spur greater foot traffic to the latter two services. For context, currently, Medicare typically only pays for emergency ambulance services if the patient is transported to a hospital. If successful, the HHS could expand the program nationwide.

Diverting patients away from emergency departments and toward telemedicine or urgent care represents a massive savings opportunity for the HHS. Emergency room (ER) visits account for a significant chunk (7%) of US healthcare's rising costs, and the price of an ER visit rose 24% to just shy of $2,000 between 2013 and 2017, while usage ticked up 10% over the same period, according to a newly released Health Care Cost Institute report.

Moreover, a large portion of these costly visits is avoidable: In 2017, more than 4 million of the 23 million ED visits made to a group of 750 US hospitals were potentially preventable, representing an $8.3 billion annual savings opportunity, per a recent report from healthcare consultancy Premier. The HHS estimates that scaling the payment model could save Medicare $500 million annually.

The proposed payment model is the latest indicator that hospitals should make strategic investments to control the first touch points of care. Healthcare's "front door"- the services consumers interact with prior to seeking hospital care or for less serious conditions - is undergoing a transformation: We've seen an uptick in consumer use of retail health clinics and urgent care clinics, and younger generations prefer nontraditional healthcare services like virtual care for many services.

Combined with the HHS' proposal to incentivize ambulatory providers to transport more patients to lower cost, nonhospital care, these signs point to a need for providers to diversify how they reach patients. Providers should consider telemedicine investments and partnering with or acquiring walk-in clinics to ensure their revenue isn't undermined by any shifts in how consumers access healthcare: Health systems New York-Presbyterian, Cleveland Clinic, and BayCare have partnered with Walgreens, CVS, and Publix, respectively, for example.

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