Cost-Benefit Analysis of Telemedicine Systems/Units in Greek Remote Areas

Abstract

Background
Telemedicine units and information technology systems provide special healthcare services to remote populations using telecommunication technology, in order to reduce or even remove the usual and typical face-to-face contact between doctor and patient. This innovative approach to medical care delivery has been expanding for several years and currently covers various medical specialties. Objective
To facilitate installation of telemedicine systems/units in Greek remote areas, this article presents results of a cost-benefit analysis for two Greek islands, Patmos and Leros, using specific economic criteria. Methods
Net present value (NPV), internal rate of return (IRR), and payback period were calculated, in order to monetize the economic benefits and the costs savings, estimate the depreciation of each project, and highlight the social benefits. ResultsCosts were reduced (through saved air medical transportations) by €19,005 for Patmos and €78,225 for Leros each year. NPV and IRR were positive; NPV was €29,608 for Patmos and €293,245 for Leros, and IRR was 21.5% for Patmos and 140.5% for Leros. Each project depreciated faster than the 5-year life-cycle period, and specifically in 3.13 years for Patmos and in 0.70 years for Leros. Conclusion
The establishment of telemedicine systems/units in Patmos and Leros was evaluated and assessed positively, with large savings, economical and social, gained by reducing or even removing the face-to-face contact between doctor and patient. Telemedicine systems/units seem to be a promising solution, especially in Greece, where the problem of primary healthcare services in remote/inaccessible areas is of great concern.

Full text

ORIGINAL RESEARCH ARTICLE
Cost-Benefit Analysis of Telemedicine Systems/Units in Greek
Remote Areas
Marios-Nikolaos Kouskoukis
1
•Charalambos Botsaris
2
ÓThe Author(s) 2016. This article is published with open access at Springerlink.com
Abstract
Background Telemedicine units and information technol-
ogy systems provide special healthcare services to remote
populations using telecommunication technology, in order
to reduce or even remove the usual and typical face-to-face
contact between doctor and patient. This innovative
approach to medical care delivery has been expanding for
several years and currently covers various medical
specialties.
Objective To facilitate installation of telemedicine sys-
tems/units in Greek remote areas, this article presents
results of a cost-benefit analysis for two Greek islands,
Patmos and Leros, using specific economic criteria.
Methods Net present value (NPV), internal rate of return
(IRR), and payback period were calculated, in order to
monetize the economic benefits and the costs savings,
estimate the depreciation of each project, and highlight the
social benefits.
Results Costs were reduced (through saved air medical
transportations) by €19,005 for Patmos and €78,225 for
Leros each year. NPV and IRR were positive; NPV was
€29,608 for Patmos and €293,245 for Leros, and IRR was
21.5% for Patmos and 140.5% for Leros. Each project
depreciated faster than the 5-year life-cycle period, and
specifically in 3.13 years for Patmos and in 0.70 years for
Leros.
Conclusion The establishment of telemedicine systems/
units in Patmos and Leros was evaluated and assessed
positively, with large savings, economical and social,
gained by reducing or even removing the face-to-face
contact between doctor and patient. Telemedicine systems/
units seem to be a promising solution, especially in Greece,
where the problem of primary healthcare services in
remote/inaccessible areas is of great concern.
Key Points for Decision Makers
This study aimed to assess/evaluate the efficiency
and efficacy of a telemedicine system/unit
intervention, monetize the economic benefits, and
conclude if it is desirable or not.
A larger population translates to a higher number of
air medical transportations per year that can be
avoided.
Telemedicine systems/units may have an advantage
in terms of access, equality, and quality of primary
health services.
1 Introduction
Telemedicine units exchange health data from one hospital
or health center to another via electronic communications,
providing real-time services to multiple healthcare centers
regardless of their locations [1]. They have off-site
&Marios-Nikolaos Kouskoukis
marioskousk@gmail.com
Charalambos Botsaris
botsaris@otenet.gr
1
Department of Economic and Regional Development,
Panteion University of Political and Social Sciences, 42
Sofokleous Street, Voula, 16673 Athens, Greece
2
European Center for Interdisciplinary Research and
Education, Panteion University of Political and Social
Sciences, 136 Andrea Siggrou Avenue, Kallithea, 17671
Athens, Greece
PharmacoEconomics Open
DOI 10.1007/s41669-016-0006-z

command centers, usually in hospitals, where doctors and
nurses are connected with distant patients through real-time
audio, visual, and electronic means, enabling real-time
monitoring of patient instability or any abnormality in the
laboratory, ordering of diagnostics tests, diagnosis and
treatment, and control of life-supporting devices [2].
A satisfying amount of research has been performed in
the US and Europe, in order to examine the implementation
and utilization of telemedicine systems/units to determine
their efficiency and efficacy. The results concluded that
current studies are early steps before telemedicine systems/
units become widespread, especially in Europe, implying
that there is a lack of concrete evidence with which to fully
assess the economic impact of telemedicine systems. Some
cost-effectiveness analysis (CEA), cost-minimization
analysis (CMA) and cost-utility analysis (CUA) studies
demonstrated that telemedicine can reduce costs, but not all
[3,4,6]. A CMA of telemedicine for two Greek islands
was implemented, comparing the costs of telemedicine
with those of referrals, where patients from remote areas
travelled to the hospital for consultation, concluding that
the costs of referrals were significantly greater than the
costs of telemedicine [5].
Among the main limitations of the economic evaluations
and assessments of telemedicine systems/units were the
disparate estimation methods, a lack of randomized control
trials, lack of long-term evaluation studies, small sample
sizes, and absence of quality data and appropriate measures
[6]. While many studies draw conclusions on cost based on
decreased mortality and length of stay (LOS), actual cost
was not reported [7–9].
Specifically, a review by the New England Healthcare
Institute, the Massachusetts Technology Collaborative, and
the Health Technology Center deduced that most (11 of 16)
of the studies comparing similar intensive care units (ICUs)
found a statistically significant decrease in hospital mor-
tality, and most (11 of 15) also found a statistically sig-
nificant decrease in ICU mortality. Similar to the findings
of mortality rates, there was substantial evidence that 6 of
13 studies found a statistically significant decrease in
hospital LOS and 11 of 17 found a significant decrease in
ICU LOS [10]. Actual cost is a crucial factor that needs to
be considered, especially for smaller facilities that pursue
high return of investment (ROI), high net present value
(NPV), high internal rate of return (IRR) and short payback
period. NPV, ROI, IRR, and payback period are the eco-
nomic criteria needed in order to assess and evaluate the
project’s efficiency and efficacy, monetize its economic
benefits, and finally conclude if it is desirable or not
[11–14].
The purpose of this study was to conduct a cost-benefit
analysis of telemedicine systems/units in Greek remote
areas with a case study of two Greek islands that have the
same distance to air medical transportation centers in
Athens and Rhodes, in order evaluate, assess, and compare
the costs and potential financial benefits through the NPV,
IRR, and payback period economic criteria, so that regional
health disparities could be obviated.
2 Methods
The method employed for this cost-benefit study is based
on three economic criteria: NPV, IRR, and payback period
(Table 1). NPV is a measure of profitability and it is used
to assess a given project’s potential ROI. A positive NPV
indicates that the projected earnings generated by the
project or investment exceed the anticipated costs. A pro-
ject with positive NPV will be profitable, while a project
with negative NPV will result in net loss. The criterion of
IRR is the interest rate, also called discount rate, that is
required to bring NPV to zero. It should also be positive
and is directly dependent on NPV. The higher the project’s
IRR, the more desirable it is to be implemented. The pro-
ject with the highest IRR would probably be considered the
best and undertaken first. The payback period indicates the
number of years a project or investment needs in order to
be depreciated. It should be as close as it can be to 0, in
order to depreciate the investment as fast as possible. The
project with the lowest payback period would probably be
considered better investment [11–14].
The two islands studied were Leros and Patmos, and the
distance of each one of them from the air medical trans-
portation centers in Athens and Rhodes was approximately
equal. Leros has a slight advantage when the air medical
transportation is to Rhodes and Patmos has the advantage
when the air medical transportation is to Athens. From
January 2005 till December 2014, 304 air medical trans-
portations were completed from the two island of the
Aegean to the air medical transportation centers [15].
Therefore, there was an average of 30.4 air medical
transportations per year, taking into account a period of
10 years.
Leros, according to the latest statistical data (2011
census), has 7917 residents, and the distance from the two
air medical transportation centers, Athens and Rhodes, is
331 and 182 km, respectively. Specifically, from the
average 30.4 air medical transportations per year, calcu-
lation of air medical transportations per year for Leros
based on population is 21.95 (average air medical trans-
portations per year multiplied by the Leros population and
divided by the total population of the two islands).
Patmos has 3047 residents (2011 census) and the dis-
tance from the two air medical transportation centers,
Athens and Rhodes, is 305 and 216 km respectively. From
the total 30.4 air medical transportations per year,
M.-N. Kouskoukis, C. Botsaris

calculation of air medical transportations per year for
Patmos based on population is 8.44 (average air medical
transportations per year multiplied by Patmos population
and divided by the total population of the two islands).
In order to fulfill the economic evaluation and assess-
ment of telemedicine systems/units for the two islands, the
following data from the Greek Ministry of Health and
Military Airforce were used as fixed (year 2014 costs)
(Table 2):
(a) Initial costs of a telemedicine system/unit were
€55,000. These costs include the cost of acquiring
the appropriate telemedicine equipment, the cost of
transporting and installing it, and the training cost of
medical personnel/human resources. The equipment
of a telemedicine system/unit consists of IT equip-
ment (hardware and software), office equipment, the
access control system, and medical equipment (high
resolution camera for macroscopic examination, dig-
ital stethoscope, rinoscope, otoscope, 12-lead cardio-
graph, ophthalmoscope, dermatoscope, and vital signs
monitor) [16].
(b) Operating costs of a telemedicine system/unit were
€1500 per month. These costs include the total cost of
the salary of one employee, who is responsible for the
proper functioning of a telemedicine system/unit and
the maintenance costs of the equipment [16].
(c) Average air transportation costs (average air transporta-
tion costs of each trip) were €5846 for Super Puma
helicopters, which were mostly used. The cost of each
air transportation depends on various facts, such as the
distance and means of air transportation [15].
(d) The life cycle of a telemedicine system/unit installa-
tion was 5 years.
(e) Discount rate was 4%, representing the average return
on deposits’ interest.
3 Results
Based on statistical data, air medical transportations cannot
be avoided completely [15]. Approximately 25% of cases
demand air transportation to a hospital. As a result, from
the 21.95 air medical transportations from Leros per year,
16.46 can be avoided, while from the 8.44 air medical
transportations per year from Patmos, 6.33 can be avoided.
Specifically, from 21.95 and 8.44 air medical transporta-
tions, only 25% of them (5.49 and 2.11, respectively)
should be authorized.
Taking into account the saved costs from the installation of a
telemedicine system/unit, the net cash inflows per year (cash
inflows per year minus operation costs per year) were amplified
during the 5-year period of the project. Patmos cash inflows per
year were the multiplying result of 6.33 air medical trans-
portations saved per year due to the implementation of tele-
medicine system/unit, with the average air transportation costs
per trip. For Leros, were the multiplying result of 16.46 air
medical transportations saved per year due to the implemen-
tation of telemedicine system/unit, with the average air trans-
portation costs per trip. This resulted in higher NPV and IRR.
Moreover, the payback period reached low levels in both
islands due to faster depreciation of the investment.
Interpreting the results of Table 3, we can see that there
is a positive evaluation and assessment of the
Table 1 Economic criteria Economic criteria Formula
Net present value R{Period net cash inflows/(1 ?r)^t}-initial investment
Internal rate of return R{Period net cash inflows/(1 ?r)^t}-initial investment =0
Payback period n
y
?n/p
nThe absolute value of cumulative net cash inflow at which the last negative value of cumulative net cash
inflow occurs, n
y
the number of years after the initial investment at which the last negative value of
cumulative net cash inflow occurs, pthe value of net cash inflow at which positive value of cumulative net
cash inflow occurs, rdiscount rate, tnumber of time periods
Table 2 Economic parameters for Leros and Patmos
Economic parameters Patmos Leros
Initial project costs €55,000 €55,000
Operation costs/year €18,000 €18,000
Average air transportation costs €5846 €5846
Life cycle of project 5 years 5 years
Discount rate 4% 4%
Cash inflows/year €37,005 €96,225
Net cash inflows/year €19,005 €78,225
Table 3 Economic criteria for Patmos and Leros
Economic criteria Patmos Leros
Net present value €29,608 €293,245
Internal rate of return 21.5% 140.5%
Payback period 3.13 years 0.70 years
Cost-Benefit Analysis of Telemedicine Systems/Units in Greek Remote Areas

implementation of a telemedicine system/unit in both
islands. NPV is positive for both Patmos (€29,608) and
Leros (€293,245), demonstrating that both telemedicine
systems/units can be installed. IRR is also positive due to
the above criterion; specifically 21.5% for Patmos and
140.5% for Leros. The payback period is lower than the life
cycle of each project, which means that the implementation
of a telemedicine system/unit will be depreciated before the
5-year period in both islands; specifically, 3.13 years for
Patmos and 0.70 years for Leros [15,16].
4 Discussion
Few economic evaluations of telemedicine can be trusted
to provide reliable information for decision making. The
majority of the assessments were not in accordance with
standard evaluation techniques and still have a long way to
go before governments or private investors can rely on
them to produce valid and solid cost-effectiveness, cost-
benefit, cost-minimization and cost-utility data [8–11].
Some of them demonstrated that the costs can be reduced,
providing higher quality of health services, while some of
them reached the conclusion that costs cannot be mini-
mized with quality of health services unchanged. The
reason is that each case study is different, depending on a
variety of factors such as the infrastructure, size and
location of each hospital, the organizational structures, the
condition of patients, the type of telemedicine system/unit,
and how it is used [4,6,7,12].
The main methodological similarities between these
economic evaluations and assessments were the two rates
that were used for the measurement of cost, the mortality
and LOS rate. The purpose was to compare the costs of
these rates before and after the intervention of telemedicine
systems/units and conclude if they were decreased or not.
Some of them tried to calculate the ROI, NPV, and pay-
back period economic criteria, but in a cost-based method,
having in mind the net savings from the use of telemedicine
systems/units and ignoring factors that are crucial and
important for the calculation of these criteria, such as the
discount rate and the life cycle of the project [11,12].
The main contribution of this original research, having
in mind these economic evaluations and assessments, is to
go one step further and calculate the NPV, ROI, IRR, and
payback period economic criteria, in order to assess and
evaluate the efficiency and efficacy of a telemedicine
system/unit intervention, and monetize the economic ben-
efits, concluding if it is desirable or not (from both eco-
nomical and social perspectives).
Some of the main limitations and weaknesses of the
economic evaluation and assessment of telemedicine sys-
tems/units in Greek remote areas can be the lack of
interested doctors, absence of funding or subsidizing of the
project by the government, local treatment procedures, and
organizational structures. These limitations and weak-
nesses can affect the validity of the results by canceling the
whole project or increasing or decreasing the costs.
Considering the results, a telemedicine system/unit instal-
lation on Leros seems to be more desirable due to a larger
population, which indicates that the saved costs will be higher
than on Patmos. A larger population translates to a higher
number of air medical transportations per year that can be
avoided. Specifically, the net cash inflows for Leros during
the 5-year period are 4.12 times higher than for Patmos
(Table 2). As a result, Leros will depreciate the investment in
0.70 years, while Patmos will take 3.13 years (Table 3).
Furthermore, the implementation of telemedicine sys-
tems/units may have some positive aspects, which may
lead to the obviation of regional health disparities and
create a sense of security for both patients and doctors, thus
providing decent primary healthcare services to the resi-
dents of such remote/inaccessible areas.
The installation of a telemedicine system/unit in a
remote/inaccessible area aims to cover both emergency
situations and some of the regular needs of each island on a
healthcare level. It also aims to improve patients’ health-
care until their transfer to a hospital, but also the prepa-
ration of the doctors at the air medical transportation
center.
Summarizing, telemedicine systems/units are estimated
to result in a significant reduction in the number and fre-
quency of air medical transportations, which may conse-
quently lead to the reduction of aviation accidents that may
occur during the air medical transfer. Despite the potential
advantage of a reduction in human lives lost, medical and
technical equipment losses are also of great significance.
The establishment of such telemedicine systems/units
also enables patient and healthcare issues to be handled in
the event of severe weather phenomena, where the remote/
inaccessible areas are isolated with no accessibility by any
means.
5 Conclusion
Greece’s geography encompasses a total of 227 inhabited
islands, 164 of which are located in the Aegean Sea and 78
of them have more than 100 residents. The incomplete
coverage of primary health services in remote/inaccessible
areas, combined with Greece’s unique geography, suggests
the need for telemedicine systems/units.
Telemedicine systems/units should be designed and
implemented in such way as to meet the primary health
needs of every resident, in every island or remote/inac-
cessible area. However, air medical transportation of
M.-N. Kouskoukis, C. Botsaris

patients to air medical transportation centers may be
deemed essential. The costs of these air medical trans-
fers can be reduced with the use of telemedicine sys-
tems/units, thereby benefiting the residents and society
generally.
In conclusion, considering the available data, in both
projects, the establishment of telemedicine systems/units in
Patmos and Leros was evaluated and assessed positively,
with the possibility of large savings, both economical and
social, by reducing or even removing face-to-face contact
between doctor and patient. Telemedicine systems/units
may have an advantage in terms of access, equality, and
quality of primary health services and seems to be a
promising solution, especially in Greece, where the prob-
lem of primary healthcare services in remote/inaccessible
areas is of great concern.
Author contributions The paper was conceived by MK and CB. MK
contributed the study design, collection of data, statistical analysis
and writing of the manuscript. CB commented on initial drafts of the
manuscript and approved the final version.
Data availability statement The data that support the findings of
this study are available from the corresponding author on request.
Compliance with Ethical Standards
No funding was received during the implementation of this study.
Marios-Nikolaos Kouskoukis has no conflicts of interest to declare.
Charalambos Botsaris has no conflicts of interest to declare.
Open Access This article is distributed under the terms of the
Creative Commons Attribution-NonCommercial 4.0 International
License (http://creativecommons.org/licenses/by-nc/4.0/), which per-
mits any noncommercial use, distribution, and reproduction in any
medium, provided you give appropriate credit to the original
author(s) and the source, provide a link to the Creative Commons
license, and indicate if changes were made.
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Cost-Benefit Analysis of Telemedicine Systems/Units in Greek Remote Areas