Use Of Telemedicine Can Reduce Hospitalizations Of Nursing Home Residents And Generate Savings For Medicare

Written by David C. Grabowski, and  A. James O’Malley  originally posted at


Hospitalizations of nursing home residents are frequent and result in complications, morbidity, and Medicare expenditures of more than a billion dollars annually. The lack of a physician presence at many nursing homes during off hours might contribute to inappropriate hospitalizations. Findings from our controlled study of eleven nursing homes provide the first indications that switching from on-call to telemedicine physician coverage during off hours could reduce hospitalizations and therefore generate cost savings to Medicare in excess of the facility’s investment in the service. But those savings were evident only at the study nursing homes that used the telemedicine service to a greater extent, compared to the other study facilities. Telemedicine service providers and nursing home leaders might need to take additional steps to encourage buy-in to the use of telemedicine at facilities with such services. At the same time, closer alignment of the stakeholders that bear the costs of telemedicine and those that might realize savings because of its use could offer further incentives for the adoption of telemedicine.

The hospitalization of nursing home residents has emerged as an important area of concern for policy makers. These hospitalizations are already frequent, and they are becoming more so.1,2 They result in complications, morbidity, and Medicare expenditures that amount to more than a billion dollars annually.13

Empirical research suggests that both the quantity and type of nursing home staff members, especially physicians, might have an impact on the number of potentially avoidable hospitalizations.4 In particular, the lack of physicians at many nursing homes during off hours might be one cause of inappropriate hospitalizations.5 If a medical issue arises during the evening or weekend that cannot be addressed over the phone, the on-call physician can either travel to the facility or recommend that the nursing home resident be transferred to a hospital. All too often, the on-call physician recommends sending the resident to the emergency department.6

Telemedicine makes real-time medical consultation available to nursing home patients and their families via two-way videoconferencing.7 By providing patients with this direct contact, telemedicine could prevent costly hospitalizations of nursing home residents.

This study was designed to answer two questions. First, did the residents of nursing homes that were randomly chosen to receive off-hours physician coverage by a telemedicine service experience a lower rate of hospitalization, compared to residents of homes that received standard physician coverage? And second, if the nursing homes with telemedicine coverage did have lower rates of hospitalization, did they realize substantial savings?

Study Data And Methods

Study Design And Setting

We studied the introduction of telemedicine in a Massachusetts for-profit nursing home chain in the period October 2009–September 2011. The nursing home chain signed a contract with a telemedicine provider to introduce service in eleven nursing homes to cover urgent or emergent calls on weeknights (5:00–11:00 p.m.) and weekend days (10:00 a.m.–7:00 p.m.). As part of this study, the nursing home chain agreed to randomly stagger the introduction of telemedicine coverage. We asked the leaders of both the nursing home chain and the telemedicine provider to blind their staffs to the fact that we would be studying the hospitalizations of residents in these facilities.

All eleven facilities were Medicare and Medicaid certified and cared for a mix of postacute and long-stay residents. Importantly, during the study period the facilities were not engaged in any other intervention that was specifically designed to reduce residents’ hospitalizations, such as the INTERACT program.8

We assigned the nursing homes to categories based primarily on the facilities’ scores on the Five-Star Quality Rating System of the Centers for Medicare and Medicaid Services (CMS)9 and secondarily on their bed turnover rate (that is, total number of admissions per bed). By matching nursing homes on the bed turnover rate, we captured the differences across facilities in the shares of postacute and long-stay residents.10

We randomly assigned six facilities to receive the telemedicine intervention in November 2010, while the other five facilities were scheduled to receive it in October 2011. Thus, the thirteen-month period of October 2009 through October 2010 was designated as the pre-intervention period, and the eleven-month period of November 2010 through September 2011 was designated as the post-intervention period. By examining the first phase of the staggered introduction of telemedicine coverage at randomly selected nursing homes using a pre-post design, we were able to control for secular trends in nursing homes during the study period.

The Intervention

All of the residents in the participating nursing homes received their primary care through physician group practices. Thus, prior to the intervention, evening or weekend calls were directed to the covering physician in the group practice, with off-hours care typically provided by telephone from a remote location.

Before the telemedicine service was introduced into the six nursing homes, separate training sessions were held for direct care staff members and physicians at each facility. The goals of these sessions were twofold. The first was to teach the staff members how to use the service. The second was to educate the physicians about the service and convince them to sign over their off-hours coverage to it.

Across the six treatment facilities, 90 percent of the physicians signed over their off-hours coverage. Because an off-hours phone consultation would not typically generate any reimbursement for the physician, this shifting of calls to the telemedicine service did not generally lead to lower revenue for the physician.

The intervention consisted of introducing into the nursing home a cart with equipment for two-way videoconferencing and a high-resolution camera for use in wound care. When a nursing home resident had an off-hours medical problem, a staff member brought the cart into the resident’s room and contacted the telemedicine service.

The service’s medical call center was staffed by a medical secretary and three providers: a registered nurse, a nurse practitioner, and a physician. Calls were triaged by the medical secretary to the appropriate provider at the call center.


Data for this study were obtained from multiple sources. From the nursing home chain’s electronic health record system, we obtained the following data, aggregated at the facility level: bed size; residents’ demographic and health data; and admissions, hospital transfers, and resident days in the facility per month. From the telemedicine provider, we obtained aggregate monthly data by facility on the number of and reasons for calls to the service.

In addition, for the purposes of categorizing the facilities, we obtained each facility’s CMS five-star rating,9 number of beds, and staffing levels from the CMS Nursing Home Compare website. We also obtained information from the website on all nursing homes in Massachusetts that did not participate in our study, to compare them to the participating facilities at baseline.


The key outcome of interest was the number of residents hospitalized, by nursing home and month. Because of the nature of the nursing home chain’s billing system, this measure captured only the hospitalizations with a stay that included midnight.

Importantly, our outcome measure did not include only the hospitalizations that occurred during the evening and weekend hours. This approach allowed us to incorporate into our results any possible spillover effects on daytime hospitalizations—for example, the telemedicine service could simply delay nighttime hospitalizations until the next day. Based on a recent study,2 we assumed that Medicare paid $10,000 per hospitalization.

Statistical Analyses

We generated descriptive statistics on the frequency and types of telemedicine calls by month and facility. Based on our analysis of these statistics, we categorized certain facilities as “more engaged” and other facilities as “less engaged” in the telemedicine intervention. Next, we compared the treatment and control nursing homes with each other and with all nursing homes in Massachusetts at baseline along several characteristics, to evaluate the study design’s internal and external validity.

In examining nursing home residents’ hospitalizations, we first evaluated the unadjusted pre-post difference for both the treatment and the control groups. To assess the impact of the intervention, we next conducted a difference-in-differences calculation in which we compared the difference in pre-post hospitalizations between the treatment and the control facilities.

To analyze the data in a statistically efficient yet flexible manner, we treated the observed number of hospitalizations in a month as a Poisson distributed random variable. The key variable of interest was the interaction of a facility’s treatment or control status and the time period (before or after the intervention).

We controlled for facility and month fixed effects and an offset for the log of the facility-monthly average census count. The inclusion of the offset variable allowed us to model the per capita rate of hospitalizations in terms of a Poisson regression model, thus respecting the natural discrete distribution of the data while still modeling the ratio of total hospitalizations to population—the true quantity of interest.

To account for the clustering of observations within nursing homes, we used generalized estimation equations with a working correlation matrix that allowed different nonzero correlations between observations from a nursing home that were one, two, three, and four months apart and zero correlation between observations further apart (a four-period dependent structure) to appropriately calibrate standard errors, confidence intervals, and statistical tests.

In an additional analysis, we categorized nursing homes that received the telemedicine intervention according to the extent to which they were engaged in it. The resulting model then had two treatment effects, one for a less engaged treatment facility and the other for a more engaged treatment facility.

Furthermore, because there was some ambiguity about whether calls for emergent cases involved any discretion (that is, hospitalization is relatively certain in such cases), it was not clear whether our measure of the level of engagement should incorporate calls for emergent cases. The results differed minimally according to whether or not we included the emergent cases. As a result, we retained them in the definition of engagement in the analyses reported here.


This analysis is limited in various ways. First, because our data came from eleven nursing homes in a single for-profit chain in Massachusetts during a two-year study period, the results might not be generalizable to other nursing homes or time periods.

Second, the nursing home billing data that we used to record hospitalizations did not provide the time of the resident’s transfer to the hospital. Nor did the billing data include emergency department visits, which might also be influenced by the use of telemedicine. Unfortunately, the billing data also did not allow us to distinguish between hospitalizations for short-stay residents and those for long-stay residents.

Third, although randomization provided a strong study platform to evaluate telemedicine versus on-call coverage at the treatment and control facilities, various unmeasured selection or confounding effects could be associated with which nursing homes became engaged in the telemedicine intervention. Thus, any differences we observed between more- and less-engaged facilities could be spurious artifacts of differences in the value of some unmeasured predictor of engagement and frequency of hospitalization.

However, we included nursing home fixed effects in our regression analyses. This allowed us to control for any omitted time-invariant factors such as proximity to the hospital, facility average case-mix, percentage of physicians who signed over their off-hours coverage to the telemedicine service, and the presence of on-site point-of-care testing (for example, oximetry) that might be correlated with both facility engagement and hospitalizations.

Finally, we were not able to look at other outcomes that might have been related to telemedicine, including the quality of care, the resident’s overall health, staff retention, staff satisfaction, and the satisfaction of the resident or his or her family. Therefore, we assumed that an avoided hospitalization was a positive event, but we were unable to evaluate the health implications associated with that avoidance.

Study Results

Internal And External Validity

We first categorized the study facilities according to their Nursing Home Compare five-star rating and then randomly assigned the facilities in those categories to the treatment or the control group. As a result, the two groups were relatively equal in terms of their overall five-star ratings (Exhibit 1). Compared to the control facilities, the treatment facilities were larger, but they had fewer admissions per bed. Staffing levels of nurses and nurse aides in the two groups were relatively similar.

Compared to all of the nursing homes in Massachusetts, the participating nursing homes in both the treatment and control groups had a worse five-star rating, lower staffing levels, and more beds (Exhibit 1).

Telemedicine Calls

During the eleven-month post-intervention period, the telemedicine service received 1,413 calls from the six treatment facilities. There were 185 nonurgent calls, 458 urgent calls, 85 emergent calls, and 685 calls related to new nursing home admissions. Importantly, the urgent calls were those that were likely to result in a prevented hospitalization.

On average, each facility generated 235.5 total calls (21.4 calls per month) to the telemedicine service during the study period. The aggregate call volume was lowest in the first two months of the study (76 calls and 95 calls, respectively) and was relatively higher during the following months (ranging from 114 to 186 calls per month; Exhibit 2).

Four of the six treatment facilities were responsible for most of the calls. Facilities D and F generated relatively few calls.

In the analyses below, we categorize Facilities A, B, C, and E as more engaged and Facilities D and F as less engaged with the intervention. We acknowledge that Facility C could be characterized as “more engaged” based on total call volume or “less engaged” based on urgent call volume. Because we could not ascertain whether the lower rate of urgent calls was because the facility had fewer off-hours urgent care issues or made less use of the service for those issues, we took the conservative approach of assigning Facility C to the more-engaged group.

Hospitalizations And Expenditures

The rate of hospitalizations per 1,000 resident days declined across the pre- and post-intervention periods for both the treatment and control groups (Exhibit 3). The raw rate of hospitalizations declined 5.3 percent for the control group and 9.7 percent for the treatment group. Thus, the pre-post difference in hospitalizations in the treatment group was 4.4 percentage points lower than the pre-post difference in the control group. This effect was largely concentrated in the more engaged nursing homes, whose rate of hospitalization declined 11.3 percent.

We did not observe a statistically significant effect of the telemedicine intervention on hospitalizations (Exhibit 4). However, when we compared more- and less-engaged treatment facilities, we found a significant decline in the hospitalization rate at more-engaged facilities.

According to these estimates, a nursing home that typically had 180 hospitalizations per year and that was more engaged with telemedicine could expect to see a statistically significant reduction of about 15.1 hospitalizations each year, relative to a nursing home that was less engaged.

The average savings to Medicare for a nursing home that was more engaged with telemedicine would be $151,000 per nursing home per year, relative to the less-engaged facilities. The annual cost of the telemedicine service in this study was $30,000 per nursing home, implying net savings of roughly $120,000 per nursing home per year in the more-engaged facilities.


We found that off-hours telemedicine coverage in a chain of nursing homes generated cost savings for Medicare through fewer hospitalizations of residents of the facilities that were more engaged in the telemedicine intervention. These findings may not be generalizable to other nursing homes. However, the present study highlights three important lessons for providers and policy makers.

First, simply making off-hours telemedicine coverage available does not guarantee that nursing homes will use the service. Second, if nursing homes do use the service, our study suggests that telemedicine is a viable way to reduce avoidable hospitalizations of nursing home residents. However, as long as nursing homes pay for the service and Medicare realizes the savings that result, we suspect that the use of the service will be limited. Third, new policies might lead to an increased investment in interventions such as telemedicine that are designed to prevent the avoidable hospitalization of nursing home residents. We discuss each of these lessons in detail below.

Provider Engagement

How to engage nursing home staff members in clinical interventions is a long-standing question.8 We observed considerable variation in engagement across the different nursing homes, although all of the participating facilities were part of the same nursing home chain. In particular, two of the six treatment facilities generated very few calls to the telemedicine service. The lack of engagement on the part of these two facilities probably partly explains the lack of statistical significance in our overall results.

Telemedicine providers and nursing home leaders will have to take additional steps to encourage buy-in among nursing home administrators, front-line staff members, and physicians. For example, designating a staff member as the telemedicine “champion,” having monthly staff meetings about the use of telemedicine, and having the staff call the telemedicine service at the start of each shift to increase their awareness of and comfort with the service might be catalysts to increasing nursing home engagement.

The Cost-Effectiveness Of Telemedicine

Our study represents the first US-based study to suggest that telemedicine is a cost-effective way to reduce inpatient spending in Medicare, compared to the traditional model in nursing homes of having a physician provide off-hours coverage. However, the interpretation of this result is complicated by several factors.

It is usually the case that someone pays for the telemedicine intervention and someone else reaps the savings. Under the standard payment rules, nursing homes must purchase the telemedicine coverage services, while the Medicare program saves by not having to pay for prevented hospitalizations.

A nursing home has a disincentive to invest in technologies to prevent hospitalizations for long-stay (Medicaid) residents because once these residents return to the nursing home, the facility often receives the higher Medicare skilled nursing facility benefit instead of the Medicaid benefit.11 In addition, nursing homes have a financial incentive—increasing their payments from Medicare—to prevent hospitalizations of higher-paying short-stay Medicare patients.

This combination of factors suggests that without some policy reform, nursing homes caring chiefly for short-stay residents might invest in telemedicine, while facilities caring predominantly for Medicaid residents are not likely to do so.

Effect Of Policy Changes On Telemedicine Adoption

Policy makers have recently implemented several payment reforms that could lead to greater investment by providers in preventing avoidable hospitalizations of nursing home residents. For example, the Affordable Care Act introduced several demonstration programs to coordinate payment and delivery across settings.12

One such model is the accountable care organization, which links payment across settings so that the organization is accountable for the quality, costs, and overall care of its enrollees. Accountable care organizations might invest in telemedicine coverage at a nursing home because the organization is at risk for paying the costs when a resident of the home is hospitalized.

Managed care is another approach to coordinating services across settings and encouraging a more efficient use of services. For example, Medicare Advantage Special Needs Plans assume the full risk of covering Medicare and Medicaid expenditures for dually eligible beneficiaries. Thus, a Special Needs Plan has an incentive to cover telemedicine services because it is at financial risk when nursing home residents are hospitalized. Indeed, one of the Special Needs Plans in Massachusetts reimburses nursing homes for the cost of telemedicine services for the plan’s enrollees in those homes.

Furthermore, twenty-six states are embarking on integrated care demonstrations under provisions of the Affordable Care Act to coordinate care for dually eligible beneficiaries.13 The majority of these demonstrations blend Medicare and Medicaid financing via managed care. Once again, because the demonstrations are at risk for covering hospitalization expenditures, they may be willing to invest in telemedicine for long-stay residents of nursing homes.

Until adoption of these innovative payment and financing models increases, we do not believe that the business case for telemedicine services in nursing homes is a strong one, especially in those nursing homes caring predominantly for Medicaid residents.

As noted above, the nursing home chain that participated in our study had planned to implement telemedicine in the five control facilities in the fall of 2011. However, because of Medicare’s cuts to skilled nursing facility payments, the chain could no longer justify the cost of the telemedicine intervention, and it was not implemented in the five control facilities.


Our findings suggest that nursing homes that are more fully engaged in off-hours telemedicine coverage could generate cost savings for Medicare that exceed the facility’s investment in the telemedicine service. Future research will be needed to test models that encourage greater engagement on the part of providers, as well as to examine the implications of savings for health outcomes.

If the results of such studies are promising, policy makers could consider reforms that would better align the costs of telemedicine with the potential savings from reduced hospitalizations.


The findings of this study were presented at the annual Long-Term and Post-Acute Care Health IT Summit, Baltimore, Maryland, June 19, 2012; and the AcademyHealth Annual Research Meeting in Orlando, Florida, June 26, 2012. The authors gratefully acknowledge support from the Commonwealth Fund. Although the authors are also grateful for the cooperation of both the participating telemedicine provider (PhoneDOCTORx) and the participating nursing home chain, neither of them provided any financial support or had any role or influence in the study results.