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Workshop on Standardization in E-Health
Geneva, 23-25 May 2003

Abstract


Measuring Economic Benefits of E-Health: Theory and Practice
Masatsugu Tsuji
Professor of Economics
OSIPP (Osaka School of International Public Policy), Osaka University

Based on economic theory and our field research on more than forty local governments not only in Japan but also abroad, economic factors which contribute to the successful implementation of telemedicine/telehealth projects are examined. Projects are evaluated in general using cost-benefit analysis, which includes the following methods: (1) replacement cost method; (3) travel cost method; (4) contingent valuation method (CVM); and (5) hedonic price method. Among our field research, selected projects are assessed by the replacement cost method, travel cost method, and CVM as a case study.

First, let us take the example of teleradiology. In the usual teleradiology projects, medical data are transmitted through a telecommunications network, while conventional radiology sends them by a conventional communications system such as the postal service. In our case study, medical doctors visited rural hospitals to read the X-ray pictures. We can thus compare the costs of the two systems, and show exactly how much is saved by teleradiology.

Second, telemedicine (or tele-home-care) projects using image data in the application of information technology (IT) such as CATV and ISDN are examined. In this case, by adopting the replacement cost method, we carry out an estimation of the extent to which telemedicine based on IT can help in saving the cost of hospitalization of the aged in the future. Estimation consists of future hospital expenses of the elderly and future development of CATV and ISDN. Based on this estimation, we can calculate the extent to which hospitalization costs can be saved. Our results indicated that in the year 2050, US$257.3 billion, or nearly 7.4% of total hospitalization costs of the aged could be saved by telemedicine.

Third, we turn our attention to a case study based on the CVM method. We select two rural local governments which have been implementing telehealth systems, and questioned the users of the systems in regards to willingness to pay (WTP). From this survey data, total benefit of the telehealth system is estimated and it is compared with the total implementing costs. B/C ratio assesses the effectiveness of the projects. In addition, by analyzing the correlation between WTP and other economic factors such as income, age, health condition of users, etc., we can identify factors which influence the assessment of the projects.

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