The cost effectiveness of telemedicine enhanced by embracing e-health

TeleMed 99, the seventh International Conference on Telemedicine and Telecare, London, UK, 28 Nov –

1 Dec 1999

John Mitchell & Associates, Sydney, Australia


This paper reports on a national study of telemedicine and e-health in Australia, From telehealth to e-health: the unstoppable rise of e-health (Mitchell, 1999). The study shows that the positioning of telemedicine as part of e-health is adding considerably to the justification of the cost effectiveness of telemedicine.


In 1998, John Mitchell & Associates prepared a report for the Commonwealth Government of Australia From Fragmentation to Integration: the Telemedicine Industry in Australia. The 1998 report argued that telemedicine needed to be integrated with mainstream health, if the full benefits of telemedicine were to be realised. Extensive consultations and five national workshops to discuss the 1998 report led to the preparation of a new study in 1999 on the relationship between telemedicine and e-health. The report was prepared for the National Office for the Information Economy, Department of Communications, Information Technology and the Arts.

The study (Mitchell, 1999) explores the view that, with the relentless convergence of technologies and the consequent increase in ability to perform multiple functions with those technologies, it is unwise to promote telemedicine in isolation from other uses of technologies in health care. The combination of information technologies and telecommunications is having a significant effect on health care, and the impact of this convergence on telemedicine needs to be clarified.


Major sources of information for the e-health report (Mitchell, 1999) were the presentations and discussions at the five national workshops held from November 1998 – May 1999 to discuss the findings of the report on telemedicine (Mitchell, 1998). Other methodologies included the identification of a range of Australian and overseas e-health case studies; searches of the Internet; and a review of current literature.

Mitchell (1999) pays considerable attention to clearly distinguishing between telemedicine, telehealth, health informatics, the information economy, e-commerce and e-health. The following table summarises common definitions of these terms.

Table 1: Brief definitions of key terms

Term Sample Definitions
telemedicine ‘a system of health care delivery in which physicians examine distant patients through the use of telecommunications technology’ (Preston, 1993)
telehealth ‘health care at a distance’ (Health On Line, 1997)
health informatics ‘an evolving scientific discipline that deals with the collection, storage, retrieval, communication and optimal use of health related data, information and knowledge’ (Health Informatics Society Australia website)
information economy ‘the new world of social and commercial interaction, brought about by advances in information technology’ (Towards an Australian Strategy for the Information Economy, 1998)
e-commerce ‘every type of business transaction in which the participants (i.e. suppliers, end users etc.) prepare or transact business or conduct their trade in goods or services electronically’ (Australia’s e-commerce Report Card, 1999)
e-health ‘a new term needed to describe the combined use of electronic communication and information technology in the health sector …the use in the health sector of digital data – transmitted, stored and retrieved electronically – for clinical, educational and administrative purposes, both at the local site and at a distance’ (From Telehealth to E-health, the Unstoppable Rise of E-health, 1999)

In Australia, the period 1998-1999 saw a significant rise in interest in the field of e-commerce, with the focus on business-to-business electronic communication. In the report by Mitchell (1999), e-health is taken to be the health industry’s component of e-commerce: ‘E-health is a new term needed to describe the increasing use of electronic communication and information technology in the health sector’.

Telemedicine is the term used to describe the use of telecommunication technologies for the provision of medical services to distant locations. E-health is a more general term that describes the use of both telecommunication and information technologies, for the delivery of health services both at a distance and locally. Hence, e-health is the overall, umbrella field that encompasses telemedicine and telehealth. The following diagram shows the relationship of the information economy and e-commerce to e-health, telemedicine and telehealth.

Diagram 1: Relationship between key concepts

Cost effectiveness analysis ‘contrast alternatives in terms of their relative contribution towards a specific objective’. (Dept. Finance, 1991, p. 2). Mitchell (1999) took the view that the objective of using technology is to improve the delivery of health services. The alternatives are to use telecommunication technologies on their own (e.g. telemedicine) or to use a combination of telecommunication and telecommunication technologies (e-health). These alternatives are discussed below.


Mitchell (1999) identified a range of initiatives in the Australian health sector that involve combinations of telemedicine and information technology. These include rural Victorian nurses making house calls armed with laptops that can be connected to databases at headquarters, via a mobile phone; highly qualified cardiology staff answering telephone calls from around Australia in the Adelaide call centre of the National Heart Foundation, with the support of a powerful database; renal clinicians simultaneously videoconferencing and accessing local, clinical databases; radiologists in South Australia using a combination of teleradiology and digital archiving systems; and general practitioners in Queensland accessing powerful, new pharmacy databases and producing electronic scripts.

Generally, the Australian case studies in the report (Mitchell, 1999) involve the use of both telecommunication technologies such as videoconferencing, the telephone or the Internet together with information technologies such as computer databases and other image capture, electronic ordering, storage and retrieval systems. Besides this use of combinations of information and telecommunications technologies, the use of the Internet is starting to expand the boundaries of e-health. Internet case studies in the report record such Net-based activities as GP communication with hospitals and pharmacists via the Net; provision of professional development for remote health professionals using videoconferencing and the Net; and patients communicating with health professionals via the Net.

The following table summarises the nineteen Australian case studies profiled in Mitchell (1999).

Table 2: Summary of Australian e-health case studies in Mitchell (1999)

E-health Activity Main Organisations Involved State/Territory Examples of Information and Telecommunication Technologies Used
Network of general practitioners, Pathology Laboratories, Pharmacies, Hospital, etc. Australian Capital Territory Division of General Practice; General Practice Computer Group, Australian Medical Association; Telstra Australian Capital Territory encrypted email, IP enabling services, databases, telecommunication technologies
Regional E-health Optus Communications Bendigo, Victoria telecommunication technologies, databases, software
Renal Conferencing The Queen Elizabeth Hospital, Adelaide and five other hospitals in SA and NT South Australia/Northern Territory videoconferencing; radiology and pathology slides accessed from local area network
Hospital without Walls project CSIRO, Ryde, Sydney New South Wales sensors, radio, PC, databases, alarms, cable television, Internet
DocTel DocTel, Adelaide South Australia satellite transmission; videoconferencing; www
National Mental Health Call Centre Mental Health Call Centre for Rural and Remote Sydney/National call centre telephony; database
GP electronic communication The Competitive Advantage. Medi-safe Communications. Queensland encrypted email
WA Government Health Call Centre High Performance Healthcare Western Australia call centre telephony, database
Telecardiology Concord General Hospital New South Wales mobile phone with fax display
General Practitioners using IT/Internet Health Communication Network New South Wales www, databases, software
Internet education CMENet; Queensland Rural Divisions Coordinating Unit Queensland www and CD ROM
Internet Information Med-E-Serve Queensland www, databases, software
Teleradiology and Videoconferencing Women’s and Children’s Hospital, Adelaide; Alice Springs Hospital, Northern Territory South Australia/Northern Territory teleradiology; videoconferencing
Cardiology Call centre National Heart Foundation, Adelaide Adelaide/National call centre telephony; database
Use of mobile phones and hand-held computers, dialing databases and emailing pharmacists from patients’ homes Royal Society of District Nursing Victoria mobile phones; hand-held computers; databases
Pharmaceutical electronic ordering Project Electronic Commerce and Communications for Healthcare (PECC) National secure, encrypted email; electronic catalogue; Extranet gateway trading; electronic funds transfer (EFT); electronic logistics
Telemedicine centre Johnson and Johnson New South Wales www; video editing; videoconferencing
Use of videoconferencing and Internet for Mental Health Telehealth Professional Development Women’s and Children’s Hospital South Australia/Northern Territory ISDN videoconferencing; videotapes; www
Links to Antarctic Tasmania/Antarctic Tasmania satellite transmission; email; videoconferencing; Internet

In investigating the above case studies, Mitchell (1999) found that with the relentless convergence of technologies and with the consequent increase in ability to perform multiple functions with those technologies, telehealth is becoming part of e-health. The following diagram shows the relationship between the two sets of technologies and e-health.

Diagram 2: Two sets of technologies in e-health

Mitchell (1999) also found that the cost effectiveness of telehealth is currently limited by the positioning of telehealth outside of the mainstream of health care. For some critics, telehealth is seen as a peripheral activity and as a novelty area for technological enthusiasts. The cost effectiveness of telemedicine will not be improved unless the perception that it is an ‘add on’ is changed. Telehealth is more likely to be cost effective and to be sustained if is seen as part a larger domain, e-health.

In contrast to the difficulty many telehealth projects have in becoming permanent aspects of health organisations, there are strong business cases emerging in many areas of e-health, such as in the use of call centres and online health information services. These business cases indicate that e-health services are driven by business principles and are fast becoming part of mainstream health care delivery. E-health business cases can incorporate and sustain telehealth activities.

Mitchell (1999) found that there are a number of drivers of e-health, including increased efficiencies from improvements in business processes, the improved quality of care and demand from consumers. Health care lends itself to the strategic application of online technologies because of its size, the current inefficiencies of paper-based records, the intense need for up-to-date information to provide quality health care and because consumers have indicated that they are keen to use the Net.

Australia’s special challenges of distances and the lack of medical practitioners in rural areas are obvious incentives for expanding e-health. Other Australian drivers behind these developments include the realisation of the clinical benefits of using combinations of information and telecommunication technologies to provide improved or new services; the mounting pressure from consumers that the clinical world take advantage of the digital revolution; and the ubiquitous growth of the Internet.

This repositioning of telemedicine and telehealth as part of e-health will add to the justification of the cost effectiveness of telemedicine and telehealth. It will also add to the expansion of telemedicine and telehealth beyond their current parameters. Mitchell (1999) does not advocate an end to the use of the term telemedicine or telehealth. The report advocates that e-health is an important, overarching term and that both telemedicine and telehealth have more chance of being supported if they are seen as part of a comprehensive, integrated e-health plan.

The identification of these current e-health activities and the presence of these relentless drivers substantiate the title of the report, the From Telehealth to E-Health: the Unstoppable Rise of E-health (Mitchell, 1999).


There are some regulatory and behavioural barriers to the successful take-up of e-health services in Australia. However, many of the barriers to the development of e-health can be removed, through policy changes, business strategies and the innovative use of new and emerging technologies. For instance, barriers that are now being addressed include concerns about the privacy of health data; inter-connectivity between different technologies; the need for technical standards; and the remuneration of health professionals using e-health strategies. Another barrier being addressed is the low level of knowledge about information and telecommunications technologies among many health professionals.

Mitchell (1999) recommends that the Australian Government and industry should continue to work together to ensure that technology research and development leads to the rapid commercialisation of e-health technologies. There is also a need for industry to work with health customers to overcome distrust and to explain the new business models for e-health.

The cost effectiveness of both telehealth and telemedicine improves considerably when they are part of an integrated use of telecommunications and information technology in the health sector.


A Strategic Framework for the Information Economy: Identifying Priorities for Action,Department of Communications, Information Technology and the Arts, December 1998

Australian New Zealand Telehealth Committee,

Australia’s e-commerce Report Card, Department of Communications, Information Technology and the Arts, April 1999

Department of Finance (1991), Handbook of Cost-Benefit Analysis, Canberra

Health Informatics Society of Australia website,

Health On Line. A Report on Health Information Management and Telemedicine, The House of Representatives Standing Committee on Family and Community Affairs, October 1997

Mitchell, J. (1998), Fragmentation to Integration: the Telemedicine Industry in Australia, Department of Industry, Science and Tourism, Canberra

Mitchell, J. (1999), From telehealth to e-health: the unstoppable rise of e-health, National Office for the Information Economy, Dept of Communications, Information Technology and the Arts, Canberra

Preston, J. (1993), The Telemedicine Handbook. Improving Health Care with Interactive Video. PictureTel Corporation, Danvers, MA

Author: John Mitchell

BA (Hons), Dip Ed, Grad Dip Bus Admin, M Ed Admin, EdD (cand.), AFAIM