Impact of Care Virtualization on Health Care Utilization: The Case of Telehealth Use

Abstract

Technological advancements and the COVID-19 pandemic have catapulted process virtualization in many sectors, wherein telehealth provides a notable example of digital transformation in health care. Although telehealth has been touted as a facilitator to improve access to care and address runaway costs, it can increase health care spending if telehealth visits represent new forms of resource utilization. Drawing on the lens of Process Virtualization Theory, we study the impact of telehealth on health care utilization by examining visit-level patient data on the use of telehealth in facilitating e-visits with health care providers. Our analysis indicates a 13.6 percent reduction (or 0.15 visit) in the number of outpatient visits, equating to $239 in total cost reduction within 30 days after a telehealth visit. Our results suggest that benefits of telehealth use are observed primarily among diseases with high virtualization potential. Specifically, mental health, skin disorders, metabolic and musculoskeletal diseases patients exhibit a significant reduction of 0.21 outpatient visits per quarter (an equivalent cost reduction of $179) when they are treated via telehealth, suggesting a substitution effect with respect to traditional clinic visits. We also observe empirical evidence for the representation and monitoring capabilities of telehealth in significantly reducing future health care resource utilization. Our research identifies boundary conditions that determine the nuanced impact of telehealth on care utilization, and shows that the effectiveness of telehealth depends on the process virtualizability of disease types. Our findings have important practical and theoretical implications for fostering telehealth use in a value-based health care environment.

Keywords: Telehealth, process virtualization theory, disease types, outpatient, visit, cost, value-based care