Policy implications for the virtualization of health services

Virtual care (where the provider and patient are separated in space and sometimes in time) is a natural next step in technological innovation for healthcare. Increasing care virtualization has the potential to improve quality of life for patients while increasing the healthcare system’s efficiency but it presents substantial challenges for clinicians and policy makers.  The purpose of this article is to outline those challenges and identify possible solutions.

Even the most successful innovations have presented challenges for policy makers and clinical leaders.  We start with two recent examples to illustrate these challenges:

1)      H. Pylori and the 90%+ reduction in gastric ulcers:  In 1984, Nobel winner Barry Marshall drank a beaker of H. Pylori and proved the connection between the bacterium and gastric ulcers. As late as 1989, management of peptic ulcer disease was a $6 bn cost to US healthcare and surgical management of bleeding ulcers was one of the most common general surgical procedures.  Now, due to medical therapy for H.pylori, surgical management is a rare event for which academic hospitals have to find the “old guys” to do them.  From a policy point of view:

  • It took ten years for the knowledge to propagate to the general medical community.
  • There is still an active and legitimate debate about the appropriateness of treating asymptomatic H. Pylori infection (which has been linked to stomach cancer as well)

2)      Digitization of Radiology: In 2003, Canada Health Infoway committed about a quarter billion dollars to building Diagnostic Imaging Patient Archival Systems (DI/PACS) across Canada.  These systems are now ubiquitous across Canada and increase the productivity of radiologists dramatically (Nenadaovic et al 2008).  Richard Alvarez, Infoway’s CEO, is fond of saying that this intervention has created capacity equivalent to 500 “virtual” radiologists.  Assuming a virtual radiologist cost the same as a real radiologist that is a $300Mn+ increase in health expenditures.  From a system point of view:

  • Prices for images have not declined as fast as quantity has risen.  This has resulted in steadily escalating total costs
  • There is some fear that the expansion of capacity has resulted in an increase in inappropriate imaging.

And these were clear cut cases.

We now face a rapidly digitizing healthcare system in which credible senior people believe that 25% of all health services will be virtual by 2020 (Dr. Ed Brown, ATA president, OTN CEO).  This projection is backed up by US data at leading centers:   Kaiser Permanente – Northern California reported 10.5 million virtual visits in 2013, and projects that virtual visits will exceed in person visits by 2016. Similarly, the VA has recently partnered with Kaiser as part of a strategy to prioritize virtual medicine[i].

Virtualization of the patient-provider interaction creates opportunities and service improvements for providers and their patients.  Removing physical contact can make care delivery faster and more convenient. For caregivers, patients can be “seen” in less time and asynchronous interactions allow for better time organization.  Exact estimates vary by type of service but doubling and even quadrupling of “visits” has been reported.  Compiling requests and results for asynchronous review and response can increase the efficiency of the patient interaction even further.

For patients, the need for travel time is reduced dramatically and the quality of the “waiting room” is greatly improved. A 2012 Conference Board of Canada study sponsored by Infoway estimated that the average citizen spends a total of three hours getting to, waiting for and then returning from a 10-15 minute appointment.   A new BC virtual video provider (Medeo) reports that their set-up and waiting time for an established patient is averaging 50%-100% of the actual encounter time.  This is a 10x improvement in the value for citizens. The loss of intimacy is balanced by less need to travel, speed of interaction and reduced exposure to the waiting room environment.  Recent studies by both PwC and Infoway have confirmed that Canadians want virtual access to their care providers.

These new modalities present challenges for policy makers – particularly in a fee-for-service environment.  The remainder of this essay outlines nine key challenges with suggestions for addressing them:

1)      Lowering prices for higher throughput virtual care: Virtual care increases throughput. This works well in capitated primary care practices as the Kaiser results suggest.  In specialty care, the first two virtual OHIP codes introduced at the last negotiations) for Dermatology and Retinal scans were set at 55% of the physical fee code based on a presumption of 2x volume increase.  This is an improvement on the radiology experience of the past decade but a more nuanced policy approach will be needed if 25% of care is to be delivered in this way.  Some form of envelope –based reimbursement would control total spending in the specialty and reduce fee levels as volumes increase.

2)      Queue reduction and total system costs: Queues control access and limit quantity of service; their removal removes this control point.  Waiting for an appointment creates an opportunity cost to see a health provider – often a considerable non-financial burden.   Removing this barrier increases system access but also system costs. Technology improvements have sent spending spiral higher for technology heavy specialties including radiology, ophthalmology and cardiology.  “Productivity gains” have caused short term pain for health budgets because fixed fee schedules don’t have any way of coming down when “productivity” goes up.

3)      Queue reduction and appropriateness: Limited schedule availability requires that physicians prioritize their cases. Whether by objective or subjective criteria prioritization through physician judgment improves appropriateness even if it reduces timeliness.  Policy makers implicitly rely on queues to choose among cases requiring treatment or access to diagnostics.  The opposite may also be true and the elimination of the wait list may induce demand that would otherwise have not been included as a system cost.   Creating a choice to provide more service will mean that we must choose wisely.

4)      Short-term impact of queue shortening: Technology improvements like virtual care may increase throughput appropriately in the short term and this creates a temporary increase in spending where there is a large existing queue. This effect occurred in Ontario when wait times were reduced in the mid-2000s (e.g. cataract surgeries circa 2007-9).  This is appropriate and the healthcare system needs to find the funds to pay for this. Tracking the one-time impact will help to make sense of true underlying service demand.  Not doing so creates a volume spike in one year followed by an apparent reduction in the following year. This can be incredibly confusing and frustrating for the health system and the public it serves.

5)      Quality and Virtual Care: New modalities will require new quality standards as virtual care becomes normal practice. They will also provide new opportunities for direct monitoring of practice patterns and care quality. We do not yet know all of the ways in which virtual care will improve quality but there are many early Ontario examples including:  post-surgery wound care (WCH), mental health through telemedicine (OTN, MSH), Cardiac care (UHN/OTN), pain management (HSC), and COPD (St. Joe’s-Hamilton).  More frequent and immediate care virtually will create opportunities for care innovation and new systems of quality monitoring.

6)      Virtual Care Continuity and Coordination: Quality standards should clearly spell out the responsibilities of the provider to deliver virtual care, how the virtual visit will be incorporated back into the permanent patient record, the circumstances that would require a face to face visit, and metrics to track performance. Without these standards, there exists the possibility that virtual care may compromise care for patients and undermine the physician-patient relationship.  While virtual visits may replicate the convenience of the physical walk-in clinic we should not allow them to replicate the lack of coordination and care integration that has occurred in that system.

7)      Drug-seeking behaviour:  In the early years virtual care should not be used for narcotics and other controlled substances unless the provider of care has an existing (physical) relationship with the patient.  Even then those prescriptions should be subject to review.

8)      Fraud and Abuse:  Payment will require open review of any billings fraud and abuse.  Virtual care will have time stamps as to duration of visit and the results must be recorded in a medical record.  Health payers should insist on the ability to have a second physician monitor suspect practice patterns.

9)      Barriers to adoption of the new standard of care:  Established policy and programs sometimes run counter to the adoption of these innovations. In particular, our fee for service system has an inherent bias against virtual services.  Care happens (and is billable) when hands are laid on the patient.  Similarly hospitals are paid for footfalls.  These historical systems need a comprehensive review to ensure parity of virtual and physical care.  Physical contact will still be required for many medical services but where it is not clinically needed it should not be continued simply as a queuing mechanism to allow for cost control.

We are entering an exciting time in medicine.  Virtual care has the potential to dramatically improve the lives of patients and caregivers.  Canada is already leading the way through organizations like Ontario Telemedicine Network and through the recent moves by the BC government to allow secure virtual care from any location to any location to be billed under the fee schedule.  A path to a sustainable public health system is now in view.  Let’s prepare ourselves well for the journey ahead.

The comments section is closed.

  • Riham Hanna says:

    Although it may not be a conscious decision by individual policy makers the system effect is the same.

  • Scott Wooder says:

    Virtual Care in family practice is an important tool. It leads to improved access both for those people who get virtual care and for those who require a face to face assessment. It is more cost effective and convenient for people who don’t need to book time off work and travel to a physical location
    Because there are no fees to capture the virtual care being done by family practice in Ontario, it appears to data collectors that family physicians are doing less work. E-mails, phone calls and other non-billable communications are not tracked.
    This has led the Ontario Government to take the ridiculous position that capitation rates need to be ‘recalibrated’, which means reduced.
    When someone looks at my day-sheet and compares it to a similar day-sheet from 20 years ago they will say “you are seeing fewer patients in your office”. Thank you! I’m spending less time doing unnecessary activity to generate fees and more time with patients who need extra time.
    We cannot penalize family doctors for doing exactly what patient enrolled models are meant to do, spending more time with those people who need it.

    • Will Falk says:

      Great point Scott. We need to stop managing inputs and manage (and pay for) outcomes and outputs

  • Ben Fine says:

    Hi Will and Sacha
    Will, we discussed this point a few years back: dollar paid per image interpreted has in fact markedly decreased over time (http://www.longwoods.com/content/22892). Good news for payors.

    More importantly, I think you make a great point that decreasing wait times and increasing access drives demand. We see it, for example, every time radiology departments increase access to emergency departments. Patients are equally as sick but, after interesting access, more imaging tests are ordered/demanded. It changes the mental arithmetic of ordering providers for each patient they see (“is this test that might help me manage this patient (benefit) worth the wait (cost)… ” As that wait decreases so does the mental “cost” of doing the test – and people order more tests). That’s just hypothesis for now. Countering this effect will be vital in any system that cares about cost.

  • Kashif Pirzada says:

    A newer RAND study in California failed to show meaningful cost savings (https://www.rand.org/news/press/2017/03/06.html), and documented an increase in use for minor conditions. I’m sure there is a place for virtual visits, but people still pay the expense of travel to business meetings instead of using Skype… and there is a crackdown on remote employees by the likes of IBM and Yahoo and others in the corporate world.
    There is a certain quality to face to face interactions that still isn’t replicated by technology, yet…

  • Ryan Wilson says:

    Will, Thoughtful commentary as always! One oft-overlooked policy implication of virtual care is the opportunity for data collection, way-finding and patient engagement.

    1. Data Collection – Virtual Visits open up the opportunity for the system to collect data from patients and providers in a manner that is impractical for physical visits. Medeo, for example, followed up with every single patient encounter asking the patient how satisfied they were that their issue had been resolved and offered the ability to provide feedback to their provider. The opportunity for collecting quality metrics, academic research and other data points that can be used to improve the system’s efficiency and quality can not be understated.

    2. Way-Finding – By reshaping behaviour of Canadians to ‘start with the app’ we can use evidence based best practices to route people to the optimal manner of care. Things like ED diversion, mental health and nurse line come to mind. The digital native generation often doesn’t know where to start or how to access care.

    3. Patient-Engagement – We have been talking about patients having access to their medical records for years but PHRs often go unused. Virtual care provides a motivation for patients to log on and access care. By requiring documentation of the care plan and other key data elements in policy we can lay the foundation for patients having access to their care plan. By building required documentation and patient access to electronic medical records of virtual care into policy we can mitigate quality/abuse issues while driving patient engagement.

    Full disclosure I was formerly the CEO of Medeo. Currently no conflict.

  • Mark Fruitman says:

    One of the central claims of this article is that “virtual care” not only increases throughput (i.e. the total number of cases) but also increases efficiency (i.e. the number of cases that can be provided by a physician per unit time). Radiology is cited as an illustrative example where Will Falk claims that the advent of PACS increased efficiency equivalent to the addition of 500 radiologists. Presumably Mr. Falk is contending that this extra work is being absorbed by existing radiologists with the same investment of effort and time, since he advocates a proportionate decrease in remuneration. He supports this contention by referencing Nenadovic et al., 2008, which seems to be this report, referenced in the comments below:


    Page 12 of this report seems to be the source of the claim that there has been a “25-30% improvement in Radiologists’ productivity”. In support of this claim, the report references “Infoway PACS Survey”. I cannot find a complete citation and cannot review the source article. It appears to be a survey rather than a quantitative study of effienciency, but it is hard to be sure.

    As a radiologist, I cannot do 125-130% more studies than I used to be able to do in the pre-PACS era, and I believe my colleagues would say the same. I believe that if someone were to review the data, they would see that radiology volumes started to increase several years after the implementation of PACS, and would most closely correspond to the MOHLTC’s wait time initiative. Perhaps someone has done that analysis?

    I do not argue that my anecdotal evidence should be the last word, and yet it is unclear to me that Mr. Falk’s evidence is of any higher quality. Nevertheless, operatives at the highest level of the MOHTLC are using these potentially questionable statistics for planning purposes. Can someone please provide a reference that shows the methodology used to develop the claim that efficiency has increased 25-30%? If we are going to have an “evidence-based” discussion, perhaps we should begin by reviewing the evidence.

    I have asked for this information before on this and other forums and I am usually met with silence.

    • Mark Nenadovic says:

      Hi Mark –

      Thanks for your interest in the methodologies underlying the study published in 2008. The evaluations of digital diagnostic imaging investments addressed the key projected benefits of these projects, including: provider productivity and efficiency improvement; decreased patient transfer and duplicate exams; decreased cost per case; and decreased turnaround times. Studies completed by four provinces (British Columbia, Ontario, Nova Scotia and Newfoundland and Labrador) were the primary source of data for this analysis, supplemented and validated through key informant interviews and a literature review. Using these data sources, a method of triangulation (i.e., top-down/bottom-up estimates using three or more references) was applied. Benefits were estimated on a run-rate basis, assuming 100% pan-Canadian implementation of PACS with a 90% capture rate of benefits. Additional information can be found in an article published in Electronic Healthcare, 7(4) April 2009: e1-e10 is available at http://www.longwoods.com/content/20599.

      You might also be interested in the 2008 MacKinnon A.D. et al article entitled Picture archiving and communication systems lead to sustained improvements in reporting times and productivity: results of a 5-year audit. Clin Radiol. 63(7):796-804 found that “productivity, defined as the number of films reported per WTE radiologist, increased from 336.6 per month to 406.9 per month (i.e., by 18%). Between March 2002 and March 2006 there was a reduction in the numbers of radiographers (74.5 to 71.9 WTE) and clerical staff (35 to 27.1 WTE).” You will be able to find this article at http://www.ncbi.nlm.nih.gov/pubmed/18555038

      Hope that helps.

      • Mark Fruitman says:

        Hi, Mark.

        Thank you for your response. Both articles are behind a paywall so I cannot access them. I will see if I can get them through the hospital, and will respond here if I do.

        However, taking the result of the Clinical Radiology article at face value, the reported increase in efficiency of 18% is significantly lower than the 25-30% in improved radiologist efficiency quoted in the Canada Health Infoway report for which you provided a link. And yet this is the number that we frequently hear. Bear in mind that I have probably already dug deeper than many people, who just use the headline number.

        I doubt that anyone would deny that PACS has afforded some improvement in true radiologist efficiency (i.e. number of cases read per unit time, NOT per day). But I think anyone actually reading these studies would doubt it approaches 30%.

        The effect of “efficiency” may decrease over time. For example, improvements in MR technology allow either faster image acquisition or better image quality. There is a tradeoff. We are probably doing imaging both faster and better imaging than we did 10 years ago; however, we have maximized neither time efficiency nor image quality, since both are important. I suspect PACS would be the same: we can certainly read the same case faster now than we could ten years ago, but the cases are not the same. There are more images and more phases of acquisition. Some studies, like femoral angiography, would not even be possible without PACS, but they are time-consuming to read. And the case mix tends to change over time: a case mix between 2002 and 2006 is unlikely to be the same as it is today.There was virtually no CT colonography for excample, in the period of that study, but it is a common study today.

        These considerations mean that estimates of cost savings from increased efficiency have many embedded assumptions that will be wrong, and the actual savings realized will be less — possible much less — than those projected. It hink it does everyone a disservice to exaggerate the efficiency benefits.

        I’ll see if I can dig deeper if I can obtain these papers.

  • Mark Nenadovic says:

    I cannot agree more that “virtual care has the potential to dramatically improve the lives of patients and caregivers”. Benefits related to the use of digital diagnostic imaging systems alone were valued at $844 million in 2012 and, according to a 2008 report, benefits when fully implemented are estimated at between $850 million and $1 billion per year. Source: https://www.infoway-inforoute.ca/index.php/resources/reports/benefits-evaluation/doc_download/339-diagnostic-imaging-benefits-evaluation-report-full

    Your claim that prices for images have not declined as fast as quantity has risen, driving an increase in total costs, should be clarified. Digitization has increased the capacity of radiologists and at the same time, reduced the cost per image. Film and storage costs, as well as the increased productivity of support staff, are just a few of the areas where cost structures have changed.

    Bottom line, on which we all agree, is that there needs to be alignment of patient needs, reimbursement models, workflow, policy and regulation to maximize benefits for both the patient and the health system.


  • Elizabeth Rankin BScN says:

    Your article is timely and thank you for raising the points that you see as central to the issues with the “virtualization” of medicine. My UPCOMING book, THE PATIENT WILL NOW SEE YOU: How Listening To The Patient Will Redefine The Patient-Doctor Relationship delves into why, how and when patients and doctors will have the opportunity to participate in a variety of technology device driven based relationship experiences in one chapter of my book. It would be good to chat further about your article if you are interested.

    • Will Falk says:

      Sure. Can you contact me through twitter or LinkedIn please. Or post a reply with your email. Glad u liked the piece

  • Waiting f. Godot says:

    “Physical contact will still be required for many medical services but where it is not clinically needed it should not be continued simply as a queuing mechanism to allow for cost control.” WOAH NELLIE……what are you suggesting? that our healthcare system is making us line up on purpose because they they don’t think its necessary and it would help us reduce costs? Is this kind of like how Rogers Customer Service never calls you back or re-routes you to 9 different representatives with the hope that you’ll hang-up eventually????!!!!

    Health Ministers, Deputy Ministers – is this what you guys are doing? That would seriously tick me off and I suspect the rest of my fellow Canadians….

    • Will Falk says:

      Your analogy about queues for service is spot on.

      Although it may not be a conscious decision by individual policy makers the system effect is the same. Queues are a tool for prioritization and allocation (aka rationing). Always have been

      Thanks for your comment

  • Generation Y says:

    Why is this even a policy discussion? why do we want the government in the business of virtual healthcare? Why do we want an government run platform like OTN for the majority of virtual care that should be happening on the consumer’s mobile device. Let this play out and let the market determine the price and cost. Governments should see this as a way to engage the next generation who are willing to pay for these services… and guess what gov’t health expenditures will go down!

    • Will Falk says:

      You raise an interesting point. Virtual care could well be a back door to a separate payment system. We would view that as unfortunate as creating a second better tier with improved access and quality should not be based on ability to pay.

      Obviously there will be those who don’t agree with that statement. Just as there are those who don’t support the current financing and organization of the public system

      Our position is that government should be equally involved in both the physical and virtual care. That there should be party’s to regulation and payment

      You do raise an interesting point though about whether innovation would happen faster outside of the public system. Virtual care is growing quickly worldwide so we will probably get to see!

      Thanks for your comment

  • Junior Incredible says:

    what is a senior credible person? does this mean there are senior people who are not credible….and what about junior people do they have no credibility?

    • Will Falk says:

      Copy edit accepted. Thanks

      Point we were trying to underline is that 25% of care delivered virtually is a real possibility this decade. This shift will be of the same order as the shift from inpatient to out patient care.

      Thanks for your comment

    • Nienke Klaver says:

      Thank you for your excellent article. For rural remote communities eHealth could be very important and would alleviate the need to travel to the closest urban centre (90 minutes away in our situation) for specialist visits. In our community there seems to be some resistance, but hopefully once people will feel more comfortable using these ‘tools’ this will disappear.


Will Falk


Will Falk is a senior fellow at the CD Howe Institute, an innovation fellow at the Women’s College Hospital Institute for Health System Solutions and Virtual Care and an executive-in-residence at the Rotman School of Management at the University of Toronto.

Sacha Bhatia


Dr. Sacha Bhatia is the director of the Institute of Health Systems Solutions and Virtual Care and a Staff Cardiologist at Women’s College and University Health Network.

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