The R&D Tax Credit Aspects of Telemedicine



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Telemedicine

        Telemedicine will revolutionize the way healthcare is delivered to patients in the United States.  With an aging population, increasing healthcare costs, and an active healthcare consumer movement, more efficient ways of delivering healthcare services are being developed across the industry by innovative healthcare technology companies.   

        Antiquated ways of delivering healthcare are overburdening the health care system nationwide.  In 2014, total spend on U.S. healthcare increased 5.3% totaling over $3 trillion dollars.   That $3 trillion amounted to 17.5% of the nation’s total GDP.  In 1960, healthcare spending was only about 6% of national GDP.  The 17.5% is also unusually high when compared to other developed nations such as Germany, France, and Japan with an estimated national healthcare cost of 10-11% of GDP, according to data from the World Bank.    Most other countries’ healthcare costs are even lower.
    
        The rising national healthcare costs are being exacerbated by the following trends:

  • The U.S. pays for nearly any healthcare technology without regard to economic value or efficiency.  
  • People are demanding more health services than they did in previous years.   
  • The demand for physician services is growing faster than the supply.   

        By 2025, there is expected to be a shortage of between 46,100 and 90,400 physicians in the U.S.  Along with the increasing demand for healthcare services, providing the necessary healthcare services to an aging population in the coming years is going to be quite challenging.

        Some hopeful solutions to this challenge include virtual licensed doctors, distant specialists, and high tech patient monitoring which could dramatically increase efficiency and lower operating costs throughout the industry.  Modern doctors are incorporating tablets, Skype chats, and mobile robotic solutions to diagnose more patients in a shorter amount of time across geographical boundaries.

        In addition, the Internet of Things (IoT) connects monitoring devices to cloud servers that communicate with hospital central databases and healthcare facilities. These cloud servers store data and facilitate electronic patient monitoring.   
The development and integration of these and similar technologies are being increasingly encouraged by federal and state governments with R&D Tax Credits.


The R&D Tax Credit

        Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent.  On December 18, 2015, President Obama signed the bill making the R&D Tax Credit permanent.  Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and startup businesses can utilize the credit against payroll taxes.


Telemedicine Integration

        Telemedicine is the use of technology to gather and exchange medical information in order to increase economic efficiency.  The industry includes a growing variety of applications/services such as two-way video, email, smartphones, sensors, and wireless tools.

        A 2011 Center for Disease Control study showed that 80% of adults who received non-necessary emergency room treatment did so because they did not have access to a primary care provider.  The ER is the most expensive way to provide non-urgent care, being that a typical ER visit costs an average of $1,500 to $3,000 dollars.   Many of the diagnoses and treatments that occur in the ER can be accomplished using the more cost and time efficient methods of telemedicine.
 
        Researchers at the University of Rochester found that 28% of the visits at a pediatric ER involved ailments such as ear infections or sore throats.   These and similar ailments can easily be diagnosed using telemedicine technology.    

        In contrast to the $1,500 to $3,000 ER visit costs, a telemedicine visit can cost as little as $40 to $50 per consultation.  Many patients prefer this method and are often more satisfied because they can consult with doctors more frequently and without leaving their home.  A parent with a sick child in the middle of the night can access a provider via webcam and avoid an unnecessary, expensive trip to the ER.

        In addition to patient benefits and direct cost savings, there are indirect economical benefits as well.  Traditionally, a trip to the doctor’s office means time out of the work day, however, with telemedicine, employees can now communicate with health care providers during work hours, at lunch time, or by taking a short break.  According to a recent study by the Affiliated Workers Association, as many as 70% of doctor visits can be handled without an office visit using telemedicine.   Instead of leaving work for medical evaluations, diagnosis, and treatment, patients can stay working and retain lost income that would otherwise be foregone.

        LifeDojo, Inc., a telemedicine start-up based in San Francisco, recognizes the opportunity to provide health services for employees at the workplace and targets employers who want to keep their employees happy and healthy by offering specific services to boost overall health.


Mobile Technologies

        Mobile technologies in telemedicine involve the use of smartphones, tablets, and other electronic devices to provide interactions for patients and healthcare providers.  According to a Healthcare Information and Management Systems (HIMSS) survey, 83% of physicians now use some sort of mobile technology to provide health care services.

        Nuance’s PowerShare imaging app connects over 2,000 different healthcare organizations who share over 3 million images of patient MRI’s, X-rays, and other relevant data.   Users can also zoom, pan, scroll and handle multiple frame data sets at once.  Medical images can be uploaded to the cloud for access by both doctors and patients across different networks.  The cloud network eliminates the need for outdated technologies such as CDs or expensive infrastructure such as databases at hospitals.

        There are numerous other mobile healthcare apps available for healthcare providers as well.  As of 2012 there were at least 13,000 medical and healthcare apps on the market.  In that same year, 55% of physicians were using them.  That number has likely increased significantly since that time.


Software Development

        Viewing medical images and other data on mobile devices often involves the use of special software applications that display, enhance and possibly manipulate image data.  Telemedicine software needs to be easy to use for both patients and physicians.  The best telemedicine software, for example, incorporates creative user-interface design that is both simple and detailed.   

        SnapMD, Inc. in Glendale, CA created a virtual platform for secure one-on-one live video, audio, and text message consultations between ambulatory patients and their primary and specialty care physicians. The SnapMD cloud based platform enables healthcare providers to directly engage patients in a “virtual care” environment and is HIPAA and HITECH compliant.

        Software programs, such as eVisit, can communicate with pharmacies via ePrescribe and allow physicians to submit a prescription electronically without picking up the phone.  


Internet of Things

        The Internet of Things (IoT) provides several great opportunities for technology developers in the telemedicine industry.   The ability to connect physical objects to each other, in addition to the internet itself, allows for automated remote monitoring of patients, many of whom have chronic illnesses and need 24-hour care. Mobile devices connecting physicians with patients can significantly increase the identification of patient conditions early on.

        By 2020,  IoT is expected to support 212 billion connected devices representing an $8.9 trillion market. Goldman Sachs recently reported that this digital health revolution could result in nearly $305 billion in medical industry savings each year.


Wearables Devices

        The use of wearables devices may be the largest breakthrough in the telemedicine industry.   Clothing and accessories incorporated with sensors can provide both continuous monitoring of patients and automated treatment for health conditions. Innovative wrist watches, for example, can monitor heart rates, take blood pressure and test glucose levels for diabetics.

        Siemens, the large global technology and automation company recently introduced the syngo.via WebViewer which allows users to view images quickly on a tablet or other smart device.  In the case of a stroke or trauma, physicians need to see images as soon as they are available and the ability to display images directly on a tablet means patients do not have to be brought to a reading room to explain a diagnosis.

        Other mobile devices are giving rise to a new class of clip-on diagnostics that allow patients to monitor and diagnose themselves.   AliveCor, Inc., based in San Francisco, sells a heart monitor that connects to an iPhone and allows patients to record their own ECG. The app records accurate ECGs and heart rates in about 30 seconds at a very reasonable cost.


Data Analytics

        Data analytics will allow doctors to make more informed, faster, and overall more intelligent decisions about a patient’s health.   For example, the use of big data analytics is helping to improve research and treatment for Parkinson’s disease by detecting patterns in patient data collected from wearable technologies used to monitor symptoms. This effort is an important step in enabling researchers and physicians to measure the progression of the disease and to accelerate breakthroughs in drug development.

        Data analytics can also give patients tailored advice on what to do in any given medical situation from a vast database of human experience. In addition, patients can enter inputs such as their smoking history, their athletic ability, and their DNA profile and compare the effects of their lifestyle with other similar users in the database.

        Thanks to large data sets made available with big data analytics, we now have the ability to search for trends and associations that we would have missed only a decade ago.  A recent study, mining electronic medical records (EMRs), showed that women with ovarian cancer who were on certain blood-pressure drugs actually lived longer.


Data Security

        As the ability to transfer information electronically and view medical files with internet connected devices develops, data security becomes an increasingly practical concern.    Storing medical data on cloud servers and other internet connected devices raises concerns among some patients and doctors that  data could potentially be accessed by unauthorized users.

        The CDC recently estimated that each year there are 35 million hospital discharges, 100 million hospital outpatient visits, 900 million physician office visits, and billions of prescriptions all containing confidential patient information.  Technology developers need to create products that are 100% secure and HIPPA compliant as well.


Online Therapy

        Perhaps one of the most obvious uses for telemedicine involves virtual therapy.  Breakthrough Behavioral, Inc., based in Redwood, CA offers online therapy in an attempt to make it easier for patients to get access to mental health providers. The site offers some impressive stats, with 86% of patients returning after their first session.  Studies have shown that online counseling is just as beneficial as in-person.   


More Convenient Access

        Perhaps the largest benefit of telemedicine is that it allows people in rural areas and undeveloped countries to access healthcare markets for the first time.  In-home telemedicine solutions can be tailored for use in remote locations like villages in Africa, India, and even rural America. Advances in satellite communications technology now allows people in these remote areas to bypass decades of infrastructure development and connect easily to the internet. Many of these people would have access to real doctors for the first time.   

        Pager, Inc., a NYC based start-up, provides on-demand home doctor visits within 2 hours through the use of their app.  So far Pager, Inc. offers services in New York and San Francisco but plans to reach more cities throughout the U.S. in the near future.    


Electronic Medical Records (EMRs)

        An electronic medical record (EMR) is a digital version of a patient’s paper medical history chart.  Real-time, patient centered records make information available instantaneously to patients, doctors and other authorized users.  Advanced EMR systems go beyond standard clinical data and offers detailed e-files containing a patient’s medical history, diagnoses, medications, treatment plans, allergies, immunization dates, radiology images, and laboratory and test results.  

        This digital format is particularly useful because it allows doctors to share information across organizations. Many times patients do not know what type of health information is relevant to share with doctors and often forget important medical information that should be disclosed to healthcare professionals.  Electronic databases, however ensure that all relevant patient health history is disclosed to doctors even if a patient fails to mention it.  


Conclusion

        The use of telemedicine technology to evaluate, diagnose, monitor and treat patients across geographical boundaries could potentially revolutionize healthcare services throughout the world.  Federal and state R&D Tax Credits are available to help support and stimulate those who developing technology in the telemedicine sector.

Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andrea Albanese is a Project Manager with R&D Tax Savers.

Michael Wilshere is a Tax Analyst with R&D Tax Savers.


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