To perform an economic evaluation to estimate the return on investment (ROI) of making available telemedicine consultations from a healthcare payer perspective, and to estimate the economic impacts of telemedicine under a hypothetical scenario in which all rural hospitals providing level I neonatal care in California had access to telemedicine consultations from neonatologists at level III and level IV neonatal intensive care units (NICUs).

We developed standard decision models with assumptions derived from primary data and the literature. Telemedicine costs included equipment installation and operation costs. Probabilistic analysis with Monte Carlo simulation was performed to address model uncertainties and to estimate 95% probabilistic confidence intervals (PCIs). All costs were adjusted to 2017 US dollars using the Consumer Price Index.

Our probabilistic analysis estimated the ROI to have a mean value of 2.23 (95% PCI, −0.7 to 6.0). That is, a $1 investment in this telemedicine model would yield a net medical expenditure saving of $1.23. “Cost saving” was observed for 75% of the hypothetical 1000 Monte Carlo simulations. For the state of California, the estimated mean annual net savings was $661 000.

Providing telemedicine and making available consultations to rural hospitals providing level I neonatal care are likely to reduce medical expenditures by reducing potentially avoidable transfers of newborns to level III and IV NICUs, offsetting all telemedicine-related costs.