Telemedicine is a communications technology that can be expected to influence investment in equipment, the delivery and organisation of health services and outcomes of healthcare. Analysis of the economic impact of telemedicine has so far been limited and has focused on cost studies for individual applications. Telemedicine initiatives should be compared with conventional alternatives. A search of recent literature revealed 20 such studies that included, usually limited, economic analyses. It is important to note, however, that such assessments apply to localised situations and may not be generalisable. Overall, the potential impact of telemedicine on healthcare systems remains unclear.The challenges that lie ahead for telemedicine, and its economic assessment, include technological change, sustainability of applications, availability of outcomes and other data, and generalisability of evaluation results.