Telemedicine has the potential substantially to improve the delivery of health care. However, cost-effectiveness studies are needed to help define the appropriate scope and application of telemedicine in different settings. Reports on the evaluation of telemedicine are dominated by technical and feasibility studies. Such studies may be very helpful for initial decision making. However, any cost information at this level tends to be very preliminary and often concerned with making a case to proceed further. Decision makers will wish for further information as the telemedicine application is introduced, to consider its effectiveness - its performance under routine conditions. Without information on the costs and effectiveness of telemedicine services, decision makers run the risk of supporting telemedicine systems that are not responsive to health-care needs or which do not provide cost-effective services. The most immediate needs seem to be improvements in the conduct and reporting of studies, and additional information on the performance of telemedicine in routine practice. Investigators need to provide transparent accounts of their studies, describing in detail the approaches taken, sources of data and assumptions made, and indicating the reliability of their results. Decisions may have to be made on the basis of limited studies, but sufficient detail must be made available to decision makers.