Human Capital & Careers

Have Illness, Will Travel?

Medical tourism emerges as a new option for keeping health-care costs in check.
Alix StuartOctober 1, 2010

Two years ago, Bob Ihrie, senior vice president of employee rewards and services for home-goods retailer Lowe’s, decided to investigate “medical tourism” as a potential way to reduce health-care costs. The basic idea: have employees travel to places like Costa Rica or Singapore for certain surgeries that cost thousands of dollars, if not tens of thousands, less than U.S. hospitals typically charge.

What with health-care costs climbing an estimated 10% on average this year, and health-care reform showing no signs yet of stopping that trend, companies — particularly those that self-insure — are becoming more willing to take comparison shopping to its logical extreme.

Besides offering employees the chance to visit an exotic locale, usually on the company’s dime, the overseas costs of big-ticket operations are “likely to be significantly below prevailing Medicare reimbursement levels,” the lowest prices U.S. hospitals generally accept, says Jeff Carter, CEO of HealthGlobe, an organization that connects employers and individuals to a pre-vetted network of overseas hospitals.

So far, however, this intriguing concept has remained just that. Few companies have signed up, and even fewer employees have packed their bags. A 2008 study by the National Business Group on Health found no employers offering it, but about 40% planning to evaluate it at some level. Steven Cyboran, a consulting actuary in Sibson Consulting’s health-care practice, estimates that the number of companies now offering it hovers around 1%.

Such hesitation is not surprising, even given the rising costs. Among the chief obstacles are concerns about the lack of data on overseas hospitals; the potential risks associated with political unrest, natural disasters, terrorist acts, or pandemic outbreaks; and questions about whether employees are willing or able to travel. “This will likely be more viable for employers who have a more international workforce,” advises Cyboran; in some cases expat employees may find themselves heading to their homelands for a procedure.

But the concept is inspiring more employers to look beyond their own backyards for cheaper health care. Ihrie’s investigations, for example, ultimately brought him to the decidedly nonexotic destination of Ohio, where he negotiated a special deal on specific kinds of heart surgeries with the Cleveland Clinic.

Ihrie says the program, rolled out in February, is a runaway success, with 19 employees (or about 15% of those likely to be eligible for the surgeries in any given year) taking advantage to date. “Lowe’s expects to break even or save money on each operation,” even after providing financial incentives such as waiving the deductible and paying all travel costs for the employee and a companion, says Ihrie.

As an example, one of the first employee patients in the program, who faced a particularly complex heart problem, cost the company $469,000, compared with the $531,000 local hospitals would have charged. And then there is the increased productivity that may result from the shorter hospital stays and lower readmission rates associated with higher-quality facilities.

Not All about Cost

Medical tourism underscores the often paradoxical nature of health-care costs: quality and price don’t necessarily equate. As Ihrie points out, the Cleveland Clinic does so many heart surgeries, “they’re set up to do it very, very efficiently, much more so than folks who do it only occasionally.” The postsurgery period can also cost less at higher-quality centers, thanks to shorter lengths of stay. Leah Binder, CEO of Leapfrog, an employer-sponsored group that collects quality metrics from hospitals across the country, says that medical travel — international or domestic — is “definitely something employers should consider.”

The companies that have embraced the full-blown overseas experience aren’t all multinational giants. Tim Harding, vice president of Harding’s Market grocery stores, a group within a 29-outlet chain based in Kalamazoo, Michigan, recently signed up with HealthGlobe to offer the 100 employees covered by his company’s medical insurance the option of going overseas for some common high-cost procedures. Harding says he has been talking to local physicians about the idea for several years, and became more comfortable when the stop-loss insurance that the self-insured company buys to cap its losses agreed to participate in reimbursements for it.

The appeal was straightforward: “For the same amount of money, I can give more care,” he says. Harding is hoping that some employees will choose the option to help the company manage costs. “In a company our size, you can typically handle, say, one or two chemotherapy treatment series a year, but if you get three or four, while it’s nobody’s fault, it just blows up the system,” he says. Medical tourism might allow the company to absorb atypically high expenses more economically.

HealthGlobe CEO Carter says that some overseas facilities may even be able to provide superior care. Stomach cancer, for example, tends to be very rare in the United States, and as a result has very low survival rates, since so few doctors have significant experience with it. In Korea, however, the incidence of such cancer is much higher, and so is the survival rate.

Most companies investigating medical travel, though, are taking the Lowe’s approach and staying as local as possible. Pretzel-maker Snyder’s of Hanover, for example, has been trying to direct employees across the country to centers of excellence within their local regions, as identified through independent data and with the help of its company nurse. Penny Opalka, benefits and compensation manager, considers the program fairly successful, with 5% to 10% of all employees with serious conditions electing to use a better-rated facility each year.

In fact, Opalka credits the survival of one employee who had pancreatic cancer to such a decision. To date the company has never had to pay out the $3,000 it offers to cover travel for the employee and a companion, “since we have been able to get people to centers close to where they live,” she says. Snyder’s, which is self-insured, often works with its third-party administrator and PPO provider network to make sure highly rated facilities are in the network and to negotiate good terms with them.

Confronted with the prospect of patients traveling far away from their hometown providers, local health-care concerns will sometimes step up and offer better rates. Sharon Kelley, CFO of MetroHealth System in Cleveland, says her organization recently cut a deal directly with the county in which it operates to create a package that limits county employees to using MetroHealth facilities, in return for a significant discount in premiums both to the county and to the employee, plus extras like a concierge service. “We did this internally rather than going through an insurance company, and I think you’re going to see more such eliminations of the middleman,” says Kelley, who plans to offer the program to other local employers if all goes well.

The Rx: Better Data

For now, says Sibson’s Cyboran, most companies are too consumed with wrapping their heads around the immediate impact of health-care reform to deal with analyzing various performance metrics and the relative costs of hospitals near and far. The undertaking is not easy, many note, since most data is only available at the hospital level, with information on the performance of specific doctors lacking.

But over time, he and others hope that the combination of rising costs, reform, and private initiatives like Leapfrog will yield better data upon which both employers and employees can make their own decisions about care — and how much they’re paying for it. The Patient Protection and Affordable Care Act, in fact, specifically calls for both hospitals and physicians to report more about the outcomes of their work to the government, most of which will be made public. Hospitals will be eligible for bonus payments for outperforming on particular procedures or metrics, along with some penalties for issues like excessive readmission rates.

“We try to provide employees with tools to select the best hospitals for elective procedures, and give them quality ratings as well as price,” says Delia Vetter, senior director of benefits for EMC, which is a member of Leapfrog but so far does not give incentives to employees to use any particular hospitals for their surgeries. “I’m not sure [the effort] dramatically affects choices right now, but it at least prompts people to start thinking along those lines.”

Alix Stuart is senior editor for human capital and careers at CFO.

When the Prognosis May Call for Travel

The following high-cost procedures ($20,000+ in the United States) may be of most interest to companies contemplating the “medical tourism” option, since these surgeries may cost 70% to 90% less in other countries than in the United States.

• Heart bypass
• Heart-valve replacement
• Angioplasty
• Hip replacement
• Knee replacement

A larger number of lower-cost procedures, listed below, may still cost thousands of dollars less, even after travel costs are factored in. To date, however, employers have not warmed up to medical tourism in large numbers, and at companies that do offer it employees have been slow to participate.

• Knee surgery
• Shoulder angioplasty
• Transurethral prostate resection
• Tubal ligation
• Hernia repair
• Skin-lesion excision
• Adult tonsillectomy
• Hysterectomy
• Hemorrhoidectomy
• Rhinoplasty
• Bunionectomy
• Cataract extraction
• Varicose-vein surgery
• Glaucoma procedures
• Tympanoplasty

Source: Sibson Consulting