Medical Tourism – Inside and Outside the US Creating Pricing Competition Among Hospitals
Posted Nov 24 2009 10:01pm
Everyone seems to think of medical tourism as jumping on a plane and going to a foreign country, not necessarily so, we have competition within the US with hospital marketing and pricing too. With the current state of affairs with approximately 55% of the hospitals operating in the red in the US, the pricing wars certainly are not set out to make that picture any brighter. If you read the news, almost every day there’s news about how they are looking at their budgets and financials, asking for breaks on medical devices for one example.
The one case cited below involved 10 patients with a US employer who was offering a cost cutting alternative to employees by going to Singapore for their surgeries, and when given the opportunity to reduce cost, the patients stayed here and the hospitals offered lower costs. Sometimes the price differentiation is so big, they fly the doctor too, but again we have the element of time involved here and it’s not every doctor who can take time out and jump on a plane to perform surgery in a country outside the US. In short, even if the patients, hospitals and doctors negotiate a lower rate, it is not doing much for the financials of hospitals here in the US.
Earlier this year I attended the World Tourism Conference in Los Angeles and did some nosing around to see what I could learn, and learn I did. I also learned about the importance of having a PHR abroad too as that is another big move to bring records to and from abroad locations. There were several US companies at the convention working on their tourism offerings too and I spoke with the likes of Cedars Sinai and UCLA who had booths and a hospital chain in Miami who was launching their alternative solutions to give patients another choice. One thing to keep in mind though is that tourism does work both ways too as many were looking to build ties with known American healthcare centers to provide surgery for those situations when the US is the only country that may have the surgical procedure technology needed.
Health insurers were at the conference too, taking a hard look as all the legal areas have to be covered before they put their stamp of approval on promoting overseas care. We recently have seen some of this with HealthNet in California with medical care in Mexico.
Employers faced with health insurance costs are probably one of the biggest groups looking at this alternative and with many being self insured, they are looking at options, the power of big corporations I might say here as this is not an option for all employers by any means. Many smaller employers are cancelling providing health insurance due to cost and even with healthcare reform, many of them may not ever return to providing health care benefits.
We may call it marketing between states in the US, but it is somewhat our own internal US tourism packages with states competing between themselves. Add on the pricing pressure from facilities outside the US and hospitals today are confronting a battle with financials and keeping the best doctors available for medical services that a few years ago would have been unheard of, and the challenges do not seem to be letting up by any account.
Add on healthcare reform to the items hospitals need to be aware of and work with, and gee, they have so many areas to address and all I can say is that being a hospital CEO today has to be one complicated and challenging job, hats off to those CEOs working through all of the challenges. BD
An increasing number of US employers are embracing the medical tourism concept. However, the pace of change is slow. The case study most mentioned is Hannaford Brothers, a supermarket chain based in Maine, with 27,000 employees in five states. Two years ago, the company offered to send its employees needing knee or hip replacements to Singapore. The medical costs would be so low that the company would pay the employee’s insurance co-payment of about $2,500 and the travel expenses for the employee and a spouse or companion.
The move attracted the attention of hospitals in Maine and Boston, and they offered to match the Singapore price. Hannaford recently said that in the last two years, ten employees have had operations. The twist is that none of the employees went overseas; all 10 had the surgery performed in the United States. A flight from Boston to Singapore takes between 24 and 30 hours… hardly ideal for a person recovering from major surgery.
The Kansas hospital Galichia Heart Hospital is cutting rates for uninsured patients and those with high deductibles. The moves are an extension of the domestic medical tourism program that it is now promoting online with a video. Stephen Harris of Galichia says the U.S. hospital pricing system makes it economically feasible to discount rates and still make money. For decades, he adds, hospitals typically have collected 35 to 40 percent of their charges from insurers. And they've billed uninsured patients for 100 percent of the charges. Discounted prices for those without insurance will be about half of what has been charged. Galichia hopes to pick up more medical tourism traffic from January through a contract it has with AWAC, a medical management company based in Georgia.AWAC works with 20 third-party administrators of self-insured health plans, acting as their medical directors. As part of its contract, it will promote Galichia's medical tourism program.
Several U.S. medical facilities have started medical tourism programs of their own, hoping to draw foreign patients as well as Americans who are uninsured or who have high-deductible insurance plans or health savings accounts. The Surgery Center of Oklahoma in Oklahoma City, advertises flat-rate discounted fees for outpatient procedures.