Outsourcing Surgery and Other Medical Services

Some corporations are taking a serious look at medical outsourcing - sending people abroad for medical care - and some insurance plans are adding foreign hospitals as preferred providers:

Outsourcing Your Heart Elective surgery in India?, by Unmesh Kher, Time: Whiplash was just the first agony that Kevin Miller, 45, suffered in a car accident... The second was sticker shock. The self-employed and uninsured chiropractor ... learned that it would cost $90,000 to get the herniated disk in his neck repaired. So, over the objections of his doctors, he turned to the Internet and made an appointment with Bumrungrad Hospital in Bangkok, the marble-floored mecca of the medical trade that ... resembles a grand hotel more than a clinic. There a U.S.-trained surgeon fixed Miller's injured disk for less than $10,000. "I wouldn't hesitate to come back for another procedure," says Miller...

With this surgical sojourn, ... Miller joined the swelling ranks of medical tourists. As word has spread about the high-quality care and cut-rate surgery available in such countries as India, Thailand, Singapore and Malaysia, a growing stream of uninsured and underinsured Americans are boarding planes not for the typical face-lift or tummy tuck but for discount hip replacements and sophisticated heart surgeries. Bumrungrad alone ... saw its stream of American patients climb to 55,000 last year, a 30% rise. Three-quarters of them flew in from the U.S.; 83% came for noncosmetic treatments. Meanwhile, India's trade in international patients is increasing at the same rate.

That's still a trickle compared with the millions of surgeries performed each year in the $2 trillion U.S. health-care system. But a significant shift is under way. It's one that could put greater competitive pressure on U.S. hospitals... Elective surgeries are key moneymakers for hospitals, and even a small drop-off can cut deep into their profits.

What may accelerate the trend is that some pioneering U.S. corporations ... are taking a serious look at medical outsourcing. Blue Ridge Paper Products of Canton, N.C ... may soon offer employees outsourcing as a health-care option. The carrot? The patient would get to pocket some of the firm's substantial savings.

The calculus behind this interest isn't complicated. Many major employers in the U.S. are self-insured, which means they pick up the tab for much of their employees' medical care. ... Procedures in Thailand and Malaysia ... cost only 20% to 25% as much as comparable ones in the U.S.; top-notch Indian hospitals sell such services at an even steeper discount. ... "This has the potential of doing to the U.S. health-care system what the Japanese auto industry did to American carmakers," says Princeton University healthcare economist Uwe Reinhardt.

U.S. hospitals could certainly do with a little global competition. ... The ingrained inefficiency of most hospitals doesn't help. "A lot of them still don't know how to schedule their operating rooms efficiently," says Reinhardt. "They've never had to. They always get paid, no matter how sloppy they are."...

United Group Programs (UGP) of Boca Raton, Fla. ... sells a low-premium, bare-bones form of coverage called a mini--medical plan, this month began promoting Bumrungrad Hospital as a preferred provider to its customers. ... Mini-med plans are increasingly popular with contract and hourly workers, who are more likely than most other workers to be uninsured.

But these plans are controversial because the buyers often think they cover more than they actually do. UGP's plans at best cap reimbursement for surgery at $3,000 and hospital stays at $1,000 a day. That would barely cover an afternoon in a U.S. hospital. But in Thailand, ... a heart bypass that would cost its U.S. customers $56,000 could be had for $8,000.

Companies with traditional plans are also taking the initiative. Blue Ridge Paper ... was carved out of the forest-products firm Champion International when its employees bought a few factories that were scheduled to close. But health-care costs are hurting the company. So a Blue Ridge team plans to visit hospitals in India to assess their quality of care. If it gives the green light, Blue Ridge will begin promoting the option to its 2,000 workers.

Employees who opt for India would get to take along a family member ... and the whole experience, including a recuperative stay at a hotel, would be covered. IndUShealth, a medical tourism start-up ..., will make all arrangements and coordinate care between U.S. and Indian providers. The sweetener: the company will share with these intrepid employees up to 25% of savings garnered from the outsourcing.

Get a new hip--and a rebate. Sounds like a bargain, but would people actually travel...? ... Polls ... suggest that few consumers would opt for surgery abroad for incentives below $1,000. But raise the ante above $1,000, and ... about 45% of the underinsured or uninsured declare they would get on the plane; even 19% of those who have insurance say they're game. Above $5,000, the percentage of takers climbs to 61% and 40%, respectively.

State governments ... may find those numbers appealing. A bill in the West Virginia legislature sponsored by delegate Ray Canterbury outlines incentives for the public employee health-insurance program that are similar to Blue Ridge's. Hospital administrators attending the legislative session when the bill came up for a hearing ... nearly gagged, says Canterbury: "They were not happy. But I didn't expect them to be. The point is to make them face competition."

Is the quality of care in foreign hospitals high enough? To cater to an international clientele, many private hospitals abroad are applying for accreditation (many of them successfully) from the Joint Commission International, the ... institution that accredits most U.S. hospitals. Many of the tourist hospitals teem with surgeons who have trained in the U.S. or Britain, which is a great comfort to American patients (the irony is that 25% of physicians in the U.S. got their M.D.s abroad). ...

Wayne Steinard, 59, a general contractor from Winter Haven, Fla., is one of those U.S. patients "who fall through the cracks"... Steinard landed in New Delhi last week ... to get a clogged artery cleared and a stent installed. Steinard, too rich for Medicaid and too poor for insurance, certainly didn't have the $60,000 he would have had to pay back home. So he contacted PlanetHospital, a ... medical-tourism agency, and learned he could get it done for about a tenth as much at Max Healthcare's Devki Devi Heart & Vascular Institute.

Things have not gone as Steinard expected. When surgeon Pradeep Chandra scanned Steinard's angiogram last week, he found the artery 90% blocked. "A stent is out of the question," ... Steinard, though, was blunt about his choices. It's either this, he said, or a fatal heart attack back home. The surgery last week was successful; the hospital's bill: $6,650. ...

Yet India is a developing country, and this can shake the confidence of even the most cavalier patient. ... And for the litigious minded, good luck. The country's malpractice laws limit damage awards, one of many reasons that health care in India is cheaper.

But people don't have to be in Steinard's ... straits before they cross borders for care. Retirees, especially the snowbirds who winter in South Texas and Arizona, have turned Mexican towns ... into dusty dental centers. Los Algodones might rake in as much as $150 million during the winter season. People ... arrive in chartered planes to get their teeth fixed in these dental oases. Two California insurers, Health Net and Blue Shield, for the past few years have marketed popular health-insurance plans, aimed at Latinos, that charge lower premiums and cover treatment on both sides of the border.

Mexico's medical industry is just beginning to bubble; India's, like its other outsourcing segments, is booming. ... A corresponding boom is taking place among Western agencies that funnel patients to Asia. Eight have popped up in Canada... [A]s the medical-cost crisis deepens, the corporations who pay insurers are likely to find the lure of outsourcing as irresistible in health care as it is in software. ...