Have Illness, Will Travel?

Medical tourism emerges as a new option for keeping health-care costs in check.

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.”

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