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Is It Time to Pack Your Bags?
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Is It Time to Pack Your Bags?

Predictions about the explosion in medical tourism may finally come true.

If you were following health care trends five to 10 years ago, one of the biggest identified by the experts was medical tourism. They predicted an explosion in the number of U.S. citizens traveling outside of the country for medical procedures that would be far cheaper, yet as safe and effective as those provided on U.S. soil.

A 2009 report from the Deloitte Center for Health Solutions projected that the number of people seeking care in foreign countries would grow from 750,000 in 2007 to an estimated 1.6 million by 2012, a nearly 120 percent jump.

Then, about four years ago, the prediction shifted to domestic medical tourism after a handful of U.S. companies (Lowe’s, PepsiCo, Wal-Mart, Cerner) announced plans to send their employees to specific health care providers in the United States for certain types of medical procedures or services at which the specific providers excel, most notably cardiac and maternity care. Employees would travel to another city or another state for care that would be far cheaper, yet safer and more effective than that provided in their home health care market.

Maybe it’s the people I hang out with or the neighborhood I live in or some of the scary tips from the Centers for Disease Control and Prevention for medical tourists—for example, ask whether the dentist uses new gloves for each patient—but I haven’t personally seen the predicted explosion in medical tourism, foreign or domestic. Nor have I seen any credible data on the number of medical procedures by year performed on people who traveled a specific distance from their mailing address.

But a number of economic ingredients needed to make medical tourism work for employers and workers finally are coming together. The three key ingredients are price transparency, bundled services and consumer-directed health plans.

As I’ve discussed in this space, price transparency is sweeping through the health care industry like a rotavirus on a cruise ship to the Caribbean (read the April column at bit.ly/1jnqEiG). Whether it’s voluntary because of competitive reasons or involuntary because of new state laws, many hospitals, medical practices and other providers are disclosing their prices for services ahead of time for prospective patients, or even posting them for all to see on their websites. Price transparency will make it easier for medical tourists to comparison shop for the medical services they want and are willing to travel to receive.

Second on the key list of ingredients are bundled services. Hospitals, medical practices and other providers are increasingly bundling all the components of a specific type of medical treatment or procedure and offering that set of services to a health insurer or employer for a fixed price per bundle (see the June column at bit.ly/1hv01ma). Medicare has identified 48 different treatments, interventions or procedures that it will contract with hospitals and doctors for under its Bundled Payments for Care Improvement Initiative (see the list at 1.usa.gov/1le2DbC). Bundled services will make it easier for medical tourists to comparison shop for deals based on what they will and won’t include, such as rehabilitation services after a hip replacement.

Third, the number of employees obtaining their health insurance benefits through consumer-directed health plans (CDHPs) will only continue to grow. CDHPs are high-deductible health plans coupled with a health savings account or a health reimbursement account funding mechanism. The percentage of employers offering CDHPs to their workers inched up to 23 percent last year from 22 percent in 2012, according to the latest figures from the American Association of Preferred Provider Organizations. The AAPPO expects that number to jump to 35 percent by 2016 (bit.ly/1lV01Ri). That means employees with CDHPs will become medical tourists by default, forced by their benefits to shop for care based on value.

For employers, the time finally may be right to make those medical travel arrangements for your employees.

Destination surgery

Recognizing the benefits for both employers and health care providers, Twin Cities Orthopedics quietly hung out its domestic medical tourism shingle this summer.

“It’s something we’re very interested in, and we’re just scratching the surface,” says Troy Simonson, CEO of the 85-physician orthopedic practice with 25 locations in the metro market.

Twin Cities Orthopedics began offering packaged pricing for hip and knee replacements in 2012. New knees cost $21,000 apiece, and new hips are $24,000 each.

The practice recently contracted with a third-party broker that arranges bundled-payment deals between employers and providers. In late June, the practice saw its first patient—from Minnesota—through the program but is looking to attract patients from employers in other states.

For employers, domestic medical tourism offers an opportunity to provide better care at lower prices for their employees, Simonson says. For providers, it offers a new line of business that not only can generate new revenue but improve cash flow, as most employers pay 100 percent of billed charges directly to the hospital or medical practice, he says.

Update

In the August column, I discussed employers’ and employees’ conflicting expectations of retiree health benefits and how that will lead to big disappointment for one of them. Here’s some gas for that fire. Some 501 of the Fortune 1,000 companies had amassed a collective $285 billion in retiree medical obligations for 2013, according to figures provided to yours truly from Towers Watson, the global benefits consulting firm, and 67 percent of those 501 companies had no assets to cover their respective liability. On the plus side for area businesses, Minnesota recently was ranked the No. 1 state for healthiest seniors (bit.ly/1cevXhg) by America’s Health Rankings, which is affiliated with health insurer UnitedHealth Group. So keep encouraging the running and the biking, and maybe none of this will be a problem in the short term, at least locally.

David Burda (twitter.com/davidrburda, dburda@msp-c.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.

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