Employers Opt for Medical Tourism

In Priceless, I hazarded a guess that employers could cut the cost of hospital care in half by engaging in medical tourism. It’s a variation on what is sometimes called “value-based purchasing” or “reference pricing.” In its pure form, the employer picks a low-cost, high quality facility and covers all costs there. If the employee chooses another hospital, the employee must pay the full extra cost of the more expensive choice.

In Priceless, I hazarded a guess that employers could cut the cost of hospital care in half by engaging in medical tourism. It’s a variation on what is sometimes called “value-based purchasing” or “reference pricing.” In its pure form, the employer picks a low-cost, high quality facility and covers all costs there. If the employee chooses another hospital, the employee must pay the full extra cost of the more expensive choice. In Priceless, I argued that to take full advantage of the opportunities available, the patients must be willing to travel.

Several large companies are already trying the idea out. As Jim Landers explains:

Wal-Mart Stores Inc., the nation’s largest employer, will jump into medical tourism next year by offering insured employees no-cost heart and spine surgeries at Scott & White Memorial [in Temple, Texas] and seven other hospitals across the country…By using a hospital in the new narrow network, patients could save as much as $5,000 or more…

The hospitals in Wal-Mart’s network — including the Cleveland Clinic and Geisinger Medical Center in Danville, Pa. — have gained national reputations for both quality and value. Physicians and surgeons work under financial incentives rewarding improved patient outcomes.

Come fly with me

Here is the complete network:

1. Temple’s Scott & White Memorial — Texas (cardiac surgeries, spine surgeries)
2. Mayo Clinic’s three hospitals (organ transplants)
3. Cleveland Clinic (cardiac surgeries)
4. Geisinger Medical Center (PA) (cardiac surgeries)
5. Mercy Hospital Springfield — Springfield, Mo. (spine surgeries)
6. Virginia Mason Medical Center — Seattle (cardiac surgeries, spine surgeries)

This is actually an expansion of a program already under way. And Wal-Mart is not alone:

• Wal-Mart developed a relationshipwith Mayo Clinic in 2007 for transplant and lung volume reduction surgeries.
• Lowes began an initiative in 2010 when it began offering workers the option to travel to Cleveland Clinic for cardiac procedures.
• PepsiCoannounced in December of 2011 that it planned to offer its employees the option to travel to Johns Hopkins Medicine in Baltimore for cardiac and complex joint replacement surgeries.

Writing at Tom Emerick’s blog, Brian Klepper sums up the trend this way:

Health care organizations should not underestimate the significance of Wal-Mart’s (Center of Excellence) program. It is one of many signs suggesting that, after 40 years of being impervious to market forces, the health care bubble could burst. All it would take to change health care as we have come to know it is for more employers to collaborate and follow Wal-Mart’s, Lowes’ and PepsiCo’s leads. They would stop doing business with health care organizations that are unaccountable and don’t provide measurable value, and transfer that business to those that do.