Friday, September 12, 2008

Medical Tourism and Medical Ethics - At Home and Abroad

I'm a clinician and an academic. For insights into medical ethics, health policy and the health system, I typically turn to case reports and research studies, not to the source of this posting - supermarkets!

Hannaford is a 125 year old supermarket chain, with 27,000 employees ("associates") and 164 stores in the northeast. Since 2000 Hannaford has been part of the Dehaize Group, a 141 year old Brussels-based food retailing company with 2,700 stores in 7 countries (Belgium, Germany, Greece, Indonesia, Luxembourg, Romania, and the United States).

Like many large companies in the U.S., Hannaford is self-insured for its health insurance. (For non-U.S. readers - "self-insured" companies pay for the health care costs of their insured employees themselves, and hire insurance companies to handle typical insurance functions like paying claims. It is usually cheaper for the company to provide health insurance this way.)

Hannaford made the news in January by offering incentives to its employees to have procedures like hip and knee replacement done in Singapore, which delivers comparable quality at a significantly lower cost. Peter Hayes, director of health benefits at Hannaford, reported that "after the announcement, I got calls from several U.S. hospitals offering to match Singapore on pricing." Now Hannaford offers the same incentives to employees who travel to U.S. hospitals that meet quality standards at a price that is competitive with Singapore.

Anyone at all knowledgeable about health policy knows that the U.S. incurs sky-high costs but provides mediocre quality. Until self-insured companies began to act on this information by encouraging employees to seek care abroad, the national reaction has been nil. Self-insured companies like Hannaford are familiar with outsourcing business functions that can be done more cheaply elsewhere, so outsourcing medical care wasn't a far out idea for them. Now hospitals around the U.S. are noticing the loss of business and are taking price competition seriously.

One reason the U.S. health system is in such a mess is fragmentation. The population is divided into hundreds of thousands of employer groups, unions, etc., the cost of whose care is covered by thousands of different insurers. We think more and more in individual terms. The way the system is organized makes it hard to get the big picture. Unlike virtually every other developed country, no one takes overall responsibility for population health.

This is what makes Hannaford so interesting. The parent company is based in Belgium. According to Hayes:
"Hannaford's new coverage policy was prompted by stinging criticism from its European owners. For them, medical costs and outcomes in the United States just don't add up. [They said] look at what they're spending in the United States. It's two or three times what they're spending in any other industrialized country. But if you look at quality, [the U.S.] is ranked dead last. So the Europeans said, 'why is health care going up at this extraordinary rate in the United States?'"
I've come around to the view that our employer-based health system, which is so dysfunctional in so many ways, may be the most promising source of learning and reform. Employees are part of a community - the company they work for - and are in a better position to understand the cost and quality of their health care and the impact of cost on wages and corporate success. We in the U.S. have fought tooth and nail against facing the need to make trade offs in health care. But employees can understand that higher costs trade off against lower wages and possibly even loss of a job. And they can see the implications of having joint replacements at their local tertiary hospital or, assuming comparable quality, at lower cost in Singapore.

I don't think anyone designing a health system from scratch would create the hodge podge of employer-based insurance and thousands of insurance companies we have in the U.S. But as of 2008 that's what we've got. If we wait for reform to come from the top down we may still be waiting when Godot finally arrives. But as more self-insured companies enagage seriously with health system dynamics, we may see important learning emerging from the ground up.


Anonymous said...

Excellent post!

Medical tourism is obviously serving as a catalyst to reform the health care system in the United States. As more and more individuals and self-insured businesses pinch pennies on their health care spendings and turn to overseas for cheaper but comparable quality care, local providers are going to feel the pinch, too.

So we have witnessed at Healthbase as we provide medical tourism services to Americans, Canadians and others. Additionally, our partnership with several US-based healthcare providers is a proof that US healthcare providers are now willing to match the lower foreign prices so they don't lose their clients.

Anonymous said...


Not being an American myself, it is difficult for me to make informed comment on the state of the health system in your country.

However, from what I have read in the international media, the global perception at least is that health care services in America overcharge and underdeliver on service, as you have indicated.

In America, the trend towards 'medical tourism' to places like Singapore or India, will force health care providers to lift their game or risk losing business.

But what about the effect in developing nations, such as India?

Some claim that it will result in a two tier system in these countries, with the top professionals being lured away from the public system toward the more 'elite' hospitals which cater for the 'tourists.' They claim that this will result in a brain drain away from the public system, and a resulting decline in standards for ordinary citizens.

I disagree. Clinics catering to foreigners will most likely raise the benchmark of health care in the host country. This should help to lead the way for improvements in overall standards of care in these countries.

For things to improve, someone must raise the benchmark.

Jim Sabin said...

Hello Healthbase and Andrew -

I'm heartened by the optimistic outlook in your comments.

Healthbase feels it is seeing the medical tourism services it offers stimulating true price competition. That's all to the good. Medical tourism prints its prices right up front, whereas in insurance contracts the negotiated prices are often confidential, which makes it harder for one institution to compete with another on price.

Andrew - I've worried about the potential negative impacts of medical tourism on the host countries. I hope you turn out to be right, and that medical tourism ends up catalyzing improvements as you envision. That would also be another example of constructive competition.

(You might be interested in my September 15 posting on "Ethically Admirable Health Care Competition")



Anonymous said...

"Clinics catering to foreigners will most likely raise the benchmark of health care in the host country."

Jim is quite right. I know for a fact that Apollo Hospital, which attracts maximum number of foreign patients, has raised the standards of medical care in India.

Jim Sabin said...

Dear "low cost surgery" -

Thank you for your comment.

I followed your link and see that you are writing from the Medical Tourism Corporation, headquartered in Texas but with presence in India as well. I'm glad to hear your impression of the impact of the Apollo Hospitals on medical care in India. I'll be in India soon and will hope to learn more about how medical tourism is playing out for the Indian health system when I'm there.