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Self-insured firms offer medical tourism option to cut health care costs

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When HSM Solutions, a Hickory, N.C.-based furniture manufacturer, first gave its employees the option of going overseas for medical care, many balked.

“They looked at us like we were monsters,” said Tim Isenhower, director of benefits, describing the reaction he received six years ago when he traveled around the country to introduce the concept of medical tourism to the midsize company's 2,500 U.S.-based employees.

Medical tourism involves patients traveling from highly developed nations to other areas of the world for medical care, usually to find treatment at a lower cost. Among the more popular destinations are India, Mexico and Costa Rica.

As an incentive, HSM offered to waive copays and deductibles, cover the cost of travel for the employee and a companion, and even pay a bonus of 20% of the savings the company would experience, up to a cap of $20,000, he said.

“We have about 50 locations. At the last meeting, one of the employees said he would go. So I went with him” to India, as a show of good faith on behalf of HSM, Mr. Isenhower said.

Since that pioneering first trip abroad, approximately 250 HSM employees and dependents have taken advantage of this employee benefit, which is becoming an increasingly popular option for many self-insured employers struggling with the high cost of health care.

Mr. Isenhower estimates the company has saved $9.5 million in health care costs over a six-year period, and that some of those savings are starting to accrue in the HSM's workers compensation program.

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“We had a lot of back injuries, and those employees didn't want to get fused anymore,” which is the typical treatment for disk injuries in the United States, he said.

By contrast, doctors in India perform disk replacement surgery, which preserves patient mobility, he said.

In the United States, “such a surgery would cost $300,000 to $400,000,” Mr. Isenhower estimated. “I'm paying $38,000,” which includes the cost of a $5,000 airline ticket.

Because HSM's medical tourism benefit has been so successful, the employer has expanded it to include bariatric surgery, knee and hip replacements, and hernia operations. More recently, HSM employees began going closer to home — Costa Rica — for knee and shoulder endoscopy procedures, Mr. Isenhower said. Such procedures are significantly less expensive than most of the other types of surgical procedures HSM has outsourced to India, but the cost of travel is significantly less, making it cost-effective nonetheless, he said.

“A plane ticket to Costa Rica is only $500,” he said.

The Deloitte Center for Health Solutions estimated that approximately 1.6 million U.S. residents traveled outside the country for medical care in 2012, with an anticipated annual growth rate of 35%.

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While most medical tourism initially involved uninsured or underinsured patients, it is being considered by more employers as a cost-containment measure, said Joseph Harkins, associate editor of the Medical Tourism Association in Palm Beach Gardens, Fla. Evidencing that fact, the association's sixth annual World Medical Tourism and Global Healthcare Congress in Las Vegas in early November attracted 2,500 doctors, hospital administrators, clinicians, insurance company executives, employers, government officials, travel agents and medical tourism facilitators. Nearly 200 countries were represented.

“It all comes down to shopping for the best value,” Mr. Harkins said. The association's “2013 Medical Tourism Survey Report” found that 80% of the demand is driven by cost savings.

What also makes medical tourism attractive is that the hospitals that offer it bundle charges into a single bill that in many cases also includes travel expenses, unlike most U.S. hospitals, said Alex Odell, president of Medical Blossoms, a Mount Vernon, Wash.-based medical tourism facilitator.

Such facilitators contract with medical facilities worldwide that are accredited by the Joint Commission International to participate in networks not unlike preferred provider networks in the United States, said Kevin Rude, CEO of Medical Treatments Management Inc., another facilitator based in Walnut, Calif., whose network includes 250 hospitals in 40 countries.

To protect against the possibility of complications after a procedure, most medical tourism facilitators recommend that patients purchase “surgery complication insurance,” which pays for any subsequent medical care that might be required, said Kelly Jenkins, CEO of 360 Global Health, a Los Angeles-based facilitator.

“But I've never had anyone make a claim,” she said.

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Ms. Jenkins, who recently traveled to Puerto Vallarta, Mexico, for her own arthroscopic knee surgery, said medical tourism offers self-insured employers several advantages.

“First off, it saves self-insured employers a lot of money,” she said. For example, her own procedure, which cost $5,800 including travel expenses, would average $14,000 in the United States for the procedure alone. Savings are even greater for hip replacements, which average about $60,000 in the United States compared with $15,000 in Mexico or as low as $8,000 in India.

“It also can help to foster employee loyalty and morale,” Ms. Jenkins said. “If someone knows they can save out-of-pocket expenses and also get a bonus, it puts the employee and employer in a partnership. And it also demonstrates a forward-thinking corporate culture.”

Ms. Jenkins, who formerly worked in the corporate wellness industry before starting a medical tourism company, also sees a strong correlation between medical tourism and the health care consumerism movement.

“Employers offered preventive care and wellness benefits in exchange for higher deductibles. This is the next step: offering financial incentives for using medical tourism,” Ms. Jenkins said.