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Medical tourism: '5-star' care at a discount

"Facing a $100,000-plus operation, he thought he had two choices: 'submit or die.'"

Carolyn Lochhead, Chronicle Washington Bureau

Dec. 21, 2009

Critics of health care reform often point to desperate Canadians who head south for surgery to escape waiting lists. But a bigger trend points in the opposite direction: Americans heading overseas to escape the exorbitant cost of U.S. care.

Former Mill Valley resident John Freeman, 61, now living in Reno, needed a coronary bypass. He had dropped his catastrophic insurance coverage because the $320 monthly premium was eroding his retirement savings and the $5,000 deductible left him with big bills.

Facing a $100,000-plus operation, he thought he had two choices: "submit or die."

A friend pointed him to a third: World Med Assist of Concord, which lined him up with a heart surgeon in Turkey. The all-inclusive cost: $18,000. He had the surgery last spring and "unreservedly" recommends the care.

U.S. doctors refused to give him a price. "They would almost be proud of it," Freeman said. "They would say, 'That's not my department, I do operations. I don't have any idea how much anything costs.' Even the nurse would get mad at me and say, 'You want me to connect you with the billing department?' "

But for Freeman, cost mattered. "For people who can't pay, somehow the government won't let them die. But if you're like me in that awkward middle, where you have a little money saved, they'll take it all."

Once a cottage industry, medical tourism may be on the cusp of a big expansion as governments from India to Singapore are investing in state-of-the-art hospitals, vying for a global market.

Deloitte Consulting estimated that 560,000 U.S. residents went abroad for care last year. The firm thinks that number will rise to 1.6 million by 2012, with patients getting discounts of up to 90 percent on procedures from liver transplants to hip resurfacing.

Uninsured patients like Freeman make up the bulk of those now venturing abroad. But big insurers have started pilot projects, and a reinsurer for businesses, Swiss Re, is now offering overseas coverage. A Northern California casino and a Maine supermarket chain now offer the option to employees.

Lack of transparency

A key draw for overseas care is transparency - in price and quality - and U.S. providers' lack of transparency.

Anesthesiologist Keith Smith, managing partner of the Surgery Center of Oklahoma, is an exception. His center performs as many as 700 procedures a month in Oklahoma City. Smith does a lot of business with Canadians but even more business with Americans he thinks are getting a rotten deal.

Smith started posting his prices online when he saw he could beat rates in India, Costa Rica and other popular medical destinations. He said his center's rates for surgeries are up to 90 percent cheaper than nearby nonprofit hospitals.

Competing hospitals "are not going to publish their prices online because it would be meaningless," he said. Hospitals offer discounts to insured patients "so the uninsured patient is going to wonder why they're not getting the same price," Smith said, adding that hospitals "don't want to publish these prices because then everybody knows how ridiculous it is."

For example, cochlear implants that can bring hearing to a deaf baby cost about $25,000. But Smith said hospitals mark up the device to $75,000 and then charge $25,000 for the 90-minute surgery. He charges no markup and $8,800 for the operation.

Hospitals strike deals with insurers to provide care within a physician network, charging patients more if they choose a surgeon outside the network. "It is a cartelization of care," Smith said, that allows providers to exclude competitors like him.

Overseas providers, meanwhile, have lower costs because doctors often get free medical education there and don't have huge debts to pay off. Wages and living standards are often much lower, and there are no U.S.-style malpractice lawsuits.

Still, Stephen Shortell, dean of UC Berkeley's School of Public Health, said medical tourism will remain a niche market unless U.S. hospitals form alliances with overseas providers to offer aftercare. "What's their incentive to do that?" he said.

Wouter Hoeberechts, chief executive of WorldMed Assist, the facilitator that linked Freeman with his Turkish surgeon, said, "We're never going to have millions and millions of Americans go abroad for treatment."

$15,000 threshold

For an insured patient, the U.S. cost has to be above $15,000 (less for the uninsured) to make economic sense, Hoeberechts said. Emergency procedures are ruled out, the length of stay needs to be less than three weeks, and follow-up care needs to be "predictable and fairly short," he said. "Once a patient is in that situation, treatment abroad is a very good option, but that does narrow it down quite a bit."

But even skeptics say the potential is huge as U.S. medical costs continue to skyrocket, reaching $13,375 for an average family policy, according to the Kaiser Family Foundation.

Employers are slashing benefits, raising co-pays and eliminating coverage. None of the health care legislation in Congress is expected to lower costs dramatically anytime soon.

"It just takes time," said David Boucher, president of Companion Global Healthcare, a subsidiary of Blue Cross/Blue Shield of South Carolina, the first insurer to offer an overseas option.

"Some individuals we work with have had a passport for years," Boucher said. "Maybe they've not been to the hospitals, but they know that Singapore and Kuala Lumpur are totally developed and that we're not including in our networks mud huts, thatched roofs and rusty scaffolds. These really are five-star hospitals."

Overseas costs

Heart bypass: $8,500 in India; in the U.S., $144,000 Liver transplant: $75,000 in Latin America; in the U.S., up to $315,000 Dental implant: $1,000 in Costa Rica; in the U.S., $2,000-$10,000 Face-lift: $4,000 in Singapore; in the U.S., $15,000 Knee replacement: $10,650 in Mexico; in the U.S., $50,000

Source: Medical Tourism Association

Carolyn Lochhead was the Washington correspondent for the San Francisco Chronicle, where she covered national politics and policy for 27 years. She grew up in Paso Robles (San Luis Obispo County) and graduated from UC Berkeley cum laude in rhetoric and economics. She has a masters of journalism degree from Columbia University. Twitter: @carolynlochhead


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