Margot Sanger-Katz of National Journal describes a new Wal-Mart initiative to contain rising health expenditures:
So last October, Wal-Mart announced that employees who needed certain pricey surgeries would have the option of traveling to one of the six best hospitals in the country that specialize in those procedures. Cashiers in California and store greeters in Alabama could fly to the Mayo Clinic in Minnesota—all expenses paid. The model, sometimes called “centers of excellence” or “travel surgery,” has caught on among a few large corporations and their employees. Unlike in retail stores, where the cheapest item is probably the shoddiest, this program is premised on the idea that cheaper health care is to be found at the nation’s very best providers. “We come at it from the perspective of how can we improve quality,” said Sally Welborn, Wal-Mart’s senior vice president of global benefits. “When we improve quality, often there will be a reduction in waste or unintended or unnecessary cost.”
John Goodman of the National Council on Policy Analysis has championed this kind of medical tourism , going so far as to claim that it could allow employers to cut their health costs in half:
Employers can cut their health costs in half if they will do three things:
1. Establish a generous Health Savings Account and let employees pay directly for all primary care.
2. Establish special HSAs for the chronically ill, giving them the opportunity to manage their own care.
3. Direct elective surgery patients to low-cost, high-quality hospitals (which may require travel to another city); if the employee chooses to go to some other hospital, he must pay the full marginal cost of the more expensive choice.
In describing the potential of domestic medical tourism, Goodman referenced MediBid , a firm that allows medical providers to bid to provide care. As Sanger-Katz explains, one of the chief advantages of travel-surgery programs like Wal-Mart is that they offer fixed-price contracts:
Instead of the usual arrangement, where insurance companies reimburse providers à la carte for various services, the travel-surgery programs are based on a flat fee for all the care involved in a procedure. Tough transplants don’t cost the employer any more than patients who sail through the surgery easily. The flat fee reduces employers’ risks and gives the hospital an incentive to avoid problems that could prove expensive down the line.
That is, the purchasing is shifting the risk of cost overruns to the provider, and the provider is betting that it is capable of delivering care for less than the flat fee. If Wal-Mart can help break down the cultural resistance to travel-surgery, the benefits could be enormous. High-quality, low-cost medical providers located in Minnesota and Ohio will be in a position to compete against low-quality, high-cost medical providers located in New York and California. For cities battered by the decline in mid-skill manufacturing employment, the rise of medical tourism could prove a huge boon, as patients from more affluent regions spend some of their wealth in Rust Belt centers of medical excellence. And as medical care becomes something more like a tradable good, we can expect it to get better – and cheaper – faster than if patients remained bound to a limited geographical area, not least because inefficient big-city hospitals will be forced to compete on cost.
source: http://www.nationalreview.com / National Review Online / Home> The Agenda / by Reiham Salam / May 28th, 2013
