Looking Back Ten Years: Managed Care, Medical Tourism, and more

Maria Todd comments on Managed Care, Medical Tourism, Concierge Medicine, Physician Employment, Bundled-priced Surgery Case Rates and other changes in American healthcare delivery

The year was 2009. I was overwhelmed with interviews and speaking engagements from  the healthcare industry, associations and prospective venture capital stakeholders seeking to understand how medical tourism works, how to enter, how to thrive. They all wanted to know how this allegedly burgeoning industry all fit together like a puzzle. There were few sources to guide them with any real longevity in the industry or any proof of expertise. I was one of perhaps five in the world. 

Back then, I had formed an LLC named, Global Health Sources, LLC. Eventually the Medical Tourism Association in Florida would rebrand their private consultancy a very similar name. Not relishing the potential of brand confusion or to give an impression that I was associated with them, I killed that brand name. 

How the original medical tourism facilitator certification program was intimidated out of existence

After seeing what was available in not for profit associations to support medical tourism, I also founded the Council for the Global Integration of Healthcare—a new nonprofit global think-tank.  We developed a complete online and in person certification program for facilitators. Immediately upon discovery, we were threatened out of existence by another association. Our board was made up of four attorneys and myself. We agreed that we didn’t want to be distracted with a or fund a fight on an antitrust lawsuit, so we decided to quit operations.

I went on the author the internationally-published, much acclaimed Handbook Medical Tourism Program Development  and the Medical Tourism Facilitator’s Handbook. Both were published by trade press brands of Informa. Since then, I’ve authored and had published 5 more titles related to medical tourism business development.

Many of the materials I created for the medical tourism facilitator certification, a compilation of examples, checklists, best practices and strategies that came from more than 30 years in the business and experiences from my consulting projects in the USA and abroad. 

I kept writing and international publishers continued to agree to publish my outputs. They manuscripts quickly passed peer-review with high marks. I knew what to write, how to write it and my greatest challenge was to find the time with increasing client demands. It still is. In order to find time to write a blog post for my own websites, or participate in interviews for other authors, I have to wake up at 4:30am (which the cats appreciate) feed cats, and start writing. That’s also the only time I have to continue my own learning and study and continual skills acquisition and refinement. In the last 10 years, I authored several other titles that have covered physician integration, managed care and physician employment contract, concierge medicine and more.

The formation and proliferation of ACOs and Concierge Medicine

In 2010, with the passage of the Affordable Care Act (“ObamaCare”) in the USA, suddenly, it appeared the world of American healthcare revenue cycle management, managed care contracting and physician integration would reclaim my time and creativity. It did. I built many Accountable Care Organizations (“ACOs”) for clients. 

Simultaneously, a new faction of physicians gone rogue was developing: Concierge Medicine. I was called upon to help these physicians, both newly graduated and established transition their existing practices or form new practices under this business model. All in, I was involved in some way in the planning, development, launch, marketing or operations management and improvement of more than 400 such practices in the USA and a few in other countries, (Spain, UK, UAE, and Saudi Arabia.) Back then, concierge medicine had no real rules to comply with other than the usual healthcare compliance and marketing and advertising regulations. Managed care plans had not yet taken them seriously. It was membership medicine. Patients paid a fee of some sort and were entitled to receive “extraordinary” service (e.g., going beyond what is usual, regular, or customary in the managed care business model). 

The Coup d’état of Concierge Medicine by Managed Care Plans

Years later, as if boiling the frog in a pot of gradually increasing heat, the managed care plans began to object, calling what was “extraordinary” expected and due, and characterizing the membership fee as “balance billing” and therefore, forbidden under their contracts. 

The eventual Coup d’état by the managed care plans eliminated the legitimacy of the “hybrid” concierge medical practice (where managed care payments were accepted in addition to the membership fee that covered the extraordinary, otherwise non-compensated amenity services) was no longer permitted. Doctors were forced to either choose all cash membership model, and resign their managed care participation, or kill their concierge business model. Those who continued to run the hybrid after about April 1, 2018 were at risk of public scandal and humiliation, expensive class action lawsuits initiated by the health plans, and consent decrees not to be naughty anymore.

Managed Care, Physician Employment Contracting, Physician Integration and Medical Tourism Training and Professional Development

2009 was also the year that I stopped teaching for HFMA’s national seminars after 16 years.  With the 2008 financial meltdown, the bottom dropped out of seminar budgets by hospitals and other healthcare providers. Seminar attendance dropped from 45-50 registrants in a class (back in 1993-1995) to below 10. Since HFMA requires speakers to pay their own expenses out of a paltry speaker fee for a 2-day seminar, it simply wasn’t worth the time and effort, as much as I loved teaching. All that effort to produce content, travel, take health risks of travel-related injury and illness and a commitment that “the show must go on” was no longer profitable. It was time to cut the tie. I could do more good in the industry with fewer events underwritten and produced on my own. And so I did. I also continued to speak and appear at events sponsored by other managed care and healthcare trade associations, professional development events and seminar producers, as I had since 1989. All in all, I’ve touched the lives of more than 70,000 professionals in 116 countries, and have presented over 2800 Master Classes, webinars, seminars, breakout sessions, keynotes, and workshops. I now have a grand total of over 24,000 contact hours of Continuing Professional Education mostly on managed care-related and medical tourism topics to my credit. That’s about 800 hours per year on average, but most of those were accumulated between 1993 and 2009.

Managed Care Meets Medical Travel in an uprecedented move by self-funded employers

2009 was also the year when WellPoint, Inc. helped Serigraph, Inc.—a Wisconsin-based printing company with 650 U.S. employees plus additional international employees working in India. launch a medical travel pilot program. This program reflected the rising costs for domestic surgery and the potential for international medical centers accredited by recognized quality and safety surveyors to provide quality care at a lower cost. Before them, Blue Ridge Paper, Hannaford Brothers, and several other companies had kicked the tires on “medical tourism” but they all did so on their own with little outside help. And before those brands tried, domestic medical travel was long established at Delta Airlines, the Atchison Topeka and Santa Fe Railroad Company, and others. It was not “new”. It was simply travel to access care from a designated provider.

WellPoint and other insurers, such as now defunct Companion Global Healthcare—a medical tourism subsidiary of BlueCross BlueShield of South Carolina— attempted to expand networks to include more foreign destinations. None of these were entirely new to global healthcare and contracting with international health providers because many had a program in place for years offering coverage to multinational companies with expatriate employees.

In 2009, WellPoint’s pilot program, the Global Health Care Partnership, allowed employees of Serigraph to access benefits for certain common elective procedures at designated facilities in India starting in January 2009. WellPoint’s then chief medical officer for national accounts, Razia Hashmi, MD, explained in several recent media interviews that the procedures would include major joint replacement and upper and lower spinal fusion. He cited the U.S. retail price for knee replacement surgery at approximately $70,000, while the same procedure costs approximately $8,500 in India.  Now on SurgeryShopper.com knee replacements are available in the USA for under $15,000 and hip replacements are easily accessed in the for under $20,000 without traveling to India. Suddenly, travel to foreign countries from the USA for these surgeries is no longer as appealing or attractive. In fact, the USA is rising to within the top five destinations for medical tourism by patients and government public health trusts. 

At the same time, these new programs for bundled-price, transparent, fully-inclusive case rates that I used to create in the early 1990s, have proliferated. Heck, it only took 25 years to be taken seriously. I chuckle when people tell me that Keith Smith, MD of SurgeryCenterOK “invented the concept in 2014.” Where was he in 1995 when I was building the concept and contracting with employers with now retired, Dr Gerald Kirshenbaum, in Denver?

The basis of comparative savings to defend international medical travel is not as sensational as the media would have you believe. 

As far as a billed-to-paid comparison, most contracted services in the US for inpatient care are generally paid at about 55-60% of billed charges, often far less. Billed charges are set artificially high in the USA because of a regulation of the Medicare program.  So while the media reports an 88% savings on its face, the reality is that the patient  only saved about $20,000 on the surgery bill by traveling to Mexico, Thailand, Malaysia, India and elsewhere. But when they added in the costs of travel for two business class tickets (very often economy seats are discouraged as they pose too much in-flight, post-operative, complication risk for blood clots in the legs and lungs), purchased medical tourism complications insurance, and had to pay for aftercare back home and risk their doctor not accepting them back after elective surgery in a foreign country. Furthermore, some very pesky microbes often hitchhiked on the way back causing post-operative infections for which there were no treatments available. 

A lot of international and cross-border medical tourism stats are pure, undocumented hyperbole.

Big numbers sell newspapers and market projection reports. They also serves as a great trailer for the evening news paid for by commercial advertising. Here’s an example of some of the responses I got on LinkedIn when I asked my followers their impressions:

Big, inflated medical tourism numbers also continue to be an excellent attraction tool to sell dubious 3-day certification badges offered by non-experts, conference and event tickets, stand rentals in exhibit halls, and advertising sponsorships. They don’t attract patient foot traffic. The only ones walking by are other startups. Established operators quickly learn that there’s little value in most events in medical tourism. But new market entrants with precious startup capital in their pocket are born hourly. Naive, and with a desire to make it big overnight in medical tourism are easily led to these events. Big numbers sell dreams to the dreamers. The ruse is no different than other get rich quick schemes in options trading, real estate flips, cryptocurrency and other.

The churn rate on medical tourism startups is often 18-36 months before startups give up and quit. They don’t know how to get into the business and assume from the surface without much research that one simply builds a website, gets contracts to source leads for hospitals, clinics doctors, and dentists, and then broadcasts to the world at large. They also don’t realize what it takes to establish a medical tourism business online and raise traffic and convert leads to bookings. If you plan to start such a business, expect to wait 5-7 years before you can reach booked 30-40 cases in a year as a facilitator. And every hour, additional newly-arrived dreamers launch another new crop of medical tourism websites. So the competitive field is crowded and growing increasingly “redundant.” When you leave, please turn off the lights and shut the door. Many medical tourism websites continue to run until the prepaid hosting account expires. Most departing operators have nothing to sell to an investor. They had no book of business. When they leave, it is usually to depart the business completely. Most were undercapitalized to begin with, both in terms of financial capital and job knowledge. 

On the other hand, there are also provider dreamers. As a provider, if you accrue 10-12 cases where people from afar travel to access your services in your first year, consider yourself extremely lucky. To grow to 10 cases per month, you’ll need to invest in public relations appearances, pay-to-play media interviews, professionally-developed SEO treatments that fire on all cylinders. You’ll also need branded, promoted  and targeted content on a website that attracts prospective patients and new potential leads. If you don’t target and place the patient as your protagonist in your content, you’ll be like millions of other medical tourism websites that produce little traffic or booked surgeries. 

The medical travel and bundled-priced case rate product does not belong in traditional managed care agreements.

Marketing a bundled-priced surgery product also requires product development. A medical travel program featuring cash pay surgeries or transparent bundled-price case rates is not the same old surgeries you always do at a new special price. This is a “product“. The future of your hospital, ASC or practice is dependent upon it being relevant. New, innovative products must keep pace with the marketplace. In this case the marketplace has several “customers”. Consumers are only one ideal customer. Employers, TPAs, benefits consultants, attorneys with patients who have not yet settled a lawsuit for a personal injury, auto accident or workers’ compensation case may be another. Health sharing ministries and health purchasing consortium groups are some of the others. Contracts are required for each group. Each reads differently depending on the relationship with the other party.

Most of my current engagement as a consultant is focused on contracted reimbursement with health plans. I stay busy analyzing managed care contracts, recommending revisions and counteroffers, maximizing established brand value if they client has any, and attempting to increase payments. The  does not belong in traditional managed care agreements. It doesn’t fit the business model. 

Marketing for the medical travel and bundled-priced case rate product also requires that you follow the rules of website design and SEO. I have to chuckle again when I review ASC websites in the USA who copy the content from SurgeryCenterOK almost verbatim. When you copy and publish the text to advertise your transparent, bundled-priced surgery case rates from any other site, even with his permission, you will be punished by Google, not rewarded with high Google Search placements. You will be banished to the basement of search engine results because you copied what Dr Smith published. Also, you will have failed to differentiate your business. If you fail on both differentiation and messaging architecture, your product will not gain traction. It will simply confuse the prospect who scratches their head and says, “didn’t I read this elsewhere?”

In addition, hundreds of programming and reimbursement systems modifications are necessary to advance medical tourism into the third-party paid medical and surgical mainstream.  Who will share or absorb these costs?  Back in 2009, I wondered how each health plan and claims shop might implement their own nonstandard variation on a theme for bundled-price surgery. To date, most have not. Some tried. Others are currently attempting to launch. What they’ve noticed is that market penetration to build a network of providers is a tougher challenge than they expected. 

Why? Because many providers they’ve contacted: 1) believe they can do what Dr Smith did if they just post the prices and broadcast to anyone with a heartbeat on their website. No, they can’t. But it will take them several years of humbling, turtle-paced, frustration to believe otherwise and believe they need a different tactic; 2) don’t want to be treated as a commodity seller of surgical procedures compared against prices advertised in India, Mexico, Cost Rica, Malaysia, and elsewhere; 3) can’t pay kickbacks and referral fees to TPAs and brokers or referral agencies and medical tourism facilitators as a price of being listed. They can’t because fee-based referral brokering isn’t allowed in the USA, Canada, UK, Germany, Australia and elsewhere; and 4) are afraid that the managed care plans will do to them what was done to the hybrid concierge medicine practices. Appropriate product design can help safeguard the latter so that a hospital, ASC or physician practice can “carve out” its bundled-priced surgery product from the mainstream managed care product marketed by HMOs, PPOs and TPAs.

In healthcare, new product development (NPD) is the total process that takes a service or a product from conception to market. New or rebranded products and services are meant to fill a consumer demand or an opportunity in the marketplace. The steps in product development include drafting the concept, creating the design, developing the product or service, and defining the marketing.

Your new bundled-priced, cash pay surgery product opens a whole new market: It can completely replace your current surgery product, take over an existing surgery product, or simply broaden the market for surgeries you offer that already exists. In 1973, that’s what HMOs and a few years later, what PPOs did. The Health Maintenance Organization Act, is a federal law that was adopted in 1973. But few realize that the first known HMO in the United States was created and registered in 1910; in 1929 the first large-scale HMO was registered (in California). The first PPO is credited to a suggestion of Samuel Jenkins of the Segal Group back in 1980, as a product of St. Luke’s Medical Center in Denver, Colorado. It was a network leasing arrangement paid for by employers to subscribe to a network of providers who agreed to discount their fees in exchange for referral steerage and discount incentives. 

A new breed of PPO for bundled-priced surgery – will it work?

Many of the newly launched (Bridge Health, SanosSurgery, The Zero Card, FMMA, and many TPAs) have attempted to tweak the nearly 30-year old existing and failing PPO model. Now what’s in their network are providers offering bundled-price surgeries. But the employer has to pay the access fee to discover the identity of the providers. 

The only network currently in existence that doesn’t charge an access fee to avail of the bundled prices is SurgeryShopper.com. It charges no access fees to consumers, employers, unions or referral partners. It does not charge providers a percentage of revenue kickback or fee like many PPOs such as HealthSmart, or HealthPartners or America’s Best PPO, or Three Rivers Provider Network, among many others.  And after only two months online, the site is generating nearly 4000 visitors per day, of which approximately 1.3% are returning visitors with high purchase intention. In medical tourism, that’s essentially unseen. The other, above-mentioned sites aren’t registering comparable traffic. Why? Lack of relevant content, lack of SEO investment, chosen targeting strategies, and more. And even then, it takes years to gain sustainable, organic, traffic. And, they’ve chosen a business model (the PPO) that’s on the slippery slope to demise in the marketplace. That’s because the marketplace has learned that it can be a better purchaser outside the rope of the PPO and HMO network negotiated prices by contracting directly with a select group of designated healthcare providers. There is room in the marketplace for all. The market will decide which models and which players deserve their business… and which to ignore. 

Another differentiator of SurgeryShopper.com is that while many of the cases it coordinates involve travel by air or by car to the treatment destination, the strategic decision to avoid the term “medical tourism” was intentional. The world has been so confused on what medical tourism is and how it is wrongly defined on the internet and parroted worldwide, that its executive team decided that the keyword search term was not how the ideal clients would search. And their hypothesis has been proven correct so far. 

Product differentiation happens through Product Development

Sometimes existing products (your surgery services, for example) are introduced to new markets, repackaged, or marketed differently. Medicare has tried this with its BPCI.  The public is confused by it to say the least.

New products can improve the use of a hospital’s or ASCs resources, launch a hospital or ASC into a new market or a wider mileage radius or a new segment of the market (such as direct contracts with employers or group health program sponsor who are not HMOs and/or PPOs that no longer can be trusted to negotiate the best deals for the employer without a skim to the HMO, PPO or TPA), or improve the relationship a Hospital or ASC has with third-party payors or brokers, or increase or defend a hospital’s or ASC’s market share. For the most part, HMOs and PPOs offer what is now described as “ordinary” or traditional fee-for-service, itemized billed, health services instead of “bundled-priced packages” from providers as their package standards. Part of the reason is that they don’t have the software to process a single line-item bill for an episode of care compiled as a single price. On the other hand, the employer can do this very easily on a directly- contracted basis.  This is one key differentiator.

As such, the new bundled-priced, cash pay surgery product is an “extraordinary” (there’s that word again) and different product that is packaged differently from what is sold through HMO and PPO program benefits coverage.

Many people are unaware that HMOs and PPOs have paid for “medical tourism”, also more appropriately described as “medical travel” for decades. Medical travel is usually covered as a benefit when medically necessary, in order to access care that is unavailable in the local market or — wait for it — less costly than the local service. Medical travel figures prominently when a Center of Excellence may be a better choice (think transplants, burn care, cancer treatment and more recently, precision medicine treatment protocols. After all, did you think that everyone at Cleveland Clinic lives in or near Cleveland?  And that Johns Hopkins only services patients in or around Baltimore? Or that Mayo Clinic only attracts patients from the area surrounding Rochester Minnesota or Scottsdale or Jacksonville? Or that MD Anderson and Baylor only treat people from Texas? Typically, these arrangements are made for complex and catastrophic cases and arranged by the Big Box HMOs’ reinsurance carriers or programs.

You don’t hear about them in the news media because most TV and media outlet reporters don’t go into these details. They don’t believe that the reimbursement details are essential to the story in the limited time or space they have in the news program.  And, the news producers believe that they are telling the truth when they lead with lines that say $80,000 saved over U.S. prices by traveling to a developing nation for surgery. As if someone will blow a whistle and a planeload of Americans will take a seat, buckle up, stow their tray tables and fly thirty hours to a place they’ve never been before to let a stranger they know nothing about in a foreign country cut their body open, take out parts and stitch them back together again all on the basis of a seemingly cheaper price tag. Given the choice to pay $10,000 -$15,000 or more and fly 2-3 hours within the same country, which option do you believe the average American will select? So it is no surprise to see why SurgeryShopper.com is attracting Americans to have surgery in America, at American hospitals and ASCs, by American surgeons, at prices less than or slightly higher than what’s being advertised in foreign countries. 

American providers must remain compliant with existing case law. 

American healthcare providers may not waive deductibles and copayments for insured patients to win business. But employers can do this at will. There is a case decision on the books, Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991) that speaks specifically to ERISA plan sponsors and co-payment and deductible responsibility. In the increasing trend to raise deductibles and cost shares for locally-sourced HMO and PPO care, the bundled-priced surgery programs offered by ASCs and hospitals bucks the establishment by offering “cash pay” prices. In Kennedy, the Kennedy-Myers contract was designed to eliminate co-payments. The employers’ plan and CIGNA’s policy required co-payments in order to maintain incentives to hold down the cost of medical care. The courts could not break the circle in favor of reimbursement without abrogating the co-payment requirement—a requirement that the employer had every legal entitlement to create.  Therefore the provider would have to sustain the loss. If the provider wishes to receive payment under a plan that requires co-payments, then the provider must collect those co-payments—or at least leave the patient legally responsible for them. If a US healthcare provider sought to match this option, the result would be devastating because to do so would subject that provider to sanctions and could foreclose their entitlement to any payment by the plan. In this bundled-priced surgery product, employers change their benefit design to encourage utilization of the program by waiving the deductible and the copayment if the plan participant agrees to the inconvenience of travel, and many encourage it further by sharing the savings with the plan participant through an HSA contribution or HRA allowance. We don’t yet see this in the usual and customary HMO or PPO benefit design. 


Disclaimer: Maria Todd is a co-founder and key adviser to SurgeryShopper.com