Medical students, patients and health care organizations are increasingly crossing oceans to receive training, undergo surgery or find new patients.
|David Ellis||Charles J. Shanley, M.D.|
One way or another, the triple-edged sword of globalization has the potential to wreak havoc in a U.S. health care industry already in crisis. It can cut a hospital’s revenues, it can increase a hospital’s revenues and it can cut a hospital’s costs.
As an example of the latter: In 2007, invoking outrage from medical schools in New York City, the city’s Health and Hospitals Corporation (H&HC) signed a contract with a medical school in Grenada in which H&HC’s 11 public hospitals provide training, or clerkships, to the school’s third- and fourth-year students. In return, the school pays the hospitals about $400 per student per week. Most medical schools in New York City pay hospitals nothing to provide clerkships, according to The New York Times (Aug. 5, 2008, p. A-1).
At a time when hospitals’ razor-thin margins are under pressure from:
it is not surprising that hospitals are “increasingly … forced to get more creative in their efforts to maintain previous levels of profitability.” To CFOs and controllers, that tends to mean looking for new ways to cut or contain operating costs, as H&HC has done in the case of clerkships. But what will H&HC do when it has shaken the last bean (perhaps, the cost of providing clerkships?) out of costs?
One way might be to use the revenue-generating edge of the globalization sword, as the Cleveland Clinic has done.
Globalization of the Cleveland Clinic
After Sept. 11, 2001, the Cleveland Clinic saw a big drop in the 5,000 overseas patients it had been treating annually. It therefore decided to “meet global patients halfway” by means of long-term engagements to share the clinic’s operational model—facilities, technology and support—with overseas institutions.
The results so far are a 15-year, fixed-fee contract to build and select the staff and manage a hospital in Abu Dhabi, the United Arab Emirates; a similar arrangement with a hospital outside of Vienna for heart surgery; a “limited” facility in Toronto; and relationships with hospitals in Saudi Arabia and Egypt. Most recently, following two years of discussion and a dozen or so trips to China, early this year the clinic began final deliberations on whether to build an $80 million to $100 million, 200-bed heart hospital in Shanghai. As with its existing partnership in Abu Dhabi, the clinic would manage the hospital but not own it, and U.S. and local physicians would staff it. The new hospital would serve China’s affluent and growing middle class.
Late last year Duke University Health Systems also signed a seven-year agreement to help Peking University establish systems and services to improve efficiency and competitiveness. The deal involves a joint cardiovascular training center; management training; joint research; clinical-care programs in specialties such as cardiology, cancer and geriatrics; and the establishment of clinical trials guidelines.
Sooner or later, Cleveland Clinic CEO Toby Cosgrove told a McKinsey & Co. interviewer, “every country is going to want to develop its own expertise, and so the flow of patients coming to the United States to visit the Cleveland Clinic is probably not going to increase.”
The fact is that enough countries have already developed sufficient expertise to pose a real threat to U.S. hospitals’ profitability, exposing them to an edge of the globalization sword they could do without. For example:
“What I wanted was the best,” an American liver transplant patient told the Chicago Tribune, adding: “That doesn’t have to be in America.” The U.S. hospital he had first approached couldn’t schedule his transplant procedure for months and would have charged him $450,000. He had the surgery in New Delhi for $58,000, which included a 10-week hospital stay for him and his wife. In India, a heart bypass goes for $10,000 and a hip replacement for $9,000, compared with $130,000 and $43,000 respectively in the United States, the American Medical Association (AMA) told the Tribune. No wonder, as the AMA noted, the number of Americans heading abroad for medical procedures is surging, and no wonder health plans are paying more than attention.
BasicPlus Health Insurance is offering its plan members the option of receiving care at overseas hospitals accredited by Joint Commission International, an arm of the Joint Commission. The option gives the customer “greater value without increasing premiums.” It is also “a way to entice employers that have more than 100 employees but cannot afford comprehensive plans,” and “a way of stretching the benefits to cover certain surgeries and other services,” including the cost of travel, a spokesman told HealthLeaders’ Rick Johnson. People would be “surprised how many employers are not only aware of medical travel as an option, but also open to the concept.”
McKinsey & Co. says that while globally there are currently only 60,000 to 85,000 inpatient medical travelers a year, the potential for growth is very high because 500,000 to 700,000 Americans meet the criteria to become international patients—they are uninsured but can afford to travel abroad for medical services they cannot afford in the United States. Among them are 29 Americans who made a two-week trip to Korea in mid-2008 for a medical program jointly developed by the Korean Government’s Korea Tourism Organization and a Los Angeles travel agency. The Americans are among 20,000 medical tourists expected to visit Korea this year, up from 16,000 in 2007.
The goal of the program is to capitalize on Korea’s “reasonable prices and quality medical skills, especially in cosmetic surgery and other treatments,” according to the Korea Times. The tourists received a full-scale health screening, and some went on for recommended cosmetic treatments, all at about half the cost of treatment in the United States.
McKinsey also predicts a decrease in the number of medical travelers from the Middle East, which makes up 35 percent of the world’s current medical travelers but is investing heavily to develop state-of-the-art hospitals. For some American hospitals, there is thus a double whammy of local patients going elsewhere and distant patients staying home.
A senior executive of a company that builds and operates hospitals overseas to cater to medical tourists is confident of growth. His company’s main concern is to ensure continuity of care, which is “going to take teamwork between U.S.-based providers and overseas providers.” He needn’t worry: Google, Microsoft and Revolution Health are among players that have introduced personal health records (PHRs) over the Internet. They are all wooing hospital systems to link their EMRs to these PHRs. Google Health, for example, links with an online health management tool from the Cleveland Clinic. Global continuity of care is an inevitable and valuable outcome of such initiatives.
Hospitals whose ob-gyn and birthing services provide the bulk of profits might feel a slight shiver over a bizarre example of medical tourism: a hospital clinic in India that offers outsourced pregnancies to couples from the United States, Taiwan, Britain and elsewhere who are unable to bear their own children. Local Indian women are hired as surrogate mothers and are cared for at the clinic during pregnancy and delivery.
As of December last year, more than 50 surrogate mothers were being cared for at the clinic. This seems bizarre and morally questionable if it’s done for convenience rather than medical necessity. At the end of the day, we suspect society will squeeze such technology-enabled practices into its moral code, because its members will indulge themselves anyway.
The Bottom Line
It seems to us that under the current system of health care reimbursement in the United States, hospitals may need to lose only a small percentage of procedures—those that provide the bulk of their current operating margin and that often equate to those that are offered less expensively overseas—to put them in the red.
One solution, which clearly is not for everyone, is to open up a front in the battle for the global patient’s attention, as the Cleveland Clinic, Johns Hopkins, Mayo and a handful of others have done. It is not obvious to outsiders, but many of us on the inside know that U.S. hospitals are veritable paragons of efficiency given the extraordinary administrative and operational complexities imposed on them by multiple and sometimes competing constituencies, from payers to professional societies. Put a U.S. hospital management team in environments (for example, countries with single-payer systems) where the level of complexity is much lower, and watch them fly.
At the very least, we would encourage hospital and other U.S. health care leaders to start thinking about the sword of globalization, and to devise strategies for dealing with it.
David Ellis is corporate director of planning and future studies at the Detroit Medical Center and publisher of Health Futures Digest, a monthly online discursive digest of news and commentary on long-range, leading-edge technological innovations and their consequences and implications for health care policy and practice. Mr. Ellis is also a regular contributor to H&HN OnLine.
Charles J. Shanley, M.D., is a vascular surgeon, senior vice president and chairman of surgical services at William Beaumont Hospital in Royal Oak, Mich. Dr. Shanley is also executive director of the Applebaum Surgical Learning Center, a state-of-the-art simulation facility, at Beaumont.
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