A recent report by Deloitte Center for Health Solutions on medical tourism points out that health care costs in the US are increasing at 8 per cent per year thus eating into corporate profits and household disposable income. It also says with a growing number of healthcare facilities in other countries now accredited by Joint Commission International (JCI), perceptions about quality have undergone a radical shift. According to Deloitte’s report, two in five respondents surveyed said they would be interested in pursuing treatment abroad if quality was comparable and the savings were 50 per cent or more.

In Nov -2008 Wellpoint, the largest health benefits company in the US, announced a new international medical tourism product aimed at helping recession-struck American corporates cut their healthcare costs. The significant thing about this product is that members can opt for elective (non urgent and done by patient’s choice) procedures at healthcare facilities in India. Serigraph Inc., a Wisconsin-based specialty printer will become the first company to participate in Wellpoint’s pilot programme that kicks off in January 2009. Its employees have the choice of being treated at two Apollo group Hospitals, in Bangalore and New Delhi.

Another significant event last month(Nov-2008) was a tie-up between South Carolina-based Companion Global Healthcare, a medical travel facilitator, with Wockhardt Hospitals in Bangalore and Mumbai. The tie-up is noteworthy, as Vishal Bali, CEO of Wockhardt Hospitals, explains. Those insured with BlueCross BluesShield (one of the largest health insurer in the US), who are tied up with Companion Global Healthcare, can now exercise an option of getting treated at Wockhardt Hospitals.

Suddenly a whole new untapped market has opened up for Indian hospitals seeking to attract patients from the US — that of insured patients. Till now, corporate hospitals in India were pegging the opportunity size of patients from the US at 45 million uninsured individuals, or underinsured individuals. But now given the recessionary climate, and moves by US corporates to cut costs by outsourcing treatment overseas, India expects to be a key beneficiary. Pradeep Thukral, head of international marketing at Apollo Hospital, now estimates the opportunity size to have enlarged to at least 65 million Americans.

Worker healthcare costs are enormous for US companies and in fact, have been cited as one of the biggest reasons why American automakers, which are seeking $34 billion from the federal government, are in such trouble. Take General Motors, which has 479,000 retirees, who get an average pension of over $40,000 a year — together these retirees health insurance costs work out to about $5 billion a year. Now add to that the healthcare costs of serving employees, and it spells big expense for firms like GM. Obviously, then companies in other sectors are quickly exploring alternative options to cut healthcare costs before they join the troubled league of the automakers.

Rajesh Rao, CEO, of IndUShealth, a North Carolina-based company that facilitates medical travel of American patients to Indian hospitals, estimates that a company with 1,000 employees typically can hope to cut its healthcare costs by half a million dollars every year by outsourcing treatment options for its employees to India. Rao should know because even before the Serigraph announcement made headlines across the US, he has been helping American corporates send employees to India. Today, Rao, has at least 12 mid-sized employers availing his corporate programme (translating into 40,000-50,000 subscribers) and he says he has been tripling his volumes year on year since he started in 2005, when it was just a trickle.

As Rao points out the burgeoning healthcare costs have forced companies in the US to look at alternative options. “Out-of-pocket expenses have shot up phenomenally,” he says.

Even if you include airfare costs of a patient plus a companion, and accommodation costs in India, the cost of getting treated in India is significantly lower. For instance, US News & World Report, in its 12 May 2008 issue lists the cost of a coronary artery bypass surgery in a US hospital as anywhere between $70,000-133,000 whereas in India this same procedure would cost $7,000. Obviously even if you include airfare, accommodation, still there will be huge savings.

There is good news for medical tourists! Most insurers retreat when it comes to covering medical procedures performed overseas, but times are changing as some insurers are exploring the option.

Twenty years ago, an American needing knee surgery probably wouldn’t think of jetting off to India for the operation. But times keep changing, health insurance costs keep rising, and Kumar Jagadeesan can cite a statistic that has led many patients to jump aboard a plane.

“A knee surgery operation in the U.S. can cost $45,000 to $50,000,” says Jagadeesan, the vice-president and CEO of Star Hospitals.net, a medical travel company. “In India, the cost would be $10,000, plus the price of a plane ticket,” which could be as little as $1,330 for a round-trip.

Star Hospitals.net is one of several medical travel companies advertising inexpensive services where patients fly to India, Thailand, the Philippines, and other countries to have surgery. With a few notable exceptions, however, insurance companies aren’t eager to cover these trips, even while they acknowledge the cost savings may be great. So for now, most patients must put up their own cash or put down a credit card.

Worries About Credentials

Why are insurers reluctant to send policyholders overseas? “One of the biggest issues is credentialing claims,” says Scott Edelstein, a lawyer with the global law firm Squire, Sanders & Dempsey. “They have to take reasonable measures that the providers overseas have the credentials to provide adequate care.”

Most medical travel companies, including Star Hospitals, currently rely on the Joint Commission International (JCI), an American nonprofit that accredits hospitals in the U.S., to help find suitable medical centers overseas. Lately the number of international hospitals getting the thumbs-up from the JCI has been growing. “There is great potential for growth, which is being driven by the build out of high quality hospitals on the global scene,” says Josef Woodman, the author of Patients Without Borders. Kenneth A. Powers, the JCI’s media relation’s manager, said that in 2005, there were just 76 JCI-accredited hospitals. Now there are more than 220.

JCI accreditation will probably help insurers overcome fears of getting sued by injured patients. But there are other issues to worry about. The insurers “have to make sure there will be smooth claims processing,” says Woodman. And, he says, there are concerns about continuity of care. “What happens when the patient comes back? Even if there are no complications with a procedure, how much is the insurance company willing to cover for physical therapy back in the U.S.?”

Few Legal Options

Despite these lingering issues, a few insurers have been bold enough to dip their toes into medical tourism in the past year. In March 2008, Blue Cross & Blue Shield of South Carolina signed alliances with seven overseas hospitals (BusinessWeek, 03/13/08). And more insurers are in talks with medical tourism companies, attests Rudy Rupak, founder of the medical travel agency Planet Hospital. “Right now we’re having active discussions with insurance companies about adding us to their plan design,” he says.

Getting more insurers involved might help ease patients’ reluctance to fly to another country for a procedure. But lack of coverage is not the only deal-breaker. “What happens if there’s an adverse effect?” asks Edelstein. “Will they have any recourse? That’s a very hot area in the legal arena. For the most part, those patients are not going to have much recourse in the U.S.”

Nor will patients have many legal options in the country where they had the operation. “Access to the court system in countries like India is not as good as in the U.S.,” Edelstein adds. “And even if you do get a trial, the judgments tend to be much lower than they would be in the U.S.”"

Nevertheless, Woodman and others are optimistic about the changing world of medical tourism and the role of health insurers. “When you think of medical tourism 20 years ago, you picture the Beverly Hills crowd of upper-crust men and women going to Brazil for a procedure and coming back home to brag about it,” says Woodman. “The profile has changed. It’s becoming a middle-class and working-class phenomenon, where folks are being driven to seek cost-effective alternatives.”