This is Part One of a two-part series on the role of medical tourism (domestic and international) in managing the small percentage of employees - or, in the case of health plans, members - who account for a significant percentage of all healthcare spending.

While conventional wellness has failed for many reasons detailed in our book on managing corporate health benefits Cracking Health Costs: How to Cut Your Company's Health Costs and Provide Employees Better Care (John Wiley & Sons, 2013) one of its major shortcomings is its misguided emphasis on anticipating and avoiding costs that may otherwise occur several years hence but probably won't, rather than focusing on the present, where a small percentage of your employees or members generate the majority of your spending.

Much of that small percentage (as in train wrecks) can't be anticipated or (as in people taking "orphan drugs") can be anticipated but not mitigated. Even so, about 2% of your covered population -- accounting for maybe 20% of your cost -- have conditions that can be both anticipated and mitigated. One of the best ways to mitigate that expense - as pioneered by Walmart and others - is through direct contracting with clinics and hospitals that have achieved outstanding levels of success in managing the care for the very sickest members of your workforce. We refer to these organizations as "Company-Sponsored Centers of Excellence" (CSCOEs), to specifically distinguish them from marketing-oriented models where a well-known hospital anchors a local network using the (often self-designated) moniker of "center of excellence."  

The pace of companies announcing new CSCOE programs and/or covering more procedures is increasing. One reason for this increase is that unnecessary procedures are also on the rise. Consider angioplasties. About 250,000 bypasses were done annually before angioplasties were introduced several decades ago. This new procedure was hailed as a much less invasive, far less expensive alternative to bypass, with pundits predicting they would replace as many as half of all bypasses. Fast-forward to the most recent data: about 1.1 million angioplasties are performed today, but seemingly none have replaced bypasses-of which more than 400,000 are now performed. All of this is despite substantial improvements in drug and diet therapy over this period, which should have replaced both, to a large degree.

Heart procedures are just one of the many over utilized interventions that have created the CSCOE movement. Our blog, www.crackinghealthcosts.com, often receives inquiries about CSCOEs. This is why a question-and-answer format probably works best to describe it: the same questions come up so many times.

Q: What are the traits of the outlier group indicated for CSCOEs?

A: These outliers typically have multiple illnesses and are seeing multiple specialists and are also often in the middle of an episode of acute care. Moreover, our experience shows that fully 10 to 20 percent of them have been misdiagnosed. Further, experience shows that around 40 percent of outliers have either suboptimal or even completely misdirected treatment plans, as the sidebar brings to life. This high error rate on the outlier populations is driving companies to develop CSCOEs, due to the fact that remote carrier case management-often conducted on the telephone with incomplete and tardy information-is simply not equipped to manage these cases.

Here is an altogether-too-common example. A blocked artery can cause chest pain, or angina pectoris. In men, this condition is usually manifested in the upper left quadrant. Women sometimes have atypical angina that instead causes severe back pain.

Almost certainly a patient complaining of back pain would receive a course of conservative therapy prior to any surgery recommendation, because most back pain resolves on its own over time. However, if this back pain is not a spontaneous, unique condition but rather a symptom of angina, it won't resolve on its own. Once the physician reaches that conclusion, she/he usually orders a number of imaging studies that will almost surely show abnormalities in the back. The reason is that most people with angina will be over 45, and most people over 45 have something in their spines that won't look right in an image. Even though spinal pain doesn't correlate closely with abnormal spinal images, the abnormalities are often assumed to be causing the pain. (That MRI interpretation is why a spine surgeon is on somewhat solid ground for going forward with the surgery. It's not like the surgeon is making up the imaging.)

But CSCOE-level hospitals work completely differently. Their protocols call quite clearly for a "differential diagnosis" in these circumstances, for several reasons: because the misdiagnosis above is anticipated; because the physicians operate in teams, rather than making hand-offs; and because certain types of surgery proposals, like this one, must pass through peer review. (Ironically, partly because of the peer review, most questionable surgeries in CSCOEs wouldn't even be proposed in the first place.)

Q: What specifically would we be offering our employees or members through a CSCOE program?

A: People who have learned they need certain surgeries may have the option of traveling (along with a caregiver) to a CSCOE, both to cover a second opinion and then, if needed, for the surgery itself. Recognizing that patients are being flown in and housed, these CSCOEs, as described in the sidebar, are set up to compress whatever evaluation and care is needed into a short time frame. Your company or plan typically would cover all expenses for those trips as well as any copays. Each payor can decide this for itself, but we recommend full coverage of out-of-pocket expenses. This is the simplest approach. Adding a lot of asterisks will increase communication complexity and make only a modest difference in the total amount spent on versus simply covering all the out-of-pocket expenses.

Q: What should we look for in a CSCOE?

Here are attributes of hospitals and clinics you should look for, or avoid, as a potential Company-Sponsored Center of Excellence.

1. The hospital or clinic should be fully integrated, meaning the doctors and hospital facilities are all part of the same organization.

2. The doctors, especially surgeons, are fully salaried, with no (or only minor) bonuses for doing more surgery. (Sometimes these bonuses are described as "productivity bonuses." Make sure that term is defined.)

3. The doctors should be accountable for getting the patients' diagnoses right, finding the safest and least invasive treatment to achieve the desired patient outcomes, and excellent patient outcomes.

4. Very few surgeons-even heart surgeons-track their patients for any length of time to observe their long-term outcomes, despite the fact that these are a critical input for a Continuous Quality Improvement process. Ensure that a potential CSCOE has a mechanism to do this.

5. Look for hospitals and clinics that are willing to provide global fees or other transparent prices.

6.Be careful of academic health systems. You should stay away from any hospital with a name that starts with the words "University of . . ." (And, note that some hospitals are university-affiliated even without the moniker.) University-based health systems have three missions: research, education, and patient care-the first two of which often conflict with the third. Many of the worst cases I've seen of over treatment and gross misdiagnoses have come from university health systems. Other hospitals have teaching programs, of course; the issue is determining the facility's main focus. Sometimes just reading the mission statement provides an answer to this question.

7. The hospitals should have a specific medical destination program, incorporating logistical elements (such as compressed time frames for evaluations) that anticipate people being flown in at your expense.

8. The hospitals should be nonprofit. The facts on this speak for themselves: in recent years, just about every publicized case of systemic inappropriate surgeries has come from for-profit hospitals.

Coming in Part 2: 

• Why not use our current hospitals?

• Which are the most popular CSCOE hospitals in the country?

• Should we include offshore hospitals?

• Which procedures should we start with and expand to?

• What about transplants?

• How much can be expect to save?

About the Authors

Tom Emerick, president of Emerick Consulting and formerly Vice President for Global Benefits Design at Walmart, blogs at www.crackinghealthcosts.com. Al Lewis, president of the Disease Management Purchasing Consortium, is also author of the award-winning book Why Nobody Believes the Numbers: Separating Fact from Fiction in Population Health Management. Both Emerick and Lewis were named in Forbes as unsung heroes of healthcare in 2013.

By Carol Neill, Director of Stop Loss Claims Administration, HM Insurance Group.

By Sally-Ann Polson, President, MedWatch 

Thirty years ago, when cost containment efforts in Utilization Management for the medical world were brand new, impact was significant and huge strides were and have been made, for example:

• Slowly the rate of back surgeries has decreased from 90% of all people who presented with back pain being operated on to 10% as a result of medical necessity guidelines being enforced by Utilization Management companies along with advancements in medical treatment and alternative therapies;

• CTs, that have 5 times the radiation as an x-ray, were ordered despite knowing that the patient's symptoms really required an MRI as the diagnostic test, thus resulting in both procedures being done, now we     re-direct so only an MRI is performed;

• Excessive amounts of hysterectomies were needlessly performed (close to half) but with the advent of Utilization Management, non-certification for these procedures were done and unnecessary surgeries were avoided and in many cases, women could retain their ability to successfully conceive because of the more conservative treatments that were done due to Utilization Management's intervention.

Great outcomes and great strides were being accomplished in the movement to assure the right care was being done in the right place at the right time. BUT, then, came United's campaign of "we will not interfere with the relationship with you and your doctor" and the PPOs took center stage.

Quality of care and prevention of unnecessary treatment was no longer the benchmark; price of care became the mantra. Many companies backslid into "automatic reviews" utilizing computers and non-clinical people to do the job. So, instead of being concerned with the unnecessary treatment, no less the overcharged and unbundled bill, they had a 45% discount and that seemed to be okay, even if it was unnecessary to begin with.

Yet now, more than ever, strong utilization management measures are critical and essential. There are new threats to the "cost and need for care", technology and new high cost drugs, devices and procedures litter the landscape and new games are being played.

• Thirty-three percent (33%) of a hospital's profits are being generated by their High Tech Radiology Centers so, an MRI, that is indeed appropriate, is performed in a hospital with a 45 % discount still results in a $1,100 bill versus the same test being done in a stand-alone facility at $400;

• Dialysis costs, we all know, are 80% higher than appropriate;

• Implants are the new game in town. Hundreds of new implants are now being created yearly and no FDA approval is needed.  The cost of implants are now paralleling the cost of pharmaceuticals with 40% of all surgical procedures resulting in the use of an implant with little or no oversight being done on not only the cost, but also the appropriateness of the procedure and the quality of the implant, and;

• The mark up on oncology and other specialty drugs and the location and type of treatment are far exceeding their true cost but the PPO and PBM contracts are protecting the providers and allowing these high costs to prevail.

And so the healthcare marketplace spiraled downward into an eddy of discounts and yellow pages of providers and thus, the "real" cost of the care: necessity and quality became less important and the SIZE of the discount became the selling point to the "buyer."   We were left on the back end discounting fees on potentially unnecessary care, medications, devices, equipment and tests.  

In 2014, the only chance we have of winning is to first and foremost, get out "in front" of the delivery of services. Other than emergencies and accidents, which present their own unique challenges, all other services must be managed, directed and controlled.

Secondly, the utilization management company you use must be very proactive and aggressive. They must have protocols for managing the processes and access to data to assist in the most quality and cost effective solution. The best solution may not be local and no solution may be the best solution! Requirements for real "pre-certification" need to be revitalized and patients should be penalized if not done 3-5 days in advance. Appropriate implants, oncology drugs, high cost radiology tests, dialysis treatment and much more can be authorized and delivered, if necessary, at the right price, with the proper advance notice and well before the PPO and PBM are even involved.

Managing cost on the front end can save your plans millions of dollars. So, the third element of true cost containment calls for clear Plan Language to support key programs and to ensure that Case Managers hands are untied to negotiate and facilitate cost containment efforts. Additionally, a communication plan should be outlined with all of the required steps needed for care of specific disease states and what the results are of non-compliance with the plan.

This is not the end, just the beginning. As abuses are identified or "pain points" are uncovered, plan language and reviews will and can be constructed to mitigate them. It is a never-ending challenge but one that must be waged to truly take control of the out-of-control spending that exists today.

About MedWatch

MedWatch is a triple URAC accredited medical management firm covering thousands of lives nationwide.   Founded in 1988, MedWatch knows that the combination of building partnerships with its clients to fully understand their unique needs while delivering innovative and cutting-edge methods of containing health care expenditures is vital to controlling costs.   MedWatch provides comprehensive clinically sound solutions that mitigate financial risk and improve member outcomes. Our cost containment  services range from wellness and early detection programs to case management of complex cases.  Contact Kevin Glass or Cindy Hom for further information at kevin.glass@urmedwatch.com or Cynthia.hom@urmedwatch.com.