This article will appear in the 2015 HealthCare Consumerism Outlook magazine. by Laura Carabello, Founder and Principal, CPR Strategic Marketing Communications, and Editor and Publisher, Medical Travel Today and U.S. Domestic Medical Travel? Ihcc.com-America’s businesses are facing some of the most monumental challenges in history regarding the provision of healthcare benefits for their employees, with significant employer compliance provisions of the Affordable Care Act (ACA) looming in 2015. The ACA impacts all employers that collectively account for 95 percent of all commercial health coverage currently in the United States.ⁱ Large employers, in particular, face substantial monetary penalties for non-compliance with the new regulations, and the cost of providing health benefits mounts daily for companies of every size and in every industry. With the sticker-shock of health reforms resonating in the employer community, business leaders are seeking solutions that not only lower costs, but also ensure quality. While there are a few pioneers in the large business category that have tested the waters to execute direct contracting arrangements with targeted centers of excellence (COEs) (e.g. Wal-Mart, Lowe’s, Boeing) the vast majority of large employers are now contemplating these arrangements in the year ahead. Furthermore, virtually all of the mid-size and small employers are also receptive to this concept and may aggregate (learn more here) their purchasing power through coalitions and other multiple employer welfare arrangements (MEWAs). Concurrently, the nation’s hospitals – which now total 5,723 registered institutionsⁱⁱ — are on the frontline in the federal government’s campaign to rein in sky-high costs while improving the quality of care. All stakeholders are often coping with more requirements and less money. Furthermore, competition among the hospitals is fierce, both locally and nationally, and 75 percent of all hospitals have a competitor within 15 miles (24 km).ⁱⁱⁱ As hospital administrators and their marketing teams vie for patients that represent optimal reimbursement, they face another competitor: doctors who now perform some procedures in their offices and with specialized clinics and surgi-centers. In this new environment, a volatile pressure-cooker for every entity in the healthcare continuum, innovative solutions that were once considered far-reaching are now meeting receptive audiences. Direct contracting, often characterized as “U.S. domestic travel,” the practice of traveling out of one’s hometown or home state to a care provider or COE located in another part of the country, represents this type of phenomenon. It’s a trend that has also spawned a new breed of health management. Health Design Plus (HDP), a healthcare management company with experience administering travel surgery programs, enables its clients to control the spiraling costs of healthcare by giving employers access to the country’s top hospitals and doctors – at a predictable cost. The select hospitals involved in the HDP program had to meet strict benchmarks for positive outcomes, low hospital-acquired infection rates, high patient satisfaction, advanced staff training and skills, thorough patient data capture and other factors. Doctor’s costs, hospital expenses and fees are part of a single, transparent price.^iv Ruth Coleman, CEO, anticipates growing interest in the regional model that they rolled out with the nation’s largest retailer — patients traveling for care within a smaller geographic region. The appeal with the regional model is that plan members travel within their own geographic region. The company also expects to see more regional programs that will go beyond surgical procedures to include programs for conditions that are difficult to manage, such as diabetes. Currently the company is focused on domestic programs, but anticipates that ongoing trends will gradually make international travel more attractive for employers and plan members. Centers of Excellence: Transparent Costs, High Quality Care Employers, especially large, high-profile companies are increasingly exercising their options to pursue direct contracting and offer a medical travel benefit, and employees are quickly becoming willing travelers. The path toward better outcomes and cost-efficiencies represents high value for all parties, although the vast majority of businesses are still uncertain as to the appropriate steps for offering this type of program, selecting the optimal COEs, and ascertaining ROI. Several organizations and purchasing coalitions are helping to guide employers in their selection process. For example, The Pacific Business Group on Health (PBGH) brings employers together with the aim of improving the quality of healthcare while moderating healthcare costs. PBGH’s 60 member companies provide healthcare coverage to 10 million Americans and their dependents, providing employers with a wide array of services that range from advising on relationships with carriers, supporting projects that accelerate price and quality transparency, and advocating for policy initiatives. One of the organization’s key members, Wal-Mart, launched a COE travel surgery program for cardiac and spine, and suggested that this type of program could have a stronger impact moving the market if multiple employers joined together. Since then, PBGH has learned that employers want a travel surgery program that offers high quality surgical care at affordable rates, not just an arrangement that provides the “best deal.” With its extensive background in quality measures and orthopedics, PBGH has developed an effective assessment and selection process for hip and knee replacement COEs. PBGH has also placed a COE in each region of the United States to minimize travel for patients, and will continue to add centers to meet participating employer demand. Employers that sign on with PBGH’s Employers Centers of Excellence Network (ECEN) can expect to receive a complete return on investment within two years — and significant savings thereafter. In addition to the competitive bundled rates, the bulk of savings opportunity is the result of the higher quality of care. Multiple Factors Impact Decision-making While quality of care has traditionally been the primary deciding factor in choosing a hospital or physician for a specific treatment or procedure, the cost of healthcare has become an increasingly important factor for consideration. As patients have been asked to pay a greater proportion of the cost of their care – through higher co-pays, deductibles and other plan cost-sharing features – they are becoming more comfortable with the notion of leaving home to access better care that is easier on the pocketbook. Employers are also incenting patients to make the journey: offering full coverage for the procedure, eliminating deductibles and out of pocket costs, and covering the travel costs of a companion or family member. Having access to geographically-specific healthcare cost information will also be key to empowering patients to make more informed decisions regarding whether to travel for care and how to plan for it financially. But transparency of information on the costs and quality of healthcare remains elusive, despite the efforts of the Centers for Medicare & Medicaid and private sector organizations that are starting to report this information. In turn, hospitals and providers increasingly mimic the practices of successful retailers and are continually updating their offerings to lure corporate customers. In their quest to become recognized COEs, they seek to attract patients from all parts of the country, and in many cases from throughout the world. For the most part, however, these care providers are unsure about how to approach corporate audiences, market their capabilities, and leverage the opportunities that now exist throughout the country. Implementation of a medical travel program is a complex undertaking, and the majority of health systems need guidance. Achieving clinical excellence is just one piece of the puzzle, and while most institutions like to point to their accomplishments in this area, they are missing many of the components for truly delivering an excellent, start-to-finish patient experience. Key Advantages to COE Programs Among the many advantages to COE programs two stand out: price transparency and bundled pricing. Price Transparency Enormous variation in healthcare prices exists across the country. For example, one hospital might bill $40,000 to remove a gallbladder using minimally invasive surgery, while another hospital might charge $91,000.^v Prices can also vary within each state. For example, the median cost for a common inpatient heart procedure in southeastern Wisconsin ranges from a high of $178,647 at Waukesha Memorial Hospital to a low of $105,119 at Wheaton Franciscan All Saints in Racine.^vi By only signing contracts with providers priced in the low range, but who also demonstrate good outcomes, employers can lower the cost of providing healthcare without compromising quality. This is beneficial for smaller healthcare clinics as it means that they can lower their procedure costs, potentially increasing business for them. Also, with advanced healthcare payment processing, the medical industry can be confident that patients will be receiving first-class care and customer service too. Bundled Pricing Bundled payment, also known as episode-based payment or packaged pricing, is defined as the reimbursement of healthcare providers based on expected costs for clinically defined episodes of care. Providers are paid a single fee for a set of evidenced-based services related to a diagnosis, with payments typically linked to outcomes, as well as other quality measures.^vii Last year, the Department of Health and Human Services announced a “bundled” payment program that allows providers to bid as a team for fixed price reimbursement for procedures, such as heart surgery or hip and knee replacements.^viii This strategy incents providers to collaborate to ensure the best outcomes because any additional cost incurred beyond the fixed price comes out of the provider’s pockets. As a result, Geisinger Health System, for example, has seen a 21 percent reduction in complications, a 25 percent reduction in surgical infections and a 44 percent drop in readmissions.^ix Models of Quality, Cost-Effective Care Virginia Mason Medical Center As more companies shift employees to high-deductible health plans leading to higher out-of-pocket costs, more employers are prompted to engage with local health systems as a way to help employees shop for cost-effective care. Serving as a model for this trend, companies like Starbucks and Costco have aggressively forged relationships with medical centers to meet the kinds of rigorous standards they use in daily business practices. The results include better health, higher patient satisfaction and lower costs.^x To improve care for back pain, for example, Starbucks worked with Virginia Mason Medical Center, requiring same-day access for employees, no unnecessary medical care and 100 percent customer satisfaction. This supply-chain approach demanded the same high standards Starbucks expects from all of its suppliers. With fewer unnecessary tests and more use of therapists — which cost significantly less than use of doctors — Starbucks experienced lower costs in the treatment of back pain.^xi What’s more, the standardized, efficient system also meant better outcomes. In fact, data showed that Virginia Mason’s spine clinic patients returned to work more quickly, missing two days on average compared with five elsewhere.^xii Northwestern Memorial Hospital General Electric Co. (GE) chose Northwestern Memorial Hospital as one of the company’s national COEs for total hip and knee replacement surgery. As part of this partnership, Northwestern Memorial Hospital offers bundled services for hip and knee replacement at fixed prices. GE requested that Northwestern be transparent about costs in creating the bundled pricing, which is necessary to ensure that pricing is not only competitive, but also financially viable. Once GE selected Northwestern Memorial, the hospital project teams began working closely to implement the program in a highly collaborative process. Northwestern Memorial Hospital has built in extra controls to ensure that before a patient makes travel plans, its physicians on both the surgical and pre-operative clearance sides have had a chance to fully review their records.^xiii Positioned for Success: COEs Strategize to Compete Current market forces have created a perfect storm for the introduction of new services, which will work to ensure patient-centric care that focuses on better outcomes for every individual. Innovative services, however, must never lose sight of the importance of first meeting patient needs and expectations, and then guiding employers and care providers to execute on their commitments to each and every person. What is needed is a single intersection for the healthcare medical travel industry, parallel to the “matching” programs for other industries such as dating, leisure travel, and business networking to accomplish these goals:

• Empower employers of all sizes with information and resources to pursue a medical travel program that generates the highest quality care at the greatest value.
• Position hospitals and care providers to serve employers and their workforces
• Offer Web and event platforms to connect the audiences

Gone are the days when a hospital’s competitors were across town or in a neighboring community. Today, the marketplace has literally forced health systems to compare themselves to institutions in a five-state radius or on another coast. The need to travel is no longer a major concern for those seeking the best care at the best price. As plan members take on a greater share of their own healthcare costs, they are beginning to distinguish between low prices and high quality.^xiv At the same time, employers are playing a more aggressive role by contracting directly with healthcare providers and COEs in order to find the best value for their employees, and opting for bundled, fixed price procedures. This has created a new dynamic in the world of health benefits that plays out as a win-win for all stakeholders. About the Author Laura Carabello has been an entrepreneur and a strategy consultant in both domestic and international businesses related to healthcare and technology since 1985. She is the publisher/managing editor of Medical Travel Today, the authoritative, online business-to-business international newsletter of the medical tourism industry, as well as US Domestic Medical Travel, the newsletter dedicated to U.S. intra-state and inbound medical travel. In 2011, Carabello published Medical Travel Today: Opinions and Perspectives on an Industry in the Making. Footnotes i Benefitfocus Solution; ACA Impacts A Transformation of the Benefits Landscape; Benefit Focus White Paper, 2014; http://cdns.benefitfocus.com/netstorage/corporatesite/production/static/media/Benefitfocus_ACA_Whitepaper.pdf; Accessed June 25, 2014. ii American Hospital Association; Registration Requirements for Hospitals; http://www.aha.org/research/rc/stat-studies/REGISTRATION_FY_08.pdf; Accessed June 25, 2014. iii American Hospital Association. iv Featherly, Kevin; Paying Less for the Best; Delta Sky; pg. 81; February 2014. v Meier, Barry et al; Hospital Billing Varies Wildly, Government Data Shows; New York Times; May 8, 2013; http://www.nytimes.com/2013/05/08/business/hospital-billing-varies-wildly-us-data-shows.html?pagewanted=all&_r=0; accessed December 23, 2014. vi Kirchen, Rich; Latest hospital pricing data show wide variance in costs of procedures; Business Journal; Aug. 21, 2014; http://www.bizjournals.com/milwaukee/news/2014/08/21/latest-hospital-pricing-data-show-wide-variance-in.html?page=all; accessed January 9, 2015. vii Satin, David J. & Miles, Justin; Performance-Based Bundled Payments; Minnesota Medicine; October 2009; http://www.minnesotamedicine.com/Past-Issues/Past-Issues-2009/October-2009/Special-Report-Oct2009; accessed January 9, 2015. viii Champion, Wes; How Bundled Pricing Just Might Save Healthcare From Itself; Healthcare Blog; Oct. 26, 2012; http://thehealthcareblog.com/blog/2012/10/26/how-bundled-payments-just-might-save-health-care-from-itself/; accessed January 9, 2015. ix Champion, 2012. x Levey, Noam N.; Unequal Treatment Where Employers Use Quality Control to Shape Healthcare; LA Times; Dec. 15, 2014; http://www.latimes.com/nation/healthcare/la-na-healthcare-employer-leadership-20141215-story.html#page=1; accessed January 9, 2015. xi Levey, 2014. xii Levey, 2014. xiii Carabello, Laura; U.S. Domestic Medical Travel; to be published: Vol. 1, Issue 21; March 2014. xiv Carabello, 2014. To view the original article click here.