Not too Good to be True! – Go to Cancun, Have Knee Replacement by US Surgeon, Come Home with a Check for $5K

August 27, 2019

An interesting twist on Medical Tourism is detailed in a New York Times article. A patient from Mississippi, Donna Ferguson, arranged her care through Denver-based North American Specialty Hospital (“NASH”).  Ferguson was flown to Cancun, had her knee replaced by a U.S. based, Mayo-trained surgeon, had no out-of-pocket expenses and was actually paid $5,000 for her trouble. The hospital is accredited by the international arm of the Joint Commission and the surgeon was covered with additional U.S. based malpractice insurance. NASH charges a fixed amount for each case and is paid by the employer or an intermediary that arranges the treatment.

How can this be possible? Due to the differential in costs between U.S. and Mexican hospitals and the cost of the knee implant, even with the cost of travel and the patient “bonus”, the cost to her husband’s self-insured employer was less than half of what it would have been in the US.  While the cost differential is certainly present in other Medical Tourism destinations, the approach taken for Ms. Ferguson attempts to allay quality concerns by providing the care by a US surgeon and coverage with US malpractice insurance. Her husband’s employer has sent about 140 employees or dependents for treatments at a hospital in Costa Rica, and together the foreign medical facilities have saved the firm $3.2 million in health costs – or approximately 50% of the cost in the US.  These savings include travel costs and incentive payments. Patient satisfaction with the program is reported to be overwhelmingly positive.

EHC NOTE: The approach described in this article appears to be an innovative twist on Medical Tourism, designed to remove some negative perceptions. As patients tend to focus on the surgeon as their primary caregiver, offering a US based surgeon alleviates concerns for some.  In our opinion, there is a much larger sphere of care which should be of concern to the patient. That sphere would include equipment and monitor quality; OR and post-operative nursing expertise; anesthesia provider experience and competence; and the resources to address emergencies or complications. 

Having said that, the ability to benefit from such a dramatic cost arbitrage is a compelling business opportunity that enterprising companies such as NASH will continue to explore. One detail described in the Times article is that the cost of the identical implant in Mexico is $3,500 as opposed to $8,000 in the US.  Such a dramatic cost differential makes little sense and is likely the single largest savings realized by traveling over the border. 

The unusual dynamics of our healthcare system have resulted in similar pricing differentials in many areas including pharmaceuticals and provider costs.  The concern for us in the operating room environment is that at some level of cost savings, an increasing number of patients with discretionary insurance may be driven to explore Medical Tourism.  At some point, a meaningful loss of these well reimbursed cases would have a negative financial impact on anesthesia providers and hospitals.