David Kibbe’s blog

Two months ago, my medical director and medical services director came to me with an interesting case related to medical tourism. In short, one of our covered members went overseas to Europe to have his spine repaired.

He received two spinal implants that cost a total of $42,000 U.S. He was requesting reimbursement as he had paid the providers directly for the surgery.

The question for me was whether we should pay it, as we had not directed him to have the surgery done “out of network.” We apparently had authorized it but had not clearly communicated to him about where he should go for the surgery. We would have most likely sent him to Salt Lake City or Denver. He made up his mind and chose Europe, and went there for the surgery. It appears to have been successfully completed.

One of the benefits of having his procedure done in Europe was the fact that the surgical standard is to have two discs replaced, while we, in the United States, only allow one implant per surgery. In other words, he got two discs repaired while undergoing just one surgery.

In any case, the surgery was completed and he requested reimbursement. He pointed out that the total cost for the two implants and surgery was far less than what it would have cost for one implant and surgery if the procedure had been completed in the United States, and thus he saved us money. He did make good points.

Of course, as a good parsimonious health plan, we asked the logical questions related to liability, precedence, etc. We queried our fellow health plans and got only one response, interestingly from Salt Lake City. Apparently there is not yet a lot of experience, at least among some health plans, with international medical tourism.

With the information that we had, we discussed the case again. My decision, ultimately, was to pay the member for the surgery, subject to some exclusions. It was a practical response, coupled with the reality that we had not been clear in our communication initially. I believe the onus for clarity falls on the health plan, not the individual member.

So, what are the cost differences? They are profound. Surgery itself was much less than in the United States. The cost of each implant in Europe was $17,000, whereas it would have been at least $20,000 in the United States. The manufacturer is an international company and sells its products in the United States and abroad. The pricing surely differs by geography, to our detriment here. Plus, it is customary for U.S. hospitals to take their acquisition cost and mark it up by 200 percent or 300 percent, creating a differential here versus abroad. I don’t know how hospitals might mark up that same implant overseas.

This incident was an eye opener that confirmed my concerns about the cost of health care in our country. I am thankful for advanced medical

medical technology and I assume, based upon our approval, that this member needed the surgery so that he could function much better.

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David KibbeHealth and Human Services (HHS) just released data on 2010 health expenditures, reporting that we, as a nation, have now reached the $2.6 trillion mark, consuming 17.9% of our GDP. Reaching that new mark required 3.9% annual growth vs. 3.8% in 2009. On the surface, the rate of growth seems less alarming than the insurance premium trends of 7%, 8%, and more that have been common year after year over the past decade. Yet the reality is that the changes are really like comparing apples and oranges, as the aggregate figures provided by HHS include a number of factors that mitigate the apparent modest rate of increase.

Often, to really see where we are, we need to see where we were. In 1978, as I started my graduate studies in health care economics and finance, health care expenditures were approximately $250 billion in the U.S. I still remember my mother, a hospital nursing administrator, showing me the financial records of a hospital that could fit on one large table in approximately five large filing containers. There was already growth and complexity in health care compared even to the prior decade, but compared to today, it was a simpler, less expensive world, to be sure. So, now today, 34 years later, we have a health care economy that is 10 times that size.

Well, getting from that point to today has involved an agenda of power, politics, money, greed, and sex (well, I don’t know about that, but it seems to go along with the others). As supposedly rational people, we often assert very good reasons for the growth in health care: population growth, aging, technology, medical advances, defensive medicine, and other factors. With a good actuary and economist, we even break down the factors driving the growth and ascribe percentages or weights to each one to explain how together, they comprise the whole. As we do that, many of us question whether the expenditures are all justified. What is “essential care”? What is discretionary? What is supply-driven? So analysis does not lead to acceptance of the expenditures but it does make us think in rational, economic terms.

There is validity to that rational economic analysis but this should be a time to explore the role that power, politics, money, and psychology have played in the development of modern medicine and the “health care system” that we have today. We would be naive to think that they have not had an enormous impact on health care today.

Much more significantly, we will fail to create “Escape Fires,” as Dr. Don Berwick stated years ago at an annual IHI symposium, if we don’t understand and appreciate the real human elements of health care and our industry today. The role of leaders is to define reality, as awkward and uncomfortable as that reality often is. The reality here is much more than the HHS notification of 2010 health expenditures. The reality is that we live and work in a complex, very human, self-serving system that has relatively few checks and balances, compared to other industries. So the question is, what does that reality then mean, relative to shaping a different system, a system that actually functions well, a la Peter Senge’s systems thinking? That is not something answered in a few paragraphs but it deserves answers and that will shape forthcoming thoughts.

David Kibbe is CEO of New West Health Services https://www.newwesthealth.com/