As a health care executive, the recent news that Hannaford supermarkets is encouraging employees to have knee and hip replacement surgeries done in Singapore because the procedures cost much less there than in America has me wanting to dance a vengeful Watusi barefoot through their salad bars. Surgery, after all, is where hospitals make their money, and the loss of even relatively small numbers of insured surgical patients would be ruinous to many American hospitals.
Rather than curse Hannaford for its self-interested decision, we would do well to see Hannaford as a corporate canary chirping frantically about the deteriorating conditions brought on by high health care costs in the coal mine of American business. Its action is a warning of things to come. If unheeded, it will not be Hannaford’s action that has brought about the ruin of some hospitals, but the failure of health care and other leaders in this country to listen to the canary.
What Hannaford is telling us is that a company competing in a global economy (Hannaford’s parent company, Delhaize, is European) cannot tolerate business costs that are strikingly out of whack in one of its markets. Cutthroat competition that does not know or care about what happens here will either force the cost to be cut or the market to be abandoned. The globally competitive company that fails to make one choice or the other will be eaten up by a competitor or die.
In this case, the thing out of whack is Hannaford’s employee health care costs. Those are greater in America than anywhere else in the world where Delhaize does business. If Hannaford does not address that issue, its corporate parent will start putting its capital investment in other markets where it generates a better return on investment, and stop investing in this country. A successful global business cannot do anything else.
That has led Hannaford to provide financial incentives to employees to go half a world away for joint surgery. If employees will get hip replacement surgery at a hospital Hannaford has selected in Singapore with a reputation for quality, the employees can keep several thousand dollars of out-of-pocket expenses they would have contributed to the estimated $45,000 cost for the procedure in the United States. Hannaford will then pay all of the roughly $10,000-15,000 cost of the surgery and employee travel – with a companion – to Singapore for surgery and the first couple of weeks of recovery.
What is striking about Hannaford’s action is that Hannaford is one of New England’s major employers, and did this in association with Aetna, one of America’s major insurers. Many other companies across the country also face inexorable global competition on cost, and all will be watching Hannaford’s experiment. If it is successful, some are likely to follow its footsteps and outsource expensive surgeries to Asia for willing employees.
There are impediments to surgery abroad, including how to find a good hospital and good surgeon, how to get follow-up care, what to do if your surgery is botched, the difficulties of being sick in a foreign land, and not knowing your doctor. There are those who think Hannaford is nuts and that any employee who went to Singapore for knee replacement surgery has titanium for a knee and scat for brains. The evidence would suggest otherwise. Research has shown that one in 10 patients with insurance, and one in four patients with no insurance and paying all of their own costs, will travel abroad to save $1,000 to $2,500 in health care costs. If surveys don’t convince you, follow the flight plans; this year more than 700,000 Americans will travel abroad as “medical tourists” for surgery of some kind.
There are those who think Hannaford should meet its company’s social obligation to this country by keeping its surgical business here in order to help keep our hospitals viable. Those hospitals, after all, are cornerstones of much of our health care system, including much of our primary care. Hannaford would probably say it can either be a successful company or meet some standard of social responsibility by paying much higher surgical and other health care costs than its competition, but not both.
In the next several years, if large numbers of Americans begin getting expensive surgical and other procedures someplace else, some hospitals will quickly be on the road to financial ruin. Hannaford’s decision is an early warning from the canary for those hospitals to rapidly find a new business model for survival, one that does not depend on surgery that costs three to four times more than in Singapore, Thailand, India or Costa Rica. It also calls for our health care leaders to pick up the pace in efforts to build a new partnership for cost-effective, high-quality health care with American businesses. There is not a moment to lose.
Erik Steele, D.O., a physician in Bangor, is chief medical officer of Eastern Maine Healthcare Systems and is on the staff of several hospital emergency rooms in the region.
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