U.S. Healthcare Reform:

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U.S. Healthcare Reform High Impact on the
Medical Travel Industry Presented by Laura
Carabello
Publisher and Executive Editor Medical Travel
Today www.medicaltraveltoday.com
Principal CPR Strategic Marketing
Communications www.cpronline.com
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A PERFECT STORM FOR MEDICAL TRAVEL

• Patient Protection and Affordable Care Act and
  the Health Care and Education Reconciliation Act
  of 2010
•  
• Growing Number of Insured with access to care
• More Americans with chronic disease
• Baby Boomers becoming seniors
• Shortage of physicians
• Downturn in U.S. economy
• Medical inflation continues to exceed standard
  price inflation
• Better American hospitals exiting public
  reimbursement programs

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Not a Done Deal

• Uncertainty remains
• At least fourteen states are challenging
  constitutionality more political theater than
  a challenge with teeth
• Counter proposals and heated debates likely to
  continue
• US physicians are outraged

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Not a Done Deal cont.
 A Plea from America's Physicians To Kill the
Healthcare Bill...Before it Kills Medicine in
America
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PARALLELS TO U.K. AND CANADA

• Government sponsored healthcare systems
• Limited access to care
• Long wait times
• UK and Canadian citizens travel extensively to
  other parts of the world for quality medical
  care. Americans are likely to follow this
  pattern.

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HEALTH REFORM POSITIVE SIGNALS FOR MEDICAL
TRAVEL INDUSTRY

• Reform does not include any language that limits
  or encourages international medical tourism
• Stage is set for disruptive innovation models
  medical travel, telemedicine, retail clinics,
  mhealth (mobile health) and other models that
• Reduce costs
• Deliver value
• Meet consumer demands for convenience and quality
  
• Offer price transparency
• Promote improved health care outcomes
•  

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HEALTH REFORM POSITIVE SIGNALS FOR MEDICAL
TRAVEL INDUSTRY cont.

• Timing is right
• Much like the restaurant industry, medical travel
  for health services adoption is a matter of
  location, location, location.

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Facts and Results

• FACTS
• The Uninsured Before Reform
•  
• US Census Bureau 17 percent of US population
  under age 65 without health insurance last year.
  

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Facts and Results

• Texas highest 26.5 percent
• Florida 24.8 percent. (second place!)
• Massachusetts lowest percent of uninsured for
  those under 65 4.6 percent
• Most Americans over age 65 have publicly funded
  Medicare insurance

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Facts and Results cont.

• Seven million undocumented immigrants, who are
  excluded, comprise 33 remaining uninsured
• 16 million are people who don't have to -- or
  choose not to -- purchase health insurance under
  the mandate
• Young, healthy people may prefer paying the 95
  fine in 2014 to buying insurance

Post Reform More than 25 million will be under-
insured Congressional Budget Office (CBO) 32
million uninsured
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Facts and Results cont.

• RESULTS
• Under and Uninsured more likely to opt for
  medical tourism

• More insurance companies will target this group
  to offer them domestic and overseas health
  insurance options
• Employers face penalties if they dont provide
  insurance to employees likely to result in
  layoffs and greater interest in medical travel
• Full reforms not implemented until 2014 and
  beyond time for medical travel programs to
  generate traction
• Dental medical tourism will continue to flourish

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Medical Travel Industry Can Leverage Post-Reform
Environment

• Compromised Access to Care
• Spiraling Costs
• U.S. Hospital Labor Costs Continue to Rise
• Domestic Medical Travel Becomes Attractive
• Non-covered benefits
• Existing Coverage Affected
• Uninsured Will Not Really Get Coverage
• Physician-owned Hospitals in Peril

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Compromised Access to Care

• Availability of insurance does not mean
  availability of care

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Compromised Access to Care cont.

• 32M people will potentially have insurance,
  putting undue pressure on a declining number of
  physicians -- especially in primary care

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Compromised Access to Care cont.

• Longer wait times for care are expected

• The wait can be as long as two months
• Boston has the longest wait, averaging 49.6 days
• Patients in northern Massachusetts travel to New
  Hampshire because of the wait times
• ABC News. June 2009
• ABC News. March 2010

Massachusetts has similar reforms and health
insurance is mandated
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Compromised Access to Care cont.

• Longer wait times for care are expected

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Prices will Rise.Quality will go down
Individuals will turn to medical travel as a
viable, quality alternative to waiting it out
in the U.S.   U.S. hospitals that do not have
waits will also be highly attractive  
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Expect Spiraling Costs

• THEN
• Health care reform initially conceived as a
  solution to
• Impending insolvency of the Medicare program in
  2018
• Means to expand coverage to the uninsured
•  
• NOW
• Legislation primarily directed to expand coverage
  for uninsured
• Reforms not expected to control costs
• True causes of US systems escalating health care
  costs not addressed directly
• Medical Travel Industry offers lower cost,
  quality care

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Expect Spiraling Costs cont.

• FUTURE
• Cost of care outside U.S. appears to remain
  stable
• Overseas, savings of 50 to 80 percent are
  available on some procedures
• Medical travel will continue to present less
  expensive options for quality care.

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U.S. Hospital Labor Costs Continue to Rise

• US Domestic Hospitals
• Hospital care in US is the biggest driver of
  overall health care spending growth33 percent of
  every health care dollar spent
• Cost of labor Single most important factor for
  the accelerated growth in spending
• Accounts for more than half of growth in cost of
  purchased goods and services
• Foreign hospitals
• Often not contending with these extraordinary
  labor costs
• Better positioned to hold down their pricing
• Medical travelers will be the beneficiaries and
  will look forward to accessing less expensive
  options for quality care
• American Hospital Association, The Cost of
  Caring, March 2010

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Domestic Medical Travel Attractive to Many

• Some hospitals within the U.S. can match the
  pricing of foreign hospitals
• Excess capacity
• Centers of Excellence (COE)
• Surmount labor cost problems
• COEs across the country generate better outcomes
  at lower costs
• Perform a high quantity of a given procedure
  while producing measurably superior clinical
  results
• Better outcomes mitigate liability claims, stem
  the tendency toward defensive medicine

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Domestic Medical Travel Attractive to Many
cont.
March 2010 Lowe's Companies Inc.,
second-largest home improvement retailer in U.S.,
strikes three-year agreement with the Cleveland
Clinic
Lowes Store Locations
First time a multi-state national company has
chosen one specialist hospital and made it
available to employees Incentives to employees
Reduced out-of-pocket costs to go to Cleveland
for heart procedures
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Non-covered Benefits
Cost containment strategies under health care
reform may increase the scope of non-covered
benefits for many Americans Plastic surgery,
gastric bypass, and dental procedures Americans
already willing to travel for affordable,
high-quality care -- likely to accelerate in the
coming years, with or without health
reform Procedures not yet FDA-approved but
available outside our borders  Stem cell
procedures, HIFU (ultrasound treatment for
prostate cancer) and others will continue to
attract medical travelers Treatment for
end-of-life diseases Look for a bump in medical
travel volume
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Existing Coverage Affected
CBO Estimates Employers will drop coverage
for five million people, forcing them to purchase
individual insurance Disruption of care forcing
many with new insurance to find new primary care
physicians since existing physicians may not have
contracts with the new plans One Georgia-based
employer With the economy in the state it's
in, some businesses may consider paying the
2,000-per-employee penalty for not covering
workers rather than paying higher benefit
costs. Many Americans will travel to another
area where medical care is more readily
available Increased volume for annual physicals
that can be accessed for extremely reasonable
fees FierceHealthcare, April 1, 2010
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Uninsured Will Not Really Get Coverage
While uninsured will have greater access to
coverage than prior to reforms   Employer and
individual mandates create bizarre incentives
Many people with coverage will elect to go
without insurance   CBO estimates five million
people will lose employer-sponsored health
coverage   Many will opt to pay upwards of
5,000 annually for individual insurance vs.
paying a modest penalty and purchasing basic care
out-of-pocket   Those who opt to go without
insurance will always have the option of
obtaining insurance if/when they get really sick
because of guaranteed issue requirements
  Bottom-line Only those who are sick will
purchase insurance, driving up insurance prices
for everyone
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Physicians Are Angry

• Reforms Dont Address Tort Reform, Spiraling
  Malpractice Costs

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Physicians Are Angry cont.

• Fees for specialists may be drastically
  cutSome say they will retire early
• Growing number will refuse to accept Medicare and
  Medicaid patients
• Shrinking number of physicians may force patients
  to travel
• for quality medical care

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Shortages of primary care physicians and
specialists
Surgery, the journal of the Society of University
Surgeons, reports an expected shortage of 1,300
general surgeons in the United States by
2010 Few Americans will tolerate not having
access to a specialist or having care rationed
because of a limited number of skilled physicians
Long term Shortage of about 160,000 physicians
by 2025 Shortage of 41,000 general surgeons,
even after accounting for the supply of
international medical graduates Hospitals in
the US and outside the country will attract
patients who cant access specialty care close to
home American Medical News, 2010 Source
 Association of American Medical Colleges'
Center for Workforce Studies
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Physician-owned Hospitals in Peril
Prohibits existing physician-owned hospitals from
expanding and bans new ones from contracting with
Medicare

• The legislation virtually destroys over 60
  hospitals that are currently under development,
  and leaves little room for the future growth of
  the industry.
•  
• Molly Sandvig, Executive Director of Physician
  Hospitals of America (PHA)

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Physician-owned Hospitals in Peril cont.

• Restrictions go into effect immediately-- impacts
  nearly 300 new and existing facilities
• Rural and inner city hospitals being rescued and
  kept open by physician investment will close
• Grandfathers in new and existing physician-owned
  hospitals that earn Medicare certification by
  Aug. 1, 2010 a deadline that more than 60
  hospitals currently under development cant meet
• Prohibits existing facilities from adding beds,
  ORs or procedure rooms -- unless they can meet 4
  "allowable growth criteria" and none can do it!

Non-physician-owned hospitals in US and abroad
Centers of Excellence will attract more patients
willing to travel for expertise. Disenfranchised
physicians in the US may opt to open their own
facilities in other countries. Stay tuned on
this one!
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Forecasts Medical Travel Likely to Expand

• Regulating premiums wont do anything to reduce
  the soaring costs of medical care. This would be
  like capping the prices automakers can charge
  consumers but letting the steel, rubber, and
  technology manufacturers charge the automakers
  whatever they want. 
• -Karen Ignagni, Wall Street Journal, February 23,
  2010

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A Window of opportunity

• Reputed benefits largely do not kick-in until
  2014
• No guarantee that programs and initiatives will
  ever be funded Opponents may take control of
  Congress and then simply withhold monies
• Americans may find the reforms distasteful
• Extensive rationing of care
• Lower overall healthcare quality higher costs
• Dramatically reduced options

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A Window of opportunity cont.

• Increased channels to leverage interdependence of
  the employers and carriers
• Carriers
• Likely to innovate when forced and pulled by
  their employer clients

Large Group Market Longer buying cycles, but key
influencer to the carriers Adoption here helps
to validate and accelerate adoption by mid-market
aggregators  
Mid-market Shorter buying cycles, quicker
decisions Dependence on aggregators (TPAs,
consultants, brokers) Validation and increased
volume will push large group market  
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• Megatrends in Global Health Care
• Megatrend 12 Medical tourism
• The allure of good care at much lower prices will
  cause increasing numbers of people to go abroad
  for cheaper treatment. The Deloitte Center for
  Health Solutions predicts that the number of
  Americans traveling abroad for treatment will
  soar to more than 1.6 million in 2012. Will cost
  pressures cause payers around the world to be
  more amenable to sending patients in their
  countries abroad for cheaper treatment?

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475 Market StreetElmwood Park, NJ
07407800.752.5588 x12 or 201.641.1911
x12www.cpronline.com Laura Carabello,
lcarabello_at_cpronline.com