A medical tourism insurer strategy can be an effective way to attract the interest and patronage of insurers. But it is far more complicated than most people realize.
For starters, medical tourism per se, is not listed as a “covered service” under most health insurance schemes. In fact, it is a specific exclusion in more policies than it is covered. In many policy documents, it is neither specifically excluded or included and is evaluated on a case-by-case basis.
By definition, health insurance is:
a practice or arrangement by which a company or government agency provides a guarantee of indemnification (to make whole again) for cost associated with specified medically necessary treatment
If an insurer determines that travel is necessary and appropriate to access care in accordance with policy provisions, then the travel may be covered to transport the patient from where they are located to where the care is located. In some cases, a companion’s travel may also be covered. Here is where the complexity begins.
Provider network development
Some insurers attempt to implement “cost containment” measures by establishing a panel of approved, vetted providers who are granted privileges to provide services to plan subscribers. Steerage of referrals is driven to these providers because the qualified providers negotiate a discounted fee for service in exchange for volume. In some cases, these arrangements are exclusive. In other cases, they are preferential, but not exclusive. The vetting and approval process is complicated, and the contractual provisions cover a broad array of covenants between the parties.
These covenants are often non-negotiable because they must harmonize and align with regulations that are codified in jurisdictional regulations in effect in the locality where the insurer is “admitted”. An insurance company that is “admitted” has been approved by regulators. This status means that…
- The insurance company must comply with all regulations in effect where they are admitted regarding insurance (which are established and overseen by a regulatory compliance authority.
- In the event that the insurance company fails financially, the regulatory authority will step in to make payments on claims as necessary, after any reinsurance coverage for excess losses is exhausted.
These regulations often include provisions for provider network adequacy, ostensible and vicarious liability for the actions of vetted, contracted providers, compliance with healthcare information management, privacy and security laws, and timely provision of care standards with specified time frames for various situations (emergency, urgent and routine care for new and established patients). As a result, these regulatory requirements and responsibility for compliance with same are then passed down to the provider level, by contractual agreement. An additional provision holds each party to the contract liable for their own acts.
Payer contracting hurdles
So often, I am approached by hospitals and healthcare practitioners that ask for assistance to “get them contracts” with insurers and employers. They expect me to work on contingency of successful negotiation of insurer and employer contracts. Most don’t realize that they don’t meet the criteria to be included in the contracted provider panel, even if they have current JCI or some other accreditation.”
– Maria K Todd, MHA PhD
Paying an expert consultant with specialized knowledge of insurer or employer contracting for health services reimbursement on contingency means that the expert agrees that its fee will be determined by the amount of the value of the contract negotiated by the expert, should a contract ultimately be negotiated and executed. If no contract is executed, the expert will receive no fee.
An experienced contract negotiator with payer-side and provider-side experience is invaluable to a medical tourism provider that intends to negotiate with foreign insurance plans and self-funded or self-insured employers who own and operate their own insurance scheme for employees, dependents and retirees. But this is only true if the provider understands and commits to making any necessary changes to meet criteria to be considered a candidate for a contract. It is comical to us to see health tourism facilitators who lack this hybrid background, or who come from website and e-commerce development backgrounds or health tourism trade associations to attempt to guide hospitals and health practitioners in this preparation, or who agree to get contracts for the providers who don’t already meet criteria.
Underwriting and reinsurance hurdles
Another complication in developing medical tourism benefit programs is financial and brand risk analysis.
Financial risk analysis is performed by underwriters. They classify, rate, and determine the wisdom of accepting selected risks. This selection process consists of evaluating information and resources to determine how much money should be set aside to cover anticipated utilization of a healthcare service that is covered under a policy. They then rate the risk to work with actuaries in determining the amount that will be incrementally added into the premium calculation. The policy and actuarial analysis is reviewed by regulators, approved, and authorized for sale. From there, authorized insurance agents (“Producers”) attempt to sell the policy in the market. People who don’t anticipate using a medical tourism benefit would have no interest in such a policy, especially if it costs more to cover both local care and health travel to care destinations.
Adverse selection can be said to exist when a risk (an individual) or group of risks that are insured is more likely than the average corresponding group to use the policy to cover the cost of care. It’s usually only those policy buyers who are ill or perhaps already have plans to travel for care that are likely to purchase an insurance policy that covers medical tourism. The underwriter’s job is to ensure that an inordinate number of these poorer-than-average risks aren’t accepted or the insurance company will lose money.
The realities of third-party payer contracting in terms of utilization and turnover
In reality, even if a medical tourism provider can meet established contracting criteria to execute a contract with an insurer, that doesn’t guarantee that they will receive patients or realize turnover.
For starters, the insured patient would have to incur a covered loss. → The subscriber must elect to travel for care and agree to pay associated out-of-pocket costs, if any. But some situations require immediate medical attention and travel for care is out of the question. In other cases, though the patient is willing to travel, but they are not fit to fly the long distance required to obtain care. That reduces a percentage of the available steerage or utilization. → The patient must then choose your service among all other options. → In most cases, the insurer must review and pre-authorize the treatment and the travel. At this stage, they could steer the willing subscriber to a different provider for a number of reasons. → Upon gathering all the required approvals, the surgeon at the destination may determine that the case is not of interest, too risky, or does not offer enough beneficence to accept the case. → Even if the surgeon and the anesthesiologist accept the case, the medical tourism policy subscriber must still request and be granted a visa and immigration privilege. → Upon arrival, the patient must meet admission criteria to be admitted to hospital in accordance with standards set forth in the hospital or clinic’s quality and safety standards published in accordance with accreditation requirements.
Depending on how large or diverse the medical tourism approved and contracted provider panel or network is, you may encounter serious competition from other destinations, or even other local providers. Health insurers and employers don’t enter into these contracts lightly. They will require a site inspection, disclosure of sensitive quality, safety and patient satisfaction statistics, proprietary policies, procedures, and protocols, and pricing details. If the provider advertises its prices for one-off medical tourism cases, it can be assured that the third-party payer that will promise to “use its bets efforts to market the provider” (standard terminology in most managed care network provider agreements) will insist on lower pricing than the advertised rates to account for volume steerage, whether it is realized — or not.
Contract negotiation costs
In the USA, most hospitals estimate that they spend upwards of $10,000-$20,000 USD to perform due diligence and negotiate each third-party payer agreement with insurers, TPAs, and/or employers. Foreign providers should expect to spend much more, even if they do all the negotiation and due diligence without consulting assistance. First, the preparations to contract with foreign insurers and employers can be as costly as it was to prepare for initial accreditation surveys. Second, the site visit will often be a hosted fam tour for 7-10 people, all of whom expect to travel in international business class. For groups of six or more flying international business class, it may be more economical to charter a private jet, depending on the distance. Hotel accommodations, ground transfers, and meals while at the destination will also be expected at the expense of the host facility. All this is in addition to the soft costs of the staff that must be involved in the fam tour and at meetings. Certain data will be required which has an an associated incremental cost to prepare. Simply stating that you don’t have the data is not an option. Legal review must be undertaken on both sides to ensure harmonization with laws in both jurisdictions. These negotiation proceedings will often take 6-9 months to finalize. Every minute of every effort has an incremental direct cost associated with the contract, all on a big risk that ultimately one might not see any cases in the first term of the contract.
This has actually been the primary complaint associated with contracting with Companion Global Care (the early-to-market medical tourism insurance subsidiary of Blue Cross and Blue Shield of South Carolina). It isn’t that CGC did anything wrong. It is that despite setting all the requirements in place, and meeting criteria to be a contracted provider, assuming that the insurer has sold enough policies to create a market that will produce patients and break-even turnover, it’s the luck of the draw. Will the insured policyholder choose you?
These are only the tip of the iceberg on the full complement of complexities of insurance contracting for medical tourism. It can be rewarding, but it is not a viable strategy for most medical tourism market entrants. Medical tourism insurer strategy is one of the most complicated components of your marketing strategy. Get competent help from an expert that will give you an honest assessment of your state of readiness to contract with foreign third-party payers and employers, and that can guide your preparation should you choose to move forward with your intentions to contract. They should also be able to guide you through the negotiation process, and prevent you from many of the perils and pitfalls that can be hidden in the contract terms and conditions, not just evaluate the profitability of the rates. After all, there’s no profit if there are no patients.
Finally, assume that the help you need for this is not a facilitator who will bring you “brokers” to visit your hospital at your expense, because brokers often are not involved in contracting with providers. They are involved with selling policies. Policies that already have networks developed and under contract. Because if they don’t meet the local regulators’ minimum network adequacy standards, the policy cannot be offered in the market by the brokers and agents. The broker that is helping an employer to build a medical tourism program for their employees is a rare breed of bird, simply because most don’t have the experience to undertake this engagement, and to step out of their domain expertise is to do so without benefit of their professional liability insurance. Most simply aren’t that reckless.