When Carolyn Rondou needed knee replacement surgery in 2012, she decided to have the procedure done at Hoag Orthopedic Institute in Irvine, even though there were several hospitals closer to her home in Fullerton.
Rondou, a 66-year-old oncology nurse, says Hoag's reputation for quality factored heavily into her decision to have her procedure done there. But something else sweetened the pot: Her surgery came with a warranty.
Warranties have long been a consumer favorite. Manufacturers frequently offer them along with new cars, washing machines, television sets and many other appliances — often at an additional charge. They typically are an agreement between a buyer and a seller guaranteeing that the maker will repair or replace a defective product at no cost.
But a warranty on the outcome of surgery? Increasingly, yes.
Currently, surgical warranties are offered by just a handful of providers nationwide, but the idea is catching on.
Geisinger Health System in Danville, Pa., was the first to offer warranties for cardiac surgeries, and now offers them for hip fractures and total hip and knee replacement surgeries as well.
Virginia Mason Hospital in Seattle is another provider that recently announced plans to make warranties available to privately insured patients undergoing joint replacement surgeries.
"Providers are now trying to use retail tactics to differentiate themselves," says Robert Minkin, a senior vice president with Camden Group, a Los Angeles healthcare consulting firm.
"What is really in progress here is a shift from the standard … fee for service to innovative forms of payment which reward value on the part of the providers," says Dr. Michael Belman, medical director at Anthem Blue Cross. "That is where the future appears to be, as directed by the Affordable Care Act."
For Rondou, the warranty assured her that if something went awry within the first 90 days after the procedure, she wouldn't pay another cent for her care.
"If I had any problems or any complications everything would be taken care of. I knew from Day One when I went in I had the best care," Rondou says.
What's more, the special arrangement ended up saving her about $8,000, she says. "I didn't have to pay anything out of pocket. It was all taken care of."
Surgical warranties vary somewhat in terms of what they cover. Generally, though, it's a guarantee to fix any avoidable complications related to surgery — at no extra charge to the patient. Warranties are offered as part of a group of bundled services that come as one-price package deals.
These new payment models are being tested and used as a way to keep down skyrocketing healthcare costs by giving doctors and hospitals a strong incentive to head off problems that would require further treatment.
Consumers on the receiving end of these pricing arrangements are rewarded with predictable costs and an assurance of high-quality care.
"The provider is saying we are so confident we can provide a level of service that is so exemplary that if there is a problem, we'll take care of it," Belman says.
Experts acknowledge that these warranties are somewhat uncommon, but for those with access to surgery warranties through their insurer or employer, they outline the benefits and pitfalls.
Not for every ailment: Certain procedures lend themselves well to warranties provided as part of bundled payments. Among the most common medical procedures for which you're likely to find a bundled payment and a warranty are hip and knee replacement and cardiac surgeries, and in some cases, cancer care.
Common warranty terms: The terms of the agreements and what a bundle or a surgical warranty includes vary by contract.
Commonly, the warranty period is 30 to 90 days, and "it covers specific complications or hospital readmissions that are felt to be related to the specific procedure that was performed," says Dr. James Caillouette, surgeon in chief for Hoag Orthopedic Institute.
That may include wound infection, a hip dislocation or a blood clot in the leg that takes place within the first 90 days after surgery.
If a problem stems from a faulty implant — say a knee or hip — and additional treatment is needed to repair the problem, that would be the responsibility of the implant manufacturer and would not be covered by the surgical warranty.
Any complications from the surgery must be handled at the same hospital where the surgery was first performed, Caillouette says. "If a patient goes to a different hospital, all bets are off. The warranty is not included," he says.
Ask about your options. Bundled payments — some offered with warranties, others not — are frequently available through Medicare, some work-based plans and private insurance policies.
The Medicare program requires providers to notify patients that their care may be part of a bundled payment arrangement so they know they won't be on the hook for extra expenses, Minkin of Camden Group says.
Employers offering these programs generally go to great lengths to let employees know that they do, and help them understand the financial and quality implications.
In California, Anthem Blue Cross has flat-rate fee arrangements in place with some large employers; employees save on costs when they have surgeries done at certain hospitals.
And Cigna, which is contracted with Hoag under a bundled payment arrangement, makes the surgical warranty for joint replacement surgery available to some of its 1 million California-based customers.
Caillouette says his organization also holds contracts with Blue Shield and Aetna.
Checking for bundles on your own. If you don't have access to flat-rate fees for medical services, new technologies are making it possible to negotiate on your own behalf.
For example, San Francisco-based PokitDok has done the work of gathering nationwide price information for the top 50 most common medical procedures. And it often can tell you what kind of bundled prices may be available — or perhaps negotiated — in your city.
Rondou, the oncology nurse from Fullerton, recently had her second knee replacement surgery.
With the warranty in place, going back to Hoag was a no-brainer, she says. "Had the services been offered elsewhere I might have chosen that because cost is a factor today."