Companies go surgery shopping


Carol and Ed Vogel enjoyed a weeklong all-expenses-paid trip to a Newport Beach resort last month, and they’re scheduled to return in a couple of weeks.

The Nevada couple didn’t need frequent-flier miles or credit card rewards to get free airfare and hotel stay as well as $1,000 in spending money. It was all because of Carol Vogel’s ailing hips and an employer’s frustration with the high cost of U.S. healthcare.

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Her husband’s employer, newspaper publisher Stephens Media, sends employees and their family members needing hip and knee replacements to a handful of hospitals across the country, including one in Orange County, that agreed to a low, fixed rate for surgery and scored well on quality of care.

This year, grocery giant Kroger Co. has flown nearly two dozen workers to Hoag Orthopedic Institute in Irvine and several other hospitals across the U.S. for hip, knee or spinal-fusion surgeries in an effort to save money and improve care. Starting in January, Wal-Mart Stores Inc. will offer employees and dependents heart, spine and transplant surgeries at no cost at six major hospital systems across the nation, with free travel and lodging.

It’s all part of a growing movement by employers fed up with wildly different price tags for routine operations. In response, businesses are showering workers with generous incentives — including waiving deductibles or handing out $2,500 bonuses — to steer them to these top-performing providers offering bargain prices.

Bundled deals are common for phone service, cable TV and travel. But an all-in-one price marks a radical departure for the conventional fee-for-service medical industry in which doctors, hospitals, labs and other providers typically bill separately for each part of a procedure. Then they tack on even more if complications and unexpected costs arise.

“You expect to see the hotel, airfare and car bundled together on Expedia,” said Susan Ridgely, a senior policy analyst at Rand Corp., a nonprofit think tank in Santa Monica. “We want to stop paying by the widget in healthcare.”

By bringing a steady stream of new patients, the arrangement can also be a good deal for the doctors and hospitals involved.


Federal and state officials are catching on as well. Medicare and some Medicaid programs are pushing for more of these all-inclusive prices for the most common procedures, from surgeries to maternity care for low-income mothers, to eliminate some of the huge disparities in U.S. healthcare costs and reward high-quality providers with more patients.

These programs are generally voluntary so patients can still opt for care closer to home, although it may cost them more.

At Kroger, employees may pay 10% out of pocket if they choose one of the company’s 19 select hospitals, compared to 25% to 50% out of pocket for other nearby medical centers.

Carol Vogel, a 64-year-old writer in Minden, Nev., said she was skeptical about flying to another state for surgery until the human resources manager explained how much she stood to save.

In Newport Beach “this was 100% paid for,” Vogel said. If she stayed closer to home in Nevada, “I would have been out $8,000 or $9,000 easy on my insurance.”

She said she’s pain-free in her left hip for the first time in years, so she scheduled an implant for her right hip later this month, followed by a free stay at Island Hotel, an oceanfront resort in Newport Beach.

“This is like the honeymoon we never had,” she said. “Are you kidding me?”

At Kroger, 21 patients have traveled for surgery this year, and none have experienced complications or been readmitted to the hospital, said Theresa Monti, a company vice president for employee benefits. She said Kroger pays about $30,000 on average for those knee and hip replacement surgeries, 15% less than what it pays at other hospitals.

“It’s a new concept, and some people have a hard time getting their arms around the idea of traveling for surgery,” Monti said. “We are looking for any opportunity we can to encourage the use of the highest-quality healthcare while holding the line on costs.”

BridgeHealth Medical Inc. in Denver is one of a handful of firms that assists employers, insurers and patients with the logistics of surgery shopping. Earlier efforts to persuade employers to send patients to India and other overseas destinations for cheaper care never took off. So BridgeHealth now has negotiated fixed rates with about 45 U.S. hospitals.

Chip Burgett, an executive vice president at BridgeHealth, said employers still come out ahead financially, even after footing thousands of dollars in travel expenses. His firm has negotiated rates on knee and hip replacements as low as $19,000.

Last year, the California Public Employees’ Retirement System limited what it would pay for knee and hip replacement surgeries to $30,000 because its hospital bills ranged from $15,000 to $110,000 with no discernible difference in quality. It found 45 hospital systems willing to stay within that amount, and its average price per surgery dropped 30% to $23,113.

“There is a lot of excess margin in healthcare and plenty of room in the pricing of these hospitals,” Burgett said. “Hopefully this drives true competition in healthcare and it’s not just based on how many helicopters a hospital has.”

While employers are leading the way right now, experts say Medicare could have the biggest impact. Federal officials are looking to test these all-in-one prices with hospitals in California and other states.

Some consumer advocates have raised concerns about patients traveling long distances for surgery and taking them away from their regular doctors. Cindy Meyers, benefits manager for Stephens Media in Las Vegas, said it has been difficult in some cases to find local doctors to provide follow-up care for patients who traveled elsewhere.

But she said the overall experience has been positive for her company, which insures about 1,500 people across several states.

“It’s a great benefit for us cost-wise, and our employees feel comfort in knowing this doctor specializes in just what they need,” Meyers said.

James Caillouette, surgeon in chief at the 70-bed Hoag Orthopedic Institute and an advocate for bundled payments since 2008, said not every patient is a suitable candidate for this arrangement.

First, he requests their medical records and talks to the patient by phone. He rules out patients who may be at higher risk for complications from surgery.

Post-surgery complications matter not just for the patient but also to the doctors and hospital because they pose a risk for additional treatment costs. Some bundled deals include warranties spelling out what complications the medical providers are responsible for. Medical studies show that complications can cost $7,600 per patient.

Hoag Orthopedic Institute’s bundled fees for knee and hip replacement range from about $20,000 at an outpatient surgery center to roughly $30,000 or more in the hospital. The surgery location depends largely on the patient’s medical condition.

Caillouette said his patients usually spend one or two nights in the hospital and then return to their hotel. A physical therapist visits them there most days, and Caillouette makes house calls to the hotel as well. Most patients fly home after a week in Orange County.

“Now there’s one bill, and employers can budget for it,” Caillouette said. “This has the potential to be a game changer.”