for DR.SAMUELSON ONLY!!!!!

Case 6-1 Global Medical Coverage McLaughlin, C. & McLaughlin, C. (2008). Health policy analysis: An interdisciplinary approach. Boston, MA: Jones and Bartlett Publishers. BACKGROUND

Blue Ridge Paper Products, Inc. (BRPP) in Canton, NC is a paper company making predominately food

and beverage packaging. It was the largest employer left in Western North Carolina in 2006, with 1,300

covered employees in the state and 800 elsewhere. Started as a Champion Paper plant in 1908, it was

purchased by the employees and their union (a United Steelworkers local) in May 1999 with the

assistance of a venture capital firm and operates with an Employee Stock Ownership Plan (ESOP). To

purchase it, the employees agreed to a 15% wage cut and frozen wages and benefits for seven years.

From the buyout through the end of 2005, the company lost $92 million and paid out $107 million in

health care claims. It became profitable in 2006. Maintaining health benefits for members and retirees is

a very high priority item with the employees and the union, although retiree medical benefits have been

eliminated for salaried employees hired after March 1, 2005.

BRRP employees are “predominately male, over 48, with decades of services and several health risk

factors. They work 12-hour, rotating shifts, making it extremely difficult to manage health conditions or

improve lifestyles” (Blackley, 2006). The ESOP has worked hard to reduce its self-insured health care

costs. Health insurance claims for 2006 had been estimated at $36 million, but appeared likely to hold

near $24 million, which is still 75% above the 2000 experience. A volunteer Benefits Task Force of union

and nonunion employees worked to redesign a complex benefit system. After two years of 18% health

care cost in increases, the rate of growth dropped to 2% in 2003. It was 5% in 2004 and a negative 3% in

2005.

Programs initiated in 2001 included a plan offering free diabetic medications and supplies in return for

compliance and a tobacco cessation plan with cash rewards. In 2004, the company opened a full service

pharmacy and medical center with a pharmacist, internist, and nurses. In 2005, it began a Population

Health Management program. Covered employees and spouse who completed a health risk assessment

were rewarded with $100 and assigned a “personal nurse coach.” The nurse coach assists those who are

ready to change to set individual health goals and choose from among one or more 14 available health

programs, which may include “cash rewards, waived or reduced co-pays on over 100 medications, free

self-help medical aids/equipment, educational materials, etc.”

Where BRPP could not make headway was with the prices paid to local providers. Community physicians

refused deeper discounts. Even banding together in a buying cooperative with other companies could

not move the local tertiary hospital to match discounts offered to regionally dominant insurers. This

hospital was not distressed and had above-average operating margins.

Articles on “medical tourism” in the press and on television attracted the attention of benefits

management. Reports were of high quality care at 80% or less of U.S. prices with good outcomes. BRPP

contacted a company offering services at hospitals in India, IndUShealth in Raleigh, NC, and began

working on a plan to make its services available to BRPP employees.

IndUShealth

IndUShealth provides a complete package to its U.S. and Canadian clients, including access to Indian

superspecialty hospitals that are Joint Commission International accredited and to specialists and

supporting physicians with U.S. or U.K. board certification. It arranges for postoperative care in India and

for travel, lodging, and meals for the patient and an accompanying family member – all for a single

package price. For example, it represents the Wockhardt hospitals in India, which are Joint Commission

International accredited and affiliated with Harvard Medical International. Other Indian hospitals boast

affiliations with Johns Hopkins Medical Center and the Cleveland Clinics.

Mitral Valve Replacement

One of the first cases considered was a mitral valve replacement. IndUShealth and BRPP sought package

quotes from a number of domestic medical centers and could get only one estimate. That quote, from

the University of Iowa academic medical center, was in the $68,000 to $98,000 range. A quote from

India was for $18,000 including travel, food, and lodging for the patient and one companion. Testifying

before the U.S. Senate Special Committee on Aging, Mr. Rajesh Rao, IndUShealth CEO, (2006) cited the

following costs.

Procedure Typical U.S. Cost India Cost

Heart bypass surgery $55,000 to $86,000 $6,000 Angioplasty $33,000 to $49,000 $6,000 Hip replacement $31,000 to $44,000 $5,000 Spinal fusion $42,000 to $76,000 $8,000

EMPLOYEE PARTICIPATION

To encourage employee participation, BRPP prepared a DVD on its medical tourism initiative, which it

called Global Health Coverage. It outlined the opportunities and described the Indian facilities and

credentials. The next step was to be an employee “due diligence” committee to India to inspect the

facilities and talk with doctors. Then they would discuss how to handle the option in the next set of

union negotiations.

SENATE HEARINGS

On June 27, 2006, the U.S. Senate Special Committee on Aging held hearings entitled “The Globalization

of Health Care: Can Medical Tourism Reduce Health Care Costs?” Both BRPP and IndUShealth presented

together with others. When testifying to the Senate subcommittee, Bonnie Grisson Blackley, benefits

director for BRPP, concluded:

Should I need a surgical procedure, provide me and my spouse with an all expense-paid trip to a

Joint Commission International-approved hospital, that compares to a 5-star hotel, a surgeon

educated and credentialed in the U.S., no hospital staph infections, a registered nurse around the

clock, no one pushing me out of the hospital after 2 or 3 days, a several-day recovery period at a

beach resort, email access, cell phone, great food, touring, etc., etc. for 25% of the savings up to

$10,000 and I won’t be able to get out my passport fast enough.

BLUE RIDGE PAPER PRODUCT’S TEST CASE

The test case under the new arrangement was a volunteer, Car Garrett, a 60-year old BRPP paper-

making technician who needed gallbladder removal and a shoulder repair. He reportedly was looking

forward to the trip in September 2006, accompanied by his fiancée. A 40-year employee approaching

retirement, he would be the first company-sponsored U.S. worker to receive health care in India. The

two operations would have cost $100,000 in the United States but only $20,000 in India. The

arrangement was that the company would pay for the entire thing, waive the 20% co-payment, give

Garrett about a $10,000 incentive, and still save $50,000.

The United Steel Workers Union national office objected strongly to the whole idea; however, and

threatened to file for an injunction. The local district representative commented, “We made it clear that

if healthcare was going to be resolved, it would be resolved by modifying the system in the U.S. not

offshoring or exporting out own people.” USW President Leo Gerard said, “No U.S. citizen should be

exposed to the risk involved in travel internationally for health care services” and sent a letter to the

members of Congress that included the following (Parks, 2006):

Our members, along with thousands of unrepresented workers, are now being confronted with

proposals to literally export themselves to have certain “expensive” medical procedures provided

in India.

With companies now proposing to send their own American employees abroad for less expensive

health care services, there can be no doubt that the U.S. health care systems is in immediate

need of massive reform.

The right to safe, secure, and dependable health care in one’s own country should not be

surrendered for any reason, certainly not to fatten the profit margins of corporate investors.

The union also cited the lack of comparable malpractice coverage in other countries. The company

agreed to find a domestic source of care for Mr. Garrett, but may continue the experiment with its

salaried, nonunion employees. Carl Garrett responded unhappily, “The company dropped the

ball….people have given me so much encouragement,” he said, “so much positive response, and they’re

devastated. A lot of people were waiting for me to report back on how it went and perhaps go

themselves. This leaves them in limbo too” (Jonsson, 2006, p. 2).

Critical Thinking:

If you were a hospital administrator, how would you react when a number of patients and companies

began to ask to bargain about prices, including presenting quotations from companies like IndUShealth?

What would be the difference in the bargaining position of an academic medical center and a large

tertiary community hospital system? How might state and national governments respond to the

expanding phenomenon of medical tourism?

References:

Blakely, B. (2006). Testimony before the U.S. Senate Special Committee on Aging, Washington, DC, The Globalization of Health Care: Can Medical Tourism Reduce Health Care Costs? by Bonnie Grissom Blackley, Benefits Director, Blue Ridge Paper Products, Inc. Retrieved from http://aging.senate.gov/public/index/cfm?Fuseaction=Hearings.Details&HearingID=182

Jonsson, P. (2006). Union blocks foreign healthcare plan. Christian Science Monitor,p.2. Retrieved from www.csmonitor.ocm/2006/0929/p02201-usec

Parks, J. (2006). First employers send your jobs overseas. Guess what? You’re next. AFL-CIO Now Blog. Retrieved from http://blog.aflcio.org/2006/09/13/first-employers-sent-your-job-overseas-guess-what-you-are- next

Rao, R. (2006). Testimony before the U.S. Senate Special Committee on Aging, Washington, DC, The Globalization of Health Care: Can Medical Tourism Reduce Health Care Costs? by Rajesh Rao, CEO, IndUShealth, Retrieved from http://aging.senate.gov/public/index/cfm?Fuseaction=Hearings.Details&HearingID=182