Imagine if your employer’s health insurance benefits offered to cover 100 percent of the cost of your surgery, as long as you were willing to travel to a hospital carefully selected for its excellent national reputation. This is called travel surgery, and for many employees of some of the largest corporations in America—think Walmart and GE—this has become a life-changing reality. After evaluating the costs, benefits and implications of the travel surgery, not only does it prove itself to be an effective model, but also a prime investment opportunity.
The hospitals central to travel surgery model are called Centers of Excellence (CoE). A CoE program, as defined by Elrod and Fortenberry of Willis-Knighton Health System, is a hospital that has a high amount of expertise and resources focused on a specific specialty or procedure, including comprehensive pre- and post-op care.
Employers with travel plans enable employees to get common procedures at CoEs in their geographic regions by offering them free flights, hotel stays, and gas compensation for their trip. A large range of surgeries at CoEs are covered by insurance; for example, Walmart—the largest employer in America and pioneer of this model— covers total joint replacement, spinal fusion, heart valve replacement, bariatric surgery, and more.
None of the procedures are paid for out of pocket by patients. According to Walmart, a patient will pay 50 percent of the bill for hip or knee replacement at a Medical Plan or Out-Of-Network hospital but will pay zero percent at a CoE. Under the travel surgery plan, insurance providers pay a set amount per surgery per patient directly to the hospital. Specifically, the insurance company will pay the CoE a lump sum for the number of patients that receive surgery within the given
pay period, which may vary from month to quarter by surgery type. The lump-sum is then divided up by the hospital to pay for the surgeon, hospital stay, physical therapist, and any other costs. Becker’s Hospital Review explains that the hospital usually receives a profit per patient unless it is a specific case with high complications; thus, the program is profitable, but by a smaller margin than regular employer insurance.
This lower margin and generally higher cost is a common concern for the travel surgery model. While Walmart states that the concentration of care to a single hospital rather than providing coverage across employee’s personal hospitals “saves money for both the associate [employee] and the plan,” Advisory Board reports that the total cost per surgery, including travel, physical therapy hotel visits, and more, ends up being eight percent higher, a cost the hospitals pass on to insurances in the per-patient price. So why keep using a more expensive model?
The overall benefits of travel surgery end up outweighing the high upfront per patient price. Woods and Slotkin, a team of a Harvard Business Reviewer and Director of Spine Surgery, conducted a study and found that patients who received care at a CoE had lower risks of readmission to the hospital, from 70 percent for total joint replacements to 95 percent for spinal operations. This helps prevent insurance from paying more readmission hospital bills for later emergency and non-elective status visits, which often cost them higher percentages. Another major deduction in the total bill for the insurance company is explained by the aforementioned Walmart report, which shows that patients in their travel program also had a 14 to 35 percent shorter stay in the hospital. Additionally, CoEs provide more reliable second- opinions, helping patients who were initially misdiagnosed at their primary care centers avoid costly surgery and receive better-fitting treatment. Therefore, despite the high per-patient price, the travel surgery model is still quite cost-effective in the long run.
The hospital also receives price benefits from the travel surgery model. For one, they have a more rapid and certain source of income directly from the insurance provider, allowing them to avoid the costly and time- consuming process of authorization. Under regular employer insurance, the total time needed to gain prior authorization for a non- emergent surgery can take up to weeks and
often causes scrambles to reschedule denied claims just days or hours before surgery. Last-minute denials also cause valuable operating room times to be left empty. The travel surgery program, which approves patients for the program itself, eases this burden on hospital employees and assures them that they will not lose money from an unapproved surgery. Surgeons are also able to book operating room times more efficiently. As their geographic reach for surgical candidates expands, they can avoid the hassle of having to give away unfilled time from low demand. Travel surgery is advantageous for a number of hospital workers.
Another question that critics have is if it is unreasonable to force patients to potentially travel hours away from home for treatment. This criticism is also largely unfounded, as Ad Advisory Board reports about 95 percent of over 5,000 Walmart patients report they feel “satisfied” or “very satisfied” with their surgery. The increased quality of care they receive compared to what they originally would have been offered in their near vicinity clearly outweighs the longer commute.
As a relatively new and growing business model, travel surgery is at a huge vantage point for early investment. Woods and Slotkin show that while just 6 percent of employers had/plan to have directly contracted deals like CoEs in 2017, the number has jumped to 22 percent in 2019. There are many opportunities associated with this rapid growth.
For one, there is room for new start-ups. Force Therapeutics, an online nurse-to-patient communication system that allows providers to help optimize patients for surgery and track post-operative outcomes, is a prime example. Third-party companies can be involved in creating a standardized communication tool for CoEs or prescription management across state lines.
Furthermore, insurance providers should incorporate travel surgery into the packages they offer. As awareness for the model and its success spreads, there will be a huge share of the market up for grabs to providers if they have the resources to execute these contracts quickly and seamlessly.
Finally, this is an opportunity for hospitals to focus resources into developing their most well-known specialty. Only hospitals with excellent quality of care are considered for CoE certification; thus, it is increasingly profitable to target investment into this.
Overall, the benefits of travel surgery far outweigh its costs for all parties involved. Looking into the future, travel surgery would be a wise investment, as it is still in its early stages and has substantial room to grow. The model is extremely innovative, opening may economic doors and ultimately allowing people across the country to access top- quality surgeries they may have never been able to previously afford, greatly improving their quality of life.