1 Outsourcing Vital Operations: What if U.S. Health Care Costs Drive Patients Overseas for Surgery? Michael Klaus 1 I. Introduction Science and technology blur borders, connect people and integrate economies, and for decades, United States corporations have been reducing costs by outsourcing operations and capitalizing on the abundance of resources in Asia. 2 Today, corporations are not the only ones availing themselves to the cost savings of Asia. In 2004, over 150,000 Americans traveled to Asia for surgeries, leaving the United States and trusting their bodies to surgeons in Thailand, India and Singapore. 3 At a time when 45.8 million Americans do not carry health insurance, 4 many uninsured Americas are enticed by the option of purchasing a surgery-vacation package that costs as little as a tenth of the cost of surgery alone in the United States. Surgeons in foreign private hospitals employ the same technologies as surgeons in the United States, were trained in the United States or Great Britain, and many, especially in India, practiced in the United States before returning to their home countries. If the quality of care in Asia is comparable to the quality of care in the United States, and surgery in Asia saves hundreds of thousands of Americans tens of thousands of dollars, then how could "medical tourism" present a challenge for Americans, the United States health care industry, insurance companies and the Asian countries that promote surgery-vacations to foreigners? This paper examines the reasons for the medical tourism boom and explores the implications of this trend, from the effects on local patients, to the so- 1 J.D., Georgetown University Law Center, See, e.g., MICHAEL BACKMAN & CHARLOTrE BUTLER, BIG IN ASIA: 25 STRATEGIES FOR BUSINESS SUCCESS (Aardvark ed., Palgrave Macmillan (2003). 3 In 2004, India attracted 150,000 foreign patients, Singapore 200,000, and Thailand 600,000, and about 25% of those patients are Americans. See infra Part II.A. 4 Health Insurance Coverage: 2004, U.S. Census Bureau, at hhes/www/hlthins/hlthin04/hlth04asc.html. 219
2 220 QUINNIPIAC HEALTH LAW [Vol. 9:219 cial consequences of combining surgery and luxury, to the longterm effects that medical tourism could have on the U.S. health care and insurance industries. Part II provides an overview of "medical tourism" by presenting the history of traveling for surgery and examining the economic factors that led Thailand and India to seek foreigners as surgical patients. Part II also compares the cost of surgeries in Asia with the costs of surgeries in the United States and considers any possible sacrifices in quality that accompany the enormous difference in cost, including logistical problems with follow-up care. Finally, Part II examines "medical tourism" as a business, portraying the brokers who package plane tickets, surgery and recovery on an exotic beach, thereby making surgery part of a vacation or even a side trip. Part III examines the possible flaws in the United States health care system and the reasons for the incredible disparity in the costs of similar surgeries in the United States and Asia. In particular, Part III describes the dual effects of the rise in malpractice lawsuits: 1) doctors pass on the cost of malpractice insurance to patients, which raises the price of surgeries in the United States, and 2) when the price of surgeries rise, health insurers raise rates, making health insurance unaffordable for many people. Inefficiencies in hospitals' paperwork have the same effects, since the money wasted on inefficient patient processing is passed on to patients and health insurance providers. As a consequence, when people must pay cash for a surgery, because they are either unable or unwilling to pay the soaring costs of health insurance, they are more likely to opt for a lowcost surgery in Asia. After establishing that the quality of care in Asia is at least as good as the quality of the care in the United States, Part IV examines the last remaining hurdle for Americans weighing the option of such surgeries - fear of surgery in a third world country. Because nearly every major hospital in the United States features Indian surgeons, foreign hospitals and patients contend that there is nothing to fear when agreeing to an operation by an Indian surgeon. Yet, fear of surgery abroad extends beyond fear of foreign surgeons to the cultural stereotype that hospitals in developing countries are unsanitary or unsafe relative to
3 2006] OUTSOURCING VITAL OPERATIONS United States standards. American patients who have participated in the medical tourism business concede that they or their friends held such concerns before they embarked on a trip to Asia for surgery, but when they return, they unanimously praise the first-class care and resort-style setting of the private hospitals in Asia. Part V evaluates the legal, ethical, cultural and social effects of the popularity of undergoing surgery in Asia. First, the lack of opportunity to sue surgeons in India or Thailand represents a legal and medical danger, since patients might not be compensated fully for medical errors and doctors might have less of an incentive to operate carefully and more of an incentive to adopt unproven surgical methods. Second, as the business of medical tourism grows, foreign patients dominate those foreign hospitals, leaving the possibility that the quality of care for local patients might decrease. Third, when surgery becomes part of a vacation package, people might become more likely to include a bargain-priced unnecessary surgery as a component of their vacation to Asia and neglect careful consideration of the health benefits and costs of surgery. Finally, this article considers the possibility that fewer people will carry health insurance as medical tourism becomes more widespread or that health insurance companies will evolve to accommodate medical tourism, which could further undercut the domestic health care industry. I. Medical Tourism Overview A. History Traveling thousands of miles for health benefits is hardly a new phenomenon: patients in ancient Greece traveled to Epidaurus to visit the Sanctuary of Asklepios, the Greek god of physicians and healing; in Roman Britain, pilgrims traveled to the waters at Bath; and in the 1800s, wealthy Europeans traveled to spas along the Nile. 5 What has changed, however, is that travel for surgery is no longer a pastime of the wealthy and no longer for treatments that could not be found in one's own country. With the advent of low-cost air travel, medical tourism 5 Cameron Macintosh, Medical Tourism: Need Surgery, Will Travel, CBC News, June 18, 2004, at
4 222 QUINNIPIAC HEALTH LAW [Vol. 9:219 has emerged as an alternative for uninsured patients who must pay cash for surgical procedures that could be performed in most countries. Thailand has been the forerunner in targeted foreign patients for low-cost health care, but India is rapidly developing its medical tourism industry and is expected to lead the industry. 6 Other medical tourism destinations in Asia include Singapore and Hong Kong, although surgeries in those countries are significantly more expensive than the same surgeries in Thailand or India. 7 For Thailand, the current leader in the medical tourism industry, the financial crisis of 1997 inspired hospitals to look beyond its national borders for patients. 8 When the middle-class clients of Thailand lost their sources of income during the economic collapse in , hospitals began targeting expatriates across Southeast Asia. 9 Many of the patients worked for western companies and had flexible, worldwide insurance plans." Aside from expatriates, Thailand's hospitals attracted residents of poorer neighboring countries such as Vietnam and Bangladesh, where high-quality health care is unavailable." Now, Bumrungrad Hospital in Bangkok, the most popular hospital in Asia for foreign patients, is reaching far beyond Southeast Asia for patients, having established "referral offices in Oman, Australia and the Netherlands As the pioneer in the medical tourism industry, Thailand's hospitals attracted 600,000 foreign patients in Witnessing the success of Thailand's medical tourism industry and attempting to leverage its own talented labor pool, India has recently begun targeting foreign patients for surgery. In 2004, India attracted 150,000 foreigners for medical treatment, 6 Id. 7 Id. 8 Frederik Balfour & Manjeet Kripalani, Over the Sea, Then Under the Knfe, Bus. WK., Feb. 16, 2004, at b htm. 9 Id. 10 Macintosh, supra note Balfour, supra note Id. 13 Ramola Talwar Badam, Americans, Europeans Head to India for Cheap, High-Quality Medical Care, AP Worldstream, Sept. 1, 2005, available at FARNEWS WL database.
5 2006] OUTSOURCING VITAL OPERATIONS 223 and the number is increasing 15% per year. 4 Facilitating the aims of its private hospitals, the Indian government has reduced import duties on life-saving medical equipment and increased the rate of tax depreciation for medical equipment from 25% to 40%.5 Additionally, in July 2005, India introduced a visa for foreigners seeking treatment at authorized medical facilities, which allows visitors to stay in India for up to a year to receive medical treatment; previously, medical tourists relied on a standard sixmonth tourist visa.' 6 Given the abundance of talented Indian doctors, support of the government and involvement of wealthy investors, McKinsey consultants estimate that India could generate $2.2 billion in revenues from medical tourism by Building upon its reputation for cleanliness and efficiency, Singapore also aims to become a major medical tourism destination; having attracted 200,000 foreigners for surgery in Nonetheless, patients are not able to realize the same cost savings in Singapore as they could in Thailand or India. A liver transplant, for example, that would cost $300,000 in the United States would still cost over $150,000 in Singapore, 19 whereas patients could spend less than $30,000 by undergoing the transplant in Thailand or India. 20 Accordingly, industry experts predict that the future of medical tourism belongs to Thailand, the pioneer in medical tourism, and India, the country with 14 John Lancaster, Surgeries, Side Trips for Medical Tourists, WASH. POST, Oct. 21, 2004, at Al, available at washingtonpost.com/wp-dyn/articles/a ct20.html. 15 Medical Tourism Industry Worth $333 Million, FIN. ExPREss, Sept. 5, 2005, available at FARNEWS WL database, 2005 WLNR As a member of the World Trade Organization, India is prohibited from applying laws and regulations to foreign goods so as to afford protection to its domestic industries. General Agreement on Tariffs and Trade, Oct , art. 3, 61 Stat. A-i1, T.I.A.S. 1700, 55 U.N.T.S. 194 [hereinafter GATT]. As long as India applies the same duties to like medical products from all other Wv1TO members and does not discriminate against foreign products in its accounting rules, India does not violate its obligations under the WTO. GATT, arts. 1, 3. The low price of surgery in Asia also does not implicate anti-dumping laws because a product is not exported and offered for sale at less than its value in the exporting state. Cf Restatement (Third) of Foreign Relations Law of the United States 807 (1994) (summarizing dumping laws). 16 Chris Oliver, Going Under the Knife Never Looked Better, S. CHINA MORNING POST, Aug. 7, 2005, available at FARNEWS WL database, 2005 WLNR Great Indian Hospitality Can be Biz Too, EcONOMIc TIMES (India), July 29, 2005, available at FARNEWS WL database, 2005 WLNR Singapore, Robert Steichen's Medical Tourist, at 19 Id. 20 Id.
6 224 QUINNIPIAC HEALTH LAW [Vol. 9: greatest growth opportunities for medical tourism. B. Cost Savings The striking disparity in cost between surgery in the United States and Thailand or India is, of course, the primary reason that uninsured Americans opt for surgery in Asia. Knee replacement surgery performed in the United States, for example, costs about $50,000, while Western-trained surgeons in Asia perform the same surgery in a resort-style hospital for around $6,000. A heart bypass surgery that costs $60,000 to $80,000 in the United States costs around $10,000 in Asia. Gastric bypass surgery costing $10,000 to $20,000 in the United States costs well under $5,000 in Asia. 2 2 At the higher end, a bone marrow transplant costs over $250,000 in the United States and as little as $26,000 in Asia. 2 1 On average, treatment in Thailand is about an eighth of the cost in the United States, 24 and in India, treatment is even cheaper, about a tenth of the cost in the United States. A foreigner undergoing surgery in Asia would obviously need to purchase plane tickets to travel to Asia, but advances in air travel and an increased number of flights offered to Asia has reduced the cost of such plane tickets. 2 5 An American can purchase round-trip airline tickets from New York to Bombay on 26 Patients booking tickets through a travel agent or medical tourism broker, or combining plane tickets with hotels could obtain even lower rates for their airline tickets to Asia. 2 7 Even accounting for the cost of air travel and lodging, the total cost of surgery in Asia is still under 20% of the total cost of surgery in the United States. Before considering the quality of 21 Id. 22 Mike Adams, Rising Popularity of Medical Tourism Reveals Deterioration of U.S. Healthcare System, NEws TARGET, Apr. 21, 2005, at html. 23 Holiday in India for Good Health, TIMES OF INDIA, July 1, 2005, available at timesofindia.indiatimes.com/articleshow/i cms. 24 Vacation, Adventure and Surgery?, CBS NEws, Sept. 4, 2005, at news.com/stories/2005/04/21/60minutes/main shtml. 25 See generally History: Growth and Development, International Air Transport Association, 26 Search performed Oct. 12, 2005, flexible dates, prices range from $911 to $1,031 for lowest economy/coach fares. Travelocity.com, Oct. 12, Medical Holidays Service Providers, Robert Steichen's Medical Tourist, (last visited Dec. 10, 2005).
7 2006] OUTSOURCING VITAL OPERATIONS 225 the care, an uninsured American who must pay cash for a heart surgery, which could be performed anytime within three months, would easily be intrigued by the prospect of low-cost surgery in Asia; he could experience a new culture, undergo surgery and then recover on a Thai beach or at an Indian spa, while saving about $50,000. C. Quality of Care in Asia's Private Hospitals While paying greatly discounted prices for surgery, American patients traveling to Asia do not appear to sacrifice quality or incur greater risks of death or infection. Post-operative and follow-up care are unavoidably limited, but many patients returning from surgery in Asia report that the hospital care exceeded the quality of hospitals in the United States. 28 Besides the vast pool of talented doctors, many of whom practiced for years in the United States before transferring to Asia, Thailand and India's well-funded private hospitals boast skilled nurses and exceptional personal attention. 29 Addressing concerns in quality, Naresh Trehan, a cardiovascular surgeon who runs Escorts Heart Institute and Research Center in India, reports that the 1999 death rate for coronary bypass patients at Escorts is 0.8%, compared to 2.35% for the same procedure at New York Presbyterian Hospital." Post-operative cardiac infection rates in Indian private hospitals, meanwhile, are less than 0.5%, which "compare extremely favorably" with most American hospitals. 31 Surgeons in hospitals in Asia were often trained alongside the surgeons practicing in the largest hospitals in the United States. 32 Dr. Trehan actually trained American surgeons as an assistant professor at New York University Medical School before 28 See generally Fred de Sam Lazaro, Travelers Head to Thailand for Inexpensive Medical Procedures, Online NewsHour, Feb, 21, 2005, bb/health/an-june05/thailand_2-21.html. 29 See Id. 30 Lancaster, supra note 14 (The New York State Health Department reported the New York-Presbyterian Hospital death rate in a 2002 study). 31 Peter Foster, Britons Flock to India for Fast, Cheap Surgery, DAILY TELEGRAPH (London), Aug. 27, See Id. (stating that about a third of the doctors in Bumrungrad Hospital were trained abroad).
8 226 QUINNIPIAC HEALTH LAW [Vol. 9:219 founding Escorts Heart Institute in India in International patients undergoing surgery in India's Apollo Hospitals Group, meanwhile, may choose from surgeons trained at institutions such as Royal College of Surgeons and Physicians in England, New York Hospital - Lornell Medical Center in New York, Galvin Heart Center in Illinois, Pomona Valley Hospital in California, and Memorial Sloan Keitering Cancer Institute in New York. 34 Setting the example for those Indian hospitals, Thailand's leading hospital for international patients, Bumrungrad International Hospital in Bangkok, features over 200 U.S. boardcertified physicians. 35 Foreign patients in Thailand and India are enamored with the attentive and communicative doctors as well as the meticulousness of the assistants in the private hospitals. Byron Bonnewell, who traveled to Thailand from Louisiana for a heart bypass surgery reflects, I found it so strange in Thailand, because they were all registered nurses. Being in a hospital in the United States, we see all kinds of orderlies, all kinds of aides, maybe one RN on duty on the whole floor of the hospital... I bet I had eight RNs just on my section of the floor alone. First-class-care. 6 Similarly, Texan Robert Carson, who traveled to India for a hip replacement surgery conducted by a British-trained surgeon, maintains, "I'd come back in a minute even if costs were equal to the U.S... I would come because of the personal care. ' 7 A logistical problem that arises for patients undergoing surgery in Asia is that they must find a doctor in their home country for follow-up care or post-operative treatment. Initially, patients may struggle to locate a doctor who is willing to administer follow-up care for a surgery the doctor did not perform. 8 In other cases, if those patients lack health insurance, they may decline to solicit follow-up care in their home country and incur the risk of 23 Lancaster, supra note International Patients, Apollo Hospitals Group, com/international.htm (last visited Apr. 13, 2006). 35 Lazaro, supra note Vacation, Adventure and Surgery?, supra note Badam, supra note Maria M. Perotin, Tourism Companies Luring Americans with Surgery-Vacations, FORTH WORTH STAR-TELEGRAM, Aug. 22, 2004.
9 2006] OUTSOURCING VITAL OPERATIONS 227 side effects or delayed surgical complications. Follow-up care for a surgery conducted in a hospital in Asia is not much different than follow-up care for a surgery conducted in a hospital in the United States. Patients who undergo a heart bypass surgery at the Mayo Clinic are referred to their local primary care physicians for follow-up care after being discharged from the hospital." If a primary care physician must refer a patient back to his surgeon for surgical complications, an American who returns home from India after surgery would clearly find himself in a bind, yet that risk could be reduced by remaining in Asia for a few days or weeks following surgery, as most patients do. 4 D. The Business of Medical Tourism The development of advanced hospitals in Asia and the widespread use of the Internet have fostered the growth of a new industry of medical tourism brokers who coordinate the relationship between foreign patients and Asia's private hospital networks. 41 Generally, brokers collaborate with airlines, hospitals and hotels to offer medical tourism packages that relieve the patient of the burden of arranging airfare, lodging, transportation and a vacation. These brokers, in turn, work with prospective hospital patients to customize a package based on the patient's budget, medical needs and desire to travel in Asia following the surgery. 42 The first step for a patient in this online medical tourism industry is to visit the website of the broker and complete a short online form indicating the type of surgery needed, preferred treatment destinations and travel dates. Within a day, the broker responds with a price range, suggested accommodations and a broad selection of available doctors. Ordinarily the list is limited to board certified medical doctors trained according to the same standards as doctors practicing in the United States. 4 3 (After the patient narrows his choices of surgeons and hospitals, the broker provides a comprehensive profile of the surgeons available to 39 Details of Bypass Surger, Mayo Clinic, (last visited Apr. 11, 2006). 40 See, e.g., Lancaster, supra note Medical Holidays Service Providers, supra note Id. 43 Id.
10 228 QUINNIPIAC HEALTH LAW [Vol. 9:219 perform the patient's procedure; the profiles include the surgeon's education, accreditation and residencies. The broker also provides a detailed description of the hospital in which the surgeon practices. 44 After the patient chooses a surgeon-accommodations package, the broker facilitates pre-consultations between the patient and surgeon via or telephone. Upon the patient's arrival at the airport in Asia, the broker also arranges for a personal assistant to accompany the patient to all medical appointments and transfers to and from the hotel. 45 Patients of means can also choose the luxuries of a "comprehensive executive health tourism package," which, in one example, includes airport pickup in a luxury automobile, "a 1 hour therapeutic massage to relieve jet lag...", a cell phone for use in Thailand, and options for shopping excursions, river tours, ancient site tours and trips to nearby beaches. 4 6 Finally, after the patient returns to his home country, the broker facilitates communication between the foreign surgeon who performed the surgery and the patient's local primary care physician. The hospital itself is integral to the popularity of medical tourism and to ensuring that patients provide favorable reviews to their social networks in their home countries. Recognizing the need to create a warm hospital atmosphere that could soothe foreign patients, Bumrungrad Hospital's Chief Executive Curtis Schroeder explains, "[p]art of the concept was to create an environment such that when people came in they didn't feel like they're in a hospital... [N]obody really wants to go to a hospital." 47 The Bangkok hospital's lobby emulates a five-star hotel, replete with carpets, sofas, a concierge and even a Starbucks. 4 8 Showcasing its own advanced technological resources, India's Apollo Hospitals Group facilitates "virtual patient visits" on its website enabling the patient and his friends in a foreign country to exchange pictures and messages. 49 Evi- 44 Id. 45 Id. 46 Why Thailand Medical Tourism Works & How Grand Imperial Travel Can Help, (last visited Apr. 14, 2006). 47 Vacation, Adventure and Surgery?, supra note Simon Montlake, Operation Hard-Sell S. CHINA MORNING POST, Aug. 26, International Patients, supra note 34.
11 2006] OUTSOURCING VITAL OPERATIONS 229 dently, the medical tourism industry of Asia bears a closer resemblance to a service industry than a health care industry, as brokers, hospital managers and surgeons realize that in order to attract future patients, they must overwhelm foreign patients with luxury, superior quality and costs savings, thus assuring that each foreign patient is so pleased with the hospital experience that he encourages friends, family and co-workers to also consider surgery in Asia. III. United States Health Care Industry Aside from lower labor costs in Asia, the enormous disparity in costs of surgery in Asia versus the United States is the result of substantial medical malpractice costs and striking patient processing inefficiencies in the United States health care system. The additional costs of health care in the United States associated with medical malpractice law and processing inefficiencies is passed on to patients and, in turn, health insurance companies. 51 Consequently, the cost of health insurance rises, making insurance unaffordable for many Americans, and now more than 45 million Americans lack health insurance. 52 Surgery in Asia is most enticing to those uninsured patients, since they have the option of traveling to Asia and avoiding the premium that they would encounter in the United States for malpractice insurance and processing inefficiencies. If the United States health care system could reduce the costs of malpractice litigation and processing inefficiencies, the appeal of surgery in India or Thailand would be lessened. On the other hand, if those costs continue to escalate, surgery in India and Thailand will only become more appealing to Americans without health insurance. A. Malpractice Costs To protect themselves from being ordered to pay large malpractice awards to injured patients, doctors, as a whole, spend 50 See infra Part 111A; Part 111B. 51 See Richard Hillestad et al., Can Electronic Medical Record Systems Transform Health Care, 24 HEALTH AFF. 1103, 1108 (2005). 52 See Health Insurance Coverage: 2004, supra note 4.
12 230 QUINNIPIAC HEALTH LAW [Vol. 9:219 over $6 billion on malpractice insurance annually. 5 3 In the state of New York, a heart surgeon pays about $100,000 a year in malpractice insurance, while a heart surgeon in India pays a mere $4,000 per year. 5 " Notwithstanding the introduction of strong price controls in Medicare, the added expense that U.S. surgeons incur for malpractice insurance is ordinarily passed on to patients directly if that patient lacks health insurance or indirectly, in the form of higher health insurance rates, if that patient is covered by a health insurance. 55 Advocates of malpractice reform also maintain that the malpractice law system generates additional medical costs by inducing doctors to adopt defensive practices, such as ordering unnecessary tests or procedures, in an effort to reduce exposure to malpractice lawsuits. In the field of obstetrics, in particular, several studies suggest that a doctor who is at a greater risk for being sued, based on malpractice premiums and previous malpractice claims, is more likely to deliver by cesarean section. 56 On an aggregate basis, one study estimates the system-wide costs associated with defensive medicine is between $5 billion and $15 billion in 1991 dollars. 57 If non-economic damages on liability were limited, the Department of Heath and Services estimates that the resulting decrease in the cost of insurance would allow an additional 2.4 to 4.3 million Americans to obtain health insurance. 58 Perceptions of a "malpractice crisis" have spawned efforts to reform the system of malpractice law, yet the drive to litigate has 53 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, CONFRONTING THE NEW HEALTH CARE CRISIS: IMPROVING HEALTH CARE QUALITY AND LOWERING COSTS BY FIXING OUR MEDICAL LIABILITY SYSTEM 7 (2002). (Medical malpractice insurers collect premiums in an exchange to defend and pay future claims against a physician). See generally GENERAL ACCOUNTING OFFICE, MEDICAL MALPRACTICE INSURANCE: MULTIPLE FACTORS HAVE CONTRIBUTED TO INCREASED PREMIUM RATES 7 (2003). 54 Lancaster, supra note 14. Commonly, physicians in the U.S. purchase policies that provide $1 million coverage per incident or $3 million of coverage per year. GEN- ERAL ACCOUNTING OFFICE, supra note 53, at David M. Studdert Michelle M. Mello, & Troven A. Brennan, Medical Malpractice, 350 NEW ENG. J. MED. 283 (2004), (Unlike earlier tort crises in the 1970s and 1980s, hospitals and physicians are now less able to cope with increases in practice costs by passing along significant portions of such costs). 56 Id. 57 Id. 58 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, supra note 53.
13 2006] OUTSOURCING VITAL OPERATIONS persisted for decades in spite of proposals for tort reform. 5 " Plaintiffs' attorneys and some consumer groups, maintain that malpractice litigation is necessary to the prevention of medical carelessness. 6 But, critics argue that the system unfairly punishes doctors and encourages defensive medicine, while awarding windfalls to some patients and no compensation for the majority of patients who are harmed by negligent medical care. 61 The growing sense that the tort system is in disrepair has inspired modest reforms proposals such as a cap on damages and an early offer program in which patients and hospital would have an incentive to negotiate a private settlement immediately after a medical error, but fundamental reform of the malpractice law system remains unlikely. 62 B. Patient Processing Inefficiencies With most medical records still being stored on paper, the United States health care industry is considered by some analysts to be the "world's largest, most inefficient information enterprise."" Dartmouth University researchers estimate that the United States wastes as much as a third of the $1.8 trillion it spends on medical care annually, much of that waste from disorganization. 64 Some doctors estimate that as much as 80% of their costs are attributable to paperwork. If hospitals were to transition from relying on paper records to relying on electronic medical records (EMR), the Rand Institute estimates that, while the cost savings of the adoption of EMR systems would accrue to different groups, private payers would save about $31 billion annually. 6 6 Although health care experts agree that the adoption of EMR systems would generate enormous cost savings and reduce medical errors, less that 25% of hospitals have adopted 59 Studdert, supra note Id. 61 Id 62 Id. 63 See Hillestad, supra note 51, at William H. Frist, Why We Must Invest in Electronic Medical Records, S.F. CHRON., July 24, 2005, available at archive/2005/07/24/edgfvc9jffi.dtl 65 Adams, supra note Hillestad, supra note 51, at 1108.
14 232 QUINNIPIAC HEALTH LAW [Vol. 9:219 such software systems." The greatest barriers to hospitals implementing EMR systems is that that health providers would absorb the initial cots of implementing EMR systems, while insurance consumers and payers would likely reap the majority of the future cost savings. 68 Depending on the amount of hardware installed, practice administrators estimate that EMR systems costs between $10,000 and $30,000 per physician. 69 Because relatively few hospitals have adopted EMR systems, the financial payoffs of the systems are slow and uncertain, and practices are uncertain as to whom the savings would accrue. 70 Moreover, the transition to electronic medical records temporarily disrupts a physician's practice, often preventing physicians from seeing some patients during the EMR transition period. 71 During that transition phase, doctors are often forced to devote much of their time to arranging for EMR installation, receiving EMR training and supporting their colleagues in maximizing use of the EMR systems. 72 Tim Terrell, the chief information officer of a health care provider that began implementing EMR systems in 2005, observes, "[t] his is a big change for doctors. It almost feels unnatural to them." 73 Accordingly, despite the projected cost savings yielded by implementation of EMR systems, hospitals appear to have little incentive for investing in EMR systems. Because hospitals are unlikely to unilaterally adopt EMR systems, the federal government is encouraging the transition to EMR systems by sponsoring studies and educating hospitals on the benefits of EMR systems. 74 In July 2004, Health and Human Services Secretary Tommy Thompson appointed a panel of executives to assess the costs of switching to electronic medical 67 Id. 68 Id. ("Providers fact limited incentives to purchase EMRs because their investment typically translates into revenue losses for them and health care savings for payers"). 69 Michelle Cater Rash, The Beauty of Electronic Records, Apr. 1, 2005, at triad.bizjournals.com/triad/stories/2005/04/04/focus1.html. 70 Robert Miller and Ida Sim, Physicians' Use of Electronic Medical Records: Barriers and Solutions, 23 HEALTH Air. 116, 119 (2004). 71 Id. 72 Id. at Rash, supra note Liz Kowalczyk, U.S. Pushes Digital Medical Records, BOSTON GLOBE, July 22, 2004, available at pushes-digital-medical_records/.
15 2006] OUTSOURCING VITAL OPERATIONS 233 records and disclosed a series of grants, including a $425,000 grant to the Massachusetts Health Data Consortium, to pay for EMR systems in select hospitals. 75 Additionally, in April 2004, President George W. Bush proposed an additional $50 million in his 2005 budget to support the transition to EMR systems and expressed his vision that Americans have electronic medical records within ten years. 7 6 Thus, over the next ten to twenty years, the relative inefficiencies of using paper records in the United States health care system will likely diminish and result in savings for health care patients, possibly reducing the gap between health care costs in the United States and Asia. IV. Hurdle: Overcoming Fear of Seeking Surgery Abroad As enormous savings lead patients to consider surgery in Asia, the psychological fears of surgery in Asia by foreign surgeons often holds them back. Given that surgery in Thailand or India has only recently become a viable option and that most Americans are unaware of the quality of Asia's private hospitals, patients are often initially apprehensive of boarding a plane for over twenty hours to undergo surgery in an unfamiliar place. Anumpam Sibal, a British-trained pediatrician who is Director of Medical Services in India's Apollo Group, optimistically believes, "Nobody ever questions the capability of an Indian doctor, because there isn't a big hospital in the United States where there isn't an Indian doctor working." 7 7 The prevalence of Indian doctors in the United States may indeed be true, but Americans who have not spent much time in big hospitals are loath to share Sibal's optimism. Bradley Thayer, a retired apple farmer from Washington, traveled to India for reconstructive knee surgery and recalls, "[m]y friends and relatives said I was crazy. They said they'll cremate you along the Ganges." 78 Thayer managed to overcome such skepticism by observing, "[i]n Canada and America when you read the names of doctors in hospitals, every third or fourth doctor is Indian." 79 Reflecting on the incredulous reactions he 75 Id. 76 Id. 77 Lancaster, supra note Badam, supra note Id.
16 234 QUINNIPIAC HEALTH LAW [Vol. 9:219 received before leaving for India, Thayer concedes, "it's a long way to come without tests, but I feel great." 8 Similarly, Stephanie Sedlmayr traveled from Florida to Apollo Hospital in Chennai, India for hip surgery, reasoning, "My doctor, actually, in Vero Beach, she's an Indian doctor. So, why not go where they come from?" 81 Sedlmayr remembers, however, "[h]ardly anybody said, 'Oh, great idea.' 8 2 In addition to fear of foreign doctors, a related fear that foreign patients must overcome concerns the sanitation and technological sophistication of developing nations. While boasting that India's hospital care has "taken a quantum leap" in recent years, cardiovascular surgeon Naresh Trehan admits, "[p]eople's impression of India's health care is the 1940s and 1950s."83 Apollo Hospitals Group in India was founded, in part, for the purpose of renovating India's primitive hospital care system; the founder was inspired to invest in a world-class healthcare infrastructure when one of his patients died two decades ago because India lacked the technology to perform a necessary open heart surgery. 84 To mitigate foreign patients' concerns that Asia's hospitals remain primitive by United States standards, Asia's advanced private hospitals commonly seek accreditation by Western organizations. Escorts Heart Institute, for example, is already accredited by the British Standards Institute, and both Escorts and Apollo Group are applying for certification from the Joint Commission on Accreditation of Health Care Organizations of the United States. 8 5 The Joint Commission already accredits Bumrungrad Hospital in Thailand. 86 To earn accreditation, the Joint Commission requires hospitals to meet performance-based standards in categories such as patient assessment, provision of care, and prevention and control of infection. To maintain accreditation, a hospital must consent to an on-site survey by a Joint Commis- 80 Id. 81 Vacation, Adventure and Surgeiy, supra note Id. 83 Balfour, supra note Chairman's Profile, Apollo Hospitals Group, available at hospitalgroup.com/c profile.htm. 85 Balfour, supra note Id.
17 2006] OUTSOURCING VITAL OPERATIONS sion survey team every three years. 87 V. Implications of Medical Tourism Boom Over time, as patients return from surgery in India or Thailand and share their favorable experiences with their social networks, fears of surgery in Asia will dissipate and the number of foreigners undergoing surgery in Asia will likely rise. The medical tourism boom is already raising important legal, social and ethical questions, and challenging the United States health care and insurance industries. For example, patients in Asia generally waive their rights to sue for malpractice insurance; Asian surgeons may be forced to choose between treating a foreign patient or a local patient; patients may overlook the dangers of surgery when surgery is offered at a bargain price; and insurance companies may be forced to revise coverage plans to accommodate medical tourists. A. Liabilities Customarily, a patient undergoing a surgical procedure in Asia signs an agreement waiving the patient's right tosue his surgeon for medical malpractice under certain conditions. 88 Such a waiver permits surgeons to charge a lower rate for the surgery, since they do not need to pay thousands of dollars for malpractice insurance. In contrast, patients in the United States do not encounter such waivers and are encouraged to sue surgeons for medical errors. However, all patients pay slightly higher rates for their surgeries, because surgeons pass on part of the costs of their malpractice insurance. Despite allowing patients to freely sue negligent doctors, the United States system of malpractice law appears no more effective than Asia's system in advancing the three purported policy goals of malpractice litigation: 1) to deter unsafe practices, 2) to compensate victims of negligence, and 3) to exact corrective justice Facts About Hospital Accreditation, Joint Commission on Accreditation of Health Care Organizations, at (last visited Dec. 10, 2005). 88 Adams, supra note Studdert, supra note 55.
18 236 QUINNIPIAC HEALTH LAW [Vol. 9:219 Theoretically, malpractice lawsuits deter surgeons from operating carelessly by reminding them of the financial, emotional and professional consequences of not exercising proper care. 90 If a surgeon reads about a colleague who, in an extreme case, is forced to leave the medical profession after losing a malpractice suit, that surgeon will presumably exercise greater care to avoid the same fate as his colleague. Conversely, without the threat of malpractice litigation, surgeons presumably have less incentive to be safe in caring for their patients. The few studies that have attempted to model the relationship between malpractice claims and rates of medical errors have generated mixed results and are usually subject to methodological criticisms regardless of the results. 9 ' On the whole, however, there is little evidence that the malpractice system effectively deters medical negligence. 92 In Asia, where malpractice laws either do not exist or are not enforced, the risk of losing patients may be a substitute for malpractice litigation in deterring unsafe practices. The Internet is the primary vehicle that foreign patients use to locate surgeons in Asia, 9 3 and if those foreign patients are mistreated in hospitals in Asia, they can easily use that same vehicle to warn other foreign patients of the dangers of undergoing surgery in a particular hospital. At this stage in the growth of medical tourism, the patients willing to undergo surgery in Asia are often leaders and innovators in their respective societies, and the reviews that those patients share in their social networks may be particularly influential. 94 If those innovators do not trust surgeons and hospitals in Asia, the growth of medical tourism could be stifled, as more risk averse candidates for surgery would never consider undergoing surgery in Asia. Accordingly, managers of Asia's private hospitals and the surgeons practicing in those hospitals already have an incentive to ensure patient safety and re- 90 See id. 91 See id. 92 See id 93 See, e.g., Vacation, Adventure and Surgery?, supra note 24 (quoting patients who says, "I was in my doctor's office one day having some tests done, and there was a copy of Business Week magazine there. And there was an article in Business Week magazine about Bumrungrad Hospital. And I came home and went on the Internet and made an appointment, and away I went to Thailand."). 94 See MALCOLM GLADWELL, THE TIPPING PoINT (2005) (observing that people who try new products first are often looked up to by others for advice and have the power to start word-of-mouth epidemics).
19 2006] OUTSOURCING VITAL OPERATIONS duce errors; if a patient is pleased with his surgery, he will spread that news to followers who may not otherwise opt for surgery in Asia. Therefore, at this point, malpractice litigation would serve very little marginal benefit in deterring Asia's surgeons in private hospitals from unsafe practices. With respect to the second purported policy goal of malpractice litigation, compensation, the United States system espouses the belief that principles of fairness and efficiency prescribe that the party that causes an injury should bear the costs of that injury, including lost earnings, medical bills, and pain and suffering. 95 In practice, however, only a small portion of the dollars expended on the malpractice system are distributed to victims of malpractice. Administrative costs account for approximately 60% of the money expended on the malpractice system." Furthermore, studies in New York indicate that there are over seven times as many negligent injuries as there are claims, suggesting that the portion of the money that actually goes to victims of malpractice is not evenly distributed among those victims. 9 7 Most alarmingly, the study estimated that only 2% of negligent injuries resulted in claims and only 17% of claims involved a negligent injury, lending credence to the criticism that the malpractice system creates a "lawsuit lottery."98 From another critical perspective, the United States system of compensating victims of malpractice could be considered overly paternalistic. In exchange for the opportunity to recover compensation for medical errors, all patients pay a premium for medical care. That is, because the United States judicial system awards large malpractice awards, surgeons purchase expensive malpractice insurance coverage, and the cost of such insurance is passed on to patients in the form of higher fees for medical procedures or higher health insurance rates. 99 If patients had the option of not paying a premium for the opportunity to recover compensation in the event of medical error, some patients might elect to pay a smaller fee for health care or a lower insurance rate and sacrifice the opportunity to recover compensatory 95 Studdert, supra note Id. 97 Id. 98 Id, 99 See U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, supra note 53.
20 238 QUINNIPIAC HEALTH LAW [Vol. 9:219 damages.' 00 Thus, although compensatory damages in a particular case might be fair and efficient in a vacuum, when considered in the context of the health care system, compensatory damages prevent a patient from gambling on the quality of his surgeon and paying a lower medical fee. Contrastingly, in Thailand and India every patient gambles on his surgeon and pays a lower medical fee, while the few patients who are harmed during the course of their medical treatment lose and bear the full costs of the medical errors. Surgeons, meanwhile, who do not bear the costs of their own mistakes, do not need to purchase expensive malpractice insurance coverage, thus reducing the cost of the surgery that is passed on to all patients. As a policy matter, the cost of medical errors falls almost entirely on the victims of medical errors, not the doctors responsible for those errors, yet that cost is borne by only a few unfortunate patients rather than all patients paying more for medical care. Third, malpractice litigation in the United States theoretically exacts corrective justice, since large awards resulting from a malpractice suit punishes doctors for their errors. 10 ' A doctor who must pay a large damage award to a former patient would seemingly exercise more care in the treatment of future patients to avoid paying a damage award again. Yet, surgeons in the United States carry extensive malpractice insurance coverage, 10 2 so the surgeons themselves do not actually pay the penalty for committing a medical error. The cost of insurance coverage is indeed linked to the history of claims in certain hospitals, but surgeons are not at risk of paying higher rates or being unable to obtain insurance coverage unless they are sued repeatedly Accordingly, corrective justice would not be achieved until insurers either refuse to renew a surgeon's insurance policy, in which case the surgeon would be forced to pay malpractice awards out 100 In auto insurance, for example, where consumers have a choice in coverage options, some consumers choose not to pay for optional coverage and instead bear the risk that they will be personally liable for some damages. See 2005 Consumer Guide to Automobile Insurance: Optional Auto Insurance, New York State Insurance Department, at 101 See Studdert, supra note Id. 103 Id. But, some doctors find that "having even one claim may make insurance coverage difficult to find." Id.