Domestic Medical Tourism - Why Competition Can Lower Price Even if No Volume Moves

Today’s Managing Health Care Cost Number is

0 

Today’s USA Today  (from Kaiser Health News) reports on domestic medical tourism.   Many have written about domestic and international medical tourism, and projected huge increases in this.  In fact, Deloitte breathlessly suggested in 2008 that 6 million Americans (1 in 50) would go abroad for treatment in 2010!  [I can’t find an active link to this report now –it’s apparently no longer online.)  Deloitte revised these trends substantially in fall, 2009, now estimating that by 2012 international medical tourism will reach 1.3 million in 2011.

Here’s why I’m focused on zero.  Hannaford Brothers, a large supermarket chain, initiated an international medical tourism program in 2007 for knee and hip replacements in Singapore.    The plan was widely reported, and widely commented upon.  Many suggested    Today’s USA Today article reveals that exactly no one took Hannaford up on the offer.

Does that mean Hannaford’s program was an utter failure? Au contraire!  The program was a real success.  The credible threat of competition led to a number of offers for less expensive orthopedic surgery in the US, and the local hospitals in Maine were willing to lower their prices.

So – a program that creates competition can lower prices even if it doesn’t actually move volume.  Not so good for the entrepreneurs in Singapore, but excellent for the patients and the shareholders of Hannaford.