Cost containment in Latin America is becoming an issue of increasing importance for travel and health insurance companies with clients in the region. Femke van Iperen investigates why, and considers what can be done to combat rising costs
International assistance and insurance-related companies working in Latin American countries have witnessed rising medical costs in tourist hotspots in recent years, with such costs now reportedly often exceeding Western European and Northern US rates. This new situation has led to the development of new cost containment procedures for dealing with hospitals in the region; and although assistance providers and insurers have faced challenges in their dealings with local hospitals, cost containment efforts are proving successful.
Although ‘sky-rocketing’ might be a slightly strong term to describe the increase in medical costs in Latin America, it can certainly be said that medical costs in popular tourist hotspots such as Cancun (Mexico), San Jose (Costa Rica), and Punta Cana (Dominican Republic) have been ‘showing an alarming rise’, said Pablo Castillo, CEO of MedBrick Inc., a cost containment vendor in Canada that specialises in managing medical costs in Latin America.
Ignacio Cesar Marquez from MDabroad, who is involved with revenue cycle management, cost containment and case handling in the area, has also witnessed such price increases, and says they fall in line with a ‘deepening of world globalisation’. He’s noticed regional price increases since the 1990s; but the scale of cost increases seems to be ramping up. Castillo called recent developments ‘notorious’ and ‘a major concern for us and our clients’.
The forces at play behind this increase in costs are varied. Although in the past Latin America has not represented a significant percentage of total medical claims expenditure for US and European insurers, professionals like Marquez have witnessed a ‘growth in traveller numbers, particularly expatriate and tourist travellers’, pushing the demand for local healthcare higher in recent years. The increasing numbers of visitors to these areas expect medical facilities to meet certain minimum standards of comfort, but they also expect the ‘enduring low price of cosmetic and similar procedures’, which has made these regions attractive for elective care and medical tourism. Such expectations of quality care have been pushing prices up, explained James Page, senior vice-president and chief administrative officer of AIG Travel. Meanwhile, an ‘inundation of local medical insurance companies’ and ‘staggering growth of local insureds’, who are requesting ‘ fixed rates and regular and prompt payment terms with local insurers’, are also playing a role in driving prices upwards, added Marquez. Naturally, these price increases have been seen in the private healthcare sector, as opposed to the public sector, which is generally only used by the local population, and is no match for the quality available privately thanks to only a small percentage of GDP being dedicated to it. The demand for private hospitals in these tourist areas to modernize their equipment and facilities to bring them up to scale with the norms and protocols of first-world standards has meant they have had to import medical devices, paying in expensive US dollars, Marquez said. Comparing the situation to that of 10 or 20 years ago, Castillo agreed: “Most medical providers in these areas now need to make big investments in order to purchase state-of-the-art technology to remain competitive in their local market.” ‑ is has led to Latin America housing some of the best hospitals in the world, but this comes at a price. “More and more Latin American institutions are Joint Commission International accredited,” Marquez continued, explaining that concurrently, there has been a rise in the cost of educating medical practitioners. “Over the last 10 years, physicians have needed more and better specialisation.” Further increasing medical provider costs is the employment of foreign physicians, according to Page, who added: “Many of these medical providers have begun to hire more American- or European-trained doctors.” Combine this with what Marquez referred to as ‘a profound change in the paradigm of practicing medicine’ in the region, which has led to an ‘in-depth investigation of the origin of the ailment, as opposed to just treating the acuteness of the event’, and we can see the picture of increasing costs developing further.
Many hospitals in Latin America are also faced with a range of external challenges that have been driving medical costs upwards, and the ‘currency exchange fluctuations in countries such as Argentina and Venezuela’, is listed as one of them by Pedro Espinoza, manager of LATAM Assistance services for Intrepid 24/7, an assistance company within the Ingle Group of Companies, based in Canada. Currency devaluation has impacted the cost of imported supplies and machinery, an issue also noted by Marquez; as has the ‘cost of money’ in Latin America, which, said Espinoza, is ‘up to 15 per cent (compared to only three per cent in the US)’, and medical inflation, which ‘from 2012 to 2014 has been increasing 10 per cent annually’.
Hampering cost containment
With costs rising, insurance companies that work in the Latin American region have been looking for ways to contain them. But, having to work in a vast region with different standards of medical care, and some significantly remote tourist locations, is not without its challenges. Take, for example, the potential for communication and business culture differences between insurers and medical providers, which can leave insurance companies feeling they are unable to manage and evaluate costs from the moment an insured needs medical care.
Although, according to Castillo, ‘some countries in the region have hundreds of reliable hospitals and medical providers that can treat any type of patient’, he also explained that several Latin American countries have a limited number of adequate facilities that can treat international patients, which further hampers the ability of travel and health insurers to contain medical costs effectively.
A reported lack of market regulation is also having an effect on cost containment, which, as Marquez explained, is particularly the case in the private healthcare industry. “There generally are no ‘rules’ or government-mandated fee schedules governing pricing in the region,” agreed Page. “In many instances, the advanced equipment, expertise and personnel are centralised, so there may also be a lack of true competition.” In addition, medical facilities in these areas have been seen adopting a change to US-style billing to their advantage. “In North America, a growing number of health and travel insurance carriers prefer to receive claims that are issued under the US coding and billing guidelines, and many [Latin American] providers have seen the opportunity to ‘disguise’ their rates by using bills and codes that can play out to their (financial) advantage,” said Castillo. Raffy Karagossian, manager of provider networks for Intrepid 24/7, also noted: “As medical providers understand the nature of insured international patients and their insurance coverage limitation, they have increased their charges to maximise their revenue.”
For Karagossian, it is actually ‘easier to contain costs in Latin America than in Europe or Canada’. However, it is the influence of ‘unethical billing agencies’ that often creates a dramatic pricing difference as far as Intrepid 24/7 is concerned. “Medical providers are always looking for reasonable payments for their services, but they are unaware of what the billing agencies are charging due to contractual secrecy,” said Karagossian, describing the actions of some such agencies as ‘exponentially increasing the value of the services in comparison to US billing codes, and demanding that the insurance companies pay those prices’.
The Ingle Group of Companies has offices in Mexico City, Santiago, Rio de Janeiro, São Paulo, Buenos Aires and Bogotá and, over the years, people working for the company have witnessed medical providers in Latin America becoming more accustomed to billing insurance companies instead of charging patients, in new, cashless ways, explained Espinoza. Some have also been forced to find ways to deal with unpaid accounts by increasing charges or, in some cases, ‘forcing clients to pay cash up front, or billing insurance companies high prices for the services provided on a guarantee of payment’.
To which Castillo added: “Let’s not forget that many hospitals are ‘for-profit’ organisations. Most of these facilities are clearly focused on attracting international patients who, for obvious reasons, hold an insurance plan.” Putting things in a wider perspective, Marquez pointed out: “Though there is certain speculation [that] with foreign admissions [come] over pricing and over-practised medicine, this is not more scandalous in Latin America than it is in the US.” For Castillo, worsening the ‘snowball effect’ concerning increasing health costs in tourist areas in Latin America, which has been ‘raising a red flag in the international insurance industry for the last three years’, are ‘claim denials and long delays for claim payments’, which push medical providers to hire a billing agent in the first place.
To make sure that cost containment challenges are overcome and that bills are fair, for insurers and assistance providers with customers in the tourist hotspots of Latin America, it pays to make sure you understand and adapt to the local business culture and political and cultural landscape. Ingle International, for example, has an assistance and insurance team that speaks Spanish, and it produces its printed materials in both English and Spanish; and for Karagossian, one of the biggest steps such companies should take, especially to avoid a rise in billing agency utilisation, is ‘to work more closely and reasonably with medical providers’.
It also pays to understand the different options of healthcare available. “Not all admissions require top-notch institutions, and second-tier healthcare providers in Latin America (often) account for the right medical and technical infrastructure to deal with non-acute admissions,” said Marquez. Castillo also noted: “If you have a solid provider network and you know where to steer your patients, you will accomplish more than dealing with unreasonable costs that are being billed to you by predatory medical providers that are doing everything in their hands to attract your insureds to their facilities.” It’s therefore no surprise that insurance and assistance companies have started making more use of networked hospitals in the tourist areas of Latin America.
Page has thus found benefit in working with smaller regional clinics, which, he explained, are often privately owned. “This allows the opportunity to set in place cost containment practices,” he said, comparing such facilities to urgent care centres in the US, which tend to use fewer staff and thus have lower overheads, but not necessarily a lower level of treatment. “Just like many hospitals, these clinics have vastly improved in recent years and continue to grow.” Discussing the benefits of using such clinics, Page also explained that ‘doctors typically have significant input on appropriateness of tests and treatments’. They can help ensure that patients are not subject to unnecessary treatment or procedures, and decisions can be made as to whether a client should be admitted, or be treated at home. Assistance companies’ in-house medical case managers also have a significant role to play here. “They can and should play a role in reviewing medical cases for appropriate and necessary medical treatment,” Page added. For Marquez, meanwhile, obtaining a cost estimate is invaluable: “Though a medical institution cannot be held to a specific initial estimation of costs or duration of care, it keeps everyone engaged and usually final charges cannot skew very far from an initial estimation,” he said, also mentioning the benefit of steering insureds to the company’s or local case handler’s preferred hospitals by encouraging them to use the company’s 24-hour helpline.
To successfully manage claims, a local presence is another strategy that can help save money, as can working with local assistance providers and specialist cost containers who have the benefit of local knowledge and who can negotiate on your behalf.
The only way is up
Most Latin Americans rely on the public healthcare system – only 25 to 30 per cent of the population has private insurance, Marquez explained; but although the public health system may improve and modernise in the next 10 years, it is unlikely to match the infrastructure and hospitality level of private institutions, he argued, so costs in the private healthcare sector are set to continue to rise. Espinoza agreed: “In the future, we can expect a rise in the cost of healthcare in tourist areas, due to the increase in utilisation.” Castillo concurred that price increases are ‘not getting better any time soon’. And since the need to address cost containment in Latin America is now more necessary than ever before, most would say that without a doubt, it pays for insurance and assistance companies working in Latin America to be aware of the challenges within the marketplace and know how best to address them.
Published by ITIJ (International Travel & Health Insurance Journal) In “The 2015 Cost Containment Review” – October, 2015Author: Femke van Iperen