Global Economics

Hannaford's Medical-Tourism Experiment


The New England supermarket chain wants to help employees get low-cost knee and hip replacements in Singapore. So far it has no takers

It seemed like a pretty good offer. In January, Hannaford Brothers, an operator of 160 supermarkets in New England and New York, began giving employees in need of knee and hip replacements the option of traveling to Singapore for surgery. Because health-care costs in the Southeast Asian city state are much lower than those in the U.S., Hannaford would work with insurer Aetna to pay 100% of the patient costs. To make the option more attractive to its 9,000 employees covered by health insurance, the Scarborough (Me.) company also agreed to waive all deductibles and co-payments and pay transportation costs for the patient and a spouse or significant other to travel to and from Singapore.

The program made Hannaford a leader among U.S. companies looking to reduce their health-care expenses by promoting medical tourism. Nearly a year after Hannaford introduced the program, though, the company's director of associate health and wellness, Peter Hayes, can't say how employees like it—because nobody has taken Hannaford up on its offer. "At this point, we have not sent a single patient," he says.

Blind Luck

As more U.S. companies latch onto medical tourism as a solution to their soaring health-care costs, the Hannaford experience demonstrates the challenges they will face. Hayes says one reason nobody from Hannaford has yet flown to Singapore is just blind luck: Nobody at the moment needs the procedures on offer there. Typically the company has only a handful of people requesting such surgery each year. But even when volunteers finally do come forward, Hayes admits the company could run into other roadblocks. As of this month, it has not yet received full cooperation from some local health-care providers unfamiliar with the standard of medical treatment in Singapore. "There's been some resistance," he says. "We've had some orthopedic groups say if you do this, we are not going to take care of you when you come back."

Hayes himself has no doubts about medical tourism. He first started thinking about it as an option last year for Hannaford, owned by Brussels-based Delhaize. Having a European parent company makes it all the more important for Hannaford to keep its health-care costs under control, he says, because the parent has other investment opportunities. Americans spend 18% of GDP on health care, twice the percentage that citizens of many European countries pay, he points out. "When you are in a low-margin business, the return on investment can be higher in other parts of the world where you don't have that kind of cost differential."

Paying Dividends

To learn about ways to reduce costs through medical tourism, Hayes last November traveled to Singapore and visited hospitals along with a representative from Aetna. He was impressed by how willingly hospital officials shared information on staph infections, readmissions, and surgeries. "There's much more openness about reporting and transparency," says Hayes. "It was easier than [with] our local hospitals."

While no one has yet gone to Singapore from Hannaford, the experiment has nonetheless started to pay dividends for the company, he says. Shortly after The Wall Street Journal reported that Hannaford had launched the medical-tourism option, Hayes heard from a U.S. company offering to provide his employees with comparably priced operations in the U.S. So now Hannaford is offering people two different types of medical travel, one overseas to Singapore and another to hospitals in other parts of the U.S. "The Singapore thing for us has changed people's thinking and providers' thinking about the health-care universe," he says. "Offering the Singapore option has changed the dialogue."

Einhorn is Asia regional editor in BusinessWeek's Hong Kong bureau.

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