Ultimate Outsourcing

by Tina Peng ,  News Week | 2008-11-19

Now, Mexican medicine. American companies are building hospitals south of the border to serve refugees from an ailing health-care system.

Dorthea, 72, a retired bank teller, lives in Harlingen, Texas, a city of about 67,000 in the heart of the Rio Grande Valley. Like a lot of Texans, she's crossed the border to Mexico a few times to buy cheap medication. But she'd never considered undergoing complicated medical procedures there—at least, not until she was quoted the prohibitive price of $30,000 for a gastric-band procedure, a treatment for obesity in which a band is placed around the stomach to limit food intake. It wasn't covered by her insurance, so Dorthea, who asked that her last name be withheld for privacy reasons, opted to drive south and pay less than $10,000 for the outpatient operation at an American-owned hospital in Reynosa, Mexico, 10 minutes over the border and about an hour from her home. The outpatient surgery was a success, and she's planning on returning for follow-up care. "It was very good treatment," she says.

Medical tourism, which used to be mainly for elective surgery, and aimed at people who could afford weeklong trips to Brazil, is becoming an increasingly viable source of more basic health care for some of those sidelined by the insurance system in America, where 47 million people are uninsured and many millions are underinsured. Now, Americans like Dorthea who live along the Mexican border are driving and even walking south in search of treatment that can cost half or less of what it does in the United States. In response, American hospital chains are starting to buy into Mexico; Dallas-based CHRISTUS Health has built six hospitals in Mexico, including the Reynosa facility Dorthea visited, through its partnership with a Mexican chain. Most of its doctors are Mexican with Mexican medical degrees.

The Mexican health-care option is particularly appealing for Texans because the state has such a high uninsured rate; it was 25 percent in 2004. Along the border, that number is even higher. Incomes in the area are low, too, so even when employers do offer insurance, the cost of medical premiums still may prohibitive for employees, according to a 2007 report prepared by Texas state authorities.

And though hospitals on the U.S. side pour hundreds of millions of dollars a year into charity care, they and other community health centers are strained. The Hope Family Health Center in McAllen—right across the border from Reynosa—sees from 50-100 uninsured patients a week, but always has a waiting list, says interim executive director Rebecca Ramirez, who adds that she has some family members who will drive to Mexico for their medical care.

Older Americans who live near the Mexican border have always crossed in search of dental care and pharmaceutical drugs, neither of which are fully covered by Medicare, according to Prof. David Warner, who studies cross-border health care at the University of Texas's LBJ School of Public Affairs.

This growing demand for lower-cost procedures is fueling an increase in hospital construction, often in developing countries and targeted in part at foreign customers. Mexico's largest private-hospital chain, Grupo Empresarial Angeles, is building 15 new hospitals over the next three years and hopes foreigners will make up 20 percent of their patients by 2010, up from 5 percent now.

American chains are getting into the act, too: International Hospital Corp. in Dallas has five Mexican locations, one close to the American border. And CHRISTUS, which bought a majority stake in Mexico's Grupo Muguerza in 2001, has grown a two-hospital chain to eight hospitals nationwide. CHRISTUS representatives say they're expanding to benefit Mexican patients but remain very aware of their increasing American clientele.

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