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Tuesday, December 20, 2005

National Report--As the cosmetic revolution continues to sweep across the country, health plans are beginning to acknowledge that millions of Americans--many of whom are managed care patients--want smoother skin and sculpted waistlines. With 8.3 million women and men undergoing some form of cosmetic surgery in 2003, health plans are taking a closer look at this growing trend to better serve their members.

A small handful of health plans have ventured into this uncharted territory and are offering their members new cosmetic services that would have been unheard of five years ago. Two Blue Cross and Blue Shield plans are providing customers with discounted cosmetic services to a network of physicians, and Kaiser Permanente, making the boldest move in the industry, has opened new cosmetic centers throughout northern California that offer everything from chemical peels to facelifts for members--and non-members.

Cosmetic procedures are not the only non-traditional benefits being offered by health plans. Many insurers now routinely cover chiropractic care, and alternative medicine is quickly becoming a covered benefit. Other health plans are starting to offer discounts on LASIK surgery, gym memberships and subscriptions to health magazines.

Consultant Patricia Burgess says that offering these "value-added services" marks the dawn of a new era in managed care. "Many health plans are running out of ways to compete, and lifestyle benefits are one of the few areas still remaining that can differentiate a managed care organization from its competitor down the street," explains Ms. Burgess, of Atlanta-based Cosmetic Surgery Consultants and author of the book "Cosmetic Surgery Without Fear."

For now, health plans are cautiously entering the prosperous field of cosmetic services--an area of medicine that has been shunned by insurers for decades. But with demand for cosmetic procedures skyrocketing, health plans are taking another look at this growing market.

"Managed care organizations are doing this to be more member friendly," comments Ms. Burgess, formerly with U.S. Healthcare. "Health plans have a vested interest in doing this because they want to direct members to qualified doctors to prevent unsatisfactory procedures."

Ms. Burgess adds that many health plans are unknowingly paying for complications resulting from cosmetic surgery. As an example, she explains what happens when a rhinoplasty is unsuccessful. "If a CPT code comes through as a nasal valve collapse, the doctor or patient will probably not say it was the result of poor cosmetic surgery. It's just going to come through as a reconstructive cost to the company. If health plans can direct people to good-quality doctors to begin with, they will minimize the cost of corrective surgeries."

Cosmetic ventures

One of the earliest experiments to offer discounts on cosmetic services failed, however. UnitedHealthcare of Georgia offered discounts to members under a pilot project started in 1999. Plan administrators decided to reduce complications by developing a network of nearly 20 cosmetic surgeons who met certain quality standards. Under the program, United's members received discounted consultation visits to Burgess' company, which provides advice and guides people to a network of cosmetic surgeons and dermatologists who meet national quality standards.

While United never supported the program with an extensive marketing campaign, word still spread quickly to members. But after a few months, the program lost support when executive leadership changed hands at the company.

Undeterred by UnitedHealthcare's failed attempt, BlueCross and BlueShield of North Carolina kicked off a program in October 2001 to provide discounted cosmetic services. Eight cosmetic surgery practices participate in the network, and more than 2,200 members have called a toll-free referral line since the program's inception. The practices offer a flat 15 percent discount on surgery costs; anesthesia and facility expenses are billed at the full amount.

Another experiment with discounted cosmetic services provided by BlueCross and BlueShield of South Carolina enlists two established cosmetic surgery practices to provide discounted cosmetic procedures to its 1.4 million members. The discounts will average about 20 percent for eight common procedures.

BlueCross BlueShield of South Carolina also signed up Charleston Plastic Surgery, headed by Tracy Harvey, M.D., and Richard Hagerty, M.D. The health plan has not determined how many other practices it might add, comments Rick Gallion, director of complementary health care.

The program, which took effect in September 2002, offers discounted rates for eight procedures: facelifts, nose reshaping, eyelid surgery, breast reduction, breast lifts, tummy tucks, liposuction and Botox treatments. After the discount, an upper and lower eyelid surgery will cost members $2,915, and a rhinoplasty will be $3,575. It normally costs patients about $4,400.

"Cosmetic surgery is very popular right now, and we see this as another opportunity to add value to the insurance program that our customers already have," adds Mr. Gallion.

Kaiser's cosmetic enterprise

While the two Carolina-based Blues plans are offering discounted cosmetic services, Kaiser Permanente's doctors actually perform the services and collect the added revenue for the company.

For Kaiser Permanente, the large group-model health plan serving about 8 million members in nine states and the District of Columbia, offering cosmetic services has required its doctors and administrators to rethink how they provide care. Kaiser had never had a mechanism in place to provide fee-for-service medicine.

"As a non-profit organization, we have always been interested in quality healthcare for the patient, not in making money," says Kenneth Ellner, M.D., chief of dermatology at Atlanta-based Southeast Permanente Medical Group. "But more and more patients are asking us about procedures they read about or see on TV. They know and trust us, and prefer to have someone they know perform these procedures."

For the past eight years, Kaiser Permanente has offered some cosmetic procedures to patients at its facilities throughout the country. In Atlanta, Kaiser Permanente opened the Cosmetic Clinic last summer, offering the full gamut of cosmetic treatments.

In Los Angeles, another hotbed for cosmetic procedures, some facilities offer esthetician services such as mild chemical peels and microdermabrasion, while also selling skincare products. One clinic, run by dermatologist Myung-Moo Lee, M.D., provides laser treatment and Botox injections, sclerotherapy and laser hair removal.

But it's Kaiser Permanente's northern California region where the company has opened new clinics and added medical staff to meet the increasing demand for cosmetic services. The majority of its 22 facilities now offer cosmetic procedures, and within the next year all of them are expected to provide some level of cosmetic services, says Steve French, director of business development for the Permanente Medical Group. He estimates that as many as 20,000 cosmetic procedures have been performed in the past five years.

The clinics, called Kaiser Permanente's Centers for Cosmetic Services, offer nearly every cosmetic procedure found at a private doctor's office. Kaiser's doctors, nurses and estheticians staff the centers. Several lines of cosmetic products, which are otherwise difficult for patients to purchase, are available at the centers.

According to Michael McGuire, M.D., chair of the public education committee for the American Society for Aesthetic Plastic Surgery, Kaiser Permanente's cosmetic program has had virtually no impact on the market. He explains: "Because Kaiser's doctors are paid on a salary basis, there's not much incentive for them to perform a lot of cosmetic procedures, and its patient population tends not to be an affluent group who can afford cosmetic surgery from Kaiser or elsewhere."

Dr. McGuire adds: "Doctors who are not real plastic surgeons attempting to do cosmetic surgery have a much bigger economic effect on the market than Kaiser's program."

Whether Kaiser will become a major player in the cosmetic marketplace remains to be seen. The medical group still has big dreams for its cosmetic program. Since 2000, the company has opened four stand-alone cosmetic centers. Already, all four centers are profitable with annual revenue growth of 15 to 20 percent, says Mr. French. "It's possible in the next couple of years, we could see a few more centers open up in Northern California if there is demand for them."

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