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1995 Innovation Optimas Award ProfileBRHotel del Coronado

May 1, 1995
Related Topics: Innovation, Health and Wellness, Featured Article
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As the oldest resort in San Diego, the Hotel del Coronado has been innovative since opening on February 19, 1888. The Hotel Del, as locals call it, is one of the world's largest wooden structures, sprawling over 33 beachfront acres. When it was built, the hotel was the largest structure outside New York City to be electrically lighted. In fact, Thomas Edison himself supervised the installation of his incandescent lamp invention. (He returned in 1904 to throw the switch on the hotel's first electrically lighted Christmas tree.)

Throughout the years, the resort has been the locale of choice to honor other pioneers, such as Charles Lindbergh after his solo flight over the Atlantic. And because it's only 16 miles north of Mexico, the Hotel Del has hosted several summits between American and Mexican presidential leaders.

In March of this year, during a ceremony at the John F. Kennedy Library in Boston, Personnel Journal had a chance to honor the hotel's human resources department for an innovation of its own — the creation of the first Mexican-based HMO. In accepting the Optimas award, Jerry Ramsdale, senior vice president, director of human resources — who pioneered the project — proclaimed that innovation is a proud tradition at the hotel.

But it's the hotel's 1,300 employees, Ramsdale said, that gives him and other managers at the resort their greatest pride. "We feel we get tremendous loyalty from them, and in turn we owe them something," Ramsdale says. Which is why, four years ago, when the hotel learned it was providing inadequate health care for some of its workers, Ramsdale began a crusade to correct it. The hotel had just switched from an indemnity health-care plan to a Blue Cross HMO for its nonunion workers, "to be able to offer a better plan with more extensive coverage that would cost the company less," Ramsdale says.

The HMO seemed an ideal program for both the company and the employees. There was one problem, however. The hotel employs more than 200 immigrant Mexicans (former Mexican citizens who have become legal residents of the United States), many of whom choose to live south of the border. And although these workers hold green cards that allow them to work in the United States and give them unlimited border-crossing privileges, some of their family members, who are Mexican citizens, don't have that option. With the indemnity plan, it was no problem. People could use any health facility they chose, north or south of the border. But with the HMO, employees and their families would have to use hospitals and doctors that belonged to the Blue Cross plan — all of which were in the United States.

Ramsdale promised the immigrant employees that he would do his best to remedy the problem. "We've always felt at The Del that we have an obligation to provide our employees with benefits that are as good as we can afford to provide them," Ramsdale says. "We particularly dislike the idea of not being able to provide for one group of employees something that we're able to provide for another group."

Solving the problem proved more difficult than Ramsdale imagined. But he didn't give up, and the resulting HMO that he established with a Mexican health-care service company not only solved the hotel's problem, but has impacted businesses up and down the Mexican border.

The search for solutions led to many dead-ends.
The first thing Ramsdale did was ask his Mexican staff what the biggest insurance company is in Mexico. They told him of La Republica, a national insurance company based in Mexico City. Ramsdale contacted La Republica's nearest office in Tijuana, the town that borders San Diego. The company sent a representative to the hotel to meet with him. The HR executive asked the company what it could provide to the hotel's Mexican employees and their dependents. The representative informed Ramsdale that the company provides private insurance only. And the insurance that it provides didn't meet the hotel's standards. For one, the insurance company said it would have to approve each employee individually based on his or her health, and then repeat the process each year. So if an employee gets sick one year, the insurance company could choose not to renew his or her policy the next. Another problem with La Republica's insurance coverage was that it would require large deductibles from the employees. And to make matters worse, the employees would have to pay their own bills when receiving any services, then wait for the insurance company to pay them back.

Certain that this wasn't the route he wanted to take, Ramsdale then contacted the hotel's insurance broker in California, who recommended that he contact an insurance company called El Groupo de Kennedy in Mexico City. "This fellow came in from there and basically explained to me what I had already heard from La Republica about how Mexican insurance works," says Ramsdale. When the HR director suggested doing it differently, he says the man looked stunned. "The company just had no sense of anything that would be new and fresh," he says.

Knowing by now that he would get nowhere with insurance companies, Ramsdale contacted the administrators at some of the major hospitals in Tijuana. They would agree only to set up a fee-for-service plan. "I'm a trustee for a union health plan and I learned a long time ago that [this type of system] allows for abuse," says Ramsdale. "A company has no way of controlling the costs, it has no way of knowing if the fees being charged are feasible. A company simply can't open itself up like that."

Ramsdale explained the capitated system used in the United States to the administrators, and even asked if they would like to talk to some American-owned insurance companies to confirm that it works. As with the Mexican insurance companies, however, the hospitals simply weren't interested in trying anything new. "It seemed that there was no solution to this problem," Ramsdale says. "No one was interested in any sort of capitated approach because they had never done it before."

And then Ramsdale saw an advertisement in a San Diego newspaper informing Americans living close to the border that less expensive health care was available at the new Hospital del Rio in Tijuana. The ad was put out by Servicios Medicos Internacionales (SMI), a Mexican-owned and operated health-service provider that had facilities within the Hospital del Rio. As a last hope, Ramsdale contacted SMI.

This was the right move. SMI already had started putting together an insurance policy arrangement that was close to what the Hotel del Coronado was looking for. However, the program was age-rated and health-rated and, according to Ramsdale, had all kinds of exclusions. Ramsdale explained the type of plan he wanted: That the company would pay SMI so much per employee per month regardless of health care received. Because the company already was interested in offering insurance to corporations, it was willing to try the arrangement that Ramsdale suggested. Says Tor Ewald, director of marketing for SMI: "We had been dealing mostly with individuals at that point, but through that service we had enough administrative systems in place to offer the HMO. In fact, things had already been put together to start accepting corporate clients, and when Jerry came along we were already open to that kind of business idea. The hotel was the first company willing to take that risk with us."

Ramsdale gave SMI a list of the hotel's Mexican employees and their dependents, and asked the company to come up with a figure for coverage. SMI came back with around $100 a month for individuals or family units. Because families average 4.5 kids in Mexico, this coverage was for an average family of 6.5 people. At $100, the cost was only approximately one-third of what the hotel was paying per family for the American-based Blue Cross HMO, which was approximately $400. SMI has raised their rates by $5 since that time, but, with the devaluation of the peso, Ramsdale doesn't expect — nor would he pay for — another increase soon.

After agreeing on a price, SMI and Ramsdale negotiated coverage. SMI originally wanted to exclude AIDS, for example, but Ramsdale explained that was considered discrimination in the United States. Within a couple of months, the two parties came up with a workable plan and the program was put in place in 1991.

The new HMO saves the company, and employees, money.
Here's how the SMI plan compares to the American-based Blue Cross plan. The hotel offers both plans to employees free of charge. For the American plan, Hotel Del charges employees $30 a month for one dependent and $60 a month for a full family. For the SMI plan, the hotel charges employees $14 for one dependent and $21 for a family. "Because it costs us less, we charge the employees a lesser proportion as well," Ramsdale says.

In addition to the lower premium cost, the Mexican-based plan requires no copayment for most services performed, unlike the Blue Cross plan for which employees must pay $20 per office visit to both their gatekeeper doctors and to any specialists to whom they're referred. Employees in the American plan also must pay a copayment for prescriptions, whereas prescription drugs are free in the SMI plan. In fact, most prescriptions are dispensed to patients right in the Mexican hospitals. Also, the Mexican plan includes dental care, which is taken care of in the same facilities as well.

Other coverage in the SMI plan includes prenatal care, psychological care, vision care and emergency care out of the area. If an employee gets into a car accident in San Diego, for example, and must go to a local hospital, he or she would be covered.

Within Mexico, employees enrolled in the SMI plan go to SMI's facilities within the Hospital del Rio to see their primary-care doctors and their dentists, and for the pharmacy. If they need emergency service, they go to Hospital Ingles, also in Tijuana, which SMI owns. SMI also contracts with other facilities in Tijuana and in Mexicali, and will be opening a facility in Juarez, the Mexican town bordering El Paso, Texas, shortly — all of which employees and their family members enrolled in the plan have access to.

Maria Luisa Huizar, an employee of the housekeeping department who has been with Hotel Del for 18 years, likes being in the SMI plan for its hospitals' convenience. She lives in Tijuana, so she's able to make appointments for the mornings, evenings after work, or on her days off.

Although Irma de Anda lives on the U.S. side of the border, the engineering employee also likes the convenience that SMI offers her. The close proximity of Hospital del Rio to the border enables her to reach it quickly, without getting caught in the traffic of downtown Tijuana. As a single mother with a young daughter, however, her main reason for joining the plan is the price. "Medicine is much cheaper," she says, "so even if I do have to put up with a line at the border [to get to the facilities], I don't mind because I get compensated a great deal."

De Anda, who has worked at the hotel for 16 years, says she's been happy with the service she gets through SMI. "They have very good doctors and dentists, and they cover everything you might need. If they don't have something you need, they'll get it or they'll send us where we can have that kind of service."

Huizar agrees that the service she receives through the plan is as good as any. "I had an accident a couple of years ago, and everyone was very accommodating. They really helped me for a long time while I was in the hospital. I got a lot of support from everybody."

Despite these employees' good experiences, there were some problems with the program in the beginning, as can be expected with any new system. Some employees complained that it was difficult to access the hospital after certain hours, and that the hospital was understaffed. There were complaints about some of the doctors not being as friendly as the others, and about a receptionist who, as Ramsdale puts it, "was on a power trip, and was anxious to protect the doctors from what she felt were unreasonable requests, resulting in her being cold and distant with the employees."

Some of the complaints came out of unrealistic expectations of the employees — such things as expecting the doctor to see four children on one visit when an appointment was made for only one child. But for all the legitimate problems, SMI made every effort to correct them. It added the Hospital Ingles, for example, to accommodate late-night emergencies, and trained or fired doctors and receptionists that gave bad service. "Although SMI had no competition — they were the only thing we could do, period — they never treated us as a captive audience," says Ramsdale. "They always made every effort to try to do something about the problems."

Ewald explains why. "For the first time, Mexican facilities were dealing with an American client that expected American standards of service. Having the Hotel del Coronado as a client, which wants its employees taken care of and is accustomed to American HMO customer service, requires SMI to react quickly to its requirements. That's the only way SMI would be able to grow."

In the American tradition, SMI now has customer-service departments, so if a member has a problem, they have someone to talk to. It also has a survey sheet it gives each person who comes for service. The patients are asked to mark Excelente (excellent), Muy Bueno (very good) or Malo (bad) for several different aspects of service. For example, the sheet asks if the patient's appointment was kept, if the doctor treated the patient well and if the pharmacy provided satisfactory service. "Every sheet that doesn't have an Excelente marked by every question goes to a customer-service person who calls the patient who filled it out and asks him or her why it wasn't excelente and how it can be made better," Ewald says.

The SMI plan started a trend that could be the wave of the future.
Although SMI was quick to ensure customer satisfaction when it was the sole provider of a Mexican HMO, it now has even more reason to do so. Since it has proven that the system works — and works well — other American individuals and organizations have contracted with Mexican hospitals in Tijuana and other border cities to provide HMOs. Hotel Del itself has signed on with two of the newer plans for its nonunion employees: Sistemas Medicos Nacionales (SMN) and Meca Internacional, S.A. De C.V. (Meca). "I added them primarily to give those employees who were complaining an option and some control over what they had," says Ramsdale. The hotel also added the SMN plan for its union workers.

The hotel has approximately 110 employees enrolled in the three plans. Adding in their dependents, that's somewhere around 500 people being serviced by these Mexican HMOs.

Having all three plans creates more competition and thus even better service. For example, when SMN came on-board, it included a provision to pay up to $2,000 of the cost of giving birth in a U.S. hospital — a benefit important to some Mexican employees because if a child is born in the United States, he or she automatically is a U.S. citizen. To keep people from transferring to this plan solely for this reason, SMI added a $3,000 U.S.-birth benefit.

The multiple plans also provide employees greater flexibility. The Meca plan, for example, offers a luxurious hospital on the beach in Tijuana that serves healthy foods with alfalfa-based liquids, is decorated with tropical fish-filled aquariums, and provides doctors with vibrating pagers so as to avoid paging people over the loud speakers. The SMN plan allows access to the greatest number of hospitals, including the largest and most well-respected hospitals in Tijuana. Ironically, a few of these hospitals were the same ones that Ramsdale approached in his initial quest to set up an HMO in Mexico. "It just had to be done once," Ramsdale says. "Once the other hospitals saw that this plan was working and that SMI was making money, they were willing to try it when the next person approached them to set up an HMO."

SMI indeed has profited from the arrangement. Ewald says since the Hotel Del has been with SMI, the company has been able to purchase the Hospital Ingles, open facilities in Mexicali, hire more people, buy more computers and grow quickly to facilitate new clientele.

That new clientele is employees of more than 100 businesses in the San Diego area. "A lot of companies in San Diego employ Mexican immigrants who live in Mexico and cross the border every day," Ewald says. "The health plans that are available in the United States don't address the concerns of these people. Their families are in Tijuana or elsewhere in Mexico; oftentimes they speak only a little English, and the health care is too expensive."

These are all reasons why the National Steel and Shipbuilding Co. (NASSCO) joined both SMI and Meca. Like the Hotel del Coronado, NASSCO converted from indemnity health-insurance plans to HMOs for its 4,000 employees back in 1993. The new plans offered coverage only at U.S. facilities. "We knew we had employees who were commuting from south of the border, so we wanted to make sure we provided for them and their families," says Steve Gould, manager of employee benefits. Because the company requires all workers to have a U.S. address, however, Gould isn't sure exactly how many employees actually live in Mexico. He estimates it's between 200 and 300, although other people tell him it's probably more. "We have approximately 1,500 people in the shipyard with Hispanic surnames," Gould says. "Some live in Mexico and commute daily, and some live in the San Diego area."

Regardless of how many, Gould says that the company "wanted to find something reasonable in Tijuana that not only would allow those families to go to medical providers in Mexico, but also save us a little money." Gould had heard about the SMI plan set up with the Hotel del Coronado, and contacted the resort to find out about getting the service at NASSCO. At the time, the Meca plan was just getting off the ground, and representatives from it contacted NASSCO directly after hearing the company was interested in a Mexican HMO.

Currently, approximately 170 employees are enrolled in the two Mexican HMOs: about 90 in the Meca plan and 80 in SMI. That number is growing. When NASSCO first began offering the plans only 60 employees joined them. Some of the growth can be attributed to hiring the company has been doing, but Gould says most of the growth comes from word of mouth. "People wanted to see the plans get started and see what other employees thought about them before they made a commitment to getting their medical care in Mexico," Gould says. He believes that there even are some employees who, now that they know they can get medical care in Mexico, have decided to move back there. Because they earn U.S. wages, they can afford more housing in Mexico than they can on the north side of the border.

Part of the appeal of the Mexican plans for the Mexican immigrants is the opportunity to receive care administered via their own culture. For example, Ewald says that in Mexico it's customary for patients to spend a lot of time with their doctors. So at SMI's facilities, doctors spend at least 20 minutes with their patients. "The patient is in the doctor's office, the computer is in the doctor's office, and the doctor is in the doctor's office," Ewald says. "That is what our clientele is accustomed to. So SMI has been able to mix the Mexican culture with American management."

Sometimes the Mexican culture clashes with what's standard in the United States. Ramsdale relates how one of Hotel del Coronado's employees in the hospital was dying but the doctor wouldn't tell the employee this because the family didn't want him to know. "I got irritated with that because I thought the employee had the right to know," says Ramsdale. "But over there, it's whatever the family wants."

For the most part, however, it's the little things that make a big difference to the Mexican workers. "They like the fact that the hospitals are close to relatives so they can come visit, and that the doctors all speak Spanish," Ramsdale says.

Martha Zendejas, a hostess in Hotel Del's Crown Room restaurant who speaks fluent English, says it best: "If I'm dying, they can tell me 'you're dying' in Spanish and I'll understand that."

Although Zendejas lives in the United States, she says she has never been in a hospital here because she feels more comfortable going to Mexican hospitals. Because of this, she's currently facing a dilemma. Pregnant with her first child, she must decide whether to give birth in the United States, thus granting her child American citizenship, or use her doctor in Mexico, whom she says she loves. "I would have to change doctors, but I wish I could keep my doctor because she's very nice and the hospital [Hospital Guadalajara under the SMN plan] is great," Zendejas says.

Zendejas has had a difficult time with her pregnancy, and has greatly appreciated not only what she considers excellent care, but the ease with which she's able to get it. Ramsdale, who because he's at the executive level has a choice between an HMO or an indemnity plan, is an HMO member for the same reasons. "I'm perfectly happy to be referred to a qualified doctor, and if I don't like that doctor, I can choose another one," he says. "And I really like the system of no paper work. I go in, plunk down $20, and whatever is broke is fixed."

Ramsdale believes that HMOs are the wave of the future throughout America, or at least should be. Ewald thinks that wave will splash across the border as well. Mexico's current system of socialized medicine, Ewald says, is "bankrupt, isn't providing quality service and is full of corruption. The people of Mexico would rather have a program more like American health care."

Already the Mexican-based HMOs have spread to American companies in other towns along the border, including several in Texas. And some Mexican organizations are buying into the system as well. Mostly they are Maquilladoras: large companies that have twin factories on either side of the border that enable shipment of parts back and forth without paying duties. SMI recently also developed a domestic program for Mexican employers that may catch on as well. And in just the four years since SMI and the Hotel Del partnered to create the HMO, SMI has become the largest privately held health-care institution in Mexico.

It's amazing how much impact one innovation can have. Surely Edison, as he ignited the glow of Hotel Del's electric bulbs, could only speculate as to the enormity of his invention. Someday, Ramsdale will know the full effect of his.

Personnel Journal, May 1995, Vol. 74, No. 5, pp. 38-49.

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