Charting Thailand's future in medical tourism:
Market analysis by consulting firm McKinsey
By Jon Fernquest |
Today's Bangkok Post features an important report on the world medical tourism business by the consulting firm McKinsey & Company.
Out of the forecast 15.7 million visitors to Thailand this year, 1.4 million are projected to be medical tourists. By 2012 this is projected to grow to 2.5 million (Bangkok Post, business, B3).
There is tremendous potential in this market:
Given the price differences between the United States and developing markets [such as Thailand], it might seem that US payers - insurance companies and Medicare - stand to gain substantially by including treatment abroad in their coverage. But the US market and competitive dynamics are not so simple.
There are many reasons why people leave their own country and travel overseas for medical treatment. Sometimes the best treatment for their medical problem cannot be found in their own country. This is especially true for poorer countries with medical facilities that lack the latest technology such as Myanmar. In countries with universal healthcare coverage (e.g. European countries, Australia, Canada) often there is a long wait to receive treatment. Traveling overseas is then an option chosen for quicker treatment.
However, "lower costs for medically necessary procedures" is the neglected market segment with the greatest potential for development in the future:
...this segment has the greatest potential for growth. Since the price of treatment varies greatly around the world, patients can save significant amounts, depending on the procedure. An aortic valve replacement costs more than $100,000 in the United States, for instance, but about $38,000 in Latin America, and only $12,000 in Asia. US patients make up the highest proportion of the people in this group. In 30% of all cases, patients are travelling for orthopaedic care, and in 16%, for general surgery
There are still many problems to be solved in the implementation of global medical tourism, in mechanics of payments from insurance companies, for instance. There are also local issues to be addressed, such as the fear that the most highly skilled medical specialists in a country will no longer spend any time treating the people of their own country. This problem might be solved by training more doctors and nurse practioners in medical schools and increasing the supply of skilled medical practitioners.
Whatever the local problems are to be overcome, they are worth overcoming, since medical tourism is already a large market that promises to grow even larger. Health insurance is a major issue in the current US presidential campaign and the issue of medical insurance is slowly growing into a crisis in the US.
Here is the article in full:
Mapping the market for medical travel
10-06-2008
Bumrungrad and other Bangkok hospitals have helped establish medical care as a key element of Thailand's attractive tourism brand. Together, Thailand's innovative health services companies have helped awaken the world to the potential of globalising medical care.
Estimates of the size of the current medical tourism market vary, but most analysts agree that it has only begun to reach its potential. Today only a few thousand Americans, to choose one country, travel to receive medically necessary procedures. Given the high costs of health care in the US, that number could rise to 500,000 per year, saving the US US$20 billion in medical costs, and boosting health service providers in a variety of destination countries. What will it take to unlock the growth potential of medical tourism?
To answer that question, McKinsey & Company recently conducted a detailed survey of the nascent medical-travel market, interviewing hospital executives, patients and intermediaries in 20 countries, including Thailand. We segmented the market and examined the barriers to growth.
Five discrete segments
The largest segment in the medical tourism market, with 40% of all medical travellers, seeks the world's most advanced technologies. These men and women take their search for high-quality medical care global, giving little attention to the proximity of destinations or the cost of care. Most such patients travel to the United States.
With 32% of all medical travellers, the second-largest segment comprises patients who seek better care than they could find in their home countries, which are often in the developing world. Some of these people disregard costs to some degree; others are looking for higher quality at the best available price. Patients in this segment seek care in several different specialities, particularly cardiology.
The third-largest segment comprises people who want quicker access to medically necessary procedures delayed by long wait times at home.
While only 9% of travellers seek lower costs for medically necessary procedures, this segment has the greatest potential for growth. Since the price of treatment varies greatly around the world, patients can save significant amounts, depending on the procedure. An aortic valve replacement costs more than $100,000 in the United States, for instance, but about $38,000 in Latin America, and only $12,000 in Asia. US patients make up the highest proportion of the people in this group. In 30% of all cases, patients are travelling for orthopaedic care, and in 16%, for general surgery.
Patients seeking lower costs for discretionary procedures, such as breast augmentation and reduction, abdominoplasty/liposuction, or rhinoplasty, come mostly from developed markets, particularly the US. This segment is the most fragmented: patients travel to many smaller, specialised providers rather than to large, multi-specialty hospitals.
Much potential for growth
The medical travel market is significantly smaller now than it could be in the longer term. At an individual level, patients are discouraged from going abroad by the inconvenience of travel, and the natural desire to undergo medical procedures in familiar settings. The major institutional barrier is the inability of hospitals in medical travel destinations to enter the networks of the developed markets' payers, to work directly with insurance companies and other health care funders. A lack of transparent worldwide data on the quality of health care is another issue.
Given the price differences between the United States and in developing markets, it might seem that US payers - insurance companies and Medicare - stand to gain substantially by including treatment abroad in their coverage. But the US market and competitive dynamics are not so simple.
Continuity of care is a major consideration for patients suffering from chronic disease, and it's not clear how well a multinational approach to the delivery of care could address this issue. Besides, many procedures require follow-up treatment or additional operations, which should optimally be performed by the original surgeon. Furthermore, the unit cost of hospital care in the United States depends highly on the volume and overall capacity utilisation of a facility. If 10% of the eligible procedures in a hospital were performed abroad, the fixed costs of delivering its services might be absorbed by the remaining procedures - and therefore by the same payers that actually seek to lower their overall costs.
Other questions include how to give patients an incentive for travelling abroad, and how to increase their awareness of medical travel in the first place.
The medical travellers we interviewed were uniformly quite satisfied with their experience. They wouldn't hesitate to go abroad for care should they need it again and would strongly recommend that friends and family members do so as well. Some patients and family members were so pleased with what they perceived as the quality of care that they said they would seriously consider travelling abroad to get better care even if care were accessible and quickly available in their developed home countries.
Clear strategies
Top providers can offer treatment at a cost compatible with its perceived value, focusing on one or more patient segments, regionally or globally. Providers should focus on the variables they largely control, such as their local and international reputation, the credentials of their physicians, the outcome of treatment, and even the maintenance of infrastructure.
Successful providers offer services, such as translators and airport pickups, to ease patient worries, from travel hassles to cultural disconnects. In particular, successful providers reassure patients by giving them access to physicians ahead of time. Many medical travellers know more about their doctors overseas than about their doctors at home: they have the physician's CV in hand, have spoken with the physician, and receive assurances that during their stay they'll have 24-hour access to personal care from the physician.
The more advanced providers have systems and processes to accommodate the special demands of medical travellers. Some patients seeking quality care abroad, for example, arrive ready to pay in cash. The normal delays associated with billing won't do for these travellers - the provider must be able to expedite billing and track its progress so that patients can pay before leaving.
Implications for medical travel players
Established hospitals need to determine what steps they would take to capture the potentially large upside of medical travel sponsored by third parties. These providers should, for example, evaluate how much to invest now to prove conclusively that they provide adequate clinical quality, to pursue relationships with payers, to establish new facilities, and to accept malpractice exposure in originator countries.
Providers aiming to capture this market should develop strategies to counter each of the barriers to growth. Established providers cover the market fairly well, so the entry of new ones probably won't expand it substantially unless the barriers to growth fall. Entrants will therefore compete with established players largely within the current market framework.
The acceleration of unsustainable health care costs in many developed economies, and the increasing concentration of wealth in developing economies are only two of the factors fueling the growth in medical tourism markets. Over the next couple of decades, these trends may largely dispel the idea that health care is a purely local service.
Paul Mango is a director in McKinsey's Pittsburgh office and Chinta Bhagat is a partner and head of McKinsey's Singapore office. This article is adapted from one originally published in The McKinsey Quarterly, www.mckinseyquarterly.com. Copyright (c) 2008. All rights reserved. Reprinted by permission. For additional Quarterly articles related to this topic, see www.bangkokpost.com/mckinsey/
(Source: Bangkok Post, 10-06-08, page B3, Paul Mango and Chinta Bhagat of McKinsey, temp-link)
Vocabulary:
medical tourism, medical travel, health tourism - the rapidly-growing practice of traveling across international borders to obtain health care (See Wikipedia on medical tourism and health tourism provider)
medical treatment, treatment - providing medical care to someone
a patient - the person who receives medical care
mapping the market - describing the market in detail
Bumrungrad - Southeast Asia's largest private medical center, established in 1980, an industry leader in medical tourism (See Wikipedia and website)
McKinsey & Company - a global management consulting firm that focuses on solving issues of concern to senior management in large corporations, organizations, and governments (See Wikipedia)
implementation - putting a plan into action, execution of a plan, making sure that something that is planned actually gets done (See glossary)
overcome a problem - find a solution to the problem so that the problem is not a problem anymore
a practitioner, a medical practioner - a doctor or a nurse practitioner
a nurse practioner - nurses with special advanced training that perform some of the functions of doctors (See Wikipedia)
establish - create (to last for a long time)
a key element of - an important part of
awaken the world to the potential of globalising medical care -
potential - capable of developing into something, has great possible benefits (See glossary)
unlock the potential - take steps to develop something promising
unlock the growth potential - take steps to make the business grow
greatest potential for growth - is the most promising for business growth
health service providers - organisations like hospitals and clinics that provide medical treatment to patients
boosting - increasing (business)
specialised providers - hospitals and clinics that treat only certain diseases and medical problems, such as heart disease, or orthopaedics (bones, muscles), so they have advanced "specialised" knowledge in this area
nascent - just started and expected to grow bigger
nascent medical-travel market - a new market that has just started to grow
a market segment, a segment - a smaller market with specialised needs within a larger market (See glossary)
patient segments, patient market segments - patients grouped by their different needs
segmented the market - split a larger market into smaller markets of customers who share common needs
destinations - places you travel to
proximity of destinations - nearness of travel destinations
X comprises Y - X has as its members Y
disregard costs - ignore costs, not treat costs as important
make up the highest proportion of the people in this group - are the highest percentage of people in this group
orthopaedic care, orthopedic surgery, orthopedics - medical treatment on bones (skeleton) and muscles, including surgery for injuries (See Wikipedia)
discretionary - not fixed by rules, decided case-by-case by authorities
discretionary procedures - medical procedures that are not automatically covered by an insurance policy
augmentation - making bigger
abdominoplasty, tummy tuck - surgery to make the stomach (abdomen) more firm, removal of skin and fat, for example, when there is loose tissue after pregnancy or individuals with sagging stomach after major weight loss (See Wikipedia)
liposuction - surgery that removes fat from the body, including abdomen, thighs, buttocks, neck, backs of the arms (See Wikipedia)
rhinoplasty - surgery to improve the appearance of a person's nose, or to reconstruct a nose when damaged, nose reshaping (See Wikipedia)
an institution, a social institution - a system or way of doing things that has been used for a long time in a society
an institutional barrier - the difficulty of changing longstanding ways of doing things
networks of the developed markets' payers - medical costs in countries like the United States are paid by insurance companies and the government (Medicare, Medicaid), and these payers are connected by a network with standard procedures for billing, etc.
health care funders - the insurance companies that pay for medical treatment
transparent worldwide data - publicly available information from around the world
Medicare - the medical insurance program in the US providing medical care for people over 65 years old (See Wikipedia)
stand to gain - possible to gain from doing this
coverage, insurance coverage - the medical treatment paid for by a medical insurance policy
including treatment abroad in their coverage - their insurance policy includes medical treatment in foreign countries
continuity of care - maintaining medical care without any breaks in time
a major consideration - something important that must be thought about before making a decision
chronic disease - a disease a person has for a long time
address this issue - deal with this problem, try to solve this problem
follow-up treatment - continuing treatment, after the first initial treatment
optimally - the best way possible
volume - the amount of activity during a period of time
capacity - the most that can be produced with the machines and factory (resources) that already exists
capacity utilisation - the percentage of capacity that is being used (for example, during an economic slowdown, consumers aren't buying much so factories don't produce much)
facility - buildings, equipment, or services provided for a special purpose (See glossary)
fixed costs - the money used to run a business that is the same no matter how much is produced (for example, the costs of running the headquarters of a large corporation)
fixed costs absorbed by Y - fixed costs paid for by Y
an incentive - a reward to make people behave in a certain way (See glossary)
increase their awareness - make more people know more about a subject
wouldn't hesitate to go abroad - would easily leave their country to travel to another country (no fear)
perceive X as Y - see X as being Y, be of the opinion that X is Y
perceived as quality of care - feel that the medical treatment was of high quality
accessible - people can get it, if they want it
X compatible with Y - X and Y can exist together, go well together, work well together
reputation - to be known or remembered for something, to be thought of as good or bad
credentials - previous training, experience, and achievements that show that they are qualified to do something
an outcome - the situation after an activity or process is completed
outcome of treatment - the condition of the patient after medical treatment
travel hassles - problems and annoyances while traveling
cultural disconnects - misunderstandings and problems when living in a different culture
reassure patients - stress once again to a patient that there is nothing to worry about
receive assurances - patients are told not worry (perhaps backed up by guarantees)
billing - sending a "bill" to a customer with a list of money for goods and services purchased
expedite - cause to do more quickly and efficiently (See glossary)
expedite billing - make billing go more quickly and efficiently
track - follow changes and movements in something (for example, track a bear in the forest, track the student's progress over the course of a year)
track its progress - follow the achievements of someone to see how well they are doing, and whether they will reach their goals
the upside of medical travel - the benefits of medical travel, the good side
medical malpractice - an act or omission by a health care provider which deviates from accepted standards of practice in the medical community and which causes injury to the patient, in some countries doctors can be sued for this (See Wikipedia)
exposure, exposure to risk - the possibility that some bad thing will happen to you
malpractice exposure in originator countries - the possibility that legal action might be taken against a doctor in the home country of the patient
counter - act against
develop strategies to counter each of the barriers to growth - make plans to eliminate the problems that prevent growth
