by Paul D. Mango and Chinta Bhagat
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 globalizing 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 some 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?
In effort to answer that question, McKinsey & Company recently conducted a detailed survey of the nascent medical-travel market, interviewing hospitals, 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 percent of all medical travelers, 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 potential destinations or the cost of care. Most such patients travel to the United States.
With 32 percent of all medical travelers, 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 specialties, 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 percent of travelers 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 at a provider in Latin America, and only $12,000 at a provider in Asia. US patients make up the highest percent of the people in this group. In 30 percent of all cases, patients are traveling for orthopedic care, and in 16 percent, 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 United States. This segment is the most fragmented: patients travel to many smaller, specialized providers rather than to large, multispecialty 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’ payors, 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 procedures in the United States and in developing markets, it might seem that US payors--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 utilization of a facility. If 10 percent 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 payors 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 travelers 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 traveling abroad to get better care even if care were accessible and quickly available in their developed home countries.
Successful hospitals have 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 travelers 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 travelers. 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 travelers—the provider must be able to expedite billing and track its progress so that patients can pay before leaving.
Implications for players in the medical-travel market
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 payors, 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/
