Medical Tourism - A Bypassage to IndiaIn E.M. Foerster’s “A Passage to India,” the conflicts between British aristocracy and the Indian professional class was explored. It was a difficult story, highlighting pride, prejudice and institutionalized bias.
These days, however, passages to India (and Singapore, Argentina, Belgium and Thailand, among others) mean something entirely different for hundreds of thousands of people (about 60,000 of them, American). Instead of looking down on the native citizens, these intrepid travelers are seeking to have the native citizens save their lives, fix their knees or lift their faces. Medical tourists come from all over the industrialized world – including from countries with government-run health care, countries with relatively poor health care infrastructures and, in the case of the U.S., places with exorbitantly expensive health care systems.
The Underlying ReasonsWhy do they make the trek? The reasons are different for each group. In Canada and the U.K., for example, long waiting times for surgeries encourage those with sufficient financial resources to look for alternatives. In countries with relatively poor health care infrastructures, quality is the driving force for those with money. In the U.S., finances are also a driver, but in a different way.
U.S.-based medical tourists fall into three predominate categories (a) those seeking elective procedures that are not covered by their insurers, (b) those seeking necessary procedures and are provided with incentives to seek lower cost options, and (c) those who, for whatever reason, cannot secure insurance.
Where do they go? It depends on the procedures and the physicians. Cosmetic procedures are easily found in Latin America, complex heart and orthopedic procedures are more common in India, Thailand and Singapore, and specialists in in-vitro fertilization can be found in South Africa, Israel and Spain. Nearly every specialty, from vasectomy to oncology, can be found, at bargain prices, at a center somewhere in the world.
The IncentivesThe incentives for medical tourism fall into two categories – time and money. In the case of public health systems with long delays, time is the motivation. These medical tourists are choosing to pay for a procedure that would be cheap or free in their home environments, but is essentially inaccessible due to express or implied rationing of care.
For U.S.-based medical tourists, money is the prime motivation. For the uninsured or the cosmetic procedure, savings of 50-90 percent are common – and those savings include transportation costs, recovery time and, oftentimes, travel and lodging for close family members. For the insured, primarily those covered by organizations that self-insure, financial incentives might be offered. For the middle-class worker, those incentives can be significant, and can include reduction or elimination of deductibles, cash payments and sick or vacation time compensation, among other things.
Generally, these patients are offered a choice: their standard coverage with deductibles, exclusions and strict limitations on hospital stays and drug formularies; or medical tourism with no deductible, inclusiveness, cutting-edge procedures, and flexibility in stay durations and drug formularies. When employers offer these options, particularly for non-life-threatening procedures, employees with limited discretionary incomes are clearly incentivized to consider the medical tourism option.
QualityWhen professionals close to the health care industry consider medical tourism, quality is among the primary concerns raised. Offshore hospitals address these concerns by seeking and obtaining accreditation from organizations such as Joint Commission International (JCI), a subsidiary of the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) – the same organization that offers accreditation to U.S. hospitals. Quality measures used domestically, oftentimes number of procedures performed, can easily be met by these facilities, who offer their services on a world stage. Many hospitals that offer medical tourism meet or exceed the standards of care of the finest hospitals located in the United States.
Physicians at facilities catering to U.S. patients are oftentimes U.S. trained – and in fact were often top U.S. physicians before being lured back to their home countries. For example, Dr. Naresh Trehan, an authority on robotic cardiac surgery and formerly of New York University, is a founder of Escorts Heart Institute in Delhi, India. The number of repatriated, U.S.-trained physicians is increasing, as the business of medicine in the U.S. has become more difficult and competitive, and as relative salaries (i.e., salaries compared to costs) and quality of facilities in foreign jurisdictions has increased.
Furthermore, the lower cost structure of overseas hospitals allows them to be more generous with resources – at least for their well-paying clientele. Nurse-to-patient ratios are higher, private rooms are readily available and family members are often included in the trip and made quite comfortable. Some facilities more closely resemble first-class hotels than they do hospitals – and offer luxury amenities to their patients and families.
Why the Difference?
At first blush, most in the industry blame the high cost of the medical malpractice system for the cost differential between domestic and international programs. However, medical malpractice is only one of many reasons for the cost differential. The familiar list of health-care woes adds to the cost of care, including operating efficiency, pharmaceutical costs, executive compensation, disparities in insurance coverage, union requirements, the requirement to provide care to indigents and emergency room and trauma care. Many of these pressures are reduced or eliminated in these private offshore hospitals.
Since most highly regarded U.S. hospitals are located in major metropolitan areas – areas with high real estate and labor costs – the cost basis (without adjusting for efficiency) for U.S. centers of excellence can be substantially greater than the cost basis of a similar facility in India, Thailand or South America.
With a substantially lower cost profile and a greater ability to control its patient intake and costs, it is no wonder that these facilities can offer care at between 10% and 50% of the cost of domestic care – and can offer such care with panache.
Malpractice and the Risks
One of the commonly raised concerns is the lack of access to medical malpractice. In many countries, including India and Thailand, malpractice exists, but offers little if any compensatory portion. In addition, exercising one’s rights through a foreign legal system is a daunting proposition, at best.
However, one must ask what the “insurance value” of a potential malpractice claim may be. After all, malpractice claims are not a sure thing domestically. Furthermore, they are time and energy intensive and are subject to sizable transactions costs for the patient arising primarily from legal contingency fees. For an uninsured or underinsured person facing a $100,000 heart bypass procedure, having a sure savings of $80,000 (assuming an 80% cost differential) may prove more valuable than protecting a malpractice claim that could take months or years to resolve, incur substantial legal fees and is somewhat speculative. In many cases, medical tourism makes economic sense.
Complexity vs. SimplicityTo many, it may seem daunting to board a jumbo jet and fly halfway around the world for surgery – far more difficult and complex than simply going down the street to the local Heart Institute. It may be, however, far simpler than going to a local hospital. It is, after all, a direct economic relationship between the hospital and the patient, and is met with few intermediaries extracting value from the relationship.
Compare that to domestic care, where each component of the system extracts value from each interaction between the system and an individual. Be it staff, hospitals, pharmaceutical companies, insurers or patients themselves, value is drawn away from the doctor-patient relationship at every turn. Going to one’s local hospital has, instead, become a difficult, complex, multi-part transaction that often leads to aggravation and frustration and contrasts poorly to first-class service offered by these offshore providers.
The Economic Effect on U.S. Hospitals
Should the phenomenon of medical tourism continue to grow as it has in the past, it will create many challenges for domestic hospitals. First among these is the loss of high-profit procedures. Certain expensive procedures – particularly elective or those offered to the wealthy uninsured – offer hospitals substantial margins. Without opening the debate as to the use of monies generated from such procedures, one can still understand that a significant loss in the numbers of such procedures could prove troublesome for U.S. hospitals. Add to that the fact that U.S. hospitals will likely be the provider of lower-margin follow up care, further stretching their thin resources.
Growth in medical tourism will also put pressure on hospitals to become, at the same time, more economically efficient and more patient focused. While this may prove good for patients, it may require a substantial shift in management focus – and in compensation structures, particularly for highly compensated, non-patient facing staff. If the historical response of other domestic industries to global competitive pressure is any guide, hospital management will have its work cut out for it.
While some self-insured organizations have been exploring medical tourism, the large insurance market has been slow to dip its toes in these waters. That is understandable, as the channel conflict between their current provider networks and low-cost offshore providers could prove significant. However, as self-insured organizations continue to look for ways to reduce their costs, and as they continue to seek their third-party administrators (TPAs) to look for additional savings, one can expect that large insurers will begin to wake up to medical tourism. Given these payor’s focus on costs and premiums, it will only be a matter of time before offshore facilities become part of their provider networks.
It is interesting to contrast the adverse effect that medical tourism has on domestic hospitals to the positive effect that it may have on hospitals in single-payer environments, such as Canada and the U.K. Medical tourism in those jurisdictions is primarily the result of “queue jumping” or trying to bypass the long waiting lists for specific procedures. In some cases, in fact, Canadian provincial governments reimburse medical tourists for their procedures. Reducing the queue is good for hospitals, as it reduces frustration with the system, and is even good for those who remain in the system, reducing their queue times.
Market Responses
One can foresee a number of responses to the challenges presented by medical tourism. These responses come from all sides of the debate. Different interest groups will attempt to offer solutions or restrict access to expand or protect their markets, respectively.
Already, companies have sprung up that assist U.S. citizens in planning their medical journeys abroad. These companies offer assistance in selecting a hospital, planning the trip (both medical and recreational aspects), payment terms and follow up. One can expect more of these organizations, either associated with a hospital corporation, an insurer or acting independently, to develop over time. As more businesses enter the support function for these services, additional information will be available to the marketplace, allowing potential patients to make better, more informed decisions.
Expect hospitals to learn from the prescription drug industry in its fight against drug imports, and focus their public statements on the risks created by medical tourism. It will be branded as a “dangerous exercise” where the patient is literally putting their lives in the hands of “a foreign doctor.” In addition, the hospital industry will likely band together to assist a certain segment of the population lower its costs (much like pharma’s recent prescription drug initiatives).
On the legislative front, expect hospitals to exert substantial pressure – particularly at the state level – to restrict insurer’s abilities to cover medical tourism procedures. In this environment, hospitals will focus on their vital community function – and will assert that medical tourism is eroding the public health sector and is against sound public policy. In addition, look for lobbyists to tie restrictions on medical tourism to tax breaks given to large-scale businesses moving into their jurisdiction.
On the more hopeful front, certain small-market hospitals may look to burnish their national reputations for specific procedures. If, for example, a heart bypass can be offered for a substantial discount at a domestic hospital in a small- to mid-sized city, patients may see this as a far less risky option than going to Asia for a procedure. To accomplish this goal, however, specialized physicians must be willing to relocate and develop a practice in such a city, something that has not occurred regularly in the U.S.
It would be unwise, however, to assume that the offshore hospital industry will stand still. To address concerns raised in the debate, expect more offshore hospitals to seek and obtain additional high-level accreditations and certifications from international accrediting bodies. As the volume of the debate increases, expect that offshore providers will ramp up their own public relations campaign – and will likely highlight their key virtues and differentiators, including U.S.-trained physicians, high nurse-to-patient ratios, state of the art facilities, lower cost and a great vacation to boot. For many, this could prove to be a compelling argument.
The offshore hospital industry may also begin offering “complication insurance” which would offer a fixed amount of compensation in the event of a complication. It could operate much like travel insurance, where a patient could buy, say, $100,000 of insurance for a particular premium pre-procedure. Should a listed complication arise, they would be able to collect the benefits, without the long, difficult and expensive prospect of a malpractice claim.
Insurers have only begun to respond to medical tourism. Currently, small “mini-med” TPAs are getting into the act. United Group Programs, of Boca Raton, FL, offers a limited-coverage plan and includes Bumrumgrad Hospital, in Thailand, as part of its network.
Large insurers will likely begin to enter the market by processing claims for procedures authorized by self-insureds. Once they learn the market, however, it is foreseeable that insurers will offer medical tourism options to their more traditional indemnity customers. Having relationships with offshore providers will, no doubt, provide substantial negotiating leverage during provider contract discussions. Furthermore, when combined with consumer-directed health plans, where consumer decisions are expected to be influenced by cost and quality measures, the better offshore hospitals may offer unbeatable value propositions.
While it may prove legally or commercially difficult for insurers to compel their members to use offshore healthcare providers, it is unlikely that legal challenges will be successful in preventing insurers from offering the option – and substantial incentives to use it.
Conclusion
Whether U.S. citizens embrace medical tourism in great numbers remains to be seen. The local doctor and local hospital are powerful draws. American’s unshakable belief, whether true or not, that our system offers the best care in the world may keep many of us from seriously considering this option. However, in a world where each of us is asked, daily, to accept more and more globalization, be it on our telephones or at our jobs – and in a world where health care accounts for nearly one out of four dollars of our GNP, medical tourism is here to stay
