Do you know how much of your patient revenue is going overseas? Medical tourism is quickly growing into a major force that can put a significant dent in many healthcare providers’ revenue streams.
As the name implies, medical tourism means traveling to another country (or to a lesser degree, another state) for medical care. The target for most medical tourists is surgery, especially expensive surgeries (both medically necessary as well as elective), and the reason is price. One popular story circulating around the Web news is of a man who had heart bypass surgery in India at a cost of $15,000. The same surgery in the United States would have cost him $150,000. A number of stories such as this are touting trips to developing nations for medical procedures with prices that run 10-30% of the comparative prices at home.
In terms of the healthcare industry as a whole, medical tourism is currently an extremely small slice of the pie. For a $2 trillion industry, a paltry $5-6 billion (about three-tenths of one percent) going overseas does not seem significant or worrisome. However, we must remember three important factors:
•Impact is Multiplied. The figures for the size of the medical segment of the tourism industry represent dollars that are received by the competition. Every medical tourist dollar could mean as much as ten dollars of revenue loss to you.
•Trends Start Small. Remember that forty years ago, the bulk of the manufacturing sector could say the same thing about foreign competition – that it is not something to lose sleep over. Twenty years ago, information technology workers could say the same thing about offshoring programmers. Perhaps now is the time for the healthcare industry to be one step ahead of the rest of the country.
•Impact is Not Evenly Spread. At any rate, for the three-fourths of the healthcare industry who are part of organizations of less than 20 and who are highly specialized, a few well placed revenue losses can put you out of business. Plus, these types of trends tend to be viral (no pun intended), as word of mouth alerts more of your local customers to the idea of taking your revenue elsewhere.
A good deal has been written on the subject from the viewpoint of either promoting medical tourism as a cost-effective alternative to receiving medical care in the U.S., or – to a lesser extent – on the potential health risks to patients of traveling to a developing country to receive such care. Little has been written on effective responses to the trend in terms of how domestic healthcare providers can stem the lost dollars, or perhaps even get in on the action themselves.
What do you do if you are a healthcare provider here in the States and want to preserve your own revenue base, and perhaps even grow it? Internally, many healthcare providers are formulating plans to address the issue of medical tourism and some have even begun to take action, albeit quietly. Externally, however, the balance of the news hype is clearly on the side of the promise of and the explosive growth of medical tourism.
There are, however, some positive actions that your organization can take to meet this challenge. In some ways, medical tourism is not a threat, but an opportunity. No matter what strategic action you take, access to the right information – the right business intelligence – can help you win.
The Value Proposition of Medical Tourism
Before going into a description of the effective responses to medical tourism and how business intelligence can help make this trend an opportunity, it is necessary to describe a few of the basics of the value proposition of this practice.
Cost. The obvious draw is reduced cost (actually price) for the purchaser of the healthcare services. As mentioned earlier, certain services in Asian, Eastern European, Middle Eastern or Latin American countries can be priced at 10-20% of the comparative prices here in the U.S. For patients in other developed nations such as Canada and Western Europe, the draw is availability of services since it can take a year or more to schedule some surgeries in those nations.
Quality. Individual facilities in the destination countries are responding very well to the call for quality by payers, purchasers, patients, politicians and governmental agencies here in the United States. Many Indian and Thai hospitals, for instance, are applying for and receiving accreditation from the Joint Commission. In addition, other hospitals (e.g., Singapore) are developing impressive research and ancillary service infrastructures to support the importation of patients to their facilities.
Luxury. In many ways, the medical tourism industry is mimicking the cruise ship tour industry in terms of developing a luxury experience for patients. Because a person is traveling from a developed nation to a developing nation, it is often necessary to shield that person from some of the realities of the destination country. The challenge, for instance, is how to get a patient from the air-conditioned airport to the air-conditioned hospital without getting them stuck in a four-hour traffic jam in a hot, sticky taxi, or having them pass groups of children digging through dumpsters for food. Neither situation instills much confidence in the patient as to the quality of the medical site. To combat these challenges, many of the medical tourism companies and hospitals are developing something of a tourist oasis near the point of patient arrival.
Make no mistake about it, as a healthcare provider, you have formidable opponents in the race for medical revenue:
•Foreign Healthcare Facilities. The motivation is obvious for this group – revenue.
•Travel Industry. Once again, the primary motivation is revenue. In this case, the revenue potential is growing at an estimated 20-30% per year, compared to 4-5% for other types of travel.
•Local Governments. Governments like revenue too. Plus, they like higher employment rates in more highly skilled jobs.
•Purchasers. One person’s revenue is another person’s cost. The potential 80-90% savings for medical services is very attractive. In fact, some employers are offering their employees incentives to take this route and save them some money.
•Payers. Several health plans are offering a medical tourism option as a way to improve their value to their customers.
These are huge factors that may seem as though they require immediate response from your organization to stem the tide, but we have one more step to go through before presenting the list of potential responses.
Four Types of Healthcare Services
Healthcare services come in four varieties. The classification of a specific service into one of these four varieties is essential to understanding and selecting the most appropriate response to the challenge medical tourism poses.
•Big Healthcare Events. This is the primary target for medical tourism – inpatient surgeries, for the most part. For the patient, these are both clinically and financially big events, such as heart surgeries, hip replacements, neurosurgery, cancer surgeries, etc. Some of the surgeries are actually outpatient (e.g., major dental surgery, etc.). It is somewhat ironic that in other industries, it was the smaller, commodity goods and services that were the first targets for offshoring; but in healthcare, it is the big, expensive, complex events that are the first targets.
•Small Healthcare Events. Today, outpatient surgeries are not the primary target for medical tours. For instance, one of my sons broke his arm skiing a couple of weeks ago. We were not going to get on a plane to have it set and cast. Other “small” healthcare events include immunizations, many dental procedures, etc. The return on investment, as well as the risk and time away, just do not justify all of the overhead associated with the treatment event.
•Big Healthcare Relationships. Think chronic disease management, which sadly involves what are often long, protracted, expensive relationships with one’s healthcare providers. While there is a seminal event (e.g., initial diagnosis), the time, clinical intervention and the cost do not come in one or a few discrete chunks. These are currently not a major target for medical tourism.
•Small Healthcare Relationships. Most people have a very good relationship with their primary care physician as well as with the professional staff (PAs, NPs, RNs, etc.) that they see frequently. This is due to many small contact points between patient and provider. Checkups, immunizations, routine and some focused visits make up a significant portion of healthcare providers’ revenue streams and form the basis of a relationship with the person and the community. Obviously, these are not even on the radar screen for medical tourism firms.
With this informal list of healthcare service classifications, we can now take a look at the various types of responses that a domestic healthcare provider might make to not only meet the challenge of this exporting of revenue, but also to take advantage of the potential benefits of getting involved.
Business Responses to the Challenge of Medical Tourism
In the spectrum of potential responses to medical tourism, one is not really a response at all (i.e., ignoring the trend). Believing that the problem is too small to warrant attention or that it won’t affect you is a recipe for being forced to scramble later. Remember the lessons of the manufacturing sector (by the way, Toyota is now the number one auto company in the world) and the IT employment sector when it comes to offshoring.
With this in mind, I have listed a few options for addressing this trend, from the highly passive to the highly active. None of these options requires protective barriers of any sort. They all do, however, require information in the form of business intelligence to not only survive, but to succeed in the increasing global world of providing healthcare services.
Taking a Defensive Stance. The instinctive response when faced with a competitive challenge of this sort is to attempt to discredit the competition. From the current literature on the subject, it appears that this is the most common reaction. The most common move is to play up the potential health risks to the patient. There is some merit to this view. Diseases are more prevalent in developing nations. Travel takes a lot out of a person, even if he or she is well. The healthcare facilities are truly something of an unknown quantity for most patients. In addition, there are potential financial risks. For instance, some insurance plans will cover the surgery (i.e., the main event), but will not necessarily cover either the normal follow-up to that event or complications that may arise. A patient could end up with a large bill on his or her hands.
•Need for Business Intelligence. Choosing a defensive stance probably requires the greatest amount of evidence in the form of business intelligence. Creating doubt in the competition puts more pressure on your organization to demonstrate that you have all of the same bases covered. You need information to support the quality differentials you are claiming. Measures of patient safety, infection rates, clinical and administrative efficiency, recovery rates, and so forth are required in order to show that your service is distinctly superior to the overseas competition. In addition, your business intelligence requires the same types of information about the competition, which may be hard to come by.
Becoming a Destination Yourself. A more positive route to meeting the competition is to become a destination yourself. A search on the term “medical tourism” provides hundreds of ads extolling the virtues of hospitals that gladly borrow the names of respected, well-known healthcare facilities in the United States. Examples I found include one that describes itself as the “Mayo Clinic” of their country, and another that claims to be the “Johns Hopkins” in their country. Why is this? What have these organizations done that causes others to ride on their names? What has your organization done that might cause somebody to use your name in their marketing? Turning this around, what can you do to play up the competencies that you have? Perhaps your differentiator is research. Maybe it is patient education. Or maybe it is a level of service that surrounds the surgical event that rivals the best five-star hotel or cruise ship and still highlights your high standards of clinical professionalism.
•Need for Business Intelligence. To support this response, it is essential to drill into the information you have on your organization’s clinical competencies, provider capabilities, operational activities and patient opinions. What you are looking for is evidence of an angle that tells your patients, your purchasers, your payers and your own people who you are and what makes you a special destination for healthcare services. Having this information at a detailed as well as a summary level will make it meaningful at every level and in every promotional situation. It will ring true to everybody who hears it.
Sponsoring Medical Tourism. Perhaps your organization can get in on the medical tourism action. There are a number of ways to do this. Johns Hopkins, for instance, has a branch in Singapore. With that country’s drive to be a leader in healthcare research infrastructure, such a move makes sense for a research-oriented organization like Johns Hopkins. Other ways to get in on this trend are to partner and/or outsource some of your surgery to healthcare facilities in developing nations. Since surgery is typically a strategic component of most healthcare organizations, this is a highly risky move and one that deserves some form of compensation for assuming this risk. It is one thing to outsource non-strategic (e.g., administrative) functions, or even to offshore semi-strategic functions (e.g., radiology interpretations done overnight in India, which is called “nighthawking”). It is quite another to release some control on a core activity such as heart surgery. However, with the right mix of planning and close monitoring, it can be done.
•Need for Business Intelligence. The challenge of managing a medical tourism partnership requires perhaps the widest range of business intelligence measures. You will need clinical indicators for both firms in the partnership. You will need information on both healthcare services (e.g., nursing) as well as non-healthcare services (e.g., transportation, lodging, etc.). The relationship will need financial measures on both sides to ensure success, and to conform to regulatory and accreditation requirements of the respective sets of authorities. All of these databases will need to be conformed or reconciled in order to provide an accurate comparison of the metrics used to monitor success and/or correct deficiencies.
Focusing on Patient and Population Relationships. The strongest trend in healthcare in the 21st century is the steep curve in the need for chronic care relating to conditions such as diabetes, cancer, dyslipidemia, depression, and so forth. As described earlier, these represent the “big healthcare relationships.” One way to deal with the loss of surgery revenue to medical tourism is to replace it with a focus on patient relationships surrounding these major chronic conditions. The day will come when overseas competition will target these relationships as well as the “big medical events” by providing periodic tours to care for patients with chronic conditions. As global travel and communications become more normal and easier to support, it will be easier for these competitors to target the “big healthcare relationships.” For now, however, cementing your long-term patient relationships is an essential step toward keeping your profitable patients and service lines.
•Need for Business Intelligence. This type of response requires information support in the form of clinical data (patient registries, clinical operations, clinical outcomes measurements, clinical quality indicators) as well as administrative and financial data (performance trends, efficiency measures, and access metrics) in order to be successful. Many types of data will be needed from different sources (hospital systems, clinical systems, financial systems), combined across different types of operating models (hospitals, primary care clinics, specialty practices, laboratories), and distributed to a broad range of users (provider executives, payer/purchaser executives, managers and analysts) to improve and maintain performance.
Medical tourism today is a relatively small segment of the enormous healthcare industry. This segment is, however, receiving a lot of press and is rapidly becoming one of the darlings of the industry in the eyes of purchasers, payers, travel agencies and political interests on both sides of the ocean. The potential revenue impact cannot be ignored.
There are positive business responses to meeting this challenge. Like many challenges faced by healthcare organizations, or any type of organization, it comes with the gift of making those organizations stronger through greater self-awareness of the strengths they possess. In other words, you may not know what you have until you are forced to look inside.
Regardless of which business response you take to meet the challenge of medical tourism, you are going to need information to help formulate that response and support it once you have set the response in motion. Business intelligence can help.
Thanks for reading!