Medical Tourism

We are all familiar with the storyline of globalization in manufacturing, electronics, and other fields. As globalization makes technology accessible around the world, manufacturers abroad gain a competitive advantage, using cheaper labor to make a product with equivalent quality and functionality. When this phenomenon goes to scale, products become commoditized, that is, there is a lack of meaningful differentiation other than price. Remember buying a calculator in the 1980’s…you would look for a good brand and pay upwards of $20. Now, you might get a free one as chotskie from a vendor, which you’ll never use anyway, because it’s already built into your cell phone.

The partially successful American response to commoditization has been to focus on advances that can produce differentiation on qualities other than price. In short, seek safe haven in technical skill and intellectual property. As Michael Douglas of the Akron Beacon Journal noted in his recent column on NAFTA, “our edge is our minds.” It will be investments in education, universities, research and development that lead to future prosperity. So what does this have to do with health care? An emerging phenomenon known as medical tourism may point the way.

Consider the case recently reported in the Canton Repository, of a small business owner without health insurance who required a procedure to repair a damaged heart. The price of the procedure at the Cleveland Clinic: $130,000+. To avoid bankruptcy, the businessman went to India, where the procedure was performed by a cardiologist with top credentials. His journey included six nights in a five-star hotel, a two-week stay in a New Delhi hospital, and sightseeing. The final cost, including surgery, hospitalization, and travel? $22,000.

On Leadership Akron’s Health Care Day, Ernst & Young’s Robert Monitello highlighted the growing momentum of global medical advances. Since the year 2000, the number of hospitals outside North America to win accreditation by the Joint Commission International, the standard accreditation body for hospitals, grew from three to 205. Of course, many unsettling questions remain. What if there’s a mistake and complications in a surgical procedure and you spend months abroad? What if you need stateside followup? But factor in that malpractice insurance in foreign countries can cost as little as $4,000 (in the U.S., it averages $100,000), and you are left with an unsurprising projection from McKinsey & Co.: medical tourism may grow into a $100+ billion industry by 2012.

The implications of globalization of health care reach beyond the idea of “medical tourism.” Consider what is already happening in some ER’s: instead of waking a bleary-eyed, local radiologist in the middle of the night, images are sent electronically to (less expensive) radiologists on standby halfway around the world. And with remote surgery now a possibility with machines like the DaVinci system, maybe the day will come that you can have an operation by a doctor in India without bothering to make the trip.

The push for transparency in health care quality and cost will likely accelerate the emergence of a global marketplace for medical treatment. Among the major planks of most health reform plans is an emphasis on clarifying both the costs of care (how much does a heart replacement actually cost at a given hospital?) and quality (what is that hospital’s success rate with heart replacements?). Armed with better information, if consumers see they can seek treatment abroad with comparable likelihood of success and a fraction of the cost, what would keep them here?

These trends are converging at a time when health care is seen as an economic engine that will power future economic growth.  It has grown from 1/7 of the economy to 1/6, and may be 1/5 by the decade’s end. But as global competitors enter the field, it will become more difficult to sustain the kind of growth that our health care industry has seen in the last two decades. Of course, because there will always be a need for a critical mass of service providers where the patients are, health care will never face a threat of total offshoring the way many manufactured goods have. Still, the emergence of a global marketplace signals the need to foster innovative products and treatment breakthroughs that can sustain continued differentiation and growth.

Here in Akron, all these trends reinforce the importance of efforts like the Biomedical Corridor and the Bioinnovation Institute. Imagine Akron as the place where the top-notch researchers in materials and medicine are developing more effective, less invasive ways to replace all kinds of decaying tissues and bones with artificial materials. Imagine Akron as the place where people from around the globe come to have their orthopedic procedures, “medical tourists” drawn by the area’s unparalleled resources in that specialty. Imagine Akron as a place where an economy anchored in health care amounts to more than a higher demand for services based on an aging population…but is based on a powerful clustering of expertise and specialties at our universities and hospitals, working together to create new products and treatments for a global health care marketplace.

Response 3/25/09

Hi Mark:
 

I read your piece.  Interesting.

I personally am not terribly worried about medical tourism.  In fact,
even our beloved Cleveland Clinic published some numbers that showed
that 75% of ALL of their business came from those here in NE Ohio.  Only
25% of their $3 billion plus net revenue per year came from Florida,
outside of the region, and internationally.  It supports the idea that
"all health care is local".

There are whole books written on the topic, so I'm just going to point
to just 2 factors that we see in our business that are drivers for
health care costs.  They aren't the only 2, just 2 that aren't always
addressed.
 

1) Commercial Payers:

Huge lobby in this country and neither the President nor Congress have
the political will to fight them.  Commercial payers ARE the single
driver of health care cost to employers.  Wonder why the guy in Canton
can't afford health insurance, it's because the payers determine the
market.  If your group isn't large enough, you pay the highest rates the
market will bear.   

In Ohio, if your group is less than 25 lives, I believe commercial
carriers are required to provide a quote.  However, that quote may be a
400% increase from your current rates.  I'm not a price controls
proponent, but there has to be some protection for small businesses.
How is a small machine shop owner with a staff of 10 going to provide
insurance when the family plan on an 80/20 plan is $2,500 a month?  Most
can't, and that is where you are seeing the big drop off on
employer-sponsored plans.

Even with a group our size with well over 50 enrolled, the market is
tough for commercial insurance.  One thing that I find personally
amazing about commercial insurance is when you shop your group, those
bidding get to see your current renewal rates rather than them bidding
from a neutral position and basing it upon a risk assessment of your
group.  It would be like a contractor bidding on a building project but
he first gets all the other bids, then bases his price upon the adjusted
quotes.  It'd be nice, but the real world doesn't work that way, except
in the health insurance business.

Remember that these are large, for profit organizations.  I saw in the
WSJ about a month ago that Aetna had a back quarter due to their
commercial real estate losses, but wanted to assure Wall Street that
2009 would be good because they were looking to increase premiums 17%
across the corporation.  Nice option if you can do it.

2)  Tort Reform:

Without it, providers are paying high premiums for malpractice insurance
on the one hand, then forcing scores of additional tests to mitigate
risk.  They are all major cost drivers that hurt the system.

The Federal government is already the driver of health care in this
country.  Over 50% of all hospital patients are Medicare primary.  The
government will certainly have to have some involvement in reform as
they are the largest payer now.  However, citizens will have to remember
that health care in this Country provides excellent care with a lot of
protections.  Go too far down any one road, things are bound to break. 

With Warmest Regards,
Tim Sheeler

__________________________________________________________

Response 3/23/09

Dear Mark:

You did a very nice job with your latest blog and outline some interesting
points.  There are several aspects to your story about the small business
owner in need of surgery which allow his care to take place in another
country- 1) his illness had a relatively quick fix, and 2) he had some
personal funds to pay for care recognizing the care was less costly.  So
many illnesses are chronic in nature and there are no "quick fixes".  A
child with leukemia will need 2.5-3.5 years of treatment and the whole
family will need a great deal of support to get through such an ordeal.
Going outside the country is not so attractive for this child/family.
Also, so many of the patients we see have no means of support (no
insurance, no jobs, sometimes no home) and they won't be accepted into a
foreign hospital for care.  Fortunately, such patients will not be turned
away from hospitals in our community but providing care to them will
increase costs for all of us.

One reason why care in other countries is improving is because of the
training provided to these physicians in the US.  You are right that
education is key in improving our nation's economy.  If more of our
students were interested in science and challenged to do well, our medical
schools and post-graduate training programs would have higher proportion of
US residents.  Currently, many such spots are filled by foreign medical
graduates.

Despite all the above, there is waste within our current healthcare system
that needs to be trimmed in an effort to reduce costs.

Jeff

Jeffrey D. Hord, M.D.
Director, Pediatric Hematology/Oncology
Professor of Pediatrics, NEOUCOM
Children's Hospital Medical Center of Akron
 

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