Will Health Tourism Disrupt America’s Hospitals?

December 20 01:00 2015 by ushadmin

The elderly man from Oman who was receiving a cardiac catheterization was the third international patient that Dr. Patel and I had seen in the past hour. Before him, there were two others: a Kenyan woman with a heart dysrhythmia and an Arab man with colon cancer.

These were just three of over 450,000 patients who travel to India from more than 130 countries annually to receive often complex care from specialty hospitals such as Apollo, where I did a medical observership this past November.

The World Health Organization generally defines medical tourism—or medical value travel (MVT)—as travel across international borders to receive some form of medical treatment. In their seminal 2007 book Medical Tourism in Developing Countries, Milica Bookman and Karla Bookman broadly define MVT as an economic activity that involves a trade in services across borders with the aim of improving one’s health.

Medical tourism is becoming a part of the business models of many Indian specialty hospitals. One Apollo administrator explained to me:

Indian Medical Tourism offers access to state of the art technology and high quality care at a fraction of Western prices. Many of our international patients come because our health outcomes are as good as in Western countries and our procedures cost 10 times less than in the West, without any quality difference.

Indeed, had the Omani patient gone to a U.S. hospital, a cardiac bypass surgery would likely have cost him 70 times the price he would pay in most Indian specialty hospitals.

India seeks to continue its upward economic growth trajectory (7.4 percent in the third quarter of 2015) and use medical tourism, with its steady volume of patients, as part of a larger strategy of expanding its global services sector. Within the broader context of helping India meet its service and other policy aspirations, medical tourism can be viewed through two basic lenses: an economic lens and a disruptive one.

With the global market valued at approximately $10.5 billion in 2012 and expected to reach $32 billion by 2019, the economic lens is the most practical one to view Indian MVT. India is one of the three main Asian medical tourism destinations, along with Singapore and Thailand. And India’s network of corporate hospitals and travel facilitators boasts a current MVT market valued at $3 billion a year and expected to reach $8 billion annually by 2020.

Yet because of certain comparative advantages, India’s medical tourism market also has the potential to become a disruptive force in Western health care markets.

The United States produces around 18,000 new physicians each year with annual primary care salaries of approximately $190,000. India, on the other hand, produces approximately 45,000 new physicians a year, with average annual salaries of $15,000.

With such major differences in pay scale and health care labor pool sizes, along with similar patient health care outcomes and accreditations from the International Joint Commission, India’s network of corporate hospitals could siphon increasing numbers of patients from the United States, eventually exerting the type of external stressor that could wring more efficiency out of the U.S. health care system.

This outcome, however, would require substantially larger volumes of patients going overseas, insurance companies signing on and large scale regulatory changes in the U.S. health care system. Right now, the volumes are far too small to be significant: The Centers for Disease Control and Prevention estimates that 750,000 U.S. citizens engage in MVT each year, an infinitesimal amount compared to the 35 million patient discharges from U.S. hospitals recorded in 2010.

But India does have many competitive advantages beyond labor market characteristics that could help increase its share of U.S. patients traveling abroad for MVT in the long run.

One such advantage is substantially lower medicine costs, a relic of India’s prior method patent intellectual property system that existed before 2005 amendments to its Patent Act. Several other advantages include fiscal incentives that the Indian government extends to hospitals engaged in MVT (National Health Policy, 2002) and favorable foreign direct investment (FDI) policies for corporate hospitals.

But in order to optimize its use of medical tourism as a growing contributor to economic growth, like in many other areas of its economy, the Indian government would have to exercise much greater strategic coordination, streamline regulations and improve data collection, which already occur in other countries known for MVT, such as Thailand and Singapore.

In the end, the Omani patient’s cardiac catheterization that Dr. Patel and I saw was clean—meaning that his heart’s major blood vessels were without blockages that could explain the chest pain he had been experiencing.

By the end of my month at Apollo, I noticed a similar interesting paradox in India’s medical tourism market as a whole: It has the potential to be part of India’s greater narrative of growth and technological success while at the same time highlighting the very symptoms that describe why that overarching success may continue to stay just outside of the country’s reach.