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The Rise of Medical Tourism

August, 2009

August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

The Rise of Medical Tourism


Medical Tourism: Traveling to a destination in another country to receive medical, dental and
surgical care because the destination enables better access to care, provides higher quality
care or offers the same treatment at a more affordable pricea
While only a small slice of total health care expenditure, medical
tourism is growing rapidly

Countries around the world are investing to capture an increased


share of global healthcare spend

Contrary to some perceptions, the services provided reach beyond


cosmetic procedures performed at spa-like medical centers and
include more complex, longer-term and costly care

With public perception becoming more positive, insurance


companies are starting to embrace the trend

However, many important questions remain to be answered before


mainstream market participants are likely to take action:

How large will this market be?


Are the savings to the patient and insurance companies real?
What countries / facilities will emerge as leaders? (both in
quality of care and spend)

Note: aSourced from the Medical Tourism Association


August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Market Size and Growth
The medical tourism market is expected to show strong growth through 2012 driven by
increasing healthcare costs in developed countriesa and improving quality of care in destinations
Global Medical Tourism Market Size,
20042012Ec

In 2007, more than 750,000 Americans traveled


abroad for medical procedures

The global medical tourism market is expected to

120
100

grow at a CAGR of 9% from 2006 to 2012 (vs. 7%


for US healthcare expenditure) driven primarily by
lower cost of treatment and increased quality of care

USD Bn

90

The factors which help to reduce the cost of


treatment in medical tourist destinations are:

60

60
40
30

Lower cost of labor

0
2004

Lower costs associated with malpractice

2006

2012E

litigation and insurance


US Healthcare Expenditure,
20042012Ed,e

Less stringent regulatory environments


Limited involvement of third party payors

4,000

Meanwhile, factors such as an increase in

3,100
USD Bn

investment and growth in the number of


internationally-accredited facilities have improved
quality of care and its perception among prospective
patients

3,000
2,000

1,878

2,100

2004

2006

1,000

Over 220 health care organizations in 33

countries have received JCI accreditationb

2012E

Notes: JCI, the international division of Joint Commission Resources, is a not-for -profit organization which provides accreditation for hospitals, ambulatory care facilities, clinical laboratories, care
continuum services, medical transport organizations, and primary care services, as well as certification for disease or condition specific care in 36 countries around the world
Sources: Grail Analysis; a Medical Tourism: Consumers in search of value, Deloitte Center for Health Solutions, 2008; b Joint Commission International Resources; c "Medical Tourism: Global
Competition in Health Care", National Center for Policy Analysis, Nov 2007; dCenter for Medicare and Medicaid Services; eKaiser Family Foundation;
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Impact on the US
By recent estimates, $35Bn in healthcare spending was exported from the US last year; a
majority went to regions such as Asia and Latin America
Medical Travelers by Source and Destinationb
To

Asia

Europe

Latin
America

Africa

95%

4%

1%

Asia

93%

1%

Europe

39%

10%

Latin
America

1%

Middle
East

32%

North
America

45%

26%

Oceania

99%

1%

From

USa,b,1

710,000

Number of procedures
performed outside US

USD 15,000

Average savings per procedure

USD 35 Bn

Total loss for US Hospitals

USD 10.7 Bn

Total estimated savings for


payors, employers and patients

Middle
East

6%
5%

13%

12%
8%

Copyright 2009 Grail Research, a division of Integreon Confidential

33%
87%

2%

58%

2%

27%

Latin American countries have been in it for more than


15 yearsin Southeast Asia, it is more recent between
1997-2000 it all started here..in Thailand and India
Hospital manager, JMI, Malaysia

Notes: 1 These figures are derived from the McKinsey report published in 2008 and represent current data at that time (2008)
Source: a Medical Tourism Is Still Small - Getting Care Abroad May Be Less Usual Than Once , Wall Street Journal; b Mapping the market for medical travel, The
McKinsey Quarterly, Health care 2008
August, 2009

North
America

Medical Tourism
Primary Destinations and Service Offerings
The primary destinations for Medical Tourism include countries such as Thailand, India,
Singapore, and Malaysia
Comparison of Major Destinations
Major Destinations

# of Medical Tourists

Thailand

1.54 MM
(in 2007)6

JCI Accredited
Hospitals2,a

Range of Costs
(% of US cost)1,b,c

Popular Treatment Options


Alternative Medicine, Cosmetic
Surgery, Dental Care, Gender
Realignment, Heart Surgery,
Obesity Surgery, Oncology and
Orthopedics

6%-28%

India

0.45 MM
(in 2007)3

11

6%-21%

Singapore

0.41 MM
(in 2006)5

15

8%-33%

Organ Transplants, Stem Cell


Transplants and other high end
procedures

6%-23%

Cardiovascular Surgery,
Cosmetic Surgery, Dental
Care, Eye Surgery, General
Surgery, Orthopedic and
Transplant Surgery

Malaysia

0.29 MM
(in 2006)4

Alternative Medicine, Bonemarrow Transplant, Cardiac


Bypass, Eye Surgery and Hip
Replacement

Note: aJCI stands for Joint Commission International, is a not-for-profit organization responsible for providing accreditation and certification services; bCost of treatment includes hospitals stay only;
cAverage cost for treatment of Heart Bypass, Heart Valve Replacement, Angioplasty, Hip Replacement ,Hysterectomy, Knee Replacement and Spinal Fusion
Source: 1Medical Tourism: Consumers in Search of Value, Deloitte Center for Health Solutions, 2008; 2Joint Commission International Website; 3Numbers of note, Business Today, Dec 11,
2008; 4Top 5 Medical Tourism Destinations, Nuwire Investor, Mar 31, 2008; 55 Myths of Medical Tourism, Singapore Medicine; 6The Medical tourism industry in Thailand, I-Shou University,
Sep 2007
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Market Drivers
A number of factors are increasing the attractiveness of medical tourism
Affordability
Medical tourism provides an opportunity to reduce costs by as much as 94% of the total US cost of the proceduresa

Large Uninsured Population

Alternative / Innovative Therapy

In the US, 45.7 MM people have no

India attracts medical tourists due to its

health insuranced
Even people with health insurance must
pay out of pocket for elective surgery and
pre-existing conditionsd

Better Quality Care


Singapore boasts state-of-the-art

offerings of ayurvedic and other


alternative treatmentsb

Why Medical
Tourism?

equipment, the finest surgeons and a


high standard of medical care
comparable with that of western
countriesb

Aging Population
The aging population of the developed
world is a growing burden on the
healthcare infrastructurec

Long Waiting Time


Patients in the UK and Canada lack timely access to elective procedures and hence travel to other countriese
The average waiting time for patients undergoing joint replacement surgery, cataract surgery, CABG surgery, and MRI
examination in Canada is 253 days,128 days, 71 days, and 29 days, respectivelyf
Sources: aMedical Tourism: Taking off in a big way in India, Indian Institute of Management, Kozhikode, India, May 2008; bDiscover Medical Tourism Website; cA Profile of
Older Americans: 2005, Administration of Aging, Department of Health and Human Services, US Government, 2005; dIncome, Poverty, and Health Insurance Coverage in
the United States: 2007, US Census Bureau; e"Medical Tourism: Global Competition in Health Care", National Center for Policy Analysis, Nov 2007; fThe economic cost of
wait times in Canada, Canadian Medical Association, Jan 2008
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Growth Barriers
however, key barriers still exist that will continue to impede mass-appeal of medical tourism
Image Problem
Developing countries are believed to
be poor and lacking in quality
facilities / physiciansa which leads
to skepticism amongst patients

Follow-up Care
Patients face difficulty in getting
follow-up treatment in their home
country after receiving medical
treatment abroadb

Barriers to
Growth

Legal Issues
The consumer must abide by the
medical tourism destinations law
in the event of bad outcomes/
complicationsb after treatment

Other Problems
Low training standards of doctors in
medical destination countries,
language barriers and low payor
coverage

Source: aMedical Tourism Industry Grows Rapidly, Forbes, Oct 26, 2006; bMedical Tourism: Consumers in Search of Value, Deloitte Center for Health Solutions, 2008;
Hospital Manager interview, Analysis of patient testimonials and doctors opinions; cThe Medical Tourism Association Survey Results, 2009
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Recent Trends
Increasing investments by industry players

Providers in destination countries are seeking and receiving


accreditation from organizations such as JCI in order to
alleviate concerns about quality of care. Consumer surveys
suggest that accreditation plays an important role in selecting a
hospital

Reputed medical institutions and providers in the US are


collaborating with institutions abroad to create brand
recognition for foreign organizations

Some private insurance providers in the US have recently


launched plans that reimburse treatment costs in foreign
locations, alleviating concerns about follow up care and
coverage once back at home
appears to be having an effect on consumer sentiment

Multiple surveys of patients experiences at facilities abroad


suggest that most feel satisfied with the quality of care and
would encourage friends and relatives to travel abroad for
medical care

One survey even concludes that most of patients feel that the
overall medical care experience at facilities abroad was better
than it would have been at a US facility

August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Ecosystem
Medical travelers, intermediaries and provider groups are the primary source of momentum in
the market while government and insurers are influencing the industry externally
Medical Tourism Ecosystem

Medical Travelers
Individuals seeking medical
care either contact providers
directly or work with
intermediaries to identify
providers and arrange care

Internal Components

Intermediaries
Medical travel planners, travel
agencies or hotel groups help
travelers identify destinations,
select providers and make
arrangements

Government
Governments play an active role through
legislation and by supporting the
development of the industry in their region

Provider Groups

Hospitals, clinics, and


specialty treatment centers
provide care to patients who
travel abroad for treatment

Insurance Companies

External
Influencers

Insurance companies influence the industry


as they make decisions about covered
procedures and reimbursement for expenses
incurred when seeking treatment abroad

Source: Medical Tourism: Consumers in Search of Value, Deloitte Center for Health Solutions, 2008; IHG and the Medical Tourism Association Join to Facilitate Medical-Related Travel into
Latin America, InterContinental Hotels Group, Jun 5, 2008;
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

Medical Tourism
Destinations
An increasing number of nations are vying to become significant players in medical tourism

How significant of an impact will this have on the US healthcare players (hospitals, devices,
pharmaceutical / biotech, insurance, etc.)?
Which countries will emerge as the strongest players?
August, 2009

Copyright 2009 Grail Research, a division of Integreon Confidential

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Medical Tourism
Summary
The continued growth of medical tourism will impact players across
the healthcare value chain as:
A

Hospitals risk the loss of revenues and talent (i.e. physicians) to


foreign institutions

Device, pharmaceutical and biotech companies have an increasing


number of markets to develop and manage

Insurance companies manage the benefits and risks of coverage for


patients seeking treatment abroad

The key unknowns life sciences organizations need to monitor are:

August, 2009

What implications does the growth of medical tourism have on


particular categories of products?

How large of an impact could this trend have on the industry and
within what timeframe?

Which markets will emerge as leaders and therefore be important to


prioritize?

How will behaviors, treatment preferences and processes differ in


prioritized markets?

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(info@grailresearch.com)

Copyright 2009 by Grail Research, a division of Integreon


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