There are no shortage of articles telling us about the scale and staggering growth of the ‘medical tourism market’. Deloitte has valued it at $60 billion, while a Research and Markets report estimates it at a lower, but still substantial, $40 billion. I have spent the last 3 years working in the field and after putting over 50,000 customers in contact with overseas healthcare providers, I have come to the conclusion that while there is a growing and vibrant international trade in healthcare services, it isn’t a market in the true sense of the word.
A market is defined as any structure where buyers and suppliers can exchange goods and services, in this instance, healthcare. Once you talk to a number of ’medical tourists’ it becomes abundantly clear that they don’t purchase their overseas healthcare from a ‘medical tourism marketplace’ at all. Instead they buy from a globalised healthcare market. In simple terms, when Annie Smith considers travelling to Thailand for a breast reduction procedure, she doesn’t compare Thailand’s cosmetic surgeons to other overseas cosmetic surgeons; she compares them to local practitioners. She doesn’t buy from the ‘medical tourism market’, she buys from the globalised healthcare market – she compares the price and quality offered by multiple clinics that carry out this procedure, both at home and abroad, and chooses her preferred option.
The fundamental mistake that analysts and pundits make is to assume that globalisation creates new markets – it does not. Globalisation combines many domestic markets into one larger market place. In the case of healthcare, the consumer is free to evaluate their options at a global marketplace and choose the clinic that meets their needs. While the location of the service provider might be a consideration for the consumer, or even a deciding factor, it does not change the fact that the services being consumed are available across multiple locations.
In some ways this globalisation of healthcare echoes that of other previously globalised markets. For example, parallels can be drawn between the healthcare industry and the automotive industry. When Carlos Ghosn became CEO of the Japanese Nissan company, he started purchasing car parts from factories in China and India. This decision was influenced by the price and quality offered, not by source location. In other ways the globalisation of healthcare is unique and some lessons will have to be learnt by trial and error, rather than by reference to historical market analysis.
One way in which healthcare is different to, for example, consumer product industries, is that the patient must be transported to the service. This has two major affects on medical tourism. Firstly, it makes it difficult for governments to apply trade barriers in the form of tariffs (effective trade barriers are already very much in place, in the form of subsidies or national insurance that apply only to domestic providers). Secondly, unlike intellectual property which can cross borders effortlessly, healthcare is not a frictionless product. The cost and time involved in travelling over large geographical distances presents a significant barrier to trade. This gives an inherent advantage to the local market. It is quality, availability of care, value for money and additional privacy that enable overseas clinics to overcome these barriers.
Healthcare suppliers who target overseas patients may regard themselves as constituting a ‘medical tourism marketplace’, but this is because they operate from a myopic, supplier-centric
view of the market. It is necessary to take a step back and view the market from the consumers’ perspective. After all it is they who define the market.
What this means for healthcare providers worldwide is that they must become aware of the options open to their patients, locally, nationally and internationally. Only then can consumers be expected to make educated decisions about their own healthcare.
Sources:
http://ryanfamily.typepad.com/files/us_chs_medicaltourismstudy28329.pdf
http://www.researchandmarkets.com/reports/c74425
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