The Rise of Medical Tourism

August, 2009

August, 2009

Copyright 2009 Grail Research, LLC

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, LLC

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
In 2007, more than 750,000 Americans traveled
abroad for medical procedures Global Medical Tourism Market Size, 20042012Ec
120 100 90
USD Bn

The global medical tourism market is expected to

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

The factors which help to reduce the cost of

treatment in medical tourist destinations are:

60 40 30 0
2004

60

Lower cost of labor Lower costs associated with malpractice

litigation and insurance

2006

2012E

Less stringent regulatory environments Limited involvement of third party payors Meanwhile, factors such as an increase in
investment and growth in the number of internationally-accredited facilities have improved quality of care and its perception among prospective patients
USD Bn

US Healthcare Expenditure, 20042012Ed,e

4,000 3,100 3,000 2,000 1,000 0
2004 2006 2012E

1,878

2,100

Over 220 health care organizations in 33

countries have received JCI accreditationb

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, LLC

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 From Africa Asia Europe Latin America Asia 95% 93% 39% 1% 32% 45% 99% 8% 26% 1% Europe 4% 1% 10% 5% 12% 2% 2% 13% Latin America 1% 6% 33% 87% 58% 27% Middle East North America

USa,b,1

Number of procedures performed outside US Average savings per procedure Total loss for US Hospitals Total estimated savings for payors, employers and patients

710,000

Middle East North America Oceania

USD 15,000 USD 35 Bn

USD 10.7 Bn

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 | Copyright 2009 Grail Research, LLC

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 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 Alternative Medicine, Bonemarrow Transplant, Cardiac Bypass, Eye Surgery and Hip Replacement

Thailand

1.54 MM (in 2007)6

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

Malaysia

0.29 MM (in 2006)4

6%-23%

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, LLC

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

In the US, 45.7 MM people have no
health insuranced Even people with health insurance must pay out of pocket for elective surgery and pre-existing conditionsd

Alternative / Innovative Therapy

India attracts medical tourists due to its
offerings of ayurvedic and other alternative treatmentsb

Better Quality Care

Singapore boasts state-of-the-art
equipment, the finest surgeons and a high standard of medical care comparable with that of western countriesb

Why Medical Tourism?

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, LLC

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, LLC

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, LLC

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

Provider Groups

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

Hospitals, clinics, and specialty treatment centers provide care to patients who travel abroad for treatment

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

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, LLC

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, LLC

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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:

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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August, 2009 | Copyright 2009 Grail Research, LLC

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August, 2009

Copyright 2009 Grail Research, LLC

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