Medical Tourism: Global Competition in Health Care

Health | International | Policy Reports

No. 304
Thursday, November 01, 2007
by Devon M. Herrick

Executive Summary

Global competition is emerging in the health care industry.  Wealthy patients from developing countries have long traveled to developed countries for high quality medical care.  Now, a growing number of less-affluent patients from developed countries are traveling to regions once characterized as “third world.”  These patients are seeking high quality medical care at affordable prices.  Reports on the number of patients traveling abroad for health care are scattered, but all tell the same story.  An estimated 500,000 Americans traveled abroad for treatment in 2005.  A majority traveled to Mexico and other Latin American countries; but Americans were also among the estimated 250,000 foreign patients who sought care in Singapore, the 500,000 in India and as many as 1 million in Thailand.  The cost savings for patients seeking medical care abroad can be significant.  For example:

  • Apollo Hospital in New Delhi, India, charges $4,000 for cardiac surgery, compared to about $30,000 in the United States.
  • Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip replacement — one-half the price charged in Europe or the United States.
  • Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee replacement that runs $30,000 in the United States.
  • A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500 in the United States.

In 2006, the medical tourism industry grossed about $60 billion worldwide.  McKinsey & Company estimates this total will rise to $100 billion by 2012.

Patients who are not familiar with specific medical facilities abroad can coordinate their treatment through medical travel intermediaries.  These services work like specialized travel agents.  They investigate health care providers to ensure quality and screen customers to assess those who are physically well enough to travel.  They often have doctors and nurses on staff to assess the medical efficacy of procedures and help patients select physicians and hospitals.

Prices for treatment are lower in foreign hospitals for a number of reasons.  Labor costs are lower, third parties (insurance and government) are less involved or not at all involved, package pricing with price transparency is normal, there are fewer attempts to shift the cost of charity care to paying patients, there are fewer regulations limiting collaborative arrangements between health care facilities and physicians, and malpractice litigation costs are lower.

How can patients ensure the medical treatment they will receive will be of high quality?

  • Foreign health care providers often have physicians with internationally respected credentials, many of them with training in the United States, Australia, Canada or Europe.
  • More than 120 hospitals abroad are accredited by the Joint Commission International (JCI), an arm of the organization that accredits American hospitals participating in Medicare; another 20 are accredited through the International Standards Organization; and some countries are adopting their own accrediting standards.
  • Some foreign hospitals are owned, managed or affiliated with prestigious American universities or health care systems such as the Cleveland Clinic and Johns Hopkins International.
  • Several companies are building and operating hospitals in Mexico that meet American standards, largely for American (and wealthy Mexican) patients.
  • Finally, patients can also use online communities to get information on the safety and quality of medical providers by reading the testimonies of other patients who have had surgery abroad.

Medical tourism is only one aspect of the way globalization is changing the U.S. health care system.  Apart from patient travel, many medical tasks can be outsourced to skilled professionals abroad when the physical presence of a physician is unnecessary.  This can include interpretation of diagnostic tests and long-distance international collaboration, particularly in case management and disease management programs, because of the availability of information technology.

If American health care consumers are to benefit to the fullest extent from global health care competition, federal and state policies must allow them to take advantage of the opportunities.  Legal reforms policymakers should consider include recognizing licenses and board certifications from other states and countries.  The federal Stark laws limiting relationships between physicians and hospitals need to be modified to let health care providers offer integrated medical services, including follow-up care for patients returning from treatment abroad.  Finally, the federal and state governments should lead by example by allowing Medicare and Medicaid programs to send willing patients abroad.  Medicare in particular would benefit from cost savings due to its large volume of orthopedic and cardiac procedures.

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