The Rise of Medical Tourism

August, 2009

August, 2009 | Copyright © 2009 Grail Research, a division of Integreon — Confidential 1

 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

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 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 Global Medical Tourism Market Size,
abroad for medical procedures 2004–2012Ec

 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 90

USD Bn
lower cost of treatment and increased quality of care 60
60
 The factors which help to reduce the cost of 40
treatment in medical tourist destinations are: 30

• Lower cost of labor 0

• Lower costs associated with malpractice 2004 2006 2012E
litigation and insurance
US Healthcare Expenditure,
• Less stringent regulatory environments 2004–2012Ed,e
• Limited involvement of third party payors
4,000
 Meanwhile, factors such as an increase in 3,100
investment and growth in the number of 3,000
USD Bn 2,100
internationally-accredited facilities have improved 2,000
1,878
quality of care and its perception among prospective
patients 1,000

• Over 220 health care organizations in 33 0

countries have received JCI accreditationb 2004 2006 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 3
 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 Latin Middle North

Asia Europe
From America East America

Africa 95% 4% 1%

Asia 93% 1% 6%

Europe 39% 10% 5% 13% 33%

Latin
1% 12% 87%
America
USa,b,1 Middle
32% 8% 2% 58%
710,000 East
Number of procedures
North
performed outside US 45% 26% 2% 27%
America
USD 15,000
Average savings per procedure Oceania 99% 1%
USD 35 Bn
Total loss for US Hospitals
USD 10.7 Bn “Latin American countries have been in it for more than
Total estimated savings for 15 years…in Southeast Asia, it is more recent… between
payors, employers and patients 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
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 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

JCI Accredited Range of Costs
Major Destinations # of Medical Tourists Popular Treatment Options
Hospitals2,a (% of US cost)1,b,c

Alternative Medicine, Cosmetic

1.54 MM Surgery, Dental Care, Gender
Thailand 5 6%-28%
(in 2007)6 Realignment, Heart Surgery,
Obesity Surgery, Oncology and
Orthopedics

0.45 MM Alternative Medicine, Bone-

India 11 6%-21% marrow Transplant, Cardiac
(in 2007)3 Bypass, Eye Surgery and Hip
Replacement

0.41 MM Organ Transplants, Stem Cell

Singapore 15 8%-33% Transplants and other high end
(in 2006)5 procedures

Cardiovascular Surgery,
0.29 MM Cosmetic Surgery, Dental
Malaysia 2 6%-23% Care, Eye Surgery, General
(in 2006)4 Surgery, Orthopedic and
Transplant Surgery

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; 3“Numbers of note”, Business Today, Dec 11,
2008; 4“Top 5 Medical Tourism Destinations”, Nuwire Investor, Mar 31, 2008; 5“5 Myths of Medical Tourism”, Singapore Medicine; 6“The Medical tourism industry in Thailand”, I-Shou University,
Sep 2007
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 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 offerings of ayurvedic and other
 Even people with health insurance must alternative treatmentsb
pay out of pocket for elective surgery and
“pre-existing conditions”d

Better Quality Care Why Medical Aging Population

 Singapore boasts state-of-the-art Tourism?  The aging population of the developed
equipment, the finest surgeons and a world is a growing burden on the
high standard of medical care healthcare infrastructurec
comparable with that of western
countriesb

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; c”A 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; f“The economic cost of
wait times in Canada”, Canadian Medical Association, Jan 2008
August, 2009 | Copyright © 2009 Grail Research, a division of Integreon — Confidential 6
 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 Legal Issues

Patients face difficulty in getting Barriers to The consumer must abide by the
follow-up treatment in their home Growth medical tourism destination’s law
country after receiving medical in the event of bad outcomes/
treatment abroadb complicationsb after treatment

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

Source: a“Medical Tourism Industry Grows Rapidly”, Forbes, Oct 26, 2006; b“Medical 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 7
 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 8

 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
Internal Components Provider Groups

Individuals seeking medical Hospitals, clinics, and

care either contact providers Intermediaries
specialty treatment centers
directly or work with provide care to patients who
intermediaries to identify travel abroad for treatment
providers and arrange care Medical travel planners, travel
agencies or hotel groups help
travelers identify destinations,
select providers and make
arrangements

Government Insurance Companies

External
Insurance companies influence the industry
Governments play an active role through Influencers as they make decisions about covered
legislation and by supporting the
development of the industry in their region 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 9
 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 10

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

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

A
foreign institutions

Device, pharmaceutical and biotech companies have an increasing

B
number of markets to develop and manage

Insurance companies manage the benefits and risks of coverage for

C patients seeking treatment abroad

The key unknowns life sciences organizations need to monitor are:

What implications does the growth of medical tourism have on

A
particular categories of products?

B 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

C
prioritize?

How will behaviors, treatment preferences and processes differ in

D
prioritized markets?
August, 2009 | Copyright © 2009 Grail Research, a division of Integreon — Confidential 11
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