Medical Tourism Source Market Strategies

Health tourism business strategists attempting to identify potential medical tourism source markets, must take into account 4 key, but complicated drivers:

1) patients’ unmet health or wellness needs and desires, 2) preference or familiarity or perceptions of a particular destination or brand of health provider, 3) the nature and perceived quality and safety of available services sought, and 4) the manner by which treatment is accessed and paid for.

USA

Many medical tourists from the United States seek treatment at the cost of four to ten times lower than what they would have to pay in the own country. This is especially appealing to those who have catastrophic insurance with ultra-high deductibles (>$10,000) or for services not covered by their insurance plan (e.g., those deemed cosmetic, investigational, experimental by their particular health plan). However, recent reforms in U.S. health delivery have raised the value-based health purchasing awareness of U.S. consumers, so they often dismiss promotional messages and overtures about “cheaper-priced” care as irrelevant.

U.S. health consumers tend to harbor expectations that regardless of where they travel, care will be delivered by English-speaking medical staff. To attract the English-speaking medical tourist and avoid knee-jerk reactive suspicions about quality and safety, marketing materials, photographs, promotional language and messages that are not culturally and idiomatically aligned with the targeted U.S. audience.

Medicare

Medicare is the U.S. federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD). It does not cover treatments or services outside the USA in most circumstances. There are also many services not covered by Medicare, including preventive dental care, some eye care, and emergency services for Medicare beneficiaries who may remain in expatriate communities abroad for extended periods.  ESRD patients who choose to travel are responsible for 100% of their dialysis, EPO, periodic exams and lab testing, and any required vascular access surgeries while outside the USA.

Workers Compensation Benefits

Workers’ compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment.  While regulations differ among jurisdictions, provision can be made for reimbursement or payment of medical and like expenses. Many states in the USA have strict rules impacting provider choice and access to care.  For medical tourism suppliers, rather than pursue a complicated strategy, seek a “low-hanging fruit” strategy and offer a services package contracted directly with self-insured global employers for high-value, treatment and diagnostics related to accidents and illnesses sustained in the course of employment as an alternative to flying the sick or injured employee back to their home country by means of costly longer distance medical evacuation transportation arrangements.

Health Savings Accounts (HSAs)

For medically necessary treatments, consultations and diagnostic testing, patients who own Health Savings Accounts (HSAs) may travel anywhere in the world for care and utilize these accounts in accordance with the rules of Publication 502, (IRC213D)[1] from the U.S. Internal Revenue Service. The money may be used from this account to pay for both treatment and travel expenses reasonably related to access care. Many accounts come with a special debit card that can be used to pay for those related expenses at the time of purchase. Documentation must be retained to show the eligibility of the expense.

Health Reimbursement Arrangements (HRAs)

In other cases, many employers allocate a special fund for known as a Health Reimbursement Arrangement (HRA) for each employee with an annual contribution. Unused dollars each year are allowed to accumulate. Expenditures also follow the same rules as the Health Savings Accounts, but the fund dollars are actually “owned” by the employer. In the event of separation from employment, unused funds revert back to the employer. Certain employers (e.g., Archdiocese or other faith-based organizations, etc.,) are permitted to limit which procedures may be eligible expenditures in alignment with their religious or other corporate or organizational doctrine.  In the case of the HRA, both the treatment and diagnostic services as well as travel and accommodation may be paid for from the HRA funds, in accordance with individual employer HRA plan rules.

ERISA

More than 210,000 employers in the USA (approximately 70%) operate a health benefit plan for employees, retirees, and dependents that is self-funded through a IRS 501(c)(9) trust account.[2] This fund is usually augmented by employee contributions from each paycheck, and the funds are used to pay healthcare claims for services deemed eligible under a Summary Plan Description (SPD). Plan Administrators are considered fiduciaries and liable for decisions to cover treatment where ambiguities may arise.  Claims are usually paid through a third-party administrator (TPA). Provider discounts are often contracted through an existing Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) network owned by another organization that “leases” its network to the self-funded employer for a monthly lease fee, paid per-employee, per-month (PEPM). Claims are then submitted through the plan’s contracted claims administrator for adjudication and fee settlement. These plans are operated in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”)[3] which was enacted in 1974 under provisions set forth in Section 29 of the US Code.  Employers operating ERISA plans have far more independent and flexibility to contract with foreign and domestic healthcare providers for comparable health services at better value than their fully-insured counterparts. Employer benefit plan administrators will be interested in comparable or higher-value based care if the offer is for covered health services available under the benefit parameters of their plan that meets or exceeds the product quality and safety compared with those services available in the local region where they operate a worksite or maintain a workforce. The deal becomes far more compelling and interesting to plan fiduciaries if, when packaged with business class travel and subsistence for two travelers, the total cost advantage affords at least USD $20,000 net savings per case in a safe and culturally attractive destination agreeable to the employee and travel companion. In case rate calculations, net savings is compared to services inclusive of most pre-operative testing and post-travel aftercare, testing, and evaluation for a period of at least ninety (90) days.

Bear in mind that price comparisons are calculated against negotiated local discount rates (sometimes as high as 40-55%), and not retail published charges often quoted by various syndicated media sources and the allegations of the US-based Medical Tourism Association[4].

Group Health Benefit Plans and Managed Care Participants

The remaining 30% of U.S. workers who have healthcare insurance benefits through an employer-sponsored plan and many of those who purchase healthcare on the new exchanges open to everyone have access to healthcare services if the providers are associated with their contracted network of participating providers. These benefits are often associated with Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs) and can also be associated with new group purchasing cooperatives formed either by commercial insurers or the providers themselves.

For the health tourism business strategist, this medical tourism source market is an especially tough challenge to attract because most of the more lucrative health services offered by a medical tourism physician or facility are covered if sourced locally. In many of the new managed care plans today, unlike in years past, there is no longer an “out-of-network” benefit option. It was simply discontinued, and only exists in cases of bona fide emergencies, and often, only offers coverage to the extent necessary to stabilize and transfer the patient to the nearest participating provider within the contracted network.  In addition, for domestic out of network care, a reticular web of “wrap around” plans exist so that it is rare that an insurer must pay out-of-network published charges often quoted by various syndicated media sources and the allegations of the US-based Medical Tourism Association[4].

If an out of network benefit option does exist, current plans now have “stacked” deductibles and disincentive copayment levels. For example, if a plan member has already met their in-network deductible for the year, another out-of-network deductible may be assessed for care received outside the network. In addition, cost shares paid by the plan member are likely to be many percentage points higher if the plan member chooses an out-of-network facility or treatment provider. In addition, allowance limitations for out-of-network services may be based on the published, local market allowable for Medicare regardless of what the providers charge. So for example, if a provider charges $28,000 for a cerumen impaction removal (CPT 69210) for an out-of-network service that normally reimburses at the rate of $39.00, then only $39.00 of the $28,000 will be credited towards the $12,000 out-of-network deductible amount. (A New Jersey non-contracted provider attempted to use this pricing strategy a number of years ago with the Blue Cross Blue Shield of New Jersey managed care plan; it didn’t work!) In this example, even if the full out-of-network deductible were satisfied, the plan would only pay the provider as little as USD $19.50, and the remaining balance bill would be the out-of-pocket responsibility of the patient at a 50% out-of-network disincentive copayment level.

Canada

For health tourism strategists trying to promote their destination and services to Canadian citizens, try to set aside the frustration with long waiting lines and services deemed not included or covered under their public health insurance scheme. Canada is a cultural trichotomy that includes important cultural and language diversity. Knee, hip and heart surgeries can be had anywhere there is a licensed health facilities and doctors with appropriate licenses and credentials.

For a health tourism supplier to win referrals, strategists should place cultural alignment of their destination with those of the Canadian citizens for competitive advantage.  This includes considerations of Diaspora present in Canada.  Historically, the wave of immigration to Canada prior to the First World War began to increase the stock of Europeans not from British or French origin. Between 1896 and 1914, over three million immigrants came to Canada. When the supply of emigrants from England and Western Europe was dwindling, Canada began accepting people from Eastern and Southern Europe, including Poles, Ukrainians, Hutterites and Doukhobors. In the period between the two world wars from 1915 to 1945, another two million immigrants came to Canada.

Visible and Non-Visible Minorities in Canada (alphabetical order)

Researchers would be wise to check Statistics Canada[5] for the most current statistics available for market sizing.

• Arab
• Balkan Region
• Black/African
• British and French, British and French and other
• British, British Isles, British and Canadian
• Chinese
• Dutch
• Filipino
• French, French and Canadian
• German
• Greek
• Hungarian
• Italian
• Latin/Central/South American
• Orthodox Jewish
• Other British multiple origins
• Other East/South East Asian
• Other European
• Other French multiple origins
• Other single and multiple origins
• Other West European
• Polish
• Portuguese
• South Asian
• Spanish
• Ukrainian
• Vietnamese
• West Asian

Another consideration is the proximity to established Canadian expatriate communities, (which actually reinforces the primacy of the cultural attraction over price or access).  I witnessed this in the early years of my healthcare business administration career in South Florida, where the Canadian “snowbird” season brought with it tremendous cash turnover to physicians and health facilities for surgeries and diagnostic testing during the months of November to April each year. Tremendous advantages were realized by those medical providers and health facilities with fluency in Canadian French and were accustomed to cultural nuances in terms of customer service, negotiation, and consumer spending habits.

The United Kingdon of Great Britain and Northern Ireland

Patients often prefer not to wait for treatment by the National Health Service if they suffer pain, disability, fear of a dreaded condition for which diagnosis is delayed. They may not be able to afford to seek the services a physician in private practice. They may also prefer to avoid lotteries for access to certain services such as assisted reproduction services and the cost of the pre-medication regimen required for the treatments.

NHS dental treatment does not include cosmetic treatments that are not clinically necessary, such as teeth whitening. Cosmetic treatments are used to improve the appearance of teeth and make them look more attractive, and are only available privately. Other services are available with a copayment, the rates and services which vary across three cost bands.[6]

European citizens

In some cases, people can apply for pre-authorization to utilize the Cross Border Health Directive 2011/24/EU[7]. They may travel to care destinations within certain jurisdictions, and limited to services that are covered under their local health scheme. If the desired care falls outside these constraints or is deemed non-covered, elective, cosmetic, investigational or experimental, or deemed not beneficent by reason of age or other circumstances, they make look outside of the CBHD and elect to pay for health travel and medical tourism from their savings or paid by credit cards.

While there is much hyperbole about the opportunities in medical tourism associated with the CBHD, the fact of the matter is that patients most often prefer to receive healthcare in their own country with friends and family and other social support nearby. That is why the demand for cross-border healthcare represents only around 1% of public spending on healthcare, which is estimated to be around €10 billion. This estimate includes cross-border healthcare which patients had not planned in advance (such as emergency care). This means less than 1% of the expenditure and movement of patients is for planned cross-border healthcare, like hip and knee operations or cataract surgery.

What We’ve Noticed about German Citizens

Germans holidaymakers are often a targeted source market for health tourism. We’ve noticed overtures from Turkey, Hungary, Poland, Spain, Greece, Thailand, and other health and wellness tourism destinations. German health tourism consumers tend to seek all-inclusive packages lasting the duration of their holiday, and often prefer self-driven or planned motorcoach tours. They tend to seek out lower-cost natural health and wellness tourism options which are often culturally aligned with their beliefs about healthcare, nutrition, exercise, fitness, and sports activities.

They are also drawn to thermalism destinations that featuring both developed and undeveloped balneo and thalassotherapies. For that reason, any destination that can afford them an opportunity for caravanning (camping), fitness activities, and access to affordable therapeutic baths, mineral waters, springs, and hydrotherapeutic treatments, and access to German-speaking staff will enjoy a competitive advantage over those who speak neither German nor English.

Mental Health Services

According to the World Health Organization (WHO), Mental illness accounts for almost 20% of the burden of disease in the WHO European Region and mental health problems affect one in four people at some time in life. Six out of the 20 countries with the highest suicide rates in the world are in the European Region. This particular service line does not pay very well for local or cross border healthcare which is why the medical tourism development in the specialties of mental health services seem largely ignored by investors.

Local and regional mental health services and practice do not always reflect the knowledge of what works in mental health care and treatment. Many countries have limited community-based mental health services and little specialist help for young or elderly people. Over the last decade attention has focused on the notion of ‘scaling up’ or increasing the capacity of mental health services. In Europe, services and resources in mental health care vary from country to country, with the number of beds ranging from 8 to 152, and of psychiatrists from 1 to 30 per 100,000 people. Also, the treatment gap is still between 35 and 50%. This diversity is not only due to the different resources available, it also relates to the different models of care applied, that are often the result of the challenges of decentralization.

Many people in large mental institutions are subject to neglect and abuse of human rights, reflected in high mortality rates. Stigma and prejudice are widespread and affect every aspect of mental health, including whether people seek and receive help. The WHO European Mental Health Action Plan was signed and endorsed at the sixty-third session of the WHO Regional Committee for Europe in September 2013, on behalf of the Ministers of Health of the 53 Member States of the European Region.

The Action Plan offers a forward-looking model of public mental health and psychiatric service and sets a strategic direction for a mental health reform in Europe. It covers promotion of mental well-being, prevention of mental disorders and the development of community-based mental health services, within the context of human rights.  Its core messages are the need to reduce the disadvantages experienced by the most vulnerable individuals and groups in society, as well as the need to provide services that guarantee safe and effective interventions.

Other source market considerations

For many nationalities, becoming a medical tourist is a chance to combine a tropical vacation with elective or plastic surgery.  Still others seek anonymity from persecution for local medical treatments that may be illegal, unavailable, or considered immoral by strong cultural beliefs.

In some cases, medical tourism is used as a convenient and economical alternative for global workforces to travel for elective health services to a nearby destination with comparable care or diagnostic services avoiding the need to travel all the way back to their home country.

In other cases, employers who require obligatory annual health checkups for key executives and managers can use medical tourism as a means of reward or incentive by sending workers and their travel companions on a 3-5 day, paid luxury getaway to have their annual checkup at a fabulous destination. They can extend the value of the trip by sending a group of 4-6 who must meet undisturbed for strategic planning, team building or training at the resort destination and clear two necessary activities off the agenda in one trip. This was the basis for Mercury Healthcare International’s lucrative MICE & Medicine™ program for Executive Health Tourism. Destination pairings that featured unique destination experiences formed the basis of an otherwise routine health checkup that was low-risk and afford a soft entry into medical tourism for executives with the influence and decision-making authority to open medical tourism benefits to employees, dependents and pensioners.

And finally, many medical professionals (doctors, nurses) and celebrities may wish to maintain their privacy and dignity without having the local medical community or paparazzi gossip and speculate about their personal medical situation.

I hope this brief (and by no means exhaustive) review of the medical tourism source market opportunities will stimulate your creativity and think beyond simply targeting customers seeking low-cost health services. There is far more research to be done in this area, the likes of which could fill a commissioned study or university research paper that is unique to your proposed product and destination strategy, and the experiences you may decide to create to attract medical tourism patients and referrals.

Best of luck in your research for your strategic plans. Always know you can contact me if you have a question on this topic and that I will help if I can or I may direct you to colleagues from our group who may be more informed in a particular domain area of expertise

[1] http://www.irs.gov/pub/irs-pdf/p502.pdf

[2] http://www.irs.gov/pub/irs-tege/eotopici81.pdf

[3] http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=225

[4] http://www.medicaltourism.com/en/compare-costs.html (accessed: 8 March 2015)

[5] http://www.statcan.gc.ca/start-debut-eng.html

[6] http://www.nhs.uk/chq/Pages/985.aspx?CategoryID=74&SubCategoryID=742

[7] http://ec.europa.eu/health/cross_border_care/policy/index_en.htm