Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upe...
Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upe...
Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upe...
Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upe...
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Globalization case - medical tourism in india

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Globalization case - medical tourism in india

  1. 1. Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4615)Healthy Business: Will Medical Tourism Be India’s Next Big Industry?Published : June 02, 2011 in India Knowledge@WhartonIn the past, U.S. President Barack Obama has singled out India for whathe sees as the country usurping American jobs and business. In May2009, he removed some tax incentives for U.S. companies who allegedlypreferred to outsource rather than create domestic jobs. "Buffalo beforeBangalore" was his rallying call at the time. Now, India is back in hiscrosshairs. In April 2011, he told a town hall gathering in Virginia thatAmericans shouldn’t have to go to India or Mexico for “cheap” healthcare. "I would like you to get it right here in the U.S.," he said. This is a single/personal use copy of India Knowledge@Wharton. For multiple copies, custom reprints, e-prints, posters or plaques, please"It’s a 100% political statement," Gopal Dabade, convener of the All contact PARS International: reprints@parsintl.com P. (212) 221-9595 x407.India Drug Action Network, told weekly newsmagazine India Today.Others in India were equally critical and dismissive. But some have taken more serious objection. "Notacceptable," says federal health minister Ghulam Nabi Azad. Affordable health care does not mean ourmedicine is inferior to any superpower’s. I would like to say our medicines are indigenous, they aresuperior, and superiority does not come by escalating costs."The bone of contention is the word "cheap." Obama probably used the term in the sense of lessexpensive. But Indians have interpreted it as meaning "tawdry and inferior." Analysts don’t expectObama’s political posturing to make any difference to the flow of U.S. medical tourists into India. Butthere is a lurking fear, nevertheless, that a nascent sector could be hamstrung at birth.There Is No Choice"Patients do not travel to India for health care services because they have a choice and they choose to goto India," says Ravi Aron, professor at the Johns Hopkins Carey Business School and a senior fellow atThe Mack Center for Technological Innovation at Wharton. "They travel to India because they have nochoice." Adds Rana Mehta, executive director, PricewaterhouseCoopers (PwC) India: "If patients seevalue in what India has to offer, they will continue to come."Indians feel aggrieved that they have been singled out. In medical tourism, the country is still a bit player.According to a report by the Delhi-based RNCOS, which specializes in Industry intelligence and creativesolutions for contemporary business segments, India’s share in the global medical tourism industry willreach around 3% by the end of 2013. The December 2010 report -- titled "Booming Medical Tourism inIndia" – says that the industry should generate revenues of around US$3 billion by 2013. "The Indianmedical tourism industry is currently in its early growth stage," says RNCOS chief executive ShushmulMaheshwari.Guess who’s the biggest beneficiary of medical tourism? It’s the U.S. "The largest segment, with 40% ofall medical travelers, seeks the world’s most advanced technologies," says a McKinsey & Co paper titled"Mapping the market for medical travel." "These men and women take their search for high-qualitymedical care global, giving little attention to the proximity of potential destinations or the cost of care.Most such patients travel to the U.S." What worries the Indian industry is that this is not the first attack onIndian medical tourism. In August last year, leading medical journal The Lancet had published an articleabout a new superbug which it called the New Delhi metallo-beta-lactamase 1 (NDM-1). "The potentialof NDM-1 to be a worldwide public health problem is great, and coordinated international surveillance isneeded," said the article. Later, a co-author noted that some material had been inserted into the articlewithout his knowledge; the editor of The Lancet had to apologize for naming the bug after New Delhi,and the Indian ministry of health had to weigh in. "The conclusions are loaded with the inference thatthese resistance genes/organism possibly originated in India and it may not be safe for U.K. patients to opt   All materials copyright of the Wharton School of the University of Pennsylvania.                    Page 1 of 4 
  2. 2. Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4615)for surgery in India," said the ministry. "The medical journals claim is not supported by any scientificdata and thus tarnishes the reputation of the country." Rightly or wrongly, the government and many inIndia’s medical establishment believe that naming the superbug New Delhi was to keep U.K. medicaltourists at home. "The superbug certainly garnered a lot of media attention given its name," says PreethaReddy, managing director of Apollo Hospitals.It won’t keep medical tourists at home, just as Obama’s appeal is likely to be ignored. "People will alwaysweigh the cost and the benefit," says Reuben Abraham. "If there is a 10% saving and there is a danger ofthe superbug then chances are that people will not want to take it. But if you are offering an 80%discount, it is a different matter. If India continues to offer high quality health care at one-tenth the cost inthe U.S. then these things will not make an impact."The Next Big ThingIf all this is going to have limited impact, why is India getting so agitated? The answer lies in thepotential of medical tourism. It could easily be the next big thing. Unlike business process outsourcing(BPO), which is on the whole very low-tech, health care -- particularly sophisticated procedures -- is veryhigh-tech. India has not been able to set up an adequate health care infrastructure for its own citizens andit doesn’t have the money to do so. Creation of a sophisticated medical tourism structure will have atrickle-down effect."India has the highest potential in medical tourism in the world," says Maheshwari of RNCOS. "Factorssuch as low cost, scale and range of treatments differentiate it from other medical tourism destinations.Moreover, growth in India’s medical tourism market will be a boon for several associated industries,including the hospital industry, the medical equipment industry, and the pharmaceutical industry."Hisstudy shows that CAGR (compound annual growth rates) in revenue in 2011-13 will be 26%. In terms ofmedical tourists, the number would touch 1.3 million by 2013 at a CAGR of 19%. "Medical tourism canbe considered one of the rapidly growing industries in the Indian economy on the back of variousfactors," he says. "However, the industry is at a nascent stage and requires a few years to reach theplatform already established by the IT sector." "India has been ranked among the top five destinations formedical tourism," says Rana Kapoor, founder, managing director and CEO of Yes Bank, which hasrecently done a study on health and wellness tourism in India along with apex chamber of commerceFICCI. The ranking by Nuwire Investors, an online source for news on alternative investments, putsPanama on top, followed by Brazil, Malaysia and Costa Rica. "India is looking at exponential growth asfar as tourism is concerned," continues Kapoor. "Yes Bank forecasts that there will be an increase indomestic tourist movements over the period (2008-2020) by 118% and foreign tourist inflows over thesame period will increase by 71.87%. What the potential for medical tourism from within this growth rateof 71.87% will be depends upon government policies, faith of the patients and many other externalfactors. We truly believe that this sector will play a significant role as a contributor towards the overalltourism growth in India.""I strongly believe that many developments across the world will put India in a fantastic position," saysDevi Shetty, cardiac surgeon and chairman of Narayana Hrudayalaya. "We produce the largest number ofdoctors, nurses and medical technicians in the world. Also, we have been traditionally linked withwestern health care because of the British influence on our medical education and the ability to speakEnglish. This is extremely important for developing [global] health care. Our greatest asset is our abilityto produce the largest number of technically-skilled individuals. We also have the largest number ofUSFDA (U.S. Food and Drugs Administration)-approved drug manufacturing units outside the U.S."Differences over TerminologyShetty doesn’t like the term medical tourism. "Medical care is something that is very stressful and peopleconsider this under tremendous pressure," he says. "It is an event where people are scared of losing theirlives. It may not be appropriate to call it tourism. Tourism is a different business altogether." Adds Mehtaof PwC: "The tourism component is really very weak. Most foreign patients come to India for chronic andserious medical treatment and I would call it medical value travel." Aron of Johns Hopkins has yetanother view. "The world over it is known as the global health care delivery system," he says. Reddy ofApollo agrees with Mehta. Says she: "At Apollo Hospitals, we prefer to term this business opportunity as‘medical value travel’ as people travel to our hospitals for serious life threatening health conditions, which   All materials copyright of the Wharton School of the University of Pennsylvania.                    Page 2 of 4 
  3. 3. Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4615)essentially need highly skilled doctors and medical infrastructure and not mere minor treatments likecosmetic enhancements, dental work or wellness which can be coupled with holidays, as the term‘medical tourism’ implies."The multiplicity of names is accompanied by a wide range of numbers. The confusion was started by theMcKinsey study on Mapping the Market mentioned earlier. The May 2008 report said that "medicaltravel has captured the world’s attention and imagination". But it went on to explain that the McKinseydefinition of medical traveler was very different from what many others thought him to be. The first to beknocked off were expats looking for health care in their country of stay. That accounted for 25-30% ofthe traditional medical tourist pool. Then was the segment categorized under emergencies. These wereordinary tourists caught up in accidents. That eliminated another 30-35%. McKinsey estimated theremaining at "between 60,000 and 85,000 inpatients a year", much lower than generally acceptednumbers. For instance, a 2008 Deloitte Center for Health Solutions report on "Medical Tourism:Consumers in Search of Value" put the number of Americans who had traveled abroad for medical carein 2007 at 750,000. McKinsey excludes "wellness" tourists (acupuncture, spas, yoga, aromatherapy andthe like), patients from neighboring countries, and outpatients -- those who don’t need to check intohospital.The Deloitte report says that India is stepping on the gas; the medical tourism sector is expected to grow30% annually up to 2015. An update on the report says that the U.S. recession is driving more people outof the country for health care; U.S. outbound medical tourism is projected to increase 35% annually from2010-2012. "Medical tourism [today] represents the maturation of a cottage industry," the report sums up.Maheshwari of RNCOS agrees that economic problems are driving more Americans abroad for healthcare. "Under almost stagnant salary increments, the disposable income and saving considerations of U.S.citizens are still well below the pre-crisis levels," he says. "In this scenario, the low cost treatment andnearly zero waiting time coupled with its proven track record offer convenient procedures for touristarrivals from various geographical locations including the U.S.""Over the past few years, the medical tourism story has changed dramatically in India," says a recentCover Story in weekly business magazine BusinessWorld. (That it made it to the Cover is a reflection ofthe growing importance of the sector.) "Not because the government has figured out the solution. Butpurely because of private enterprise -- with a few corporate hospitals, chemists and freelance agents allworking in tandem to build a thriving ecosystem that educates, facilitates and ferries medical tourists fromacross the world. Last year, this ecosystem was responsible for about 600,000 patients travelling to Indiaand spending US$1 billion in getting treated here. (The numbers are industry estimates as the governmentdoes not have any official statistics on the subject.) Corporate hospitals such as Apollo, Fortis Hospitaland Max as well as business associations estimate that the business is growing by 40% year-on-year."(Obviously, the growth numbers vary depending on who you talk to.)Other Markets Will Turn to India"India’s potential is huge," says Mehta of PwC. "Some 80% of foreign patients coming to India are fromthe neighboring countries and from Iraq, Afghanistan, the former Soviet Union, etc and now increasinglyfrom Africa. But now with India proving itself as a credible provider of value health care, the westernpopulation ageing, and health care becoming more difficult there, I expect more people to come from theU.S. and the U.K."Mehta says that some things went wrong with the earlier planning. "We expected most patients to comefrom the U.S. and Europe. We expected people to come for cosmetic and regenerative treatment and thisis where there is more potential for tourism. But the majority actually came for cardiac treatment, cancertreatment, knee replacement and other serious ailments. Therefore, tourism was not really of importance.We did not get the cost factor right. We thought that typically in India it costs one-tenth of that in theU.S., so we could cost at 5X. But hospitals have not been able to charge very much. At present, with aforeign patient, there is around 20% more earning."Cost is, of course, being underplayed in the marketing efforts; this is why the word "cheap" rankles. "Thepatient is usually acutely aware of the difference in the sticker price for care," says Aron. "There is noreason to draw attention to this. ”That’s an area where India enjoys an advantage over other countries too.   All materials copyright of the Wharton School of the University of Pennsylvania.                    Page 3 of 4 
  4. 4. Healthy Business: Will Medical Tourism Be India’s Next Big Industry?: India Knowledge@Wharton(http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4615)According to the BusinessWorld report, a heart bypass surgery costs US$144,000 in the U.S., US$25,000in Costa Rice, US$24,000 in Thailand, US$20,000 in Mexico, US$13,500 in Singapore, and US$8,500 inIndia. "The quality is excellent," says Maheshwari. In India, there is also less waiting time andpersonalized services.Becoming an IndustryMedical tourism is also taking shape as an industry, though there are some who feel that it will eventuallyfall in many buckets. (The recent FICCI-Yes Bank study talks of wellness tourism, health tourism...)"There are over 3,371 hospitals and around 750,000 registered medical practitioners," says Maheshwari.Shetty says it is easier to get loans these days. "Earlier, it was difficult for us to mobilize huge financialsupport to create large hospitals. However, things have changed now," he explains. Indian companies arealso taking over hospital chains in Asia -- Fortis has gone on a shopping spree, though it’s not beenentirely successful -- and setting up front-ends in other countries for marketing purposes. Apollo hasfacilitation centers in Oman, Nigeria and the U.S. Max is present in Nigeria, Afghanistan, Bangladesh andNepal. Says Reddy of Apollo: "There are several key players. Apollo Hospitals continues to attract thelargest numbers of international patients followed by Max, Fortis and Workhardt.""Another opportunity that Indian operators are now seeing is that you don’t have to offer these health careservices from India," says Abraham of ISB. "For instance you can offer it from say, Cayman Islands orthe Bahamas. Ultimately, the innovation is in the process and as long as you can bring the same processinnovation, even if the cost goes up a little as compared to offering it from India, it will still be asubstantial saving for the patient."This is one area where China is no threat. Foreigners in China still rush to Hong Kong when they needtreatment because they cannot communicate with local doctors.But what the budding sector will have to contend with is the Indian government. Take one example. Withthe intention of making things smoother, the government introduced a medical visa (M visa), which wasfaster and easier to get. In its wisdom, however, it added a peculiar clause -- "Foreigners coming on Mvisa will be required to get themselves registered mandatorily well within the period of 14 days of arrivalwith the concerned Foreigners Regional Registration Office." The end result: even patients who have tobe carried into India on stretchers are coming on tourist visas. If the government wants medical tourism tobe the next big thing, it has to put its house in order.As for the immediate controversies, Shetty is very clear. "President Obama’s statement or the New Delhisuperbug will not affect medical tourism development in India," he says. "First of all, he was notcriticizing India. He was just trying to put his house in order."This is a single/personal use copy of India Knowledge@Wharton. For multiple copies, custom reprints, e-prints, posters or plaques, pleasecontact PARS International: reprints@parsintl.com P. (212) 221-9595 x407.   All materials copyright of the Wharton School of the University of Pennsylvania.                    Page 4 of 4 

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