Comparing the costs of (accidental) medical tourism

Whereas much of the attention in the medical travel sector is focused on medical tourism (i.e. where the primary reason for travel is some form of surgery or treatment), a more established and mature market sector is the provision of healthcare services for the tourist or business traveller who falls ill when abroad.

The structure and maturity of this sector means that it is far easier to gather comparative data such as the cost of healthcare and actual treatment in different countries. Cost management is in the hands of the international insurers, the travel insurance companies and the assistance companies who negotiate prices with hospital providers worldwide.A recent analysis of travel insurance claims, published by the UK based travel insurer, Sainsbury’s Travel Insurance, provides an insight into the variation in hospital costs across the world and the rising trend in hospital costs.

According to their analysis:

• In 2009, a record number of people needed medical treatment whilst abroad.
• The most expensive country for inpatient hospital treatment was the United States, with the average hospital visit costing £6,000.
• The average cost of hospital treatment in a foreign country has climbed to £2,040 over the last 12 months, an increase of 6.25% year-on-year.
• The most significant increase in treatment costs were seen in Turkey (+10%), the USA (+10%) and Spain (+7.5%).
• Over the summer months (May to September), the most common reason for hospitalisation was gastroenteritis with the average bill for inpatient treatment amounting to £1,200.
• The most expensive hospital bills were for those who suffered a heart attack abroad, resulting in medical expenses that averaged £12,500.

It’s interesting that the international assistance companies who deal with these "accidental" medical tourists have shown little or no interest in entering the medical tourism business. They have everything in place to become the world’s number one facilitator and blow everyone else out of the market:

• They have a network of “approved” hospitals around the world.
• They facilitate treatment for thousands of international patients in foreign countries every day.
• They have call centres to deal with patient enquiries.
• They have extensive technology and systems to manage the patient process.
• They have people on the ground in major destinations who can provide local support.
• They have comparative data on treatment outcomes and comparative costs in hospitals around the world.

So, why haven’t companies like Europ Assistance, Mondial Assistance and AXA Assistance entered the medical tourism market and used their expertise to attain a dominant market position?

The answer is probably quite simple. The medical tourism market is just not big enough to be attractive to them, nor worth the hassle. Which is good news for the existing operators...but puts the medical tourism market opportunity in perspective compared to the long established international assistance market.

Medical tourism: The answer to the global healthcare problem?

A recent article from McKinsey International highlights the magnitude of the challenge that leaders of governments in the developed countries are going to have to deal with sooner rather than later. The article looks at the increasing proportion of a country's wealth that is going to be dedicated to the health of its citizens in future years.

In Europe currently around 9% of GDP is spent on healthcare; in the USA, it's higher, nearer 16% of GDP. For the last fifty years, the increase in health care spending in OECD countries has been 2% above the GDP...... which means that healthcare is taking an increasing proportion of the national wealth. But what happens if this continues? McKinsey says that "if current trends persist to 2050, most OECD countries will spend a fifth of GDP on healthcare. By 2080, Switzerland and the United States will devote more than half of GDP to it, and by 2100 most other OECD countries will reach this level of spending."

Those are pretty astonishing statistics! There's a decent analysis in the article, outlining the supply and demand factors that drive this growth, and offering some arguments as to why this trend will not or cannot continue at this rate. However, the harsh reality is that whatever governments do, they and their citizens will be faced by the burden of ever increasing healthcare costs.

And that's the reason why healthcare is becoming global, and medical tourism is being talked about as one of the solutions. More and more, governments will not be able to provide and consumers will not be able to afford the healthcare that they need. The global market in healthcare provision will expand to meet the growing demand from both consumers and governments for low cost treatment overseas. And that's where medical tourism comes in.

Reference: Healthcare costs: A market based view: McKinsey International