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Threats, Overstatements, and Uncertainty

Rick Johnson, for HealthLeaders Media, August 5, 2008

The newest report on medical tourism predicts "explosive growth" for U.S. outbound medical travel, with Americans paying more than $2 billion to global providers this year and doubling their spending next year. By 2010, the report estimates that spending will reach as much as $10 billion, but after that the speculation is much less precise.

In a decade from now, U.S. outbound medical travel could be as much as $79.5 billion or as little as $30.3 billion, according to the Deloitte Center for Health Solutions' report, Medical Tourism: Consumers in Search for Value.

Threats
When reports like this get circulated, the knee-jerk reaction is to rattle off a headline that the U.S. healthcare industry is going to lose big. Indeed, the Deloitte study warns that with Americans spending more on medical travel, lost domestic spending in the U.S. could reach as much as $76.1 billion by 2010.

C'mon now. Not only does that figure bank on Americans fleeing the U.S. healthcare system in droves, it also assumes these consumers would pay U.S. prices for their cosmetic and elective procedures if they didn't have alternatives beyond the borders. While Deloitte says that 750,000 Americans left the U.S. for medical care last year, it projects 6 million outbound medical travelers by 2010. That is one big leap.

Paul Keckley, Ph.D., executive director of the Deloitte Center for Health Solutions, acknowledges this would be a huge spike in medical travelers, but stands firm with the prediction, largely because he sees health plans and employers joining forces to promote incentives to patients. "Looking at the data from the Medical Tourism Association, what becomes a striking difference is the role that employers play in promoting medical tourism," he says. "The health plans are tiptoeing through this, but the cost differential is substantial."

By comparison, the McKinsey & Company study that came out earlier this year attached a very strict definition for medical travel and concluded that there are only 60,000 to 85,000 inpatient medical travelers a year.

Overstatements
The real number of medical travelers is likely somewhere in the middle of Deloitte's and McKinsey's estimates. But more importantly, where is the explosive growth going to come from? For sure, the U.S. healthcare systems can't keep increasing costs at a rate of 8% per year and expect no fallout, and as that expense gets passed along to patients, they will become more selective consumers. But the Deloitte study has some telling findings on consumer preferences.

It's important to note that Deloitte's report derives from a national online survey of more than 3,000 Americans. Of these respondents, 39% say they would go abroad for an elective procedure if they could save half the cost and be assured that quality was comparable to that in the U.S.

So this must be where the growth will come from. The report points out, "As patients are exposed to greater financial burdens resulting from higher co-payments and price transparency efforts, they are likely to seek low-cost treatment alternatives such as medical tourism."

Is this reality, or are the study's participants overstating their acceptance? I think there's at least some truth to the later. Consider that the report also found that only 12% of respondents have traveled outside of their own communities for medical treatment. If you've never had the inclination to leave your hometown healthcare provider, it would be a dramatic shift to endure a trip to Thailand, India, or even Mexico for care.

Keckley agrees that there's a difference between what participants say in a survey and what they will actually do when the time comes to make a healthcare decision, but he points out that it bodes well for the medical travel industry that more than one-third of the survey participants are expressing an interest in services abroad.

Uncertainty
As I've reported recently, an increased awareness of medical travel is a good sign for global destination hospitals. But don't think the floodgates are open just yet. It's going to take significant time and effort to turn these prospects into true believers in medical travel.

Since American consumers still only pick up about 19% of the tab for their healthcare, they aren't the only stakeholders that need convincing. As much as I might like to think the media has sway, insurers, employers, and primary care providers have much more pull with patients than any research report, news story, or online column.

And they haven't bought in—yet.

Sources from destination hospitals and insurance companies tell me, however, that U.S. corporations are inquiring more and more about medical travel as one option to limit healthcare costs. In the coming years, success stories from these early adopters could spur the kind of growth that Deloitte and others project.

In sum, this is yet another report predicting that tremendous medical travel growth from the U.S. market is just a few years away. If you make the mistake of looking only at the tables and charts, medical travel organizations might get giddy over the projections, so take the time to not only read the fine print, but also between the lines. Deloitte notes well that the kind of growth it predicts will happen only if consumer acceptance continues, employers push insurers for medical travel options, and U.S. healthcare organizations continue to watch from the sidelines.

The study offers worthwhile analysis and supports the theory that the medical travel trend will continue, but global destination hospitals should hedge their bets. U.S. outbound medical travel could explode, blow up, or have a less volatile future. While the potential is there, keep supporting regional and local consumers in emerging markets. There is long-term growth in other regions too, in spite of the continual and obsessive focus on the West.


Rick Johnson is senior online editor of HealthLeaders Media. He may be reached at rjohnson@healthleadersmedia.com.
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