|Frost & Sullivan Market Insight||Published: 5 Oct 2007|
By Sohini Mitra
The Medical Tourism industry earned global revenues of USD 20 billion in 2005 and the Asian market comprising India, Singapore, Thailand and Malaysia stood at approximately USD 2.5 billion in 2006. While the global market is predicted to double in size to USD 40 billion a year by 2010, it is estimated that the Asian market will generate in excess of USD 4.4 billion by 2012.
Governments and service providers have been quick to recognize the potential of Medical Tourism and have leveraged existing strengths and taken concrete initiatives to tap into the larger potential of this as a key revenue generator for their countries' economies.
This article discusses some of the forces driving Medical Tourism and crystal gazes into the future to identify potential for Healthcare companies to tap into.
Force Alpha: Medical Tourism Is A Revenue Generator
On the economic front, Medical Tourism is rapidly growing into a valuable revenue generator for countries such as Thailand, Singapore, India and Malaysia. The flow of medical tourists has increased by as much as 20 – 30 % a year and governments target to generate revenues of USD 1 -3 billion by 2010 - 2012.
Published estimates of Medical Tourism revenues for Asia in 2012 are forecasted to be in excess of USD 4.4 billion; a look at the targeted figures from the four countries above point to revenues of USD 6 - 7 billion in the next 5 years. Add to these potential revenues from initiatives in South Korea and Philippines and the combined pool could well add up to approximately USD 8 billion.
The key factors that support the growth of Medical Tourism are well established and now other emerging drivers too are making their presence clearly known: growing costs of providing healthcare have triggered some businesses and insurance companies in the US to outsource healthcare services to reduce spending on health. This apart, large numbers of uninsured citizens of the US are choosing to have complex as well as relatively less complex procedures carried out in Asian countries. Further, if the first experience is positive, patients are likely to return for follow – up treatment or even new procedures, for themselves as well as family.
The substantial outflow of patients from their home countries has seen private hospital groups such as the Raffles Group and Parkway Group in Singapore establish marketing offices abroad; hospitals also have linkages with facilitator agencies all of which generates enterprise and employment opportunities, both in the destination country as well as patients' home countries.
The shifts in accessing health services will contribute significantly to the revenues earned by countries that offer Medical Tourism, leading industry watchers to comment that after Information Technology, Medical Tourism will be the next major driving force for the Indian economy. It is estimated that Medical Tourism will account for 3-5 % of the India's healthcare delivery market while Singapore estimates that Medical Tourism will contribute 1.1% value to GDP by 2012.
There is the promise of benefit for all nations above from initiatives in this arena, yet the countries set to boom appear to be Singapore and India with targeted revenue growth in the range of 230 – 260% supported by strong governmental will and commitment to growing this industry.
Force Beta: Medical Tourism Requires State of the Art Technology
Medical Tourism competes directly with healthcare services in patients' home countries and in the face of this competition, destination countries are bound to deliver superlative healthcare. This requires extremely high caliber medical professionals as well as state of the art technology which is already well established in several Asian countries.
Minimally invasive surgery is well established and robotic surgery is currently in use for cardiac and neurosurgical procedures in India and Singapore. A Frost & Sullivan study also shows that Image Guided Surgeries are already quite widely employed in neurosurgical procedures in South Korea.
In light of the commitment to medical tourism, the adoption and use of state of the art technology can only move upwards. According to Frost & Sullivan estimates, there were ~ 475,000 cardiac procedures carried out in India in 2004 and the number is estimated to increase to ~ 675,000 (~9%) by 2008. Such trends in India and other nations present tremendous potential for manufacturers of medical devices and imaging systems in a variety of applications such as interventional cardiology, neurosurgery, orthopedic implants and replacements to name a few.
The upward trend also offers great potential to manufactures of hospital beds and furniture. To illustrate this, Frost & Sullivan estimates that by 2010, the projected revenues from electric beds alone will average USD 12 million across India, Malaysia and Thailand.
Accreditation is yet another indicator of meeting service requirements and leading hospitals in India, Singapore and Thailand have received Joint Commission International Accreditation. These apart, other prominent hospitals in these countries and Malaysia also have ISO 9000/9001/9002 accreditation.
With hospital groups such as Wockhardt in India tying up with health insurance companies in the UK, US and Singapore, accreditation could assume high significance in the context of insurance payouts, resulting to overseas treatments to being delivered by hospitals at a certain standard of service delivery.
This in turn suggests the potential for healthcare industry companies to invest in:
Force Gamma: Medical Tourism Triggers Investment Initiatives
The evolution of Medical Tourism has seen hospital groups extend beyond their home country boundaries into different nations. Companies are consolidating their positions by way of mergers and acquisitions as well as joint ventures. There are several instances of these in Asia.
The Indonesian Lippo Group's First REIT is the first listed Singapore REIT that gives some exposure to the Indonesian healthcare market. The company's acquisition strategy includes investments in healthcare and its related assets that would be in their shareholders' interest. Potential acquisition targets include assets in the Asia Pacific region, in countries with high growth potential.
First's portfolio comprises 3 hospitals and 1 hotel in Indonesia, and all of these are strategically located to attract a large number of potential patients (including international patients) and hotel guests.
As developed nations grapple with healthcare costs and an increasing pressure on their healthcare delivery systems, Medical Tourism strengthens its foothold and is here to stay. Countries that offer Medical Tourism are committed to providing world class services at affordable prices – and sophisticated and premium healthcare services are now more readily available without compromising on the quality and standards of treatment. Super specialty hospitals and hospitals offering superlative services in various specialties illustrate this point. For instance, India has several hospitals with a focus on cardiology while key hospitals in Singapore offer liver and kidney transplant services. Specialty hospitals in Thailand offer plastic surgery and lasik treatments.
While some countries are well on the way to fulfilling their commitment, still others are taking initiatives to tread this path. A look at some of the countries in Asia shows that they could be segmented into three tiers in terms of expanding hospital services geared to Medical Tourism.
Developed destinations such as Singapore, India Thailand and Malaysia are on a rapid growth path and are markets that marketers in the healthcare industry should target first to capitalize on the Medical Tourism industry. Developing destinations such as Indonesia, South Korea and the Philippines would come next as plans for medical tourism take shape and the industry comes of age in the next 3 - 5 years.
Sohini Mitra is a senior member of the Asia Pacific Healthcare team. Having worked with leading market research agencies in India and with numerous multi-national and Indian corporate organizations, Sohini's experience in Healthcare covers Medical Tourism, Medical Devices and Pharmaceuticals in the Asia Pacific region, specifically Thailand, Singapore, Malaysia, China and Indonesia.
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