Global Medical Tourism

Global Medical Tourism

Michael Czinkota

Nittaya Wongtada

Medical tourism can be traced to 4000 B.C. – when Greek pilgrims would sail abroad to seek the healing power of hot springs and baths. Over the past two decades, the industry encountered dramatic shifts.

Once wealthy patients from emerging economies sought treatments not available in their home countries. Since the new millennium, however, the flow of patients goes in the other direction. Rising health care costs prompt travelers from advanced economies to seek international destinations offering lower-cost or timelier alternatives to domestic care.

For instance, a spinal fusion in the United States costs an average of $110,000 in 2016. The same procedure was $6,150 in Vietnam. Heart bypass surgery, which costs $123,000 in the U.S. in 2016, is $12,100 in Malaysia. For many patients from high-priced countries, the solution is clear – it pays to seek medical care abroad!

The size of such tourism has ballooned since the late 1990s. Its value ranges between US $45.5 billion and $72 billion in 2017, with approximately 14 to 16 million patients seeking medical care beyond their countries’ borders.

Modern medical tourism is a global phenomenon. Traditional models emphasized internationalization as an incremental procedure. But the industry surged after the Asian financial crisis of 1997, which drove hospitals in Malaysia, Singapore, and Thailand to seek patients from abroad. They had already undergone substantial modernization, catering to a domestic middle class that demanded medical services commensurate with their newly acquired wealth. With the economic downturn, however, a shrinking middle class could no longer afford these superior facilities. International clients,  provided a ready solution to an excess supply of private medical facilities..

The success of hospitals in Southeast Asia inspired other countries towards medical tourism. Regional hubs emerged due to advantages of geographical proximity and specialization. Malaysia and Singapore, for instance, received an influx of patients from Indonesia, while many patients in India came from Africa and the Middle East. Brazil, Costa Rica, and Mexico all benefitted from their proximity to the United States.

A clear pattern has emerged in the lifecycle of medical industries. First, countries in the developing world begin to offer services similar to those found in advanced economies. As new segments of international healthcare populations emerge, just like sun flowers, new medical tourism destinations grow towards the new opportunity. Close proximity to wealthy consumers constitute a competitive edge. To retain their market share, leading destinations formulate new strategies and options.

In order to survive growing competition, hospitals in emerging nations tend to implement two strategies. Since technologies stem from post-industrialized countries, most can only imitate. Their novelty comes from specialization in specific medical procedures. Doing few tasks very often improves capability, capacity, and efficiency, and thus improves reputational success.

However, this tactic may be ineffective as other hospitals develop similar capabilities. Consumer preferences will hinge on how closely services comply with their own cultural preferences and norms. Hospitals attract patients based on familiarity with local approaches and usages. Such an approach gives room for the increasingly recognized component of holistic healing.

It is important to understand how the lifecycle of hospitals continues to evolve. Different stakeholders – from governments to accreditation services to healthcare providers to patients themselves – will be affected by the expansion of the industry. For example, to date, there is still much unfounded reluctance to accept health care services offered by international sources. Once the industry manages to break out of restrictive domestic silos, a fundamental reconfiguration of service and cost will be the consequence. Let’s look forward to that!

Nittaya Wongtada is a Professor at the NIDA Business School of the National Institute of Development Administration, in Bangkok, Thailand.

 

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

 

This comment is based on the article “Transformation in the Global Medical Tourism Industry”, Transylvania Review, Vol. 25, 2017.

Interview with CGTV about US New Trade Policies

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THE INTERNATIONAL SUPPLIER CONUNDRUM

TERRORISM, COMPETITIVENESS AND INTERNATIONAL MARKETING (5/6)

THE INTERNATIONAL SUPPLIER CONUNDRUM

(Fifth in a series)

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

Terrorism exposes firms to high levels of uncertainty and risk. Growing threats produce higher costs and more disruptions for the international marketing organization. Terrorism highlights the vulnerabilities produced by global sourcing, international distribution, and reliance on independent agents abroad. Unfamiliar settings also complicate intelligence gathering and corporate governance. Yet, firms need a globalizing marketplace.

Our survey of 151 multinational manufacturing firms reveals the threat of disruptions in international supply chains. Increased costs require management to include terrorist contingencies in decision-making. Advanced planning and strategic action can provide the firm with greater resources and capabilities for managing external shocks and adverse events.

Terrorism has become an ongoing challenge and now is part of the “new normal” of international marketing. Enemy groups can access and employ asymmetrically destructive power. In addition to loss of life and property, the growing ferocity of attacks sows panic and triggers new frictions for global commerce. Thus, operational, process, and strategic innovations that shield the firm are an increasingly prudent investment.

Natural disasters and man-made ones can be mitigated by investments which guard against terrorism. Such spillovers need to be considered environmental scanning is a key step in the planning process.

Globalization exposes MNEs to the risk of interdependence and imposes unanticipated perils. However, superior intelligence gathering alerts the firm to vulnerable areas and assists in forecasting as to where and how terrorists will likely strike next.

In international marketing, due to their longevity and fixed locations, channels and supply chains are particularly vulnerable. Sourcing, just-in-time systems, lean production, decentralized planning and supplier configurations, all need to be re-evaluated. For firms that rely heavily on independent suppliers, management needs to emphasize increased coordination, more reliable and transparent partners, and steps to improve trust and commitement.

Enterprise resilience refers to a firm’s ability to operate in risky environments and overcome discontinuities. Resilience requires flexibility, familiarity, and redundancy. To the extent that disruptions result in long-term shortages of needed materials and supplies, firms may opt to produce essential inputs themselves. Alternatively, in spite of cost, theoriticial preference for single source supplies, inputs should be sourced from a wider range of suppliers to provide for contingencies and limit exposure to risk. Even the best systems can fail under circumstances of suddenc stockouts without replacement planning.

Crisis management is effective when disasters are averted or when operations are rapidly sustained or resumed. As already suggested by strategist Sun Tzu, the most effective crisis management minimizes potential risk before an event. Planning for terrorism is akin to financial investors rebalancing portfolios periodically to optimize returns and reduce risks. Management might divest risky assests and increase holdings in other, geographically more safe locations or industries. Re-investments can to optimize the firm’s risk level and absorption capacity.

Innovations give rise to new safeguards in global operations. Management needs to develop metrics that trade off the costs and benefits of risk mitigation measures. For example, while the use of multiple suppliers is useful, it must be balanced against increased costs and the benefit of distribution circumvention. The task can be particularly complex when marketing internationally, because the foreign context introduces diverse contingencies that complicate analyses. But in a world which sometimes resembles a boiling caulderen of disruption and insecurity, such preparatory analysis is required for survival and prosperity. So it needs to be done!

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. He is a trade policy analyst and frequent public speaker. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).