Finally - some figures on medical travel - but is the industry ready for the truth?
Consulting firm McKinsey & Co is conducting a threemonth investigation into medical travel. Announcing the beginning of theirresearch at the Second Medical Travel Conference in Washington DCat the beginning of December 2007, they invited contributions from interestedparties in the medical travel industry. This medical tourism research is independent and internally funded, and Paul Mango at McKinsey & Co says that the research isindependent, internally funded and would be in the public domain.
“We are searching for primary data," Mango said. "We see a lot of peoplereporting other people’s information. Our methodology will be to go directly tothe source of many of the destinations and delve deeply into the primary data.We will talk to patients, intermediaries and those in the action so that we cancharacterise at the primary level what is really going on. We want to look at the size, scope and structure of themedical travel industry, its trajectory and what’s driving it. We also want tolooks at the barriers and enablers of future growth, and what are the mostpromising business models to capture that growth.
Mr Mango detailed three parts to the research:
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To anchor the debate in some sort of factual basewhich we think will be important to everyone in the industry.
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To define who might be winners and losers in thismarket, based on the forces that are most prevalent and who they might affect,and which segments are affected. On balance it might be net positive, but notfor everyone in the market.
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If and when medical travel will become disruptive.
The aim of the research, he said, is to asses the true size,structure and scope of the medical travel industry.
To stimulate debate, andalso as a starting point, threehypotheses were proposed:
(A) MOST DEFINITIONSOF MEDICAL TRAVEL ARE EXPANSIVE, YET THE MARKET IS NOT AS LARGE AS SOME REPORTSSUGGEST.
A strict definition of medical travel was proposed, namelythat patients be travelling “…for the explicit and primary purpose of receivingcare outside of their home country.” so expatriates and emergency cases shouldbe subtracted from any figures.
"The yield loss between international patients and those whoare truly medical travellers is something we will be interested in," said Ceani Guevara of McKinsey & Co, "And inthose, we believe there are four main market segments. They are thosetravelling for:
- better quality care
- quicker access to care
- lower cost for medically necessary procedures
- lower cost for medically discretionary procedures."
(B) THERE ARE SEVERALFORCES AT WORK TODAY THAT WILL INFLUENCE THE POPULARITY OF MEDICAL TRAVEL, BUTNOT ALL OF THEM FAVOUR IT.
McKinsey & CO have divided these into market drivers, competitive andvalue chain dynamics (others may capture it) and geo-political events.
Market drivers
1. These are the market drivers currently stimulating medical travel and include cost, wait time, quality,insurance coverage, service levels and the technology differences which exist betweendifferent regions.
2. Competitive and value chain dynamics (the behaviourof the players in the market). Mr Mango said that some of this might help the market, but others might cause significant problems. One example might be when governments change policies specifically toincrease or decrease the size of medical travel.
3. Exogenous events: including geo-political events, currency crisis, the ease and time it takes people to get a visa, acts of nature (SARS and the tsunami ) all of which change people’s perceptionsas to whether they are prepared to go to certain geographies. There are also changes in adjacent industries such as the travel industry.
These forces result in cross currents and have a mixedimpact. So, for instance
- wait times shortening in developed countries (e.g.:NHS in UK)
- emerging markets developing their owncapabilities at home, and so are better equipped to deal with the needs oftheir own populations (e.g.: GCC)
- insurance coverage is expanding in many countrieswith incremental people being covered, so their out of pocket costs isn’tnecessarily forcing them to travel.
(C) WHILE THE NETFORCES AT WORK MAY BE POSITIVE, THE REAL QUESTION IS WHEN WILL MEDICAL TRAVELBECOME DISRUPTIVE
McKinsey & Co will also look at the well-known barriers to further expansionof medical travel such as
- Ambiguity of quality of care
- Public perception toward off-shoring medicalcare
- Cost differential in treatment might not offsetthe cost and inconvenience of travel
- Lack of continuum of care
- Employer’s reluctance to send employees abroad
- Geopolitical concerns
Nevertheless, Mr Mango said that the contestable maximumnumber of possible medical travellers might be between 4-8 million. This figure might be derived from the numberof USinpatient admissions (40 million), less true emergencycases, pregnancies etc... to get down to electiveprocedures. Mr Mango also pointed out that the primary payer today for these sort of procedures is the US government because seniors and Medicare patients use hospitals more regularly than the commercial sector.
The figures should be out and in the public domain by the middle of next year. To contribute, comment or help with preliminary data, please email
ceani_guevara@mckinsey.com
