Growth Of The Medical Tourism Industry Tourism Essay
CHAPTER 2LITERATURE REVIEW
In the previous chapter a brief introduction to the meaning of “medical tourism” and the “medical tourism industry” has been given to develop a basic understanding of the subject for this dissertation. This chapter deals with the review of the literature for developing a conceptual and theoretical background for further research and identifying the research areas required. Literature review is an essential part of any research as it not only helps the researcher understand the research areas required, but also develops a conceptual background of the study for the reader. In survey and experimental research, the review of literature serves as a variety of background functions, which helps in the preparation of the collection of the actual data (SINGH, 2007, pp-61).
The literature review in this dissertation has been designed in a systematic and a conclusive way for the reader to understand the subject clearly. The literature review has been divided into three main parts which are:-
(Part A) Introduction:-This part deals with the literature required for understanding the concept of medical tourism as an industry and the medical tourism industry in India.
(Part B) Medical Tourism in India: Strategic Implications and Growth:-This part consists of literature required to study the strategic implications and factors influencing growth of the medical tourism industry in India. This part is related to the second and third objective of this dissertation and also helps in developing a research area required for the fourth and fifth objective.
(Part C) Conclusion:-After understanding the concept of the strategic implications and growth of the medical tourism industry the main conceptual framework can now be made and the main research areas can now be identified.
The reason for this literature review is not just to review the related literature but to identify the concepts that will be used in the research. The importance of a literature review cannot be matched by an understanding as to how a review of literature can be done but how it can be used in the research (HART, 1998, pp-1).This chapter will help in finding the questions that needs to be answered in the research.
PART A
Medical Tourism: Background
(A.1)Defining Medical Tourism
Since ancient times, travellers have left their homeland in search of the best health care possible. Historical records show that early civilizations, such as the Romans (about 4 to 400 BC) were drawn toward the healing properties of “bath” or “spring” waters (KHAN, 2010).Although Medical tourism seems to be an entirely new concept which is now being acknowledged as an industry itself it has existed from the 18th century. Some of the earliest forms of tourism were directly aimed at increased health and well being for example, the numerous spas that remain in many parts of Europe and elsewhere, which in some cases represented the effective start of local tourism, when ‘taking the waters’ became common by the 18th century (CONNEL, 2005).By the 19th century spas were found in the most remote colonies such as the French Pacific Territory of New Caledonia while the emergence of hill stations throughout the tropics further emphasized curative properties of tourism (SMYTH,2005 cited in WOODSIDE,2007).History proves that medical tourism has existed for a long time. According to John Connell (Cited in WOODMAN,2007) recently travellers have travelled in search of yoga and meditation as the search for cure took on more spiritual and holistic perspectives. Today people not only travel long distances for spas and relaxation but for complicated medical procedures in search for affordable and quality medical care.
Globalisation, it is said, lifts nations out of their isolated existence and makes them part of one “knowledge society”. Today, outsourcing of activities like laboratory investigations, medical transcriptions, software development, and telemedicine to countries like India, China, Korea, Japan, has become easier with business process outsourcing(QUADEER and REDDY,2010) . The globalization of healthcare services has given rise to a new phenomenon called “Medical Tourism.” It is also called “Healthcare Globalization,” “Health Vacation,” “Wellness Tourism,” “Medical Outsourcing,” or “Generation Next Health Holidays”. The term Medical Tourism can be defined as travel outside one’s home country in search of healthcare that is either less expensive or more accessible (KHAN, 2010).Carrera and Bridges (Cited in LUNT and CARERRA, 2010) identify health tourism as the organised travel outside one’s local environment for the maintenance, enhancement or restoration of an individual’s well-being in mind and body.
Definitions and the seeking to know meaning of terms and words can put things right elementarily between people and their words (JACKSON, JACKSON and HARMON, 197, pp-235). Although there are many definitions of the term “Medical Tourism” the definition must serve the general purpose of understanding the meaning of the term “Medical tourism”. The term “Medical tourism” can be divided into two words “Medical” and “Tourism” as shown in the figure below (JAGYASI, 2008).
MEDICAL TOURISM
MEDICAL
TOURISM
The word “Medical” means treatment of illness, disorder or injuries.
The activities of persons travelling to and stay in a place outside their usual environment for leisure, business and other purposes.
+
Figure 1: Defining Medical Tourism
Source: – JAGYASI, P.2008.Defining Medical Tourism ~ another approach. Medical Tourism Magazine .July 15 th
According to Dr Prem Jagyasi (JAGYASI, 2008) understanding of the words “medical” and “tourism” individually will not be sufficient to define the term “Medical Tourism”. Considering the definitions of the words, medical tourism can be defined as a set of activities in which a person travels often long distance or across the border, to avail medical services with direct or indirect engagement in leisure, business or other purposes.
Today medical tourism has become a huge industry itself.According to a report by Mckinsey and company and the confideration of Indian industry(2005) the medical tourism industry is expected to become a hundered million dollar industry by the year 2012.The figure below represents the projected growth in the earning in revenues of the worldwide medical tourism industry.
Figure 2
Some of the internationally know hospitals for medical tourism such as Bumrungrad in Thailand and Apollo in India, report revenue growth of about 20 percent to 25 percent annually (ROTH, 2006). McKinsey & Company (2005) estimates that Indian medical tourism will grow to $2.3 billion by 2012.In 2005 approximately 250,000 medical tourists sought care in Singapore, and 500,000 travelled to India for medical care(HUTCHINSON,2005).According to these reports the medical tourism industry is expected to grow at a large scale. A commonality in all these reports concludes that the three main destinations where growth of this industry is expected to be the highest are India, Thailand and Singapore which are countries in Asia. Therefore before the medical tourism industry in India can be seen it is important to identify the key factors influencing growth of the medical tourism industry in Asia and the different destinations gaining popularity in this industry who will eventually are the competitors.
(A.2) Medical Tourism in Asia
Table 1: Popular medical tourism destinations around the world.
Source:-NATAN, M and SEFER, E.2009.Medical Tourism: A New role of Nursing? .OJIN: The online journal of Issues in Nursing. July 22 .Vol 14 There are many countries that are now competing in the medical tourism industry all around the world. The table given below indicates the major destinations for medical tourism in the world. As it can be seen Asia has a lot of countries that have established themselves as medical tourism destinations. According to an update in a report given by Deloitte (2008) the number of medical tourists visiting Asia will grow at a rate of 20% annually and will create an industry worth US$4 billion by the year 2012.India is estimated to account for half of the medical tourism industry, countries like Singapore, Malaysia and Thailand are already promoting their medical tourism industries.
Asia
The Americas
Europe
Africa
Oceania
China
Argentina
Belgium
South Africa
Australia
India
Bolivia
Germany
Israel
Jordan
Brazil
Columbia
Hungary
Lithuania
Malaysia
Philippines
Singapore
Thailand
Cost Rica
Jamaica
Mexico
United States
Poland
Asian Governments are now supporting medical tourism through organizing awards and promotional events such as Asian Spa and Wellness tourism in 2006 and the establishment of dedication promotional boards (HENDERSON,2004 cited in COCHRANE,2008) The four main countries identified as medical tourism destinations in Asia are Thailand, Malaysia, Singapore and India. In 2002 Thailand became home to the Asia’s first JCI-Accredited hospital which was Bumrungrand in Bangkok and presently has six other hospitals which have been given this accreditation (WOODMAN, 2009). In Thailand according to the Kasikorn Research Centre, about 1.28 million foreigners visited hospitals in 2005 generating revenues of about thirty three million Thai baht (DELOITTE, 2008).Another important destination for medical tourism is India a country that has pioneered the outsourcing industry is now quickly gaining popularity as a medical tourism destination. Before the medical tourism industry in India can be looked at it is important to understand the factors that promote Asia itself as a caterer to the medical tourism industry. As seen below a SWOT analysis on the medical tourism industry is given which analysis the strengths, weaknesses, opportunities and threats of Asia itself. Organizations use the SWOT analysis as the first step in developing their marketing plan as it is relatively an easy process and helps in describing the major considerations to be taken in designing an appropriate strategy(BRIGGS,2001,p-47). This SWOT analysis plays a significant part of this research as it outlines the significant strategic implications of the Medical tourism in Asia.
SWOT ANALYSIS OF THE MEDICAL TOURISM INDUSTRY IN ASIA
STRENGTHS
az More mature medical tourism markets, facilities, and practices.
az Government sponsored tax breaks and open environment for foreign private investments in healthcare infrastructure.
az A relative surplus in the labour pool due to large populations and strong emphasis in education in some countries.
az A history of using complementary and alternative e.g., yoga, Ayurveda, herbs, TCM/TKM.
az In close proximity to Middle Eastern medical tourists.
az Asia also has a booming tourism market with many scenic locations and various types of geography (beaches to mountains) to choose from.
az Asians are known for their culture of hospitality and service.
az Services and procedures such as: wellness/CAM, eye-care, musculoskeletal care, cardiac care, transplants, haemodialysis, and general/plastic surgery.
Source:-VEQUIST, VALDEZ and MORRISON, 2009
WEAKNESSES
az The length of travel for many European and North American tourists.
az Some fears of travelling to Asia because of a reputation of social unrest, corruption and violence.
az The lack of European and North American language (e.g., English, German, French, etc.) ability.
az The culture in Asia is arguably very different from occidental cultures.
az Difficulty in seeking legal remedy in the event of malpractice.
az Large disparity in the healthcare systems for the poor and rich/medical tourists.
az Several Asian countries are trying to serve too wide a swath of the market to maintain a sustainable industry.
Source:-VEQUIST, VALDEZ and MORRISON, 2009
As it can be seen above the strengths and weaknesses of the medical tourism industry in Asia have been identified. These factors play an important role in identifying the strengths and weaknesses of the medical tourism industry in India as the Indian medical tourism industry is a part of the Asian medical tourism industry. These factors also develop a contrast between the positive and negative features of the medical tourism industry in Asia. As it can be seen above Asia also has a booming tourism market and is known for hospitality and service. The health care facilities in Asia are well developed. Asia also has a history of using complementary and alternative medicines which will support in developing wellness tourism .Although there are many positives of this industry in Asia, it also has some negatives such as a weak legal system in the case of malpractice. People also have the fear of the unknown as there is a change in the social climate. These factors relate to the Indian medical tourism industry in many ways but some of them may not apply such as the language barrier as India has a large English speaking population and the legal system which is developing rapidly. After a comparative study of the strengths and weaknesses of the Asian medical tourism industry a comparison of the opportunities and threats is discussed in the SWOT analysis.
The next two factors of the SWOT analysis are the opportunities and threats which draw a comparative study on the external capabilities of the Asian medical tourism industry.
Source:-VEQUIST, VALDEZ and MORRISON, 2009
OPPORTUNITIES
az Large populations in the region offer many advantages (e.g., more regional medical tourism, lower cost of labour, more healthcare professionals, etc.).
az Increasing strength and diversity of Asian economies and many fast-growing areas.
az Many strong governmental initiatives supporting medical tourism.
az Shrinking cost of fuel (i.e. gas prices) which makes airfare lower and encourages medical tourism.
az The wealth in the Middle Eastern could lead to more tourists travelling to the Asian region.
az The Asian expertise in off-shoring of various industries to add to their chances to capitalize on this market.
az The emphasis on education and healthcare in many countries in Asia.
az Strong private investments will build the infrastructure of the region.
THREATS
az Disease (particularly pandemics), social unrest, terrorism, overcrowding, dirty environments in some areas of Asia are perceived negatively and hurt marketing efforts.
az Competition from Latin America, Eastern Europe, and the Middle East for North American, European, and Middle Eastern medical tourists.
az Due to the economy, many consumers simply do not have large enough cash reserve to pay for services or airfare.
az Limited numbers of insurance carriers that have comprehensive relationships with medical providers in Asia.
az Fast growth of medical tourism in other regions and countries outside of Asia.
Source:-VEQUIST, VALDEZ and MORRISON, 2009
As seen above the opportunities of the Asian medical tourism industry is huge and a major advantage is the increasing strength of the economies which fuels the development of stronger governments and health care infrastructure. Asia also expertises in off-shoring servicing as seen in the case of India which is also considered the off-shoring capital of the world. Although there are many opportunities there are threats to the Asian medical tourism industry as there is an increasing competition from Latin America and certain countries in Europe. Asia is also perceived as a continent of social unrest, terrorism and unhealthy environment which impacts negatively on the marketing strategy.
In the above SWOT analysis the strength, weaknesses, opportunities and threats of the Asian medical tourism industry can be highlighted. These factors explore the internal and external capabilities of Asia itself in this industry which brings out a contrast between the positive and negative features of this industry in Asia. These factors adversely affect the medical tourism industry in India.
(A.3) Medical Tourism in India.
The Indian government’s commitment to providing comprehensive healthcare to the citizens, irrespective of their paying capacity, as part of its welfare policies was given up after 30 years of independence when the Sixth Plan opened up medical care to the voluntary and private sectors (QUADEER and REDDY, 2010).The involvement of the private sectors in the health care industry in India helped in the emergence of a corporate health sector in the 1990’s.After opening up to the corporate sector in healthcare policies the government emphasised on healthcare to the poor and their involvement in it which was seen in the eighth and ninth year plans given by the government of India in 1992 and 1997 respectively. The acceptance of the new economic policy, of the health sector reforms by 1992 increased cutbacks in public sector investments in health as well as the commoditisation of health services (RAMA and NUNDY, 2008).The cutback in public sector investments led to the breakdown of the public healthcare institutions with more collaboration from the private healthcare sector. When the healthcare services became dominated by the private sector, a new phenomenon of healthcare services becoming a form of market expansion and financial gains rather that welfare could be observed. This gave rise to the medical tourism industry in India.
The government policy of merging medical expenditure and tourism was announced by Finance Minister Jaswant Singh in his 2003 annual budget speech when he described India as a global health destination”. He identified the potential of complex health care services that are offered at relatively cheaper rates and yet earned profits. In this report he also mentioned the possibilities in investing in large chains of medical institutions and creating medi-cities. After this report heavy investment in improving medical institutions continued and today India has become of the fastest growing medical tourism destinations. This country is usually viewed as one of the most important global leader in the medical tourism industry, and it advertises itself as offering everything from alternative ayurvedic therapy to coronary bypasses and cosmetic surgery (CONNELL, 2006).Some hospital executives in India use the phrase ‘value medical travel’ to promote India as a high-quality, low-cost destination for international health care travellers (TURNER, 2007).The medical tourism industry has grown at a large scale with companies like WellPoint Blue Cross Blue Shield to handle their pilot program of offering medical tourism for Americans travelling to India (KHAN,2010).India has made its mark in the medical tourism industry in the world by providing world class medical care at cheap and affordable prices.
In a nutshell it has been predicted that the Indian medical tourism industry will rise rapidly and will continue to grow at a fast pace. There are many growth drivers involved in the evolution of this industry in India; some of them include cost factors, government policies and quality health care. After a brief understanding of the emergence of the medical tourism industry in India it is important to understand the factors involved in the growth process. The next part deals with an in-depth review of literature on the growth drivers and strategic implications of the medical tourism industry in India.
PART B
Medical Tourism in India: Growth and Strategic implications
(B.1)Medical tourism in India: Growth
Professor Michael Porter from the Harvard University is one of the well know strategic writers and describes the industry lifecycle model as the grandfather of concepts for predicting the industry evolution (LYNCH, 1997).According to this model an industry goes through four major stages which are introduction ,growth, maturity and decline. The figure shown below is the diagrammatic representation of the industry lifecycle with the four steps.
Figure 2: Industry Lifecycle Stages
Source:-LYNCH, 1997, p 126
This concept helps in describing any industry as it goes through the stages as a result the strategy of the industry changes as the stage changes. It also can help in formulating the correct strategy required at a particular stage in the industry lifecycle in an entrepreneur perspective. This concept is very well relevant to the medical tourism industry as it helps in identifying the stage that the industry is in. Identifying these key aspects at an early stage will lead to formulating the right strategy for the success of a business entering this industry. It is important for companies to understand the use of the industry lifecycle for businesses to compete in the industry effectively and successfully (BAUM and MCGAHAN, 2004).
In 2007, an estimated 750,000 Americans travelled abroad for medical care and an estimated growth to a staggering six million was expected by the end of 2010(BALIGA, 2006).According to a study carried out by Deloitte in 2008 there will be a large amount of significant growth in the medical tourism industry. In this study the numbers of medical tourist from the United States of America going to foreign countries for treatments will increase. This report also indicates that the medical tourism industry may reach the maturity by 2016 where the growth will start decreasing. This report basically proves that this industry is growing and can therefore be place in the growth sector of the industry lifecycle. The growth sector of the industry lifecycle represents that the market is expanding and customers have become more informed about the products. In this stage there will be more competitors that will enter the industry market (CARPENTER and SANDERS, 2009).The figure given below is the estimated growth given in the Deloitte report (2008) of the medical tourists going to foreign countries for medical treatment.
Figure 3: Annual growth and patient volume growth in major countries in the medical tourism industry
Source: – Deloitte report (2008)
GROWTH
INTRODUCTION
TIME
Figure 4: Predicted Growth of the medical tourism industry in India The figure represents a huge rise in the patient volume growth in major countries over the next few years which indicated the amount of growth and demand in the medical tourism industry. These statistics affect the medical tourism industry in India in terms of growth planning and understanding that growth potential of this industry in India. After witnessing the immense growth of the medical tourism industry in the world, India felt the need for this industry and entered into this market in late 2002. India’s efforts to promote medical tourism took off in late 2002, when the Confederation of Indian Industry (CII) produced a report in collaboration with McKinsey & Company which outlined the immense growth potential of this sector in India (KURIACHAN and BASANTH, 2008).In this report they made future predictions of this industry in India considering the economic and political factors. There were many strategic points highlighted in this report which concluded that the forecasted growth of the medical tourism industry in India will be from US $ 18.7 billion in 2001 to around US $ 45 billion by 2012 which is equivalent to 8.5% of GDP. The figure below represents the predicted growth according to the Confederation of Indian Industry (CII) and McKinsey & Company.
Year
US $’Billion
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Source: – Confederation of Indian Industry (CII) and McKinsey & Company (cited in KURIACHAN and BASANTH, 2008)
As it can be seen above the medical tourism industry in India is expected to grow to a 45 billion dollar industry by the year 2012 which is a 26.3% rise from the year 2001. The worldwide market for medical tourism is estimated in 2004 was estimated to be US $ 40 billion with India market share 1%.In 2012 the world medical tourism industry will be US $ 100 billion with India market share being 3% (KURIACHAN and BASANTH, 2008).These figures represent that the Indian medical tourism industry will grow at a fast pace .At a strategic level it is important to understand the factors which will affect the growth of this industry in India.
(B.3Factors influencing growth of medical tourism industry in India
The previous section showed the predicted growth of the medical tourism industry in India and the SWOT analysis of Asia that affect this industry in India. To analyze the medical tourism industry in India on a strategic level the competitive advantage of India must be analyzed. In reference to this context of global competition was given by Michael Porter in his book “The competitive advantage of nations”. He conducted a study of ten nations to develop an analytical framework at a strategic level, which tries to explain why a nation succeeds in particular industries but not in others (PORTER.1990).Porter suggests that the national home base of an organisation plays a very important role in creating an advantage on an international scale (JOHNSON, SCHOLES and WHITTINGTON, 2005).The study on this model can clearly help in distinguishing the factors that may influence the growth of the medical tourism industry in India. The model basically describes the four main attributes that individually and as a system constitute the diamond of national advantage .These attributes are:-
Factor Conditions:-The nations position in factors of production, such as skilled labour or infrastructure necessary to compete in a given industry.
Demand Conditions:-The nature of home market demand for the industry’s product or service.
Related and Supporting Industries:-The presence or absence in the nation of supplier industries and other related industries that are internationally competitive.
Firm Strategy, Structure and Rivalry:-The conditions in the nation governing how companies are created organized and managed as well as the nature of domestic rivalry.
Source:-PORTER, 2008
“Chance” and the “government” are two factors that influence these four determinants, but are not determinants themselves (OZ, 2002).
FIRM STRATEGY, STRUCTURE AND RIVALRY
RELATED AND SUPPORTING INDUSTRIES
DEMAND CONDITIONS
FACTOR CONDITIONS
CHANCE
GOVERNMENT
Figure 4: Michael Porter’s Diamond Framework: Competitive Advantage of Nations
Source: – PORTER (1998, p. 127)
(B.4)Strategic implications
Figure 4: Strategic implications of the Medical tourism Industry As described by LYNCH (1997) there are many strategic implications for the industry lifecycle .These can be modified in terms of the medical tourism industry as shown in the following figure. These Strategic implications will also help in the clear understanding of the drivers responsible for the growth of this industry.
MEDICAL TOURISM
INDUSTRY
Customer strategy
Research and Development strategy
Company Strategy
Competitor strategy
Source:-Modified from LYNCH (1997, p 127)
The first strategic implication is customer strategy which is one of most important implications as it tends to understand the customer strategy for selecting the product and the factors which are involved in it. This is also a significant factor that a business in this industry should try and evaluate on a continuous basis to complete efficiently and effectively with the growth of the medical tourism industry in the industry life cycle. By understanding customer strategy a clear view on the factors affecting the growth of the medical tourism industry can be identified.
Joseph Woodman (2008) in this book “Patient beyond Borders: Everybody’s Guide to Affordable, World-class Medical Travel” gives a guide to consumers interested in going abroad for medical treatments. In this book a step by step guide is also given and the factors influencing consumers to choose medical tourism have also been identified. According to this book there may be many reasons why medical tourists travel to attain medical care but there are seven main reasons as shown in the figure below. It is important to explore the customer strategy as it tends to understand why medical tourists choose certain particular locations as their medical tourism destination. The figure given below represents the customer strategy and the main factors influencing it.
Figure 5: Customer strategy for the Medical Tourism Industry
Cost saving
Better quality care
Customer Strategy
Shorter waiting periods
Other Treatments
Inpatient friendly
Excluded treatments
Speciality treatments
Source:-WOODMAN (2008, pp 51-63)
Cost Saving
As health care costs in developed countries like the United States of America and United Kingdom escalate individuals, small businesses, and state governments are all attempting to control health-related expenditures. Outsourcing health care to countries where surgical procedures and other forms of treatment are available at substantially lower prices is attracting interest from individuals and businesses (TURNER, 2007). With the continuing health care cost increases in developed countries, it is likely that patients, insurers and employers, particularly in countries where employers share the costs of private health insurance, will continue seeking low cost treatment abroad (FORGIONE and SMITH, 2007). There many ways in which service costs are kept low for example most provider countries, malpractice litigation costs are much lower than in most highly developed countries, which has helped to reduce the cost of medical care(HADI,2009,p.11).
Table 1: Major Medical Tourism Destinations: Cost Comparison
Medical procedures
USA
India
Thailand
Singapore
Costa Rica
Mexico
Korea
Heart Bypass
$80,000
To
$130,000
$6,651
to
$9,300
$11,000
$16,500
$24,000
$22,000
$34,150
Heart Valve Replacement
$160,000
$9,000 to
$9,000
$10,000
$12,500
$15,000
$18,000
$29,500
Angioplasty
$57,000
$4,998
to 7,500
$13,000
$11,200
$9,000
$18,000
$19,600
Hip Replacement
$43,000
$5,800
to
7,100
$12,000
$9,200
$12,000
$14,000
$11,400
Hysterectomy
$20,000
