Outsourcing Healthcare

‘First-World Care’ at ‘Third-World Prices’
As healthcare and medical insurance costs skyrocket in the United States, Western Europe, and other developed regions, patients are increasingly seeking treatment abroad. And they do not have to look far to find qualified doctors and high tech facilities in developing (and often exotic) countries that offer a full spectrum of comparable services at a fraction of the price. While there are some potential hurdles for the international health care industry to overcome, hospitals like Bumrungrad in Bangkok, Thailand, showcased here as a Case Study, demonstrate the successes already achieved and the vast potential for the industry’s future growth.

An MKThink Research Publication 1 December 2006 For further information, please contact: Chloe Lauer at 415 288 3394

Outsourcing Healthcare
‘First-World Care’ at ‘Third-World Prices’ Globalization is the language of the day, and the health care industry is no exception. In the past, foreign patients sought advanced care in the United States or Western Europe. Today, the flow of patients is shifting. With the costs of care skyrocketing and waiting lists lengthening, patients in the U.S. and Europe are seeking care in places like India and Thailand. And people who came to the U.S. for high-tech care in the past are finding internationally renowned hospitals in Asia that offer comparable or even better care for a fraction of the price (without the headache of post-9/11 U.S. foreign policy or red tape). Traveling abroad for medical treatment is not a new occurrence— people have made pilgrimages to hot springs or famous health resorts since antiquity. But the trend has grown significantly in the past five years for two important reasons: the push factor and the pull factor, according to Businessworld’s December 22, 2003 article, “The Health Travellers.” The push factor is the large surge in demand for health care in developed nations as life expectancy continues to rise and the proportion of the elderly (in comparison to the total population) is rapidly increasing. The pull factor is the excellent doctors and sophisticated facilities in exotic, developing countries like Thailand, Malaysia, and India. The push and pull factors can be broken down into the seven primary drivers of this global outsourcing evolution: cost, timing (waiting lists or lack thereof), quality of care, cutting-edge procedures, privacy, the opportunity for pre/post-op tourism, and efficiency. • Cost: approximately. 1/3-1/10 the cost in the U.S. or Europe, including airfare and lodging. • Timing: nearly immediate care instead of six to nine-month waiting lists. • Quality: complete competency; more RNs per patient; new facilities; better rooms; state-of-the-art technology. • Cutting-Edge Procedures: life-changing operations not yet through the U.S.’s tedious FDA approval process. • Privacy: recuperate away from friends and co-workers. • Tourism: a change of scenery does wonders for the body, mind, and spirit during recovery. • Efficiency: Many patients don’t have a lot of vacation time/sick leave, so the possibility of combining surgery with a tropical vacation is appealing. POTENTIAL HURDLES Quality. Western patients may at first be wary at the prospect of traveling half way across the world for a surgery that could mean the difference between life and death. After such initial doubt, many patients will be convinced by statistics and anecdotes alike that outsourced care is high-class. Take the story of Naresh Trehan, a heart surgeon at Escorts hospital group in India, for example. Formerly earning $2 million/year in Manhattan, Trehan recently returned to Delhi, where his hospital completed more heart operations (4,200) than anywhere else in the world in 2004 with death and infection rates well below first-world averages (.8% and .3% compared with 1.2% and 1%, respectively). “Nobody questions the capability of an Indian doctor, because there isn’t a big hospital in the United States or Britain where there isn’t an Indian doctor working.”1 And what about the patient experience? Byron Bonnewell of Louisiana, who received a quintuple bypass surgery at Bumrungrad Hospital in Bangkok, Thailand, raved about his treatment: “In Thailand, I bet I had eight RNs just on my section of the floor alone. First-class care.”2 These international hospitals pride themselves on creating an atmosphere of luxury. It’s no mistake that the facilities look more like a five-star hotel than a hospital. Kim Atwater of Oregon explains, “It’s much nicer than any hospital I’ve ever stayed in the United States.”2

Outsourcing Healthcare

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Nicer is an understatement. Think private room with private bath, plus massages and yoga classes. And you can stay as long as you want. Anne Bell of the British High Commission in New Delhi is happy that her baby was born in India instead of the UK: “There’s no pressure to go home after the delivery. We’ve been welcomed to stay as long as we want…Often in the UK, you might be out of the hospital within five hours if you’ve had a normal delivery.”2 Insurance. Very few medical insurers, whether public or private, currently extend health coverage to another country, with the exception of emergency services during travel. For this reason, most patients seeking overseas care are self-financed. People who have medical insurance typically choose to stay at home where their coverage is accepted. However, when the wait is too long or the procedure unavailable, even insured patients will opt for overseas services.3 Law. It is unclear what recourse patients have in the case of malpractice since the legal structures in the countries known for medical tourism differ from those in the United States and Great Britain. In any case, most patients are very satisfied with their experiences, so the need to resort to legal measures is minimal, according to our research thus far. Accreditation. Some international hospitals are seeking accreditation from the groups that administer medical facilities in Britain and the U.S. Bumrungrad (Bangkok, Thailand) is accredited by the U.S.-based Joint Commission on Accreditation of Healthcare Organizations, and the British Standards Institute has given Escorts (near Delhi, India) its stamp of approval. The Apollo Group hospitals and Escorts are in the process of becoming certified by the Joint Commission. Pre- and Post-Op Care. So you make it to India and have a successful kidney transplant. What happens once you’re back home and need a post-operative check-up? What about complications and side affects that you didn’t anticipate? This is a valid concern. A successful surgery is just the first step toward better health. The recovery process is completes the procedure.

Digital technology is one part of the solution to the distance barrier. With the ease of communication enabled by today’s technology, doctors and patients can be in touch both before and after the procedure. Web-cams and video conferencing help to ease the physical divide, but nothing compares to a face-to-face consultation. Local Population. Some argue that the medical tourism boom will reduce the care available for the local populations where these international hospitals reside. Critics are concerned that hospitals will cater to the wealthier patients from out of town while neglecting those from the other side of town. While these concerns should not be dismissed lightly, it seems that the opposite may be true. The local population can stand to benefit from the state-of-the-art care offered by an internationally recognized hospital as long as both local and international patients have equal access to care and local patients continue to represent a significant percentage of those treated. At Bumrungrad Hospital in Bangkok, Thailand, for example, Thai residents still accounted for 63% of the hospital’s 2002 revenues. And the Bumrungrad Hospital Foundation, founded in 1990, is dedicated to improving the health care for underprivileged Thais. In India, Apollo Hospital Enterprises responded to criticism from India politicians by reserving beds for those unable to pay for care, setting up a trust fund, and pursuing remote telemedicine throughout India.4 Perception of this region as breeding ground for infectious diseases. The avian flu and SARS epidemic may keep some of Asia’s would-be patients at home, but these scares will cause only minor downturns in an ever-strengthening global healthcare market. Government Regulation. In the free market as in health care, government interference is at an all-time low. Going abroad for health care is becoming more and more commonplace, and governments are likely to at least allow—if not encourage— innovations that bring affordable, high-quality health care to more of their populations.

Outsourcing Healthcare

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C A S E S T U DY // B U M R U N G R A N D H O S P I T A L . B A N G KO K , T H A I L A N D
Overview. A 200 bed facility in 1980, Bumrungrad Hospital re-invented itself in 1997 as a completely digital facility and the largest private hospital in south East Asia. With one million square feet over 12 floors and 554 inpatient beds, BH treated more than 350,000 international patients from 154 different countries in 2004, up from 161,000 in 2000. A range of impressive outpatient clinics covers a spectrum of specializations. Over 2,000 employees, including over 700 doctors (one-third of whom are certified in the U.S.) and dentists “provide efficient world class healthcare with caring and compassion.”5,6 Technology. IT is the key to BH’s outstanding service and amazing success. Global Care Solutions (GCS) is a worldwide provider of IT solutions specially designed for the health care industry. Through Hospital 2000, an integrated front office and back office operational solution with a single database that operates on “platforms such as Intel architecture-based servers from Dell and Microsoft Back Office products such as SQL server 2000”7. Only eight IT personnel are needed to maintain this vast system that supports the over 2,000 hospital employees and runs in nearly every language! In addition to the innovative comprehensive IT solutions, BH uses cutting edge technology in other areas, such as radiology. With film less imaging, doctors don’t need to wait for film to be delivered, images are not lost in the filing system, and the space that housed the records has been re-allocated as a pediatric clinic. The IT system also helps to attract and retain doctors committed to high standards of practice. Ownership. BH is traded on the Stock Exchange of Thailand as a public company. Certification. BH is accredited by both U.S. and Canadian standards and has an internationally certified laboratory. Impressive Statistics: • 40% increase in patient volume since 2000 (with no need to increase back office or IT staff) • 33% gross margin in 2003 • 850,000 outpatient visits per year with an average visit of 45 minutes, “including registration, treatment, diagnostic procedures, pharmacy, and bill paying”5 • Medical errors and infection rates have fallen. • The database holds 35 million scanned images and adds 10,000 per day. • The hospital collects 93% of its charges due to billing efficiency.

Outsourcing Healthcare

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IMPACTS/SYNERGIES Worldwide Market increases competition; lowers costs. In this multi-trillion dollar industry, worldwide statistics showing exactly how many people travel abroad for healthcare and how much they spend each year are not available. Localized statistics give an indication of the magnitude of the world market, though: medical travelers from the Gulf region alone invested over $27 billion in treatments abroad in 2000, according to a Saudi Arabian study.8 And that’s just one part of the global market. Rupa Chanda, professor at the Indian Institute of ManagementBangalore, gives an indication of the huge opportunity: “The estimate is that the healthcare market in the Organization of Economic Cooperation and Development countries alone is worth about $3 trillion, and expected to go up to $4 trillion in 2005.”8 In 2003, 1.3 million medical travelers brought over $1 billion in treatment costs (not to mention auxiliary expenses) to Thailand, Malaysia, Jordan, Singapore, and India. In these Asian nations, the medical travel market is growing at over 20% each year. At that rate, medical tourism could bring in $2 billion per year in India alone by 2012, according to consulting firm McKinsey. If the overseas market ultimately drives down private health care costs in the United States and Britain, it will benefit those on the margin of access to good care. Insurance companies, on the other hand, will be forced to reduce expenses to stay profitable. In fact, they already are. According to a CBC News story, U.S. insurance companies are outsourcing overnight computer services to Apollo Hospital Enterprises in India.4 Government/International Policy. Both the World Health Organization (WHO) and the World Trade Organization (WTO) have an interest in the medical travel movement. The WHO understands that medical tourism can improve medical facilities and the medical economy in developing nations while solving some of the cost and demand problems facing wealthier countries. The WTO views medical travel as key to upgrading healthcare globally. “Both WHO and WTO understand that medical travel could ameliorate much of the demand-supply imbalance in global healthcare. Developed nations benefit as costs or waiting times – or both – come down for a significant chunk of their population. Developing countries benefit as it brings in revenues and provides the right spur to improve their overall healthcare sector, apart from reducing brain drain in their medical fraternities. Least developed countries, too, benefit as they lack facilities for cutting-edge treatment.”8 Tourism Industry. Since patients often buy a package deal that includes flights, ground transport, lodging, treatment and a postoperative vacation or resort stay, it’s not only the medical industry that benefits from the patient’s trip. Both the cities where the

hospitals are located and coastal regions where patients tend to vacation stand to gain from the tourism dollars. Digital Technology. As described in the above case study on Bumrungrad Hospital in Bangkok, Thailand, IT is the key to its success. Besides being necessary for accurate, comprehensive care within hospitals, digital technology will be crucial to bridge the gap of physical distance. Faced with the need for doctorpatient and international doctor-local doctor communication both before and after surgery, innovations in digital technology will be driven by demand. Insurance. The chairman of Apollo Hospital Enterprises, Dr. Prathap C. Reddy, is negotiating with Britain’s National Health Service to work as a subcontractor performing medical procedures at a fraction of the rate of Britain’s private or government care. In the future, similar agreements may be brokered with private insurance groups. Physical Design. Due to the above-mentioned challenges of long-distance care, there is a burgeoning market for pre- and postoperative care facilities that collaborate with the international hub hospitals. The market is already gaining foothold: for example, Surgeon and Safari, a program jokingly known as the “beauty and beast” tour, (patients have orthopedic or cosmetic surgery in Africa and then recover while on safari) has a network of doctors in London who offer pre-op consultations. And Bumrungrad Hospital in Bangkok, Thailand, is establishing referral offices in Oman, Australia, and the Netherlands. CONCLUSION As demonstrated by ever-growing success of the internationally known and respected Bumrungrad Hospital in Bangkok, Thailand, healthcare is becoming an increasingly globalized industry. The benefits of lower costs, immediate availability, high quality care, cutting-edge procedures, and opportunity to travel outweigh any of the potential hurdles mentioned above. By outsourcing healthcare, it seems ‘first-world care’ may indeed by available at ‘third-world prices.’

Outsourcing Healthcare

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NOTES 1. Trehan qtd. in Randeep Ramesh’s article, “This UK patient avoided the NHS list and flew to India for a heart bypass. Is health tourism the future?” The Guardian, 1 February 2005; available at http:/ / www.guardian.co.uk/medicine/story/0,11381,140288 1,00.html. 2. “Vacation, Adventure and Surgery? Elective Surgeries By World-Class Doctors At Third-World Prices” CBS News, 4 September 2005; available at http:/ / www.cbsnews.com/stories/2005/04/21/60minutes/ main689998.shtml 3. www.medical-touri.org/Medical-Insurances.htm* 4. “Medical Tourism: Need Surgery, will travel.” CBC News, 18 June 2004; available at http:/ /www.cbc.ca/news/ background/healthcare/medicaltourism.html 5. Article 13 Best Practice Case Study on Bumrungrad Hospital, Bangkok, Thailand; available at http:/ / www.article13.com/A13_ContentList.asp?strAction=Get Publication&PNID=1179 6 Cumming-Bruce, Nick, “A Thai Remedy for High Health Costs.” The International Herald Tribune, 27 July 2005; available at http:/ /yaleglobal.yale.edu/ display.article?id=6067 7 “Dell Reliability Vital to Bumrungrad Hospital and Global . Care Solutions”; available at http:/ /www.dell.com/ content/topics/global.aspx/casestudies/en/2002_bum 8. Datta, Prosenjit and Gina S. Krishnan, “The Health Travellers.” Businessworld, 22 December 2003; available at http:/ /www.businessworld.in/Dec2203/ coverstory01.asp REFERENCES Bumrungrad Hospital website; available at http:/ / www.bumrungrad.com/ Datta, Mrinalini and Abhay Singh, “Indian Hospitals Lure Foreigners With $6,700 Heart Surgery.” Bloomberg, 26 January 2005; available at http:/ / www.howardsheart.com/Bloomberg.com-surgery.html Global Care Solutions Press Release on Bumrungrad Hospital, Bangkok, Thailand; available at http:/ / www.hospital2000.com/english/customer_bh.asp Lancaster, John, “Surgeries, Side Trips for ‘Medical Tourists: ’Affordable Care at India’s Private Hospitals Draws Growing Number of Foreigners.” Washington Post, 21 October 2004; available at http:/ / www.washingtonpost.com/wp-dyn/articles/A497432004Oct20.html “Over The Sea, Then Under The Knife: Patients worldwide are heading to hospitals in Asia for affordable, high-quality surgery.” BusinessWeek, 16 February 2004; available at http:/ /www.businessweek.com/magazine/content/ 04_07/b3870074.htm Surgeon and Safari website; available at http:/ /www.surgeonand-safari.co.za/
Outsourcing Healthcare

COMPANY PROFILE MKThink reveals and optimizes the nexus between people and their environments. Led by principals Mark Miller, Steve Kelley and Nate Goore, MKThink creates dynamic strategies that help solve organizational challenges. The MKThink team, comprised of anthropologists, psychologists and business people, as well as architects and urban planners, strives to fully understand their clients’ identities, needs, goals and culture before ever putting pen to paper. With a strong background in learning, workplace, community and healing environments, MKThink boasts a wealth of capabilities, including strategic, analytic and design services.

*original source no longer available online.

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