Medical Tourism, the Future of Health Services

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Medical Tourism, the Future of Health Services

Dr Christine Lee
Tourism Research Unit (TRU), Department of Management, Monash University, Australia.
[email protected]

Dr Michael Spisto
Centre for Hospitality and Tourism Research (CHTR), School of Law, Victoria University, Australia.
[email protected]

ABSTRACT

‘Medical tourism’ is a term used to refer to a travel activity that involves a medical procedure or to
activities that promote the wellbeing of the tourist. This paper utilises the factors in Porter’s diamond
to evaluate, analyse and discuss the growth and development of medical tourism. Unacceptably long
hospital queues and high costs of medical procedures in western society have created a demand for
medical tourism. Hence, as this new global product gains popularity, increased monitoring and
greater accreditation of this service is required to keep pace with an increase in its international
demand.

Keywords: medical tourism, Porter’s diamond, healthcare, quality services

1.0 Introduction

Travel itself exposes travellers to various mental and physical challenges in their new environment as
part of their experience (Freedman and Woodhall 1999; Cetron, et al. 1998; Isaacson and Frean 1997;
Lederberg 1997; Morse 1995; Wilson 1995). This is especially so when the medical tourist is ill and
debilitated and, therefore, more susceptible to contracting illnesses from the destinations. However, the
cost benefit for the travelling medical tourist to receive medical treatment often compensates for this
travel risk at the destination.

There are numerous definitions of tourists (Theobald, 1998). However, it is accepted that tourists are
travellers who have travelled and stayed away from their home environment for 24 hours or more, and
hence, have often utilised some form of accommodation facility. Those travellers who do not meet this
24 hour criterion are generally referred to as ‘visitors’. For travellers that travel overseas for medical
purposes, conceptually, they would meet the definition of a tourist. Since medical tourists are travellers
whose main motivation for travel is for a specific purpose, medical tourists can be categorised as a group
of special interest tourists, hence participating in a form of special interest tourism (Douglas, Douglas,
and Derrett, 2001).

There is no one definition for medical tourism but it is generally accepted that this term is used to refer
to travel activity that involves a medical procedure or activities that promote the wellbeing of the tourist.
Figure 1 illustrates the components of medical and healthcare tourism (TRAM, 2006).
Medical and Healthcare tourism
Treatment of illnesses
Enhancement
Wellness
Reproduction
(‘medical tourism’)
(Cosmetic surgery)
(Spa/alternate therapies)
(Fertility
treatment)

Source: Modified from TRAM 2006

Figure 1: Medical and healthcare tourism and components


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The term ‘treatment of illnesses’, generally includes medical check-ups, health screening, dental
treatment, joint replacements, heart surgery, cancer treatment, neurosurgery, transplants and other
procedures that require qualified medical intervention. These can range from healthcare services that
can be provided by a local general practitioner to complex surgical procedures such as transplants.

‘Enhancement’ procedures are carried out mainly for aesthetic purposes. Some of these procedures
require qualified medical personnel but much of this work is non-disease related (unless disfigurement is
caused by disease). Examples of such procedures include all cosmetic surgery, breast surgery, facelifts,
liposuction and cosmetic dental work.

This component of the tourism and healthcare tourism is traditionally most associated with the tourism
and leisure industry. The ‘wellness’ segment of medical and healthcare tourism promotes healthier
lifestyles (Bennett, King and Milner, 2004). Therefore, these products can include treatment in spas,
thermal and water treatments, acupuncture, aromatherapy, beauty care, facials, exercise and diet, herbal
healing, homeopathy, massage, spa treatment, yoga and other similar products. There is normally no
need for a qualified doctor to provide these services, although many professionals providing these
services, are often accredited members of the various associations.

‘Reproduction’ tourism is an increasing and growing area of medical tourism travel. Under this
component, there are patients who seek fertility-related treatments such as in vitro and in vivo
fertilization and other similar procedures. In some situations, the travel is motivated and influenced by
the legislation in the country of origin and host country. Some fertility procedures are illegal in some
countries. Furthermore, ‘birth tourism’ is also included in this category (TRAM 2006). This category
involves a pregnant mother who travels to another country to give birth to her baby in order to utilise the
services, which are often free. In addition, a further advantage for her is to have her child gain
citizenship of the new country and thus be able to reside permanently in the new location. At times,
potential parents travel for the purposes of adopting children because the legislation and supply of babies
for adoption is easier in host countries.

The scope of this paper mainly focuses on and evaluates the medical tourism areas that rely on medical
and healthcare intervention, which often saves lives, relieves pain and provides various surgical
procedures.

2.0 Porter’s diamond

Porter’s diamond of national competitive advantage is a modern international trade theory (Porter, 1990).
It was derived and used to conceptualise the four conditions that are important when conducting
international business. These four factors originate from earlier country and firm-based theories. In
simple terms, the country based theories relate to the international trade theories of nations as a unit of
business and the firm-based theories are those which relate to the firm as a unit of business.
International business can be defined as commerce or business involving one of more countries and/or
businesses located in a different country (Fisher, Hughes, Griffin and Pustay, 2006). In either situation,
it involves cross border or trans-border commercial activities, hence including the complexities arising
in different legislation, political environments, cultures, societies and other factors. As medical tourism
generally involves the participation and activities of people and transactions in more than one country,
this is appropriately relevant to international business.

Originally, Porter’s diamond of national competitive advantage was developed from the observations of
the practices of about one hundred international businesses across ten different countries. Therefore,
many of the components would encompass and consider most of the elements that are essential for the
strategic decision-making of a firm intending to conduct international business. In the shape of a two
dimensional diamond, four main components are included in this model (see Figure 2). These include
factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and
rivalry. Two additional, elements, which refer to chance and government, were later included in the

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conceptualisation to recognise the importance of these two additional components in the influence of
international business.

Firm strategy
structure and
rivalry


Factor
Demand
conditions
conditions
Related and
supporting
industries

Source: Porter (1990)
Figure 2: Porter’s diamond of national competitive advantage

2.1
Factor conditions
With factor conditions, many medical tourism products are located in warm, pleasant environments.
Therefore, the basic factors, which include ideal climatic conditions, natural resources and geographic
location, are an advantage for medical tourism especially for those visitors from colder climates. In
addition to these basic factors, there are advanced factors that have assisted in the development of
medical tourism. These include investments made by people, who usually offer medical tourism services,
predominantly in private hospitals (companies) and governments. Other advanced factors include the
utilisation of the world-wide web resources for the communication and marketing of the medical tourism
product internationally. In terms of quality, it is said that there is little difference in the medical tourism
services offered in the advanced western countries and those in the eastern or developing countries.
Quite often, medial doctors and their staff are trained in western countries, have worked in western
hospitals and then returned to their country of origin (eastern or developing countries) for various
personal reasons (CBS, 2004; 2005). Furthermore, the recruitment of foreign-trained doctors by these
private hospitals, plus attractive work conditions have helped to staff these hospitals with well-qualified
people. Therefore, the quality of such healthcare services are equivalent and the services far better than
that found in the hospitals in developed countries.

Labour, in a large population, is relatively cheap in developing industries. Therefore, many of the
activities involved in financing a hospital can be managed at a cheaper cost because salaries are
generally lower and, in turn, the savings are passed along to the patient who pays much less for the same
healthcare service than that found in their home country.

2.2
Demand conditions
As the ageing population increases, there is increasing demand for medical services, and, quite often,
this demand cannot be met in many western countries under the public healthcare service. For much of
the population, private healthcare is too expensive and so patients are placed onto public waiting lists for
medical treatment. As these lists get longer and the price of healthcare increases, it is logical that
alternative measures, which can serve this necessary demand, will be supported to improve the quality of
life of these patients. Quite often, simply the cost of an expensive holiday could finance medical
treatment and a recuperative break away in the destination country. This is very attractive for many

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people. Both physical and mental well-being are addressed (Garcia-Altes, 2005; Henderson, 2004). The
former is taken care of by surgical procedures, the latter involves recuperation and pampering in an
exotic location that can promote mental health and wellbeing during this process. Hence, such a
medical tourism experience is very attractive.

A further demand for medical tourism is created by the increasing population that do not subscribe to
private healthcare insurance. There are various reasons why some people do not have medical insurance
- these are usually cost-related. Consequently, this would be a group of patients who would either
benefit from medical tourism, or, not be able to afford any treatment at all.

Insurance companies that have to pay for the cost of medical treatment of their insured clients are
continuously seeking ways of reducing their expenses and improving their services. These companies
are gradually creating a demand for medical tourism as well. Where companies allow flexible claims for
healthcare services, these companies may pay a smaller amount of compensation to their clients who
have paid less for their medical treatment received overseas. For example, India has targeted the
National Health Service to explore the use of medical services overseas. Such international business
arrangements are somewhat like a sophisticated form of subcontracting or off-shoring of services, which
is a commonly utilised business strategy to reduce costs.

2.3
Related and supporting industries
Since medical tourism involves a form of travel to a foreign location, there is demand for some form of
accommodation in the hospital or in a hotel and also for local travel at the destination. Therefore,
medical tourism relies upon a developed infrastructure. The tourism industry includes the provision of
travel by the airlines and accommodation in hotels and motels and also taxis for local travel.
Furthermore, there are activities that cater for the leisure and recreation of tourists, which can provide
ideal facilities for a relaxing and pampered recovery from any medical procedures. With such sound
infrastructures in place in most developing countries, not much further infrastructure investment is
required by local businesses and host governments. In addition, foreign governments are aware that the
value of the tourism dollar can be increased by the introduction and support of medical tourism and so
have supported businesses investing in this new industry. Furthermore, it is recognised that a medical
tourist rarely travels alone. It is common for another relative to accompany the patient and, therefore,
the accompanying person or entire family may travel to the selected destination and stay for the
necessary duration of the medical treatment. Governments further encourage medical tourism by
allowing visas to be easily obtained and so do not hinder the process.

2.4
Company strategy, structure, and rivalry
This factor shifts from the macro-related (at country level) toward those at micro level (at level of the
firm) in the Porter’s diamond. At micro level, the future of individual enterprises (including hospitals)
participating in medical tourism will be dependent on their strategy, structure and rivalry. Although
medical tourism is supported by governments, as with other tourism businesses, those companies, which
do not provide a quality service and maintain a good customer satisfaction rating, cannot remain
sustainable in the market environment. As medical tourism becomes more attractive to many countries,
there will be much more international competition and rivalry. Therefore, with medical treatment being
equal across many countries, the tourist would begin to select their target destination based on other
reasons. Some medical enterprises have compiled packages to make it easier for tourists who then do
not need to spend so much time in researching their travel and accommodation requirements (Medical
tourism, 2005a; 2005b). With the medical tourism facilities increasing in demand over time, as with
other international business operations, there is room for multinational enterprises that can offer such
healthcare services internationally. With a multinational enterprise comprising staff that is recruited
internationally, there are facilities within the structure of the firm to enable these enterprises to
expatriate medical staff to manage future subsidiaries around the world. Although doctors are required
by law to register with the local medical associations before they can practice in the local environment,
there is no such requirement for the CEO to manage and start such operations in any country. Thus, it
will not be unusual in the near future to have different forms of entry modes in medical tourism, such as
with franchising agreements or joint ventures.

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Table 1 lists a range of countries that are currently offering international medical tourism healthcare
services. This table shows that almost all the countries in the world offer some form of medical tourism
services. As the benefits of medical tourism is realised in financial terms and for the wellbeing of the
patients, more resources from governments and private investors in this industry will be provided.

Argentina
Bulgaria
Czech Republic
Iran
Mexico
Saudi Arabia
Australia
Canada
Dubai
Israel
Netherlands
South Africa
Bahrain
Cayman Islands
France
Japan Jordan
Oman Peru
Switzerland
Bangladesh
Chile
Germany
Korea
Philippines
Taiwan
Barbados
Costa Rica
Greece
Lebanon
Poland
Thailand
Belgium
Cuba
Hungary
Lithuania
Romania
Turkey
Brazil
Cyprus
India
Malaysia
Russia
Table 1 International medical tourism provision of service


Source: TRAM (2006)

2.5
Keeping up with developments
As with all rapid developments, there will be some need to regulate and monitor institutions in order to
ensure and maintain the health and safety of medical tourists. It is more likely that this process will be
reactive to issues and problems rather than proactive in preventing problems from emerging. With some
medical tourism procedures, such as heart surgery, hip replacements, cochlear implants and dental
surgery, it is necessary to be aware of the qualifications and training of surgeons, operating teams and
the reputation of the medical facilities offering the treatments. It cannot be taken for granted that the
same level of health standards apply in the domestic and international environment. Nevertheless, the
utilisation of overseas health services is not too different from the better known subcontracting or the
off-shoring of services, such as those used in call centres and other business services. Since medical
tourism decisions are sometimes based on higher costs and average expertise in the domestic situation
(in comparison with the cost of medical services abroad at lower prices and sometimes of better quality),
medical tourism is likely to be the new global trend for providing medical services through necessity
rather than choice for many future medical tourists.

With the range and scope of medical procedures offered in the international marketplace, different
countries offer different levels of control over their domestic medical tourism services. This can be risky
and dangerous (Menck, 2004). In the worst case scenario, either post operative recovery does not go
well and patients need to prolong their stay at the destination and therefore incur additional costs, or, if
patients have returned home, they would have to seek further medical care and treatment in their home
country. This would increase the cost of the overall treatment for their condition especially for cosmetic
procedures, which are monitored less (Connell, 2006). Hence, ‘buyers beware’ is currently the norm
than the exception. Therefore, in the early days of global investment in this new product, the
monitoring or accreditation of these products can significantly increase their international demand. The
way forward is towards some form of international monitoring of the global medical tourism product and
services at governmental and global levels. This would require a large degree of international
coordination and cooperation between the nations beyond that exhibited by the current day situation.

3.0 Conclusion

Medical tourism is becoming a new and emerging international business that is gradually increasing in
importance. In capitalising on the tourism infrastructure that supports this industry, nations do not need
to invest much more in supporting medical tourism. As an international business, this is not too
different from the subcontracting or the off-shoring of services. With higher costs and expertise, in the
future, medical tourism is likely to be the new global trend for providing medical services. The rapid
developments in medical tourism demands have left the policing and legislation behind. It would be
imperative for this legislation to catch up in order to protect the vulnerable that are unable to make well-
informed research-based decisions. It remains to be seen in the future which countries will adopt the
proactive stance to strategically avoid future problems to maintain and protect their country’s reputation
in this important and growing area of healthcare.


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Authors’ Backgrounds

Dr Christine Lee [BSc(Hons) Dundee; DipAcc&Fin, DipMgtSt, MMS, PhD Waikato; GCHE Monash
ANZIM] is an assistant lecturer in the Department of Management at Monash University, Australia.
She currently teaches undergraduate and postgraduate subjects in management and international
business. Her current research projects are mainly in the health, tourism, international business and
management. She has published and presented numerous papers at domestic and international
conferences in these research areas and in her teaching. At Monash University, she is member of the
Tourism Research Unit (TRU), Family and Small Business Research Unit (FSBRU), International
Business Research Unit (IBRU), Social and Economic Interface Research Network (SEIRnet) and the
Australian Centre for Research in Employment and Work (ACREW). In addition, she is also a member
of the human ethics committee (SCERH) at Monash University. In the local community, she is a
member of the Latrobe Tourism Advisory Board and a member of the Gippsland Heritage Park
management committee.

Dr Michael Spisto [BSc, LLB, LLM(UCT), Grad. Cert Tertiary Ed., Grad. Dip. Tertiary Ed. (Vic), PhD
(Wits), Attorney of the High Court of South Africa] is a law lecturer in the School of Law at Victoria
University, Australia. He currently teaches undergraduate and postgraduate subjects in law. His
current research projects are mainly in law, taxation and tourism. As an academic, he has presented
numerous papers at domestic and international conferences. He has published in a number of different
areas including teaching research. At Victoria University, he is a research associate of the Centre for
Hospitality and Tourism Research (CHTR), Centre for International Corporate Governance Research
(CICGR), Centre for Strategic Economic Studies (CSES), Institute for Community Engagement and
Policy Alternatives (ICEPA) and Centre for Strategic Economic Studies (CSES).