A Primer on Global Affiliations
International Patient Programs focused on patient care can be lucrative to a hospital’s bottom-line. A healthcare organization wanting to raise the bar in its ability to attract patients from around the world can set itself apart by offering innovation and competitively priced procedures. As the industry grows, the competitiveness of international patient programs will be distinguished by the global affiliations negotiated and the long-term relationships established.
Based on the risk level an organization is willing to assume, the affiliation process may begin with an academic exchange program providing a new avenue for research abroad and a visiting/observer medical professional program.
As global expansion becomes a part of a healthcare organization’s strategic marketing plan, successful programs may be spun-off as independent legal entities with a separate board of governance, budget and staff focusing, primarily, on development of international partnerships offering consulting and advisory services, developing another income stream and creating a new market for upstream patient referrals.
Global expansion raises important questions.
- What happens to the brand if the affiliation or collaborative relationship fails?
- How will the host organization and the board deal with political, cultural and operational issues that arise?
- Has sufficient due diligence been conducted on the partners involved to ensure the brand is protected?
- Is it possible to recruit qualified personnel?
- Are the physicians credentialed to U.S. standards?
- What are the legal impediments to enter the affiliate’s country?
- As the host healthcare organization, is the administration willing to provide resources to the affiliate organization?
- How much risk is the host willing to assume?
- Will the affiliate provide local resources?
- Will government provide incentives for the project?
- Is government or private funding available for investment in the project abroad?
- Are there any local political or economic issues that need addressing?
These and other questions should be answered as a healthcare organization determines the acceptable level of risk and prior to launching the global outreach.
Inbound International Patient Program
The lowest level of risk a healthcare organization may undertake when entering the global stage is establishing an inbound International Patient Program. Why? The investment in the program must be justified with a strategic and targeted marketing plan focused on a natural, regional market as part of the organization’s service expansion.
In addition, the budget can grow as the program grows, international patient volume can be acquired through patient-directed international insurance contracts with elevation of the brand internationally through a strong targeted marketing plan.
Many organizations have expanded their international strategy by happenstance rather than a targeted approach. Healthcare organizations at Houston’s Texas Medical Center created their international patient programs as a result of a need to care for diplomats, high-ranking executives and wealthy patients arriving from Latin America and the Middle East.
As the programs have matured over the years, organizations such as the University of Texas M.D. Anderson Cancer Center and Methodist International developed targeted strategic plans for expansion in markets of importance to their mission and goals. As an organization succeeds in building a strong business case in targeted international healthcare markets, a long-term strategy should be developed.
Long-term strategy and targeted approach
A long-term strategy should be a primary tenet of any organization’s plan. The strategic plan should include time for patient development, the creation of a patient referral system and the opportunity to develop relationships. In the short-term, international healthcare insurance contracts can drive patient volume to the organization as the long-term strategy is implemented.
A brand and a strong international reputation must be developed as well in order to compete for business in the global marketplace. The organization’s strategic and marketing development plan should focus on the natural, regional market.
For instance, organizations at Houston’s Texas Medical Center (TMC) have had a clear strategy targeting Latin America as a natural, regional market. As a result of Houston’s dominance in the oil and gas industry globally, the Middle East is also an important market for TMC organizations.
As an organization moves strategically from patient care to establishing collaborative agreements, outreach to key organizations should be initiated in target countries for development of collaborative and affiliate relationships. International relationships take time to develop and any healthcare organization’s administration should be prepared for the long-term.
Academic and observer exchange program
The most common international agreement with a minimal amount of risk establishes an affiliation program with an academic component. Affiliation agreements should be tailored to meet the strategic needs of the host healthcare organization and their affiliate partners.
An academic exchange program permits medical students, residents and physicians from abroad a vehicle to enhance their medical education and/or credentials in a specialty of interest. Additionally, research opportunities with the affiliate organization can be developed providing a new population for conducting clinical trials, establishing collaborative relationships with affiliate researchers and clinicians thereby developing a stronger relationship for both organizations.
The risk is that both institutions allow the agreement to lapse without taking advantage of the opportunity afforded to mutually learn from each other.
The author has found that an affiliation program can be utilized as a marketing tool for both organizations by providing medical symposia and conferences, offering continuing medical education programs and creating a staff development program.
During the author’s tenure at an organization at the Texas Medical Center, twenty-seven affiliation agreements were negotiated and signed with organizations in China, Turkey, Spain, United Arab Emirates, Mexico, Guatemala and El Salvador.
The majority revolved around academic exchange with a component of collaborative research in sports medicine, cardiology and plastic surgery. Marketing these programs in the affiliate market can position both organizations strategically, locally and regionally, elevating both brands and serving as an upstream patient referral source for specialty care not provided by the affiliate organization.
Creation of a separate legal entity
The level of risk an organization is willing to undertake is determined by the corporate officers and the board of directors. As academic exchange programs succeed and a deeper relationship develops with an affiliate, opportunities arise to expand the relationship. An important step in the international program process is the decision to minimize the risk by creating a separate legal entity that focuses all offshore international efforts.
Although the new legal entity is owned by the parent organization, no longer a separate cost-center, the legal entity is created with its own board of director’s, budget and staff. The legal entity is authorized to operate abroad, enter into contracts with clear demarcation from the parent health care organization.
As opportunities arise, the separate legal entity has the authority to move forward without encumbering the umbrella corporation. In addition, the separate entity may be for profit rather than restricted by the non-profit status of the umbrella.
Advisory and consulting services
The global healthcare arena has become increasingly competitive over the past decade. Organizations abroad are entering the medical tourism industry to obtain a part of the global international patient market. The global competition has required that countries play a strategic role in the development of their healthcare infrastructure.
Affiliate healthcare organizations that choose to become more competitive may require assistance with their healthcare infrastructure, corporate governance, development of standards and procedures, patient safety and quality management, staffing and management, clinical development, benchmarking, performance improvement and international accreditation.
As a healthcare organization determines they will provide advisory or consulting services to an affiliate abroad as part of their brand positioning, development of relationships is tantamount to the success of any project needed. As Marcie Guzman, vice president for Global Development/The Americas with Houston’s Methodist International states, “the cultural divide must be bridged between organizations for a successful relationship to be developed.”
The affiliate organization may have political issues that must be overcome with the help of the advising healthcare organization, i.e. providing support with the board of director’s and corporate governance, implementation of changes in standards and procedures, physician credentialing, cultural issues in management and/or provision of care, changing hierarchical relationships to value clinical teams (physician/nursing hierarchy), legal impediments and gender issues, to name a few.
Guzman also states “that both organizations learn from each other establishing a collaborative relationship as changes are implemented and the relationship evolves.”
Operational support and management services
Operational support and management service agreements can provide a unique way for a healthcare organization to develop a footprint in a foreign country. Management expertise may require investment of time and resources calling for capital investment from the affiliate to pay for the support.
As these relationships evolve, the affiliate culture can change becoming competitive locally, nationally and regionally. According to Guzman, the Methodist International agreement with American British Cowdray (ABC) Medical Center in Mexico City has evolved as Methodist has provided operational assistance, guidance with international accreditation, management support and training, academic exchange with physicians from both organizations, implementation of a team approach to clinical care and instituting evidence based learning.
ABC benefited by elevating its credibility in Mexico City, regionally and nationally with the use of the Methodist International’s name as its affiliate. Methodist International benefitted by creating a long-term collaborative relationship with ABC. The impact of the agreement has elevated the level of care for the local population, improved performance and created a team environment eliminating cultural barriers to providing care.
Before a healthcare organization considers providing support or managerial services to a prospective affiliate, the organization should do its homework. Do the laws permit foreigners to manage a healthcare organization in the affiliate country?
Johns Hopkins Medicine International CEO Steven J. Thompson states in “The Perils of Partnering in Developing Markets” (Harvard Medical Review, June 2012), the process can be fraught with problems. As a project in Turkey was under development with Johns Hopkins agreeing to build and operate a medical center in Istanbul, they encountered a Turkish law mandating “that the chief executive be a Turkish citizen” leaving Johns Hopkins without control.
Eventually, the issue was resolved with changes in management structure approved by the affiliate board overcoming the legal impediments. It is vital a thorough due diligence be undertaken to prevent unexpected impediments, which could hinder a project with an affiliate institution.
As a result of long-term relationships with established affiliate institutions and providing consulting and advisory services, the next step for an organization with a mature international program is to explore opportunities to own a facility abroad. Part or full ownership assumed by any healthcare organization has potential risk due to political and economic instability, cultural differences (hiring, training, management and quality, etc.), lack of development funding, inadequate infrastructure, legal impediments and maintaining control of the brand.
The decision to build, buy or operate a hospital abroad requires a significant capital outlay. Investment and ownership can leverage an organization’s high-quality service and expertise, build the brand, create another income stream and provide academic support to an affiliate wanting to expand their reach in their market, locally, nationally and regionally.
Dr. Rajiv Thakkar, Assistant Professor at Johns Hopkins University School of Medicine recently spoke at the 5th World Medical Tourism and Global Healthcare Congress in Miami, Affiliations, Collaborations and Management of Overseas Hospitals – Boom or Bust.
Dr. Thakkar provided a history of Johns Hopkins evolution of their footprint in Southeast Asia. The relationships established began with research studying disease in Southeast Asia. An agreement was signed in 1998 with the Singapore government to develop the country’s first private medical facility.
The opportunity arose in 1999 to conduct clinical trials in a broader research program funded by the Singapore’s Economic Development Board in collaboration with National University Hospital, which did not work out.
However, another opportunity presented itself and in 2000, Johns Hopkins International acquired its first jointly owned and managed patient care facility outside the U.S. in Tan Tock Seng Hospital acquiring JCI accreditation in 2004.
As an organization’s international programs mature through partnerships and as opportunities present themselves, the decision to invest abroad becomes the next step to obtaining a foothold in another market. Some examples of health care organizations which have collaborated and invested abroad are:
- The University of Texas M.D. Anderson Cancer Center’s joint venture with MDA Holding Spain, S.A. built Spain’s first multi-disciplinary cancer center in Madrid;
- Harvard Partners Medical International’s collaboration on the design and construction of University Hospital in the United Arab Emirates as part of the Dubai Healthcare City;
- Houston’s Methodist International served as the management company with the Dubai Mall Medical Center encompassing project development, operation and management;
- Cleveland Clinic’s partnership with Mubadala Development Company to build Cleveland Clinic Abu Dhabi Hospital scheduled to open in 2013.
Global trends will impact the decision for healthcare organizations to seek opportunities abroad. Due to difficult entry into the U.S. post-9/11, patients are seeking alternatives for medical care. U.S. immigration laws require that an individual on a J-1 training visa return to their home of origin upon completion of their training.
Insecurity in the hospital industry will also compel healthcare organizations to explore other avenues for income. Increased collaboration between hospitals and insurers will also determine where patients are directed to reduce cost.
The opportunities abroad provide an organization the ability to capture a new patient market by providing quality care, utilizing U.S. trained physicians in their home country and elevating the brand through collaboration, providing advisory or consulting services and/or investing in a facility in a target market.
In conclusion, a healthcare organization entering the international patient market should have a long-term strategic and targeted marketing plan. As the program succeeds and patient volume rises, the organization must determine the level of risk it is willing to assume should global expansion be a strategic goal.
The benefits from establishing international affiliations with organizations abroad may include international recognition for collaborative research published, development of advisory and consulting services providing a new income stream, building a global network of relationships with strong upstream patient referrals for specialty care, serving a targeted market by providing advanced healthcare services and international brand recognition.
About the Author
Rosanna Gomez Moreno is a Texas licensed attorney. Ms. Moreno’s educational presentations provide an in-depth view of successful medical tourism programs for hospitals and clinics, global marketing and positioning, the travel and insurance industries impact on medical tourism and in-depth case studies of existing health care clusters globally.
As a partner in Global3, she and her partners provide consulting, project development and logistical services to companies, developers and governments focused on the Latin American market. In addition, Ms. Moreno is a partner in Blue Marble Healthcare, a healthcare cluster consulting and design company.