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Public and Private Sector Collaboration ~ Prevention of Two Tiered Markets

Economics & Investments

As the number of people travelling abroad seeking medical treatment continues to grow many countries around the globe have embarked on building marketing for and establishing medical tourism options for a regional and global community. But as governments see the benefits of creating their own medical tourism industries how can they avoid creating the risk of a two-tiered system leading to undesirable and unintended consequences?

Anyone can tell you that travelling abroad for health care is nothing new. Since early times people have travelled far and wide in search of cures and treatments for various ailments. The nineteenth century was perhaps the heyday for spa towns and health resorts to flourish throughout Europe. In recent times wealthy patients from around the globe have traditionally sought the latest technology and highest quality service in exclusive private clinics in Switzerland or world-renowned American hospitals generally travelling wherever they felt they could get the best care.

Nowadays medical tourism is the most visible part of a generalized growth in the globalization of health encompassing not just patient movement but also cross border supply. Fuelled by technological progress e-health and tele-medicine are increasingly breaking down national frontiers as a delivery mechanism for health information and services.Improved communications and transportation facilitate the movement of people both as patients and healthcare providers.

In most developed countries people generally still prefer to receive health care close to home. However under certain circumstances it may be more preferable for a patient to seek care abroad.In some cases the nearest health facility may in fact be just across a border. In others certain specialists or state of the art treatments are simply not available at home or are subject to long waiting lists.

Besides cost plays a key role: Rising health care costs at home and lack of insurance coverage are among the more often quoted reasons for patients to be treated abroad. Indeed some countries are able to provide the same procedures and treatments at a fraction of the cost incurred at home. Legal and ethical obstacles such as stem cell therapy or some fertility treatments have also been cited as forces behind the increase in health tourism.

But in recent years there has been a growing body of evidence that the number of patients travelling across international borders specifically for the purpose of receiving health care has become increasingly important in many countries. Hard statistics on the value of health-related travel remain patchy but certainly underestimate activity. The Thai Investment Board reports Thailand treated over one million foreign patients in 2006.

More than just holidaymakers these patients were part of an expanding global trade in medical tourism which the board then valued at $40 billion worldwide and with growth potential of some 20 percent per year worldwide.Some estimates go higher still. A 2008 report by the Deloitte Center for Health Solutions estimated the value of the world medical tourism market in 2008 was around $60 billion and expected double digit growth rates in the years ahead.

A follow up report in 2009 suggested the recession would slow this growtha trend which recent reports from Thailand appear to echo but it still estimated the number of U.S. outbound medical tourists would reach 1.6 million by 2012.The health sector has not been slow to respond to this phenomenon. An increasing number of countries have been actively promoting their comparative advantage as medical travel destinations.

Promising high quality technologically advanced and competitively priced health services lead their hope to attract patients from all over the world. Substantial visitor numbers floated around with significant growth estimated in India Singapore and Malaysia as well as South Korea Costa Rica Jordan and many more.Individual hospitals and clinics or clusters of health care providers also have sought international accreditation in order to win recognition on the international health insurance and purchaser networks.

Medical tourism concerns are often termed the North- South flow. Predominantly travelers from North America and Europe travel to destinations in Latin America Asia and Africa. However other flows can also be important particularly regionally. First flows within Europe or between the U.S. and Canada called North-North second flows between countries in the Middle East or Asia called South-South where one country acts as a hub for medical care for neighboring countries  such is often cited for Jordan.

While medical tourism remains marginal it is growing and can have proportionally larger effects on states regions and specialist areas of care. Such globalization of health services offers new opportunities for countries but also creates new risks. In examining the potential benefits governments of developing countries have sought to promote the growth of medical tourism in their economic growth policy as a way to introduce new technologically advanced and quality health services to their own citizens.

However the danger is when an increased demand from foreign patients provides important revenues it may draw away critical resources from the local population.


For countries promoting themselves as medical travel destinations the risk of a two-tier health system developing arises. In two tiered markets offering high quality richly resourced healthcare for foreign patients results in the provision of low quality low resourced care for the resident population.Alternatively scarce public funds would be given away in the form of tax breaks incentives and subsidies to help develop the private health care provider industry and diverted away from the core task of delivering much needed primary care.

Indeed there is a danger of a crowding out of the local population by investing in health providers dealing with quite different population needs  tertiary technology intensive care services unadapted to the basic care needs delivered in a primary care setting.Another concern can lead to a possible brain drain. Trained health professionals would prefer private providers servicing foreigners to domestic public health systems and urban to rural areas.

In many countries the cost of training of doctors and nurses is provided or underwritten by the state which then sees this investment lost. In summary the accusation goes that medical tourism will only result in aggravating the poor performance of the local health system and help to widen further observed health inequalities.But while much of the focus rests on possible effects of medical tourism on the destination country there may be undesirable and unwanted effects on the patients country of origin.

In addition to a possible inadequate domestic health system unable to meet the needs of its population there are questions over equality. Indeed wealthy patients are able to access certain services abroad or jump waiting lists and as such it may be seen as a substitute for much needed health care reforms or investment in resources in the domestic health system. Other public health issues have also been well documented and found their way recently into the headlines. such as complications from treatment abroad or the introduction of drug-resistant superbugs back into the home country.

More generally there may also be concerns and questions over the lack of control and the by-passing of legal hurdles for certain treatments only available abroad.But consider the positive effects of achieving a win-win situation: there are a number of potential benefits of medical tourism to be gained from both inbound and outbound medical tourism. For the country promoting medical tourism there are the obvious foreign earnings from both increased health and tourist flows.

While acknowledging the medical tourism industry plays for now only a marginal economic role improved health outcomes and rising income are shown to be closely linked especially in developing countries. And as a secondary effect there should be increased employment opportunities for the local population and improved infrastructure and business opportunities servicing the needs of the new health providers.Importantly a desirable trickle down effect can be envisaged.

Indeed the more rapid diffusion of new health care technologies and treatments coming from the presence of internationally recognized and accredited health care providers would help raising the health care standards for local populations. The problem of health care professional flows within developing countries from the public sector to private medical tourism providers is dwarfed compared to the migration from developing to developed countries.

In fact there has been some anecdotal evidence pointing to a small scale reverse brain drain. For instance in countries such as Trinidad and Tobago or even India whereby health professionals are being enticed to return to work in the health system of their country of origin.For the importing country there may be important economics of scale and cost savings to be made by patients going or being sent abroad for specialist and costly treatment.

Rather than a substitute for reform it may also be seen as a catalyst for change or a necessary introduction of badly needed external price competition into a malfunctioning domestic market. Often the potential loss of revenue can have a sobering effect on an industry.So how do governments develop effective strategies to ensure a successful medical tourism industry goes conjointly with the principle public health objectives and resident population needs?

It would be sensible to conclude that strong public-private cooperation in developing a strong strategy could be a key to success. Early involvement of all the relevant stakeholders that is to say Ministries of Health Tourism Industry health care professional associations as well as the health care providers and investors in a coordinated and transparent approach appears important and has some precedents.

An impact assessment is paramount in order to assess the strengths and weaknesses identify the right markets as well as implementing a system for monitoring and coordinating.


The strong commitment of government and the public authorities is key to provide the right climate for success. In its support and governance role it needs to create the right regulatory framework for providers to ensure quality and patient safety  an industry can quickly be damaged if foreign patient expectations are not met. This means a review of the registration and accreditation procedures and existing practice barriers to provide the right incentives for investment in the industry.

Some countries such as South Korea have also played a key role in developing a central one-stop information site for medical tourism in the country to provide coherent information for potential visitors and in case something does go wrong.So in order to make two-tier health system fears best allayed there is no single solution  as hinted before the allocation of a certain proportion of beds or services reserved for local needs is not always the optimal way and is often difficult to enforce and not necessarily the right type of services needed by the local population.

Investing ear-marked funds back into the local health system from resulting health tourism revenue has been adopted in a number of regions and may have more of a desired and targeted effect. In general though the introduction of high quality state-of-the-art treatments within a country may in itself be a more effective driver in raising the population health standards.

In addition to any natural flow of health care professionals back to their country of origin some countries have developed effective human resource planning strategies to combat the loss of health care professionals abroad or to the private sector. In some cases there may be a deliberate surplus training in order to adequately cover the export of doctors and nurses. In another example the Philippines has allowed nurses to work abroad or in the private sector if they repay a part of the cost of their training covered by the public purse.

There may also be certain incentives or obligations to doctors towards the local population while still working in the private sector.Of course there is a fundamental need to continually monitor and report the state of the industry: providing information to adapt and reform the strategies and make such information transparent to all the relevant stakeholders.

In summary health is a major and growing sector of the economy and while medical tourism is still marginal it is growing even faster and can have impacts in many areas of health policy. While the effects of medical tourism on importer and exporter need more evidence and monitoring it is suggested strong public-private partnerships and a clear and consistent medical tourism strategy appear key to success.* The views contained in this article represent the personal views of the author and not necessarily those of the OECD.

About the Author

David Morgan is a Health Expenditure and Financing Analyst in the Health Division of the Paris-based Organisation for Economic Co-operation and Development (OECD). Responding to the important public health and trade policy issue raised Mr. Morgan has been leading a two-year project in order to improve the measurement of international trade in health goods and services. The project aims to identify the diverse and developing range of transactions and flows between the domestic healthcare sector and non-residents. Mr Morgan has ten years of experience at the OECD predominantly in the area of health statistics and heath expenditure accounts. Working closely with the public administrations of OECD countries and other international organizations the OECD aims to provide internationally comparable data on health care spending and financing for analysis and decision making.

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