Medical Tourism – An Avenue for Growth?

The healthcare sector accounts for approximately 10% of world’s GDP. This has been rising on average by 5.2% a year between 2014 - 2018 and is expected to reach USD9.3 trillion. Spending is driven by a growing ageing population, rising affluence, longer life expectancy and lifestyle related diseases.

ASEAN’s overall healthcare expenditure has lagged behind that of developed countries. Japan and the U.K. spend twice as much per capita on healthcare compared to Malaysia, Singapore, Thailand and Indonesia (“ASEAN four”). Income levels and spending on healthcare are fairly closely related. So there is every chance of more spending in the ASEAN four.

The industry has the following key characteristics:

(i)         Resilience in a downward cycle – not unduly impacted by a recession;

(ii)        Low-price sensitivity – the higher end market is not price sensitive;

(iii)       Structural demand – continued steady growth expected with rising urbanisation;

(iv)       Increasing private healthcare investment meeting future needs;

(v)        Low insurance coverage, especially in ASEAN four – possibility for insurers to be involved; and

(vi)       Usually regulated operations by authorities.

There are also risks involved which are similar to other sectors:

·       Competition from local players and overseas centres;

·       Operating efficiency and management;

·       Size and scale of operations – the larger the operations, better is the access to finance;

·       Geographic location;

·       Service coverage – operations that cover more procedures reduces vulnerabilities of revenue stream; and

·       Clientele – as a service industry, consumer satisfaction is important

In the midst of this, is the growing niche on medical tourism. The expansion of which is largely attributed to affordability, treatment options and access to air travel. The revenue that medical tourism generates is substantial, for example Thailand earned more than USD3 billion in medical tourism in 2015. There are hospitals in Thailand with over 50% of its revenue coming from foreign patients.

Cost comparison of selected medical procedures

(USD)	USA	Singapore	Thailand	Malaysia	India
Coronary artery bypass graft	88,000	54,500	23,000	20,800	14,400
Valve replacement with bypass	85,000	49,000	22,000	18,500	11,900
Hip replacement	33,000	21,400	16,500	12,500	8,000
Knee replacement	34,000	19,200	11,500	12,500	7,500
Spinal fusion	41,000	27,800	16,000	17,900	9,500
Gastric bypass	18,000	13,500	12,000	8,200	6,800

                    Source: Patients Beyond Border, 3^rd Edition by Josef Woodman

On every procedure listed above, India has the lowest cost. Thailand is lower than us (Malaysia) for knee replacement and spinal fusion. We are more competitive than Singapore and the U.S. According to Malaysia’s Healthcare Travel Council (MHTC), healthcare travellers to Malaysia increased from about 0.64 million in 2011 to 1.05 million in 2017. MHTC was established to facilitate the strategic development of Malaysia’s healthcare travel industry and raise the country’s profile as a globally-preferred destination for world-class healthcare services.

With a little bit of imagination, we could market our procedures based on quality, speed and accessibility. There is need for a broad masterplan on this with coordinated steps by MHTC to harness our medical advantages.

Source: Various reports, including RAM (April 2016)