Living Economics

Healthcare Tourism
Lower-pay certified doctors, duly accredited facilities, and 5-star facilities have contributed to the comparative advantage of overseas hospitals in non-emergency big-budget surgeries for international patients.

For decades, foreign doctors have come to U.S hospitals for medical training. Now these same foreign doctors are providing health care for American patients overseas at 1/10th to 1/8th the cost of private healthcare in the U.S.

Is this a return of favors or outright cut-throat competition?

We used to think face-to-face personal services are immune to offshore competition. And there is nothing more personal than healthcare services.

But for non-emergency and expensive procedures such as cardiac, orthopedic, spinal, and knee surgery, there is no reason why the same procedures cannot be performed overseas; especially when:

the overseas hospitals are accredited by the same body as all U.S. hospitals;

the doctors are U.S. board-certified;

the medical equipment and drugs are made by top-flight U.S. companies;

the hospitals are managed by seasoned American hospital managers;

the blood supply is monitored by the International Red Cross;

the interpreters are fully capable of bridging the language barriers;

the facilities are 5-star resort quality dedicated to foreign patients;

the much lower cost covers the surgeon, anesthesiologist, the hospital, the room, and physical therapy.

The Bumrungrad Hospital in Bangkok, Thailand treated 430,000 international patients from 150 countries in 2006. About 65,000 of these were Americans. The Parkway Group Healthcare of Singapore treated 122,000 foreign patients in 2003. Escorts and the Apollo Group of India are also gearing up for foreign patients.

With health insurance premium rising much faster than the inflation rate, it is not surprising that even Blue Cross/Blue Shield of South Carolina has struck a deal with Bumrungrad for healthcare outsourcing. And with 47 million uninsured Americans, the pipeline for medical tourism is quite full.

But with these foreign hospitals more than 10,000 miles away, they can at best nibble at the margin of the gigantic American healthcare pie. Still, the threat of global competition is real and the law of comparative advantage immutable. Specifically, no market can expect to get away with charging a lot more for the same services without facing price competition in the absence of a physical barrier.

References:
  • NPR. 2/27/2007. "Insurance industry watches 'medical tourism'."
  • Business Week. 2/16/2004. "Over the sea, then under the knife."
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