THE POTENTIAL MARKET

A large segment of the US population requires specialized medical care but does not have the financial resources to procure the necessary treatment. Moreover, within the aforementioned group there is also an important patient population that desires elective surgeries (i.e. cosmetic, therapeutic) but find the ongoing market prices too high to contract. This environment has led those individuals to consider foreign sources that offer quality medical services at affordable prices.

According to a study carried out by Deloitte, the number of medical tourists arising from the United States alone is vast. In 2007, 750,000 americans sought such services abroad. The outlook for medical tourism is amazing, expecting a 100% increase during 2008 (1.5 million people) and doubling again in 2009 and 2010 reaching 6,000,000 Americans who are expected to travel abroad for medical treatment.

The motive that drives americans to seek treatment abroad is pricing. Foreign hospital centers are able to offer attractive prices mainly due to lower labor costs. In the United States, labor costs equal more than half of the hospital operating revenue whereas the average wage rates and other labor costs are much lower overseas.

• Median nurses’ salaries are one-fifth to one-twentieth of those in the United States.
• The wages of unskilled and semiskilled labor, such as janitors and orderlies, are also much less.

These lower labor costs make it much less expensive to build and operate hospitals in other countries.

Another reason for the lower cost of medical services abroad is the absence of “Third-Party Payment”. Financial markets tend to be bureaucratic and stifling when insurers or governments pay most of the medical bills. In the United States, third parties (insurers, employers and the government) pay for about 87 percent of health care. Thus, patients spend only 13 cents out of pocket for every dollar they spend on health care. As a result, they do not behave like typical consumers and the providers who serve them rarely compete for their business based on price.

The fees charged abroad for similar services is substantially lower that those available in the United States. Following are some examples:

• Apollo Hospital in New Delhi, India, can charge $4,000 for cardiac surgery, compared to about $30,000 in the United States.
• Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip replacement — one-half the price charged in Europe or the United States.
• Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee replacement that runs $30,000 in the United States.
• A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500 in the United States.

Global competition in health care allows patients the ability to find lower-priced non-surgical procedures and tests abroad:

• An MRI in Brazil, Costa Rica, India, Mexico, Singapore or Thailand costs from $200 to $300, compared to more than $1,000 in the United States.
• A six-hour comprehensive fitness exam — including an echocardiogram, stress test, lung-function test and ultrasound of internal organs — costs only $125 at India’s Rajan Dhall Hospital; a similar battery of tests in the United States could easily top $4,000.