Many medical tourism hopefuls view the USA as a targeted source market for medical tourism patients. Is this a flawed strategy?
It is said that if you truly want to learn about something, you must be able to explain it to others. I guess that’s where the mantra “see one, do one, teach one” comes from that we hold so sacred in healthcare. In recent months, I’ve been consulting to government officials, tourism boards and associations, private equity investors hospitals, private clinics, insurers, and physicians. As a topic of discussion, I’ve answered a lot of questions to set the record straight on the situation in the USA as it relates to medical tourism targeted marketing.
Many medical tourism hopefuls outside the USA at the most simplistic level will jump right into a sales strategy based on the fact that they sell health services at cheaper prices than the USA. This is a strong indication to me that the seller is a novice that has not invested adequate time or effort into market research or understanding their chosen target consumers. Here’s why:
Three Population Segments of US Healthcare Purchasers
The Medically Bankrupt
Prior to the Accountable Care Act (ACA) (a/k/a “Obamacare”) millions of people had no access to insurance coverage to enable them to access medically necessary care and pay for it through an insurance scheme. At the same time 60% of all bankruptcies in the USA were due to medical expenses that could not be paid. When a person files for protection under US bankruptcy laws their credit goes away and they have no credit cards and very little cash in bank accounts. These people were not potential customers for medical tourism, nor could they apply for and be approved for loans from a bank or lender to pay for their medical care outside the USA even if they wanted to go someplace to obtain healthcare.
The Wealthy
On the other side of the spectrum, you have the very wealthy who can make a decision to obtain care anywhere they want. Sending messages to this population about how cheap your healthcare service prices are is not relevant to them, so they tend to ignore your message as “not intended for them.” Instead, they tend to shop for “branded” health care providers (just like they do for a watch, organic foods, accessories and clothing) if they need something out of the ordinary.
They tend to shop for anti-aging services, cancer treatments, regenerative medicine, and cosmetic surgery services from the high street providers with branded reputations and known outcomes. After all, half the fun for this group is gossiping about where they bought their little extravagances among the “A” list members of their social circles. This is no different than what happens in Monaco, Dubai, and other such localities of the rich and famous. While the provider cannot disclose who had what procedure, the patient does it all the time. They look to brag about how much they spent.
The Middle Class Working Population
The middle class working population that has medical insurance benefits or employer-sponsored health benefit programs were converted to “high-deductible” programs. This quintupled in the wake of the recession to more than 30 million lives[1]. These plans did not permit dollars spent outside a specific system to be counted towards the deductible of their in-network benefit plan.
As a result, this population is tethered to local care unless their employer decides otherwise. 70% of the US population is covered by these health benefit schemes, of which 210,000 employers in the USA have the prerogative to choose to integrate providers from abroad into their networks, but must do so with certain criteria to avoid potential litigation and legal liability. Lower costs are but only one of the significant criteria that must be taken into consideration. The rest revolves around quality, safety, outcomes, credentialing, and privileging and regulatory compliance with regard to healthcare privacy and security standards in place at the foreign provider health facilities, not whether or not it is JCI accredited.
The employer approach is a key source market strategy, but not for beginners. It is complicated and solutions oriented and not at all associated with accreditation badges, wall plaques and certifications. That’s more myth than reality. The rationale behind this statement is the topic for another discussion.
U.S. Healthcare Reform Implications
With the advent of the ACA, millions of people receiving coverage through federal and state public health insurance exchanges have deductibles in excess of $2500 and annual out-of-pocket maximums that only count “in network” expenditures at levels of $6000 per year. Those plans do not recognize medical tourism expenses, even if for medically necessary services, from providers outside the exchange designated networks. So any expenses spent outside the recognized network are not counted towards meeting the deductible or copayment responsibilities.
These public exchanges will eventually add 15-20 million people to this tethered “patient pays first” pool. On the other hand, private exchanges, used by employers with richer benefit programs will pay a 40% excise tax in 2018 will account for another 30 million population. Can they add medical tourism benefits to their program? In a word “yes”, but the providers must meet certain criteria, none of which any of the providers I’ve reviewed have developed successful strategies to market what they offer to these employers and benefit design specialists.
Clearly, third-party reimbursement will no longer be a front end of any future hospital payments in the USA, as more than 100 million “tethered” consumers in the USA are self-insured for the first several thousand dollars of their encounters with healthcare providers. This has several implications to US providers between now and 2020:
- Hospital prices will fall.
- Hospital prices will no longer be artificially inflated to work around third-party payer contract terms and conditions that are rendered moot.
- US Hospitals and clinics will compete on prices and quality in value-based equations
- Narrower networks will channel both exchange populations to the most affordable network providers and dampen down future insurance and third-party rate negotiations
US Consumers Don’t Have Lots of Cash
Despite economic rebounds in the USA, consumers remain frightened, debt burdened, and cash poor. More than 77 million American consumers have defaulted on debt and are on the rolls of collection agencies of some kind.[2] The debt burden has fallen only 10% since its peak in 2009.[3]
Forty-four percent of US households are liquid-asset poor, meaning that they have saved barely enough money to cover three months or less of living expenses,[4] and 51%do not have enough cash to pay off outstanding credit card balances[5], meaning that they can’t possibly consider the purchase of air travel and hotels together with medical costs outside the USA, no matter how cheap the price.
US Consumers Don’t Use As Much Healthcare as Other Nations
One thing I noticed traveling abroad as much as I do in completing consulting assignments for situation analyses is that European and Asian consumers use their health benefits much more than their American counterparts. This is cultural and also economic. It is tied to the front end load of care costs in the USA. Only 11% of our US population meets their $2500 deductible in a year. Only 4% of those with $5000 deductibles meet their annual minimum out of pocket expenses.[6] This was a reason why many of the exchange deductibles are set at $6000 per year. By setting deductibles so high, insurers will only have to pay claims for about 10% of the population. What a great business to be in! And they only have to count the claims for local, in-network medically necessary care that is covered by the plan. Everything else is irrelevant to them.
Out of pocket cost avoidance
When Americans have major cost-sharing responsibilities, they tend to avoid healthcare utilization whenever possible. This includes preventive care such as mammograms, checkups, and other diagnostic testing. They live with pain and suffer disability until they simply can’t stand it anymore, and then some. They allow acuity and chronic diseases to rise to untenable levels before taking action. Then, they don’t pay their medical bills that are incurred when care use becomes unavoidable. This is because full prepayment in the USA for private health services is essentially unheard of.
Moving towards a decentralized model of care
Healthcare services are being dispersed beyond the hospital or inpatient setting to communities through ambulatory centers, physician clinics, urgent care centers, nursing homes, home-based care and hospice agencies that provide treatments at home.
Price competition in the USA will occur here in portable services. These services will not be drivers to foreign providers because their unit cost will be low enough that foreign travel to access care won’t be feasible. That leaves a few other drivers to the foreign market:
- Anonymity
- Access to unavailable services
- Clinical trials and experimental or investigative services
- Rapid access to care to side step queues to access care
Big Ticket Services
Managing unavoidable care costs such as intensive care services, trauma treatment, and scheduled complex interventions for cancer and cardiac conditions will be most likely tethered to local providers because of the urgency. These will all be paid under diagnosis related groups that are capped off from the prices quoted by most medical tourism marketers that tend to highlight “billed charges” in the USA from some often unreliable source of data. That is because most billed charges in the USA are not published, so the credibility of the data is suspect, and because most billed charges in the USA are actually 45-55% discounted.
Tighter Managed Care Controls
As the majority of the US population becomes enrolled in accountable care organizations (ACOs), excessive consultation costs, poor communication channels, unnecessary testing, and leisurely inpatient stays will cause accountable primary care providers to direct patients to other hospitals and patient care settings because the doctors are once again financially “at risk” for the cost of care through capitation schemes.
Patients Don’t Come to Buy Surgery – They Come to Buy a Solution
Most hospital executives in the USA and abroad fail to connect exceptional care experience to repeat business. Few consider what the patient wants to buy and instead focus on what they have to sell. Even fewer hospitals and clinics in the USA and abroad conduct patient satisfaction surveys with any rigor that closely resembles the CAHPS and HCAHPS surveys that are now a requirement in the USA. Those that are conducting the surveys in the USA will face 2% clawbacks in third-party payer reimbursments as a result of patient dissatisfaction and even more for poor clinical outcomes.
Health facilities in the USA and abroad fail to take seriously the patient encounter as a component of value-based care. Not enough is being done to shorten visit times, accurately pre-authorize insurance coverage, give accurate estimates on patient financial responsibility, and effectively use integrated electronic medical records and telehealth services or communicating results electronically. In the foreign market, not enough importance is given to having a well-implemented international patient department, English-speaking nurses and doctors and patient information materials published in English. Few hospitals have dual-lauguage signs posted and wayfinding throughout clinics and health facilities. These all contribute to the experience of care, and will reduce the satisfaction with the encounter. Such reductions will impact testimonials and brand loyalty if they tend to return.
A few greedy providers that spoil reputations for the sector
As increasing numbers of scandalous reports of medical tourism providers padding bills and ordering unnecessary tests begin to filter across the popular media syndicates, all medical tourism providers will be implicated, not just those who are greedy beyond compare. This will lead to skepticism of the market and suspicion of “bait and switch” pricing. Any deal that is too good to be true is probably going to be suspect.
Providers must price things reasonably, not so cheap consumers suspect the quality of care and services. Few providers in the USA or abroad use activity-based costs as a guide to pricing their medical tourism services. As a result, they often find themselves selling at price points that don’t cover costs. That is unsustainable in any land. Medical tourism startup has costs that can add up quickly to implement an international patient department ready for medical tourism, and set up the necessary marketing infrastructure and competitive certifications necessary to enter the market and thrive. These are incremental direct costs that are not relevant or associated with local patient care. The return on investment of these startup market entry and research costs is also unrealistic. Many providers overlook the fact that at its peak, medical tourism revenues will amount to a maximum of 10-20% of revenue after about 5 years’ time.
There’s a reason why cheap startup strategies don’t produce desired results
Marketing messages that are confusing, poorly constructed, laden with misspelled words and idiomatic errors do little to inspire confidence in attention to detail and patient safety, or quality health delivery. Poorly-designed websites that do not respond to user interfaces on mobile devices, content that is nothing more than sales pitches and menus of services available will not work with the American consumer.
A lack of quality social media presence and user-driven content (testimonials, star ratings, etc.) will cause medical tourism providers to search someplace else that offers solutions for problems they want to overcome. A lack of branded providers selling “cheaper” surgeries is irrelevant. The American consumer has been taught how to shop online for books, music, gourmet foods, and doctors. They won’t be shopping for brick and mortar hospitals and healthcare facilities.
American consumers place their emphasis on the surgeons and specialist consultants that have established a personal and professional brands as a key opinion leader with laudable published outcomes, and published content that their primary care physician can research and approve for their medically necessary and elective cosmetic and other procedures. These marketing and promotional approaches can be accomplished even in spite of regulatory constraints on advertising that are prevalent in many countries outside the USA.
If you can offer the solutions that consumers hold in high regard and can trust, you have a chance to connect with the US market. If not, you’ll need to rethink your strategy of focusing on USA as a targeted source market for medical tourism patients.
For more information or to ask questions, feel free to ask them below.
[1] Kaiser Family Foundation and HRET 2014
[2] Urban Institute report
[3] Ratcliffe et al, 2014
[4] Brooks et al, 2014
[5] Kahn, 2014
[6] Boland and Gibson, 2014
