Medical Tourism Economic Report - El Salvador

Apr 1, 2009 - David Vequist

El Salvador is a land of amazing beauty and has experienced much growth over the last ten years.  During this period, the country has adopted the US dollar as its currency (2001), continued to move towards a free-market democracy, became the first to ratify the Central America-Dominican Republic Free Trade Agreement (CAFTA) in 2006, engaged in a countrywide modernization, and became the third largest economy in Central America despite being the smallest country (total area of 8,123 square miles [21,040 sq km], about the size of the state of Massachusetts) in that region.  Most U.S. cities can reach El Salvador by airline within 2 to 7 hours, English is the second language (Spanish is the official language of the nation), and the tourism market from the U.S. and other western countries is robust.

According to a recent report by the Ministry of Tourism, El Salvador received $411,135,773 USD in foreign currency in the first half of 2008 (annualized to $822 million USD or a 22.0% growth in earnings compared to 2007).  The same report indicates that were 991,874 tourists during this same period (annualized to 1.9 million tourists or a 25.8% growth rate compared to 2007). Also, for the same period, the percentage distribution of tourists by region is: Central America, 62.12%; North America, 31.64%; Europe, 2.83%; South America, 2.30%.  Within the Central American market niche, the number of tourists from Guatemala (which it borders along with Honduras- which is third with 103,234 arrivals or 15.0% of the total) increased by 12.95% versus 2007.  The U.S. was 2nd with 183,476 arrivals (360k when annualized) which was about 26.65% of the total number of tourists.

Recently, the country has been expanding capacity in the hospitality sector and currently has 7,282 rooms in 318 hotels throughout the country.  It has some of the most interesting Mayan ruins in all of Central America, over 307 km of shoreline (with supposedly wonderful surfing!), majestic volcanoes, and beautiful cloud forests.  El Salvador has a tropical climate with only two real seasons, the dry season (verano- from November to April), and the wet season (invierno- from May to October).  Temperatures vary depending on the elevation in El Salvador with the coastal areas being the warmest, averaging between 22°C and 32°C throughout the year.  El Salvador's central international airport, Aeropuerto Internacional Comalapa, is about 50 km southeast of San Salvador (the capital city) and is a major Central and Latin American hub (with direct flights to North American cities like Los Angeles, New York and San Francisco).

The Chamber of Exporters of Health Services of El Salvador (Exportsalud), the Export Promotion Agency of El Salvador (Exporta), the Investment Promotion Agency (Proesa), and Ministry of Tourism (Mitur) are pursuing medical tourism in this country. These include savings of up to 75% over U.S. prices and many U.S.-trained physicians in the areas of dentistry, gastroenterology, bariatric surgery, ophthalmology, general surgery, plastic surgery, and orthopedics, providing services such as dental implants, gastric and weight loss surgeries, ophthalmologic care, hernia repair, cosmetic procedures, and laparoscopic orthopedic procedures.

Economic Facts

According to the CIA Factbook, it is expected that economic growth will decelerate in 2009 due to the global slowdown and El Salvador's dependence on exports to the US (its most important trading partner, receiving 65.4% of its exports and providing 46.3% of its imports).  In addition (similar to Mexico), El Salvador leads the region in remittances per capita from Salvadorans living abroad (primarily from the U.S.) with inflows equivalent to nearly all export income (in 2005, remittances reached $2.83 billion).  An estimated 1.5 to two million Salvadorans reside in the United States (estimated in 2007 as 3% of the foreign born residents), many of them illegally (in 2007, it is estimated that only 30.1% are naturalized citizens).  The total population of El Salvador is estimated at 7,066,403 (as of July 2008) and growing at a slightly positive rate of 1.679%.

The GDP (using the purchasing power parity model) of El Salvador was $45.34 billion USD (using 2008 estimates) which equals out to around $6,400 per capita (PPP).  GDP was growing at a 3.2% rate and GDP per capita was growing at a 2.3% rate back in 2008.  In the most recent estimates from 2008, the services sector makes up 64.1% of the GDP, with industry (primarily manufacturing) making up 24.7%, and agriculture making up 11.2%.  The labor force is composed of approximately 2.958 million Salvadorans (by industry in 2006 would be: services 58%, industry 23%, and agriculture 19%) and the unemployment rate is 6.3% according to 2008 official rates (there is quite a bit of underemployment in El Salvador).

Healthcare Facts

The ratio of physicians per 1,000 population in El Salvador increased in the last 5 years from .9 to 1.22 (but still low compared to an OECD of 3.1) and now the country has at least 7,298 registered physicians (from 2002 numbers).  The ratio of nurses per 1,000 population however is .8, which is significantly lower than the OECD average of 9.7.  The number of dentists in El Salvador per 1,000 population is surprisingly high at .54 which is comparable to Canada (which has a rate of .58).  According to WHO statistics, the total expenditures on health per capita was $387 USD and total expenditures on health as a percentage of GDP was 7.0% (in 2006).  This ranks as 83rd in the world in health expenditure per capita but overall El Salvador ranks 115th in the world in health system performance.

According to some commentators, the reason for this low ranking is that El Salvador has something akin to two distinct health care systems.  The first is the government run system (approximately 41.8% of the total healthcare expenditures) that is designed for the poor, employs overworked doctors, uses out of date equipment (it was estimated in 2000 that 63% of hospitals in El Salvador are over 30 years old), and don't have as much time to spend with each patient.  This system was made up of 610 establishments in 2000 (30 hospitals, with a total of 4,677 hospital beds, 357 health units, 171 "health houses", 52 Rural Nutrition Centers, and 1 clinic).  The second system is a completely private based system (using a Fee For Service or FFS approach) that uses qualified doctors, state of the art technology, and the doctors spend ample time with their patients, which unfortunately, only the affluent can afford (58.2% of healthcare expenditures, with households contributing 97% out-of-pocket).  Most of these private sector clinics, general and specialty hospitals are concentrated in the country’s capital and other large cities. Some of the main hospitals are the Hospital de Diagnóstico, Hospital de la Mujer, Centro Pediátrico, and Centro Ginecológico.  The main insurers in this region are SISA, Pan American Life, ASESUISA, and Salud Total.

El Salvador is in the process of receiving recommendations from Joint Commission International, Trent Accreditation Scheme and Accreditation Canada to evaluate options for international accreditation of its hospitals and specialty clinics.

Impacts to Other Industries

An interesting aspect of the medical tourism hopes of El Salvador was the announcement by a medical tourism firm that it was working with a major insurer to design a low-cost health plan (coverage might cost a family as little as $200 USD per month) that would offer limited benefits (sometimes referred to as a “mini-med” plan) where the benefit would be a specific sum of money.  Mini-med plans typically provide coverage for a limited number of physician visits each year, a limited amount of inpatient care, and some basic coverage for prescription drugs (the benefits are typically capped at a maximum of about $25,000 USD annually).  Because these policies pay a relatively low amount, patients bear a significant cost-sharing amount for medical care which can provide an incentive to avoid high out-of-pocket costs.

The unique aspect of the  plan was that it would reimburse patients the same amount for each particular service, regardless of where it is performed geographically.  Therefore, a patient would pay significantly lower out-of-pocket costs by going abroad for treatment.  The firm was planning on a health plan targeted at El Salvadorans living in the United States.  These beneficiaries would receive a limited number of primary care visits (in the U.S.) and could travel to El Salvador for covered major medical needs.

Also, an interesting trend is El Salvador’s market in reproductive tourism (includes IVF procedures and surrogacy options).  Driving this trend are the number of fertility specialist practicing outside the U.S., the state-of-the-art facilities in countries like India, Mexico, and El Salvador, the high surrogacy costs in the U.S. ($80,000 USD or more), and the existing legal liabilities (in the U.S., there are no legal guarantees that the surrogate will not later attempt to keep the baby).  It was reported in 2008 that surrogate pregnancies (currently estimated to be a $1 billion USD business in India) only cost around $25,000 USD in India (it is assumed to be similar in El Salvador), plus there are limited legal issues and the arrangements are also easier to manage.

Summary

El Salvador has a lot going for it when looking to grow the medical tourism market particularly in the beauty of its location, friendly populace, and western-trained and English-speaking providers.  However, it still has some obstacles to overcome including more robust and mature competitors in other Latin American countries, the disparity in its’ health system, and a reputation for violence and crime.  However, there is the possibility it could carve out chunks of market share rapidly in areas like full mouth restoration (see below) and reproductive tourism, among others.

Finally, medical tourism in El Salvador received a big PR boost when a Fox News Radio Anchor/Reporter (Lori Lundin) wrote a multi-piece blog (in 2008) off of the Fox News online site (see http://health.blogs.foxnews.com/category/medical-tourism/) about her experiences in the country.  Lori’s husband Doug needed a full mouth restoration and was quoted a price of $60,000 USD by a U.S. dental surgeon.  They then received quotes from several countries and decided upon El Salvador and paid $19,000 USD for the procedure plus a few thousand for travel expenses (a savings of over $30,000 USD!).  They describe the country and the people in a very complimentary light and bemoan the fact that the country still has a reputation for being unsafe.  This is a great piece and is worth its weight in gold for marketing medical tourism in this beautiful country.

David G. Vequist IV, Ph.D. is the founder and Director of the Center for Medical Tourism Research (www.medicaltourismresearch.org) - the very first Medical Tourism research center in the world.  He is also an Associate Professor of Management in the H-E-B School of Business & Administration at the University of Incarnate Word in San Antonio, Texas, USA.  He is also a consultant, author and speaker on topics such as healthcare trends and technologies.  He can be reached at vequist@uiwtx.edu.

Erika Valdez, is a student in the MBA program in the H-E-B School of Business & Administration at the University of Incarnate Word in San Antonio, Texas, USA.  She is a promising speaker and author in the area of economic development in developing nations.  She can be reached at evaldez@uiwtx.edu.