Medical Tourism Economic Report: South Korea

Oct 31, 2008 - David G. Vequist and Erika Valdez

South Korea is hoping to take advantage of its core competence in biotechnology and, in particular, stem cell research. In 2006, it was reported that the Korean government was awarding $430 billion won (approximately $400 million USD) aimed at supporting stem-cell research. The government stated it hoped to become one of the world's top three leading countries in stem cell research by 2015.

One of the up and coming countries, providing healthcare options to the world, is the country of South Korea. The country is already very popular with wealthy citizens in Southeast Asia who are in the market for high-quality health care at a low cost. In March 2007, a council composed of 34 Korean hospitals/clinics and the government officials launched the Council for Korea Medicine Overseas Promotion (CKMP), which is tasked with attracting overseas patients to the country. One of the functions CKMP serves is to help Korean hospitals in international marketing. Half of the budget (primarily to be used for marketing and promotion) of the CKMP is coming from government sources (the government has set aside $570 million won or approximately $601,000 USD) and another half is coming from hospitals/clinics for 2007 (each member hospital will pay approximately 15 million won in fees).

In 2007, hospitals/clinics affiliated with CKMP had over 16,000 foreign patients visit Korea for healthcare procedures compared to only 10,000 (national estimates of foreign patients) in 2005 (an increase of 62.5% in 2 years). The country has set the ambitious goal of having at least 100,000 foreign patients annually by 2012. If they achieve this goal, it could bring the country medical tourism earnings of an estimated $200 billion won (approximately $199 million US Dollars) per year, according to CKMP secretary general Jang Kyung-Won. The government (through the health ministry department) is also helping by simplifying the visa issuance for overseas patients. Some of the potential markets for the Korean medical tourism industry are patients from China, Japan (around 2 million Japanese tourists visit South Korea every year accounting for around 50% of total tourist arrivals!) and the United States. From the US, there are many direct flights (particularly to the fairly recently built Incheon International Airport some 50 km west of Seoul) that average 12 to 15 hours flight time to reach Korea).

Economic Facts

Four decades ago, the GDP per capita of South Korea was comparable to many of the poorer countries of Africa and Asia. But since the 1960s, the Koreans have achieved an incredible record of growth and have developed into a high-tech, modern, global economy resulting in the country joining the trillion dollar club in 2004. Currently, its GDP per capita (in 2008 it was around $24, 800 USD) is roughly the same as the European countries of Greece and Spain. Part of this historical success is due to close government and business ties and smart economic policies (e.g., promoting the import of raw materials and technologies at the expense of consumer goods and encouraging citizens to save and investment). In addition, the Government instituted economic reforms after the 1997 Asian economic downturn and South Korea is expected to continue to have one of the largest and fastest growing economies in the world.

The future looks very bright for South Korea (population estimated in July 2008 at over 49 million); it has very favorable economic conditions for continued sustainable growth. Disposable income of the Korean people seems to be rising and there has been a comparable rise in the per capita expenditures on healthcare. The current GDP (from 2007) is USD $1.201 trillion and growing at a 2008 projected rate of over 4% (which is down somewhat from the 8.5% the country experienced in 2000). Of this GDP, a majority (over 57.6%) is driven by the Services sector (which includes the Healthcare industry). In fact, expenditures on health as percentage of GDP are around 6.4% (2006) and total consumer expenditures on healthcare are estimated at $32.8 billion USD (2005). In fact, between 2000 and 2006, the growth rate in health spending per capita in Korea reached 10.7% per year (compared to a 5% OECD average). One reason for this is that pharmaceuticals accounted for 25.8% of total health spending (from 2006) in South Korea (compared to a OECD average of 17.6%).

Healthcare Facts

In 1989, South Korea (using the Japanese health insurance system as a prototype) expanded the national health insurance (NHI) program (developed in 1977) and extended it to all citizens. Recently (in July of 2000), NHI started to separate reimbursements for pharmaceuticals from medical care (regarded by some as the most significant financial issue that could disrupt the Korean NHI). Also, many Korean physicians feel that the universal health insurance system (which only pays around 65% of customary medical care costs) limits their income. On the other hand, historically there has been limited public accountability over charges by medical personnel which has led to: an excessive overuse of antibiotics; more magnetic resonance imaging (MRI) machines per million population than anywhere else in the world; and high rates of cesarean delivery (about 40% of all live births). However, according to a 2002 Journal of Public Health article, the Korean government has begun to do a better job of controlling health insurance costs.

According to WHO statistics (from 2000) there were 61 hospital beds per 10,000 population (according to 2002 statistics there were a total of 963 hospitals and 22,977 clinics) in Korea. Of these facilities, it is estimated that the private medical care sector makes up about 90% of the total bed capacity (private health expenditures were 62.2% of total expenditures compared to 55.9% in the US- data from 2000). The most common Korean government facilities are community public health centers known as Bogeunso. The US Embassy of South Korea estimates that there are at least 25 hospital facilities in the country that offer English-speaking staff. There is one Korean JCI accredited (in May of 2007) hospital, the Severance Hospital, which is part of the Yonsei University Health System (YUHS) and is located in Seoul. The YUHS system consists of 2 graduate schools, 3 colleges, and 5 hospitals (consisting of more than 3,000 beds) which see more than 2.7 million outpatients and 992,000 inpatients every year. In South Korea there are estimated to be 1.4 physicians per 10,000 population (2002 estimate- compared to most developed nations which have an average of 3.0) or approximately 78,070 licensed doctors (not including 13,460 Oriental medicine doctors) in the country. Interestingly, medical specialists make up more than 80% of practicing medical doctors in South Korea (in most Western countries this percentage is around 50%) and about one fourth of Korean medical doctors have 2 or more specialties. There are approximately 181,786 nurses in the country (2002) and these numbers have increased significantly during the past decade (estimated at 4.0 per 1,000 population in 2006- compared to an OECD average of 9.7). It is estimated that the average charge for an in-patient visit in a Korean hospital is about 13 times lower than in a U.S. hospital (approximately $3,762) and an average outpatient visit is about 9 times lower than a comparable U.S. visit (approximately $13,000).

Impacts to Other Industries

The Medical Tourism industry in South Korea should benefit from the country’s reputation in plastic surgery. Korean doctors are known abroad for abundant experience and expertise in cosmetic and aesthetic treatments. In addition, South Korea is hoping to take advantage of its core competence in biotechnology and, in particular, stem cell research. In 2006, it was reported that the Korean government was awarding $430 billion won (approximately $400 million USD) aimed at supporting stem-cell research (the government stated it hoped to become one of the world's top three leading countries in stem cell research by 2015). Finally, an interesting finding (also being found in other Asian countries) is the bundling of complementary and alternative medicine (CAM) treatments (in this case, Korean traditional medicine) in medical tourism packages.

Summary

South Korea has a very ambitious plan to take advantage of their state-of-the-art technology, good reputation in certain specialties, low prices, and advanced research agenda to compete in the medical tourism market. The country has plans to continue to upgrade existing healthcare centers, to increase the total number of healthcare facilities; such as clinics and diagnostic centers, and to train more doctors and other medical professionals. It also has the advantage of millions of visitors from Japan (which has a rapidly aging population), better infrastructure than some of its other Asian medical tourism competitors, and possible visitors from North Korea (based on the rapidly changing diplomatic situation). In addition, it will also be interesting to see if the practice of CAM treatments are an added differentiator for medical tourists from Occidental countries. For this country, the opportunities in medical tourism are immense and the possible rewards are numerous.

About the Authors

David G. Vequist IV, Ph.D. is 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 atvequist@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