Healthcare Reform and the Demise of Medical Tourism?

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Business leaders in the Medical Tourism industry have valid questions about the viability of their business models as healthcare reform transforms the U.S. healthcare environment.  While it remains unclear how the U.S. healthcare market will transform over the next decade, it does seem clear that increasing costs of care will continue to drive political and legislative agendas.  


The combination of rising healthcare costs and the desire to provide healthcare to uninsured Americans will create disruptive market opportunities for companies who identify innovative solutions that address these issues.

Medical Tourism is an example of an innovative and disruptive market solution that has become popular in the U.S by addressing these concerns.  International hospitals did not enter the U.S. market by offering healthcare through traditional insurance products.  


Instead, a new business model was developed that targets the rapidly growing uninsured and underinsured U.S. market.  It offers a disruptive market solution that provides easier access to cost-effective and high quality medical care outside of the U.S.

Identifying New Market Strategies

To capitalize on the healthcare reform debate, organizations specializing in Medical Tourism should develop new marketing strategies based on a differentiated value proposition for emerging targeted customer segments.  The marketing strategy should define not only the core products and services for targeted segments, but also where the customers will buy it, how much they will pay, and what messages will resonate.  


The key to effective marketing strategies lies in understanding both established and emerging targeted segments.  Market segments defined by demographics or products are often unsustainable.  Successful marketing strategies first segment customers by their circumstance (i.e. uninsured) and then by the “job” that they would like the company to fulfill (i.e. providing affordable and high quality care if willing to travel abroad).

Americans who are uninsured or underinsured and experience a health crisis have few solutions for affordable healthcare.  Traditional health plans are generally unavailable to someone already needing medical care without the backing of an employer.   Emergency rooms offer short-term healthcare solutions.  


Insurers have launched some products available regardless of health status, but these are typically designed for low-cost routine care.  Medical Tourism was successful not because international facilities competed with products similar to U.S. plans, but by offering affordable and high quality medical care to those paying their own medical expenses and are willing to travel.

Opportunities with Healthcare Reform

While some believe that healthcare reform will eliminate America’s interest in Medical Tourism if all Americans are insured, it may offer tremendous opportunities.  Those specializing in Medical Tourism should identify the circumstances under healthcare reform where Americans will be searching for solutions.  While there is no way to know at the time of this writing what direction healthcare reform will take, there are some likely scenarios that have a common foundation.  


The guiding principle of healthcare reform, “fix what doesn’t work and keep what does” is focused on keeping employer based healthcare, at least for the foreseeable future.  Many employers have stated that they intend to continue to provide health benefits as a tool to attract and retain high quality employees.  Employers who continue to use health benefits as a way to attract high quality employees may be a sustainable target market including both self-insured employers and insurance carriers.

Public Vs. Private Plans

One issue hotly debated is a public plan competing with private insurance.   Public plan advocates state that 97 percent of Americans will be covered if Congress passes a public plan.  Whether most Americans will be covered by a combination of public and private alternatives or all are covered under a public plan is not clear in the long term.  


Even without a public plan, healthcare reform with an individual mandate and guarantee issue, requiring private insurers to sell health plans to anyone regardless of health status, could also greatly impact the market of those who are paying their own medical expenses and willing to travel.

The development and understanding of reform scenarios is required for those specializing in medical tourism to transform their business models and develop successful marketing strategies.  Sustainable strategies under U.S. healthcare reform will first define Medical Tourism customer segments by their new circumstances and then learn more about the circumstances and resulting new customer ‘job’ requirements.  


Savvy business leaders will define and redefine medical tourism customer segments based on circumstances and job requirements created under ongoing healthcare reform scenarios.


Two of the most attractive yet underpenetrated market segments already targeted by medical tourism businesses are large insurance carriers and self-insured employers.  These are the third-party payors for the healthcare of 160 million Americans.  While some insurance carriers and self-insured employers have begun offering medical tourism options, many have not.  


The prospect of competing against a public plan gives insurance carriers greater motivation then ever to rein in medical costs for employers of all sizes.  Medical Tourism is uniquely positioned to help drive down medical costs.   Attracting this segment will require hard data.  Metrics demonstrating systemic costs savings as compared to the discounted medical expenses large insurers pay is essential.  Metrics demonstrating high quality outcomes, safety and accreditations are critical for this segment.

Non-Covered Benefits

Cost containment and comparative effectiveness strategies under healthcare reform may increase the kinds of non-covered benefits for many Americans.  One early market segment targeted by medical tourism focused on people seeking affordable treatment for non-covered benefits.  Plastic surgery, gastric bypass and dental procedures are three examples of non-covered benefits that Americans have been willing to travel for affordable and high-quality care.  


Under most health plans, many procedures are excluded because they are considered too experimental or aesthetic in nature.  Comparative effectiveness research and other cost containment strategies may lead to regulations driving more exclusions and non-covered benefits.  Regardless, there will be Americans who wants non-covered treatments at affordable price and will be willing to travel for high quality outcomes.

One potential result of healthcare reform in the media is an intolerable increase in waiting times for many procedures as experienced in both Canada and England. These countries also have a history of medical travel for non-urgent procedures.  There is a reasonable argument that the U.S. healthcare system does not have capacity under some healthcare reform scenarios.  Potential waiting times under U.S. healthcare reform could also result in a growing market segment for medical tourism.


As medical science and technology continues to grow at significant rates around the world, there will always be cutting edge procedures not yet available in the U.S. due to the FDA approval process.  Americans have demonstrated a willingness to travel abroad for hip-resurfacing and other non-FDA approved procedures.  Medical Tourism facilities on the cutting edge can deliver a differentiate value proposition for this market.

Who’s Paying For It?

The unanswered question is whether the U.S. government will pay for medical care abroad under public plans like Medicare or new plans under healthcare reform.  That may happen one day but it seems unlikely for 2010.  How healthcare reform addresses the higher profile issue of paying for prescription drugs outside the U.S. is some indication although it is more widely accepted than medical tourism.  


Perhaps the U.S. government is more likely to accept medical tourism in the future if it has demonstrated systemic costs savings and outcomes with large insurance carriers and the American public generally perceives it as a high quality alternative.  This will require a paradigm shift in the perceived value of medical tourism.

Most American consumers of medical tourism are searching for an affordable option.  They create peace of mind through word-of-mouth on the internet, understanding safety and accreditation standards, and finally high quality outcome data convince some Americans to say yes to travel. One of the first segments attracted by outcomes and quality before price were medical travelers seeking non-FDA approved procedures.


This sustainable value paradigm is about Americans seeking what they perceive as higher quality healthcare whether in the U.S. or not and finding an affordable price and peace of mind abroad.  New customer segments that emerge under U.S. healthcare reform may enable this industry to change the value paradigm in the U.S.

Healthcare reform should fuel huge growth opportunities for the medical tourism industry.   New and underpenetrated markets segments will emerge, some with more financial resources than the status quo.  Insurance carriers will continue to feel increasing pressure to reign-in medical costs driving new alliances abroad.  


Historically, market disruption in the U.S. has been foundational for new growth and healthcare reform is poised to generate unprecedented market disruption. The politics of healthcare reform is laying the foundation for Congressional action.   Fortunately active legislative and regulatory environments always present new market opportunities for savvy business leaders.

Marsha Proctor Killen is an attorney who has provided strategic and business advice to health and specialty insurance plans in the U.S. for over a decade.   Most recently, she has led the international market segment for a Blue Cross and Blue Shield Plan through alignment with the Blue Cross Blue Shield Association international strategy.  Ms. Killen conducted seminars defining strategies to fund healthcare under the U.S. Tax Code (e.g. Health Savings Accounts, Health Reimbursement Arrangements) for Lorman Education Services.  At the Linkages Strategies Marketing conference from the Institute for International Research, she presented a case study on Using Targeted Customer Research to Create Relevant Communications.  In her law practice, Ms. Killen represented clients on a number of health and elder law issues.