Healthcare Financing Aspects and Tourism - Essay Example

Healthcare What explains the directionality of flows in health care? Patients, health workers, managerial practices? What are the five segments of patients who are willing to travel across borders to obtain health care? Are there other patient segments beside these five? Why is there growing rivalry for inbound international patients? Under what conditions should a hospital invest in plant and equipment to attract international patients? What explains the global price differential among hospitals? Why would countries like the U.S. have 10x the charges for procedures like hip replacements?  People have been making journeys for reasons related to healthcare and medical facilities since the ancient times. The Egyptians and Greeks traveled to hot springs to take bath which would have a refreshing effect on their bodies as well as act as a cure to certain health problems. In the eighteenth and nineteenth century Americans as well as Europeans made journeys to spas to find cure to diseases like tuberculosis. But with advancement of technologies medical facilities have become more widespread along with which the cost of availing such cures have also increased hugely. The result is the growing medical tourism industry. Medical tourism refers to the practice of leaving home and going to some other place, within the country or outside the country, to obtain medical care. Countries like the USA have seen surprisingly big numbers of their patients moving abroad to get medical treatment for various ailments (Pickert, 2008). These patients are willing to travel for a number of reasons. Out of the causes that are emerging, a primary cause is the cost of the treatment. The trend to travel abroad for treatment is accelerated by the decision of some leading US corporations to turn towards medical outsourcing. Alongside several medical travel intermediaries have also developed which are providing reliable guide to medical tourism and help the patients, right from selecting the suitable hospital to the billing transactions to the transportation. The willingness of the patients to travel for accessing medical facilities depends on the patients’ socio-economic factor, perceptions about the provider from where she would get the service, intricacy of the ailment, availability and cost of the service in her own place or locality, basic fitness of the patients required to travel, or any cases of dissatisfaction associated with previous treatments at the local hospitals. The medical tourism industry had gross earnings of around $60 billion worldwide. This total will go up to $100 billion by the year 2012 as estimated by McKinsey & Company (Herrick, 2007). Although the reports on the number of patients traveling abroad for this cause are varying, it has been estimated that in 2005, 500,000 American patients made journeys abroad for treatment. A majority of them traveled to the Latin American countries including Mexico and Cuba (Pickert, 2008). Many of the have also went to Singapore, India and Thailand. Directionality of flows in healthcare Globalization is influencing the flow of patients as well as health human resources (HHR) around the globe. On one hand the patients are traveling to other countries to receive satisfactory medical treatment at an affordable price, while on the other hand some of the wealthy nations in Europe and America are seeing migration of health workers to other countries. The creation of a global labor market has eased the flow of health professionals across borders. With enlargement of the European Union (EU) the health professionals are moving out to other countries which are offering better salaries. Health professionals in Lithuania and Poland are increasingly accepting jobs in other countries. Slovenia has already started to undergo important deficit of health workers due to such out-migration. The United Kingdom, Netherlands and Norway are also facing severe deficit of HHR. The shortage of domestically trained doctors and nurses can also be felt in Australia, New Zealand and some of the North American countries. The solution to this problem can be found by drawing in foreign-trained professionals into these countries. This can fill up the gaps of these important HHR positions. Besides, the aging population group of Western Europe is creating higher demand for the health professionals to attend to their complex health conditions. This fuels the trend of increasing HHR flows. These European nations attract professionals from other European countries which have over-supply of such professionals. In countries like Spain and France, there is inadequate job opportunity for physicians and nurses. Not only are the professionals drawn from the European countries, they are brought in from other parts of the world, like “India, the Phillipines, Pakistan, the Carribean, and South Africa” (Packer, Labonté & Runnels, 2007, p. 216). The global market integration and liberalization can be partly held responsible for the deteriorating economic as well as social conditions in the developing countries. Liberalization affects the working conditions in these countries negatively, thereby laying its impact on the availability of employment and career development. It acts like a “push factor” for the skilled professionals to move out of their countries in search of better opportunities. Apart from the movement of the mobility of the health professionals, managerial practices and administration in the healthcare units contribute to the movements of patients across boundaries. The situation of shortage of nurses and physicians has its immediate impact of giving rise to lengthy waiting lists for the patients’ treatment or surgery. Sometimes this repels the patients and they consider moving out to other countries. The delay is caused in the procedure of registering the patients for admittance into the hospital, transfer of the patients from the Emergency Department (ED) to the general hospital by following different formalities and also the discharge process of the patient that include several ancillary services like transfer of medical reports, completion of paperwork required for internal use of the hospital, and finally housekeeping to prepare the units for new patients (Hall, 2006, p.9). Limitation of resources is one of the major factors in this delay and the hospitals face the challenge of providing quality service within limited resources. Reduction in patient delay is negatively correlated to inflow of patients to the hospitals; since as the delay in service delivery reduces, the waiting time for the patients fall and more patients would be willing to avail service from the hospital thereby leading to increased inflow of patients. The delays in healthcare can be reduced by forming collaborative amongst clinicians and administrators. However success would depend heavily upon good understanding of the system of healthcare and proper interaction between patients, clinicians and support services (Hall, 2006). Five segments of patients who are willing to travel across borders Five different segments of patients can be identified from their different desires to obtain medical treatment. These categories are described below: Not wealthy patients from the developed countries People from the developed countries are increasingly seeking medical services from the places that were once characterized as the “third world”. Many of these patients, termed as “medical tourists”, are not very wealthy as per the living standards of their developed countries (Herrick, 2007, p. 1). Hence they cannot afford the treatments offered in their own countries by their physicians. For example, in USA, fees for the treatments range from double to almost five times than the fees charges by the service providers abroad. In some of the countries prices are almost 80 percent lower than USA. Yet, the quality of service available matches with the quality of service a patient could get in the United States. Most of the hospitals that treat international patients the doctors and nurses are trained at per the doctors of the developed countries. There is another aspect to this issue. Due to the rising demand of quality prices at affordable prices, the private organizations or entrepreneurs are setting up infrastructure outside the US by making use of domestic as well as foreign capital. They employ technicians, doctors and nurses who re trained to American standards. If quality personnel are not available locally they hire expatriates for the job. Hence the patients can save a big sum of money even after incurring the traveling costs and other costs of traveling and staying in the foreign countries (Herrick, 2007, p. 1). As patients are facing the burden of higher costs, they are seeking alternative sources of low-cost treatments wherein medical tourism comes as rescue. The patients whose health conditions are good enough to travel, statistically speaking, fall in the top 20 %, they constitute the greater portion of the medical tourists (Medical Tourism, 2008, p. 5). Patients covered by National Health Insurance Some countries including Canada and UK have their own scheme of national health insurance. For instance, in Canada, the patients that are covered by this scheme cannot receive treatment in private by any Canadian physician for any ailment whose treatment is listed in government health plan (Herrick, 2007, p. 2). Besides, people covered by this scheme have limited access to certain medical facilities due to rationing of healthcare. Therefore they cannot get timely access to the treatments when they desire the treatment to be done. This happens in cases of elective surgeries that are pre-scheduled according to the patient’s convenient time. Also, the hospital waiting times are also long in some countries. Hence, the patients opt out for other countries or other places within the country. They have the facilities of checking the reputation earned by different hospitals through the internet. They might also take the help of intermediaries for making a check on the hospitals and the doctors. The patients can choose the hospital as well as make appointment with the doctor that she has chosen to get the treatment done, through the internet. This saves a lot of time for the patient. Patients desiring cosmetic surgeries Certain medical facilities like cosmetic surgeries are not covered by insurance. Therefore the cost for these treatments in the developed countries is huge. An American would get the same treatment done in Brazil or Argentina at a much lower cost (Herrick, 2007, pp. 2-3). Colombia is the favorite of many people for getting cosmetic surgeries done. Some service providers also arrange medical travel facilities. Online marketing plays a big role in this case. The costs are inclusive of hotel accommodation as well as travel advice. A Buenos Aires based clinic, Plenitas, has earned good name for providing such service. Besides cosmetic surgeries patients can also get treatments like in-vitro fertilization and weight loss surgery. Aged patients The national health systems at times deny treating certain patients. This happens when conducting surgery becomes risky for a patient due to his age. In some other cases the condition of the patient might be unconvincing to carry out the operation. The government health schemes do not always provide support for such events. The patients in such cases need to opt for other private health care units where they can get a better diagnosis and care. These patients choose off-shore destinations or places within their own country depending on the costs and quality of service and the distance to be traveled that the patient would be able to endure (Herrick, 2007, p. 2). Patients who consider the availability of luxuries seen in resorts The relationship between cost and quality definitely plays the biggest role in the decisions made by the patients about their destinations for accessing medical facilities. However there is a segment of patients who are inclined to check the amenities and facilities available in that place. For example, a place where the people can speak good English makes its way up the list of favorite destinations for international patients. India is scoring high in the recent years in this measure (Herrick, 2007, p. 4). Patients like to have the facilities that can be had in a good hotel or a resort whiles their stay in the foreign country as a medical tourist. These facilities help to move the focus of the patient away from the seriousness of undergoing a surgery. It makes the tour a more exotic one. Good infrastructure at a better price serves good purpose, why the patient would select a different destination away from her locality. These are the major patient segments that are identified to be willing to travel across borders to obtain medical facilities. Other than these there might be other patients who be traveling to other places for surgery due to any preconceived notion about the destination or any prejudices. However, financial factor plays a major role in medical tourism. Growing rivalry for inbound international patients A competition is emerging in the healthcare industry to attract international patients. The impact of medical tourism is felt in both the departure as well as the destination countries. These can be specifically seen in three spheres of the activities going on in the countries, i.e., health care systems, social policies in the countries and their involvement in this industry of medical tourism. The concept of medical tourism has been born in this era of globalization although people used to undertake long journeys in ancient times as well for healthcare reasons. Several countries are becoming medical tourism destinations since in addition to the healthcare facilities they have improved transportation and communication facilities (Connell, 2010, p. 96). Medical tourism is a rising industry and is a part of “private, for-profit health care” (Johnston et al, 2010). Both the countries can mutually benefit by participating in this business. However, it requires serious oversight and proper regulation. Otherwise, this may damage the existing public health care facilities operating in the countries or even act as a barrier in those countries in which investment of more public funds is necessary for betterment of the society. A meaningful compensation must be provided to the citizens of the countries which are offering their expertise and facilities in the medical field to international patients. Source of revenue generation The destination countries for medical tourism industry are commonly identified as the developing or “third world countries”. However, this concept is changing rapidly. The skepticism about the quality service provided by these countries is changing with the reputation that the healthcare facility providers are earning with delivery of service matching international standards. Thus with the rise of “trade in medical tourism” (Johnston et al, 2010), a lucrative source of earning hard currency is opening up in these countries. In countries like India, Malaysia and Thailand the growth potential of this industry is estimated at more than 25% annually (Johnston et al, 2010). Yet the potential for growth is varying according to reports since the estimates for the medical tourism industry operating globally are scattered and particular values for the patient inflow and patient outflow have not been found. Yet there is a general harmony on this issue amongst the views of researchers that there is scope for significant growth in the countries that are a house of necessary skilled human capital and technical knowhow. Following this concept the potential countries are competing with each other to offer their services to the international clients. Thailand has gone to the extent of negotiating “the portability of public insurance” (Johnston et al, 2010) amongst the countries in the area so as to boost up the flow of inbound international patients. Medical tourists spend almost more than twice the amounts spend by the traditional tourists (Johnston et al, 2010). Inbound medical tourists tend to be better off than the general patients of the region and pay commercial charges and sometimes higher medical bills for the medical facilities. This makes medical tourists an important guest to the host countries. The revenue generated out of this trade is invested into funding the public health care system of the host country. Cuba is one such country where the revenue is utilized to develop the publicly funded health care system. In some countries, like India, the foreigners are served at a premium and the difference is used for subsidizing the treatments availed by the local citizens in a non-profit hospital. The foreigners still save a considerable amount on the cost of the treatment after application of premium, since the cost of these treatments is pretty higher in their own countries. Improvement in standard of healthcare facilities The development of medical tourism has brought about considerable changes in the standards of healthcare in the low and middle income host countries. In order to match the demands of the patients that hail from the western developed countries the host countries are working hard towards improving their quality of service and delivery. The facilities and equipments are improvised following the western standards. It spurs local as well as foreign investment in the medical field. Although it is intended to cater mainly to the international patients, the effect trickles down to the basic infrastructure of the country. The standard of healthcare system existing in the country improves under the spree of globalization and increased awareness and exposition to the western world. This benefits the locals of the country. It sheds light on the ways to solve the problems existing in the healthcare system of the country. Conditions under which a hospital should invest in equipment Trade in healthcare is experiencing an upswing in the recent years. Healthcare is acquiring the features of the ordinary commercial sector. This calls for capital investment in the healthcare industry which would build the way for a sound business. Such investments should be made strategically with a forward looking approach. A well coordinated and high quality healthcare system necessitates the establishment of good infrastructure. High performance can be achieved with a “well-distributed workforce, information systems for data collection, quality improvement analysis and clinical communication support” (National Healthcare Quality Report, 2010). A healthcare delivery system that is culturally competent and allows ready availability of service along with quality of care will lead to improvement in patient outcome. This would improve their possibility of catering to international patients. To increase their opportunity, the hospitals should take investment decision in plant and equipments, but that should be done strategically. Capital investment decisions entail large monetary investments in technologies and equipments which are expected to realize long-term gains for an organization (Zelman, McCue & Glick, 2009, p. 272). Such investments can be classified into three categories, viz., strategic decisions, expansion decisions and replacement decisions. Capital investment decisions which are designed to improve a healthcare organization’s long-term position are known as strategic decisions. Expansion decision refers to those capital investment decisions which increase the operational capability of the healthcare unit, such as increasing the examination space in the organization. Replacement decisions are those capital investment decisions which are made to replace the older equipments with newer ones that would serve cost saving purpose (Zelman, McCue & Glick, 2009, p. 272). Capital investment decision must be made after consideration of the two facts: determination of the worthiness of the investment and determination of ways to finance the investment. These two decisions have to be considered separately although these two factors are interrelated. The feasibility of an investment can be evaluated by understanding the period of time required to recover the amount of initial investment, not considering the time value of money (Zelman, McCue & Glick, 2009, p. 278). The long term benefits expected from a capital investment decision can be of three broad types, namely, non-financial and financial benefits and ability to draw more funds in the future. Non-financial benefits come in the form of community benefits that includes greater access to different treatments, better quality of care and lower charges. Financial benefits can be obtained in two ways. The first type of benefit goes to an investor in the form of getting periodic payments like dividends and interests. The second one is the benefit of retained earnings that is used for the growth of the organization. In many countries, the technical dimensions of capital planning are developing rapidly. In future, successful hospitals “will be those that recognize the need for change” and adapt themselves accordingly (Walshe, K. & Smith, Judith, 2011, p. 316). Global price differential among hospitals The fees for different treatments differ a lot between the United States and the countries like Thailand, India, Argentina, Singapore, Brazil and Costa Rica. There is no particular way to categorize payment mechanisms for healthcare (Deber, Hollander & Jacobs, 2008). This difference can be attributed to a number of reasons. Difference of cost of hip surgery in USA and outside USA The cost of hip surgery can be divided into two main parts: hospital and professional. A larger percentage of the cost of a total surgery is the cost of the implant. It is the hospital cost. The professional costs are a smaller fraction of the total cost and include fees of the surgeon and other physician consultants that take care of the patient. The hospital reimbursement by the Centres for Medicare and Medicaid Services (CMS) has increased by a relatively smaller amount, although the government bears a major portion of these costs. The implant costs are rising substantially. Due to the long waiting lists the patients might be required to get the surgery done by physicians in private, which would imply higher costs to the patient. Besides the lack of transparency of prices of the treatments and the complicated factors involved in the process of billing makes the price of the service quite unpredictable until the bill arrives. According to a study which has compared the hospital cost of hip replacement surgery done in the United States with that done in Canada, the average total charge of surgery in Canada was reported to be $6766 (inclusive of direct and overhead charges) whereas that in USA was $13,000 (Lavernia, Hernandez & Rossi, 2007, p. 24-25). The major reasons that cause the cost differentials: Cheap skilled labor Wage rates are much lower in the countries other than USA. This is due to the availability of skilled labor in countries like India and Thailand in plenty compared to the employment opportunities. Thus the costs of services in these countries are much lower than in that in USA (Herrick, 2007). Less or null third-party payment A large proportion of the medical bill is paid by the government in the United States. Hence the consumers do not bargain for prices like they would do had they paid the entire sum out of their own pocket. The interference of the government also brings in bureaucracy which increases the costs (Herrick, 2007). Package pricing Prices of treatments are difficult to obtain in America until the procedure is over. Service providers cannot provide the accurate price for the treatment. This makes way for ambiguity. But in international healthcare market packages are common. The service providers can provide reasonable price list which makes the costs quite transparent (Herrick, 2007). Streamlined services Some medical providers in countries, like India, are specialty clinics whose tasks and procedures are streamlined to make them highly efficient. In the business model followed by the Rajan Dhall Hospital in New Delhi the customized service of hotel industry is combined with the industrial procedure of automaker. The senior executives of the management of this hospital have experience in both these industries (Herrick, 2007, p. 12). Limited malpractice liability Malpractice litigation costs are quite higher in the United States than in other countries. In some specialties American physicians need to make an annual payment of more than $100,000 every year for liability insurance policy. Contrasting to this, a healthcare practitioner in Thailand needs to spend an amount of nearly $5,000 per year. Malpractice awards are much lesser in Thailand compared to the United States (Hunter & Brown, 2007).. Fewer regulations Research in the field of health management is limited in Europe and outside Europe it is more apparent (Hunter & Brown, 2007). The United States practices excessive regulations over healthcare services. The Stark (anti-kickback) laws effective in America regulate compensations made to physicians in their hospitals. While many hospitals in other countries can structure the physicians’ compensation so as to create financial incentives for doctors so that they would be encouraged to provide efficient treatment, American hospitals usually cannot. Conclusion Although research is being constantly conducted in the field of medical travel concrete documents are not yet available. The equity in healthcare financing is not adequately judged by the indices developed as in the case of Irish healthcare financing (Samantha & Charles, 2009). Patients have total access to the global market for health services through the wide usage of internet (Hodges & Kimball, 2012). Further research is needed for better understanding of the growth prospective in the industry of medical tourism. References Pickert, K (2008), A brief history of medical tourism, Time, retrieved on December 14, 2012 from http://www.time.com/time/health/article/0,8599,1861919,00.html Herrick, M. (2007), Medical Tourism: Global Competition in Health Care, retrieved on December 14, 2012 from http://w.medretreat.com/templates/UserFiles/Documents/Medical%20Tourism%20-%20NCPA%20Report.pdf Medical Tourism (2008), Deloitte, retrieved on December 14, 2012 from http://www.deloitte.com/assets/Dcom-unitedStates/Local%20Assets/Documents/us_chs_MedicalTourismStudy(3).pdf Johnston, R. et al (2012), What is known about the effects of medical tourism in destination and departure countries? A scoping review. Int J Equity Health, 9, 9-24 retrieved on December 14, 2012 from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2987953/ Packer, C., Labonté, R & Runnels, V (2007), Globalization and the Cross-border Flow of Health Workers retrieved on December 15, 2012 from http://www.globalhealthequity.ca/electronic%20library/Globalization%20and%20the%20Cross-Border%20Flow%20of%20Health%20Workers.pdf Hall, R. W. (2006). Patient Flow: Reducing Delay in Healthcare Delivery, Springer. Zelman, W. N., McCue, M. J. & Glick, N. D. (2009). Financial Management of Healthcare Organizations: An Introduction to Fundamental Tools, Concepts and Applications. John Wiley & Sons. Walshe, K. & Smith, Judith (2011). Healthcare Management. McGraw-Hill International. Lavernia, C. J., Hernandez, V. H. & Rossi, M. D. (2007), Payment analysis of total hip replacement, retrieved on December 15, 2012 from http://www.orthomercy.com/wp-content/uploads/2010/08/Payment-Analysis-of-Total-Hip-Replacement.pdf Hodges, J. 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