The coming globalization of health care.

AMERICANS CRUISE THE FREEWAYS IN CARS BUILT IN Yokohama, Germans flock to movies filmed in Hollywood, and Japanese quaff vodka distilled in Moscow. This is Phase One of the global economy: The exchange of goods produced in markets where specialization has led to superior quality and lower costs.

That's fine for goods, but what about services? In Phase Two of the global economy, Egyptians may undergo heart bypasses in Scotland or Minnesota. It's a notion no more preposterous than Japanese eating American-grown rice.

One of the industries best positioned to profit from the coming globalization of services is health care. In fact, it's already starting to happen. Stanford University Medical Center, for example, is currently building a facility in Singapore, and the Cleveland Clinic is building a site in Cairo.

The phenomenon of foreign patients seeking treatment in the United States is nothing new. For years, a small number of patients with the resources to avail themselves of the best medical care in the world have made pilgrimages to the U.S. to consult with top surgeons and specialists. But this enterprise has been limited for the most part to a select few health care providers with international reputations: Latin American patients have traditionally sought treatment at the Ochsner Clinic, and Middle Eastern patients have traveled to the Mayo Clinic. Other institutions with a prominent international clientele include the Cleveland Clinic, Johns Hopkins, Texas Heart Institute, M. D. Anderson Cancer Institute, Massachusetts General Hospital, Fred Hutchinson Cancer Research Center, Houston's Methodist Hospital, and a few other large teaching hospitals.

But in today's global market, growing numbers of health care providers are recognizing that it is in their best interest to go after the international patient population. In fact, it's not unheard of these days for major U.S. hospitals to have an international patient infrastructure, including a translation/interpretation department, multilingual staffing, international air services, a travel office, an international relations department, or an international marketing department as part of their senior management structure. Even some smaller institutions previously unknown outside their home state, such as Tampa General Hospital, Mercy Hospital of Miami, and Seattle's Swedish Medical Center are beginning to compete successfully for market share. (1,2)

While there are no good data on the number of foreign patients who visit the U.S. for medical care, it has been estimated that tens of thousands arrive every year for diagnosis and treatment. Furthermore, it's predicted the number of foreign patients visiting our shores has the potential to grow exponentially in the coming years. (1)

In this era of managed care, declining reimbursements, fierce competition, and empty beds, it's also important to realize that these are no ordinary patients. International patients tend to suffer from more complex health problems, resulting in average charges up to four times higher than domestic patients. (3) Typical reasons for visiting the U.S. include heart surgery, neurosurgery, organ transplants, cancer treatment, and congenital malformations. Another attraction to U.S. providers has been that foreign patients pay prior to treatment, and funds are customarily wired to the health care provider before arrival, virtually eliminating bad debt and discounted charges.

One obstacle to entering the international market is the perception that health care is fundamentally a local service. While this was true in the days of house calls, and is still true for sore throats and most medical emergencies, it's no longer the case for highly-specialized medical and surgical services, which are increasingly regionalized, even for domestic patients.

It's unrealistic to expect every community hospital to have the resources or volume to offer the kinds of sophisticated procedures that represent the state-of-the-art in neurosurgery, oncology, and cardiac surgery. To access these specialized facilities and providers, the fact is that a patient often has to travel. Furthermore, the notion of local control of health care is itself becoming an illusion: it's increasingly the case that a local hospital is owned by, and the provider paid by, a distant corporation.

The diversity of international health care purchasers

International purchasers, at many levels, have come to recognize this new reality. The first level is the growing number of affluent foreign individuals seeking health care in the U.S., who tend to be very informed purchasers. These patients are increasingly knowledgeable about the advantages state-of-the-art medicine has to offer. The Information Superhighway has made this information accessible all over the world: anyone in Morocco or Malaysia with a computer and a modem can scan the latest edition of The New England Journal of Medicine or perform a Medline search on the latest treatments for astrocytoma with just a few clicks of the mouse. It doesn't take a medical degree to understand the implications of the recent report in Lancet showing a significantly lower mortality rate for heart attack patients treated in the U.S. than in 14 other countries. (4)

The second level of international purchasers is a growing number of foreign governments who are frequently involved in the selection process for international health care providers. It's not unusual for contracts with foreign governments to produce hundreds of patients for specific procedures. Participating hospitals will typically sign contracts to provide specialized treatment for specific disorders, such as heart disease or cancer.

These large-scale government-level buyers are increasingly price-sensitive, however, often seeking "package deals" or all-inclusive pricing schemes for procedures. As in the U.S., governments purchasing health care for their nationals are also interested in seeing detailed outcomes measurements from providers.

As recently reported in the British Medical Journal, (5) payers are also beginning to jump on the international bandwagon. At a recent meeting sponsored by the American Association of Health Plans and the Academy for International Health Studies, a group of managed care executives met in Mexico City to investigate international opportunities to export managed care expertise. Insurance giant Aetna recently announced a joint venture with Sul America Seguras, Brazil's largest health insurance company, an alliance that could make Aetna the dominant insurer in Brazil and Mexico. (6)

Finally, on a more global scale, both the World Health Organization and the World Bank5 have tacitly endorsed the privatization of health care, potentially opening the door to international providers of cost-efficient care. It's increasingly clear not just in the U.S., but in the rest of the world, that competition outperforms regulation in achieving the goals of lower cost, higher quality, and greater efficiency. In Latin America, for example, more than half of all social security spending goes to health care, yet health care is often inequitable and inefficient. Privatization offers several advantages, including greater capacity and the potential to redistribute scarce public resources to less advantaged citizens. (7)

Obstacles and Opportunities

If expansion into the global market sounds straightforward and easy, it isn't. Going international is not for the unsophisticated--it's a far more complicated venture than simply printing a new brochure and mailing it to selected international prospects. Having studied in Europe or traveled in Mexico won't qualify a provider to meet the Minister of Health or readily establish relationships with referral physicians.

One key to reaching the international health care market is the same as in the domestic market--a good marketing program. No matter how outstanding the service, if customers aren't aware of it, they won't buy it. Like the marketing of any other goods or services, having the right product isn't enough; it's essential to identify the target audience, determine its needs and resources, devise the best way to reach that audience, then apply good marketing techniques to get the organization's message across.

The window of opportunity for entering the global health care market won't last forever. International competitors are not sitting still. Some, in fact, are way ahead on the learning curve. For years, British, French, and Swiss hospitals have treated large numbers of foreign patients. HCI International Medical Center in Glasgow, Scotland, for example, has promoted its services to American cosmetic surgery patients by inviting plastic surgeons to bring their patients to Scotland. They have also planned to extend their marketing efforts to U.S. executives through an aggressive Executive Health program.

Not only do these services take advantage of inherently lower costs, they offer value-added amenities, such as a European holiday or a golf outing in Scotland. Recently, one U.S. surgeon took advantage of this international opportunity by bringing 50 patients with him to Scotland. Another international competitor is Ontario-based InterHealth Canada Limited, a broker for 50 Canadian clients seeking to market their health care products and services in India, Belize, Hungary, and Czechoslovakia. (8)

Governments are also increasingly getting into the act. Countries in Asia and the Middle East are investing heavily in their health care infrastructure to raise the quality of care available at home. Furthermore, in many foreign countries, especially in the Middle East, leading hospitals are new, modern, and equipped with the most sophisticated equipment money can buy.

The missing component has often been the physician team. But that is beginning to change. In Saudi Arabia, for example, physicians are routinely sent to the U.S. for advanced medical training, with the expectation they will return with the ability to meet the needs of an increasingly affluent and demanding domestic population. And unlike years past, when foreign-trained physicians often stayed in the U.S., more and more of them are returning to their home countries to practice. For the first time in memory, there are reports of expatriate physicians in Saudi Arabia being displaced by returning Saudi physicians.

One key aspect of international health care marketing is recognizing overlooked opportunities. For example, a hospital might use its expertise in a specific disorder to target countries where certain diseases or injuries are especially prevalent. Hispanics, for example, are more prone to diabetes mellitus, and Japanese have a higher prevalence of stomach cancer. Because of cultural and legal taboos, organ transplants are next to impossible to obtain in Japan. And according to a recent Wall Street Journal report, (1) Johns Hopkins Medical Center signed contracts with Peru and Ecuador to treat soldiers wounded in local conflicts.

While some U.S. hospitals have targeted underdeveloped countries, particularly in Latin America, they have often overlooked other geographic possibilities. The same forces that attract Mexican patients to Cleveland are applicable to North Africa, India, the Mediterranean countries, former Eastern Bloc countries, and Russia. Columbia-Presbyterian, for example, has entered the Russian market in blatant fashion: they opened a clinic in Moscow. A joint venture of Pepsico World Trading, Inc., Columbia-Presbyterian Health Services, and the Fund for Large Enterprises in Russia, this outpatient facility is staffed by seven US physicians.

Other evolving opportunities for reaching the international health care market don't even require a patient's physical presence. Increasingly, U.S. and foreign hospitals are relying on telemedicine and teleradiology to link up via high-speed ISDN telephone lines. This and other new technologies are reducing the cost of telecommunications dramatically. Now, for the price of a telephone call, physicians at distant institutions can talk, see each other, even examine patients.

A physician in Baltimore could listen to a patient's heart in Casablanca or examine a patient's skin lesion in Caracas; a radiologist in Seattle could interpret a CT or MRI scan performed in Seoul. Work now underway will allow a pathologist in Rochester to view a pathology specimen from a patient in Singapore. As Massachusetts General Hospital has discovered, there's no reason why a merchant in Riyadh can't have access to the same top radiologist as the CEO of a major corporation.

The pharmaceutical and biotechnology industries also respect no geographic boundaries. U.S. pharmaceutical corporation Schering-Plough, for example, is betting on substantial growth in the $15 billion Asian market, hoping to double market share over the next three years.

Similarly, administrative expertise in managed care, rehabilitation, and continuing medical education are also readily adaptable to international markets and are equally exportable. Massachusetts-based InterQual is attempting to market updated clinical protocols to British physicians. (9) Leading drug benefits management organizations Diversified Pharmaceutical Services, Medco Containment Services, PCS Health Services, and Caremark International are all looking to expand into the European market. For any of these types of services, however, strategic alliances with local providers will not only facilitate, but may be a prerequisite, to entering local markets.

It would be a mistake to dismiss the globalization of health care as a fanciful exaggeration. Like virtually every other aspect of the global economy, events may overtake us much faster than anyone could have anticipated. Seven key phenomena join forces to make international markets especially compelling for U.S. health care providers:

1. Domestic profit margin constraints due to the inability to further raise prices or cut operating expenses.

2. Falling trade barriers resulting from international treaties, such as the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT).

3. The emerging consumer class in developing countries.

4. A social agenda to improve health care in underserved countries, such as Russia.

5. The global shift to a service economy.

6. A relative lack of competition for international providers of services.

7. The international appeal of U.S. goods and services, from hamburgers to hospitality. Why not health care?

If there are any remaining doubts, consider this: Columbia/HCA Healthcare Corporation, the U.S. health care conglomerate, has recently joined forces with PPP, the second largest UK insurance company, to purchase four London hospitals. They next plan to purchase the 26 UK hospitals owned by BMI, making this formidable international health care alliance one of the largest insurance/hospital networks in the UK. They're also looking at acquisitions in Switzerland and other European countries.10 Next stop for this health care giant: the Australian health care market. As we enter Phase Two of the global economy, can others be far behind?

References

(1.) Lagnado, L. US hospitals target patients from around the globe. Wall Street Journal. August 10, 1996, p. 1, sec. 2.

(2.) Washington Hospitals Court International Patients. AM News, March 10, 1997, p. 16.

(3.) "Attracting Full-Pay Patients: 13 Tactics for Improving Hospital-Payer Mix." Health Care Advisory Board, Washington, DC, 1991.

(4.) Holmes, D., Faliff, R., Van de Werf, R., et al. Difference in countries' use of resources and clinical outcome for patients with cardiogenic shock after myocardial infarction: results from the GUSTO trial. Lancet. 1997;349:75-78.

(5.) Smith, R. Global competition in health care. British Medical Journal. 1996;313:764-765.

(6.) Aetna in Joint Venture with Brazilian Insurer. AM News, February 24, 1997, p. 31.

(7.) McGreevey, W. Social Security: Promise and Pitfalls in Privatization Experience in Latin America. HCO Dissemination Notes. World Bank. Issue #10, July 12, 1993.

(8.) Bannerman, H. Corporation Seeks Contracts, Projects for Canadian Firms in Global Health Care Market. Canadian Medical Association Journal. Volume 154, 1996, p. 96-98.

(9.) McGinn, P. US Firms Seek to Export Protocols to Great Britain. AM News, January 20, 1997, p. 11.

(10.) Johnsson, J. Columbia Still A Player. AM News. May 5, 1997, p. 3.

Bruce A. Berlow, MD, is an allergist at Sansum Medical Clinic in Santa Barbara, California, as well as a veteran freelance and medical writer whose work appears regularly in professional journals and mass-market periodicals, such as Child, Working Mother, and Golf Digest. He can be reached at 805/682-2621.

Douglas Trigg is a well known medical marketer, and former Vice President for International Development at HCI Medical Center in Glasgow, Scotland. He can be reached at 805/969-7569.