Medical Tourism in Developing Countries

Would You Like a Safari With Your Lasik Surgery? ● 75on a nonsubsidized fee-for-service basis. 41 With the growing importanceof medical tourism, hospital capacity in the late 1990s increased by over5 percent per year, with private capacity increasing at almost three timesthe rate of public. 42 Thailand has a larger private sector and a market orientedhealth-care system that offers its population choice in care, 43 as doesChile’s competitive dual system. 44 In both cases, consumer choice is largelybased on disposable income: the higher the income, the more private healthcare will be demanded. With growth and rising incomes, the domesticpopulation demands more private health care. This alleviates the demandon the public sector and increases the competition with foreign patients.Market Structures in Medical TourismAt one end of the spectrum, a plastic surgeon in Rio de Janeiro is singlehandedlyresponsible for attracting most foreign patients to Brazil. 45 At theother end, large hospitals predominate (such as Indraprastha MedicalCorporation in New Delhi, the third-largest corporate hospital outside theUnited States in 2005). While both small and large entities exist, it is thelarge hospitals that have been treating foreigners. By sheer size, hospitalssuch as Apollo in India and the Bumrungrad in Thailand have become thegrandes dames of LDC medical tourism. Their size, measured by the numberof employees, sales revenue, and number of unit sales to capital employed,is impressive. They did not start off that way. Initially Apollo’s goal was toproduce a state-of-the-art hospital for the 250 million or so middle-classIndians who could afford to forgo public hospitals. Then it expanded intomedical tourism, attracting foreign patients. 46 Now, major Indian corporationssuch as Fortis, Max, Tata, Wockhardt, Parimal, and Escorts have madesimilar investments and are setting up hospitals, and promoting medicaltourism.Medical tourism, especially in the invasive and diagnostic sectors, tendsto be dominated by large size firms operating in highly concentrated markets.With the exception of Cuba, where the government has a monopolyon medical tourism, most countries under study have oligopolistic healthcareindustries in which a small number of producers dominate. Barriers toentry are too high in medical tourism for monopolistic competition todevelop. Each producer has some power over price and output, but all areinterdependent, and their product depends on those of the others. Firmsand industries that are mutually interdependent may begin to function likeoligopolies and have reactions to each other’s behavior. This is especiallytrue in the cross-fertilization that occurs between corporate medicine forforeigners and the hospitality, air transport, and food/beverage industries.