Medical Tourism in Developing Countries

76 ● Medical Tourism in Developing CountriesThe large size of medical tourism entities enables economies of scale tooccur. In their efforts to maximize profits, corporations set up big hospitalswhere supply costs per unit of production decline as inputs are increasedand output expands. For example, Medicity, on the outskirts of New Delhi,is under construction with economies of scale in mind. It will be a teachinghospital and research institute that will offer medical and nursing degreeswhile treating Indian and foreign patients in a 1,800-bed facility. 47 Perhapsthe most impressive attempt to make use of economies of scale has occurredin the United Arab Emirates. According to its website, the Dubai HealthcareCity has invited institutions across the world to partake in this largeproject—institutions in health-care delivery, education, services, and researchand development “to collaborate on the site to take advantage of the synergiesbrought about by physical proximity, interconnectivity, and professionalcollaboration.” 48 All of these will be organized by clusters—a medicalcluster and a wellness cluster. The former will include diagnostics, research,education, clinics, rehabilitation, pharmaceutical businesses, and medicaldevice companies, all in one place.The cost savings from economies of scale enable suppliers to chargelower prices. While market structure is not solely responsible for comparativelylower consumer prices, they are likely to play some part in the following.In India, the cost of coronary bypass surgery is about 5 percent ofwhat it is in MDCs while the cost of a liver transplant is one-tenth of whatit is in the United States. 49 Similarly, Malaysian hospitals are able to offerheart surgery for one-quarter of the price in the West.Large producers are more likely to squeeze out small suppliers who lackeconomies of scale, further increasing the concentration of the medical tourismindustry. While it might be argued that large corporate hospitals maynot be sufficiently flexible to bend to patient demand, the rise in specializedsubniches described in chapter 3 points out that this has not happened.The market for traditional medicine such as acupuncture is fundamentallydifferent as size is hardly an issue. Instead, many small producers offertheir services in highly competitive markets with easy entry and exit. To theextent that they are part of a larger structure, it is often the result of theirintegration with a major hospital or clinic (no different from tie-ins thathospitals have with tourist establishments, as discussed below).What about the tourist industry that provides the tourism part of internationaltrade in health services? The predominant market structures of themedical tourism and the nonmedical tourism industries are similar insofaras the market is dominated by large providers, be they hospitals or resorts,that reap the highest revenues in the industry. However, they differ in twoimportant ways. In medical tourism, the large-scale providers also see more