• Today
    September 19

  • 03:54 PM

The medical tourism niche

Wayne Kirton,

Added 30 August 2013

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Much has been made – but little really said – about Barbados’ prospects for attracting medical tourism to our shores, and since we need to diversify and grow our economy in these difficult times, it’s about time somebody looked at defining the industry and our prospects. Let’s start with the industry. By broad definition, medical tourism is the provision of health care and wellness services, to a customer base that travels outside their home country to the location to avail themselves of the services sought. The services include quite a range, from spas, through alternative or holistic medicine, to conventional medical services including dentistry, surgical procedures, cutting edge treatments, medicines and medical devices – in short, anything that improves one’s health. The main thrust in industry development has occurred largely in three areas – surgical procedures (with plastic surgery and orthopaedic surgery like hip and knee replacement dominating), dentistry, and cutting edge procedures (like stem cell treatments), but the growth of alternative medicine facilities and general wellness facilities like spas is also a feature In terms of economic opportunity, hard statistics are difficult to come by, but the range of consensus seems to be that the industry is worth between US$40 billion and US$100 billion annually, and it is estimated to be growing at between 15 and 30 per cent annually. These estimates include the spin-off benefits of family members accompanying patients and staying in hotels, and also of patients staying on to recuperate. It seems to me that’s something worthy of our attention, especially considering that the top ten destinations in the provision of medical tourism services are Brazil, India, Costa Rica, Mexico, Hungary, Malaysia, South Korea, Singapore, Thailand and Turkey. The Americas are far less developed than Asia as regards this growing industry, and given Barbados’ familiarity and/or proximity to the principal three source markets of the United States, Canada and Britain, and our common English language, westernized culture and reputation both as a leading tourism and international business destination, the phrase “competitive advantage” comes to mind. We may have a significant opportunity to take first mover advantage in the Caribbean in this industry. The reasons for leaving the familiarity and security of one’s own country for medical treatment vary, but the industry is predicated on lower cost, ready availability of the treatment sought in these overseas treatment facilities, and access to state of the art treatments and technology – and perhaps the anonymity of having treatment away from one’s community. Health care costs in North America, generally, and in Europe (especially Britain) have risen dramatically in the last 20 years, and, at the same time, the wait for surgery (especially elective surgery) has also grown alarmingly – for example, I know of one friend in Canada with a painful back condition who has been waiting over a year for surgery. For many, the availability and (mostly) lower cost of the procedures offered overseas outweigh the concerns they might have over the quality of medical care they might receive, but even this concern is also being rapidly removed in North America. Physicians in North America have become increasingly frustrated with their inability to practice medicine in the face of controlling medical insurance company rules, and they feel that it is the insurance companies that now determine the level and extent of treatment, more than the medical profession. Further, in the United States in particular, medical malpractice insurance, driven by the increasingly litigious nature of the country, has escalated. These factors are combining to make operating in medical tourism facilities outside of North America much more attractive to top talent, so that we have reached the stage where not only is health care less costly and more readily available outside of the United States, Canada and Britain, but one can now be increasingly assured of the quality of medical attention. In Barbados, medical tourism has been around for some time. On a small scale, Barbadian doctors and dentists have treated regional patients, and some have even treated extra-regional patients from the three markets mentioned. We also have several facilities on the spa and alternative medicine side, although it would be fair to say that the latter are more directed at the local market. Our flagship currently is the very successful Barbados Fertility Clinic, one of the few JCI-certified (the gold standard for international certification) facilities in the Caribbean, and one which has earned an international reputation for quality. These pioneers recognized the opportunity and grasped it, but there is so much more opportunity available. Have we pursued this opportunity? Has Government done anything to encourage it? Certainly, there have been approaches from private sector medical tourism ventures looking to locate in Barbados, and while we have had our share of alleged scams (for example, the stem cell treatment facility in St John) and have turned away a few bogus schemes in the past, the ones that appeared genuine and interested and potentially attractive have been either stymied or chased away by our bureaucratic approval process, or by our current inability to offer the assistance they seek. Waiting two years for a decision on a project is enough to chase away even the most patient and motivated investor, and even now, there is an incredibly attractive medical tourism project – a perfect fit for Barbados – that is floundering waiting for a Government decision, and already being courted hard by other Caribbean and Latin American destinations. The case in point is American World Clinics (AWC), who were invited by the Government to make a proposal for the development of the St Joseph Hospital site in late 2009, and their concept and proposal was considered and approved by Cabinet, along with certain basic concessions. Their concept was a perfect fit for Barbados – high quality medical care in a state of the art facility, offering a wide range of services to medical tourists from North America and Britain – currently our largest tourist markets. They originally proposed to build and operate the facility, raising equity and debt of around US$100 million to do so. Unfortunately, it took them over two years to get through the bureaucratic red tape in Barbados, during which time the world recession deepened and lenders and investors became a lot more cautious, so that when the final approval was given in October 2012, the proposal had changed to one where AWC would introduce an equity partner that would buy the land and build out the facility and lease it back to AWC, who would operate the business – and the project had grown to a US$300 million project. However, the equity partner now required a sovereign guarantee in the event of a default in lease payments by AWC, and, despite several safeguards (for example, a six-month lease payment buffer held in escrow) and what most experts in the industry would consider a low risk of project failure, our Government, guided by their internal and external advisors, appear to be concentrating on the maximum risk – the worst case scenario – and its potential effect (as a contingent liability) on Barbados sovereign debt ratings, despite the clear fit and opportunity for the island to become a major player in medical tourism that the AWC opportunity presents. How does one reconcile this position with the Government’s recent action of acquiring the somewhat run down Almond Beach Village property, which takes the whole of the debt on to the country’s balance sheet, as opposed to the remotely contingent nature of the AWC guarantee? So, we have at our feet a means by which to access a US$40 billion to $100 billion (and growing) medical tourism market, and as yet our Government and its advisors do not feel able to appreciate that the benefits of the project – which include hundreds of permanent jobs even after construction (and hundreds more during construction), foreign investment of over US$300 million, of which about US$250 million will come in within the first year of construction, a diversification of the tourism product, annual foreign exchange earnings averaging US$200 million per annum in the first five years, reputational enhancement for both tourism and international business, tax revenues, and technology and skills transfer – outweigh the risk. There is a glimmer of hope, however, as I understand that the size of the guarantee requested by the equity partner has now been reduced significantly, through AWC’s efforts to find a partial guarantor for most of the risk, and we can perhaps live in hope that this emboldens the Government to take prompt action on this tremendous opportunity for Barbados. • Wayne Kirton is a former CEO of INVEST Barbados.

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