Medical Tourism and Private Hospitals: Focus on India

This paper examines demand factors for sophisticated medical treatments offered by private hospitals operating in India.  Three types of medical tourism exist: Outbound, Inbound and Intrabound. Increased profitability and positive growth trends by private hospital chains can be attributed to rising domestic income levels within India. Not all of the chains examined were financially solvent. Some of the hospital groups in this sample that advertised directly to potential Inbound medical tourists appear to be experiencing negative cash flows.

Literature Search

Ramesh Bhat published a working paper (2006) which used 2003 financial data and a sample of 128 hospitals.  The paper titled, “Financial Health of Private Sector Hospitals in India”² relied on financial ratios and used cross-sectional data.  Relying on published U.S. hospital studies as a framework for his paper, this study identified 26 key financial ratios that predict solvency.  A significant ratio was Financial Charge Coverage Ratio defined as Profit before Interest and Tax payments divided by required interest payments owed to lenders.  Thirty-eight (38) percent of the hospitals comprising the Bhat study had negative Financial Charges Coverage ratios.

Bertrand Lefebvre (2010) study, “Hospital Chains in India: The Coming of Age” ³ documents the development and growth of major private hospital chains operating in India.  The paper specifically discusses the: Apollo Hospitals and Fortis Healthcare chains and their strategic management strategies.  These chains have consciously chosen to diversify their offerings within India.  They have built health-care networks with primary and secondary facilities feeding tertiary care facilities.  This network development strategy directly encourages the expansion of Intrabound medical tourism. This growth strategy seems to directly cater to the domestic population with an emphasis on regional medical centers offering specialized care.

Web advertisements encourage Inbound medical tourism from the United States, Canada and the United Kingdom.  The relatively recent Indian medical visa or the “M” visa promotes traveling to India for the sole purpose of undergoing medical treatment. 

Concluding Remarks

The Apollo Hospital chain located in India primarily caters to the domestic population.  Intrabound medical tourism where patients with special needs are sent to regional centers for specialized care may frequently occur and is a function of how this medical provider is designing its health care system.

As the US population becomes more demographically diverse there may develop a trend where U.S. citizens travel back to their origin countries for medical procedures such as dental, cosmetic and other elective surgeries.  Future legislation that denies care, delays treatment resulting in long-wait times or results in exceptional high deductibles and copayments would probably encourage medical tourism to become a more wide spread trend for U.S. citizens.

Transparent pricing where a patient can budget for the procedure without incurring unexpected bills may be attractive to patients with high deductible insurance plans or those without insurance coverage.  Any legislative trend that denies care due to age under Medicare or causes the proliferation of high deductible health insurance plans will encourage price conscious, internet savvy Americans to travel  abroad for medical procedures.