Investment in expanding Mexico's medical tourism segment

The global medical tourism industry is dynamic. According to research firm Allied Market Research, the global industry will grow at a compound annual growth rate of 15.7% to reach $143.8bn by 2022.

In the US per capita health care spend stood at $10,345 in 2016, the highest in the world, and given the cost of health insurance, many US citizens choose to travel abroad for a range of treatments, from heart surgery to hip replacements, and for cosmetic treatments or wellness vacations. Patients Without Borders, a consumer information service focused on medical tourism, estimates that in 2016, 1.4m Americans travelled abroad for medical care, spending between $3800 and $6000 per visit including treatments, travel and accommodation expenses. Mexico and South-east Asia are considered to have the highest growth opportunities for medical tourism in the coming years, with most treatments costing 40-65% less than in the US.

Given its proximity to the US, Mexico has a major competitive advantage which private sector players are just beginning to exploit. “Medical tourism is an unmissable opportunity for Mexico to develop both its health care sector and its booming tourism industry, but it has yet to reach its full potential,” Alejandro Paolini, vice-president of MesoAmérica at Siemens Healthcare, told OBG. “A quality health care infrastructure already exists and many hospitals and specialised facilities have recently been certified to the same standards as those in the US. It remains to be seen if this will lead to a large-scale take-up by the American market as a result.”

Border Towns

For decades Californians have been making day trips to Mexico to buy cheap pharmaceuticals from Tijuana pharmacies, but it was in the northern most tip of the Baja California state in the town of Algodones that Mexican medical tourism was born. 30 years after opening its first medical consultation office, the town of 4000 inhabitants – which borders Yuma in Arizona – is now home to 350 clinics and takes in an estimated $6m annually from cross-border patients. The town has some 400 dentists who charge approximately one-10th of the cost for crowns and surgery compared to their US counterparts.

Market Estimates

Immigration information is not sufficiently detailed to determine exactly how many foreigners visit for treatments, but a number of studies give an impression of the size of the market. One such report by Universidad Iberoamericana estimates that 400,000 tourists accessed medical treatments in the cities of Tijuana, Monterrey and Mexico City in 2015, and that 80% of them were US citizens, many of whom were second- or third-generation Latinos. Patients Without Borders estimates that, when undocumented Mexican nationals living in the US are included, the total number of medical visits reached 1.2m in 2014. Investment promotion agency ProMéxico estimates that medical tourism generated $3.3bn of business in 2015.

Three Types

The Universidad Iberoamericana study did not include Cancún, thought to be the largest and most advanced medical tourism destination in Mexico, but it did identify three distinct types of medical tourism. The first, on the border, caters to cross-border walk-in dental and orthopaedic surgery. The second type – focused on the country’s beach resorts of Cancún, Los Cabos and Puerto Vallarta – is centred around outsourcing patients to certified hospitals for cardiovascular and orthopaedic surgery and where the patients can rest after their treatment. The final niche is found in the big cities where patients can find advanced and specialised treatments and surgeries.

The specialisation of services in Mexico’s regions is set to continue. “Unsurprisingly, existing examples of medical tourism in Mexico are concentrated in a handful of places such as Baja California and Cancún,” Martin Ferrari del Sel, country manager of Dräger México, a medical devices producer, told OBG. “However, due to the vast potential of the market, each destination is vying for market share to differentiate themselves from other destinations and to attract foreign patients to their facilities.” Importantly, the country has both the facilities and human resources to provide treatment at a low cost. According to the latest data from ProMéxico, at 63.4% the proportion of specialised doctors is well ahead of the OECD average of 57.7%. In 2011 the country had 8385 surgeons, 9676 gyno-obstetricians, 8315 anaesthetists and 7591 paediatricians. Data from 2012 shows that cardiac bypass surgery costs an average of $27,000 in Mexico, while patients can expect to pay $144,000 in the US; spinal surgery costs $12,000 compared to $100,000 north of the border; and installation of a gastric band could be done for $6500 in Mexico, but would set a US patient back $30,000 at home.

New Projects

Beach destinations are the focus of major investment plans in the coming years. The delayed medical city in Puerto Cancún is scheduled to take shape in 2017 following the acquisition of facilities. The residential project, renamed Wisdom Towers, aims to attract foreign baby boomers to live in the 500-ha development, which is located within 10 minutes of local hospitals. In Acapulco, in Guerrero state, a $1bn development project to rejuvenate the city’s tourist facilities will include a medical facility with four operating rooms and 40 beds. The MXN1bn ($60.3m) facility will be built by local firm Grupo Autofin.

In Monterrey, meanwhile, the development of the Nuevo Leon Health Cluster is ongoing. Consisting of numerous clinics and dental facilities, the cluster includes three hospitals that are certified by the US’s leading accreditation for health care organisations, the Joint Commission International (JCI): San José Hospital, Oca Hospital and Cima Monterrey Hospital. As such, Monterrey has proven popular with medical tourists from Texas, California and Arizona.

“The city’s medical infrastructure has become very attractive,” Servando Garza Rocha, executive director of the Monterrey Convention and Visitors Bureau, told local media in July 2016. “In terms of certified hospitals, we have the largest in Latin America – Doctors Hospital – we have recognised doctors and specialists in all kinds of practices, and this draws a lot of attention.”

Certification

As in other countries, the medical tourism industry must gain the trust of potential patients to expand. The acquisition of international certifications and agreements with foreign hospitals and insurers is a key part of this process, and remains the principle challenge facing the segment. “Apart from obvious infrastructure requirements, such as direct flights to multiple US cities and the construction of world-class facilities, the key to attracting medical tourism on a larger scale is gaining approval from the four major US insurers who are the gatekeepers to their customers leaving the US,” Alessandro Rubio, director of Grupo Autofin, told OBG. “This has happened on some occasions, but without them, health tourism is limited to a few niche areas with little chance of mass adoption.”

As of March 2017 there were five Mexican organisations accredited by the JCI. In addition to the Nuevo Leon hospitals in Monterrey, Galenia Hospital in Cancún has received its certification, along with other institutions in Mexico City. “The key to success is to obtain an international certificate of recognition so as to be considered by insurance companies as a viable destination for patients,” Javier Sanchez Muñoz, director-general of IGSA Medical Services, told OBG. “However, it is also appealing for patients to go to beach resorts rather than border towns, and for this reason destinations like Cancún are increasingly popular for North American medical tourists.”

Once hospitals and clinics have their accreditation it is far easier to build relationships with US hospitals and insurers. In March 2016 the North American Specialty Hospital, based in Denver, Colorado, signed an agreement with the Galenia Hospital in which the firm’s US patients will travel to Cancún for hip and knee replacement surgery. Servando Acuña Braun, president of the Medical Tourism Association, told El Economista in March 2016 that the deal would lead to an 11% rise in the number of foreign visitors to Cancún for such treatments in 2016. However, certification is a costly business, and the Mexican-American Hospital in Jalisco decided not to renew its JCI accreditation in 2017 given the $350,000 cost of renewal.

Prospects

Even without a fully articulated sector strategy and with less than 10 internationally certified hospitals, Mexico has a successful medical tourism industry that ranked first globally in terms of patient arrivals in 2016, according to Allied Market Research. ProMéxico forecasts that the segment will continue to grow at 6.3-7% annually in the coming years.

Furthermore, with the future of health care provision in the US remaining uncertain in the wake of Donald Trump’s election to the presidency, the possibility of attracting an increasing number of US patients to undergo medical treatments, dental surgery or assisted living resorts appears bright. Certified institutions look certain to benefit first, but if medical tourism becomes normalised in the US, and Mexico continues to promote itself as an affordable and qualified destination, the benefits could spread to the wider health industry.

 

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