Deloitte’s Medical Tourism Fallacy

Posted By Damjan DeNoble

The term “medical tourism”  has been spreading like wildfire since the release of the in 2008 which predicted that 6 million Americans would go abroad for medical tourism in 2010, with an additional 3 million going abroad in 2009.  The study was cited 350 times in 2008, and even referenced by high profile news outlets like CNN and the Economist.  When it was time to cite the authors, the phrase “team of experts”  from Deloitte was used several times.

The study conclusions produced by Deloitte were bold – it’s predictions for the global medical tourism industry effect on the American healthcare industry ring large; “16 Billion dollars lost in opportunity costs for US healthcare system,” “500 billion dollars lost by 2017,” “6 million Americans will travel abroad for medical tourism in 2010.”

Perhaps, because of its boldness, news agencies ran with stories about the “medical tourism” phenomenon without giving much thought to the origins of a report that pulled a half-trillion dollar disrupting force out of thin air.

At first glance, the numbers even seem impressive because of the implied effort that a group of individuals would have to put in to such an endeavor.  Health industry trends are interlinked with politics, military matters, and very literally, the lifeblood of nations.  So, to confidently predict cause and effect mechanisms for trends in a health industry sector is at best an effort that requires a massive allocation of research resources, and at worst, impossible.

But, when one asks – How thourough was Deloitte in its research? – the answers  are less than convincing.

A quick scan of the Deloitte document reveals that  all of these predictions are based on a dubious, unpublished survey of 3000 Americans, and an equally dubious trends graph, where predictions for 2010 are extrapolated based on two data points from 2006 and 2007.   Due to the fact that the survey details, including its design were never published, the data is about as reliable as hearsay.  A further scan of the study bibliography shows that Deloitte got a lot of its information from Wikipedia.  Read into that fact what you will, but I do not consider that serious research.  ( I don’t want to shortchange Wikipedia here, because it is a fantastic resource.  As co-blogger James Flanagan points out; If you are citing definitions, no problem.  If you are citing numbers and pinpointing trends, there is a problem.)

After reviewing it in even more detail, the report starts to crumble ( I will let you do this exercise yourself, as I don’t want to take too much space doing it here).  An on final review, it turns out to be little else but a thinly veiled, and sensationally written, document that furthers  Deloitte’s business goals as a health consultancy.  And, as such, it should mean very little to health industry professionals trying to figure out how to shape their business strategies.

As Nassim Taleb would say: How quick we are to believe predictions, especially sensational ones, when it comes to fields we know little about.

A much more reliable report, that stays within the parameters of known information is the McKinsey report titled Mapping the market for medical travel. Though the McKinsey analysts still conclude that the medical tourism industry will expand, they are much more measured in their conclusions, and thier predictions of the market are only 10% that of the Deloitte study.

Perhaps the most amusing part of the report is McKinsey’s subtle but noticeable reference to the “today’s conventional wisdom,” which one can only assume is the Deloitte report, since it garnered a lot of media attention for medical tourism a few months before the McKinsey report was published, and is really the only source beside McKinsey providing commentary on the medical tourism market.

The market is smaller than conventional wisdom suggests, and most of today’s medical travelers seek high quality and faster service, not lower costs.

Global medical tourism is certainly an interesting development, and there are countries where the health industry is enjoying nice windfalls from medical tourists.  But, for CEOs and entrepreneurs to start banking on profits from medical tourism is a bit premature because the data just does not exist in order for informed decisions to be made.  Instead of planning a business model around medical tourists, just try to be ready for them instead, even if you don’t have to be ready for 6 million of them coming from the United States by 2010.

For a measured account of this developing trend, see this recent NY Times article, that wisely cites McKinsey and not Deloitte.