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CASE STUDY 1: THE GLOBALIZATION OF HEALTH CARE Conventional wisdom holds that health care is one of the industries least vulnerable to dislocation from globalization. After all, like many service businesses, health care is delivered where it is purchased, right? If an American goes to a hospital for an MRI scan, won't that scan be read by a local radiologist? And if the MRI scan shows that surgery is required, surely the surgery will be done at a local hospital in the United States. Until recently, this was true, but we are now witnessing the beginnings of globalization in this traditionally most local of industries Consider the MRI scan: The United States has a shortage of radiologists, the doctors who specialize in reading and interpreting diagnostic medical images, including X-rays, CT scans, MRI scans, and ultrasounds. Demand for radiologists is reportedly growing twice as fast as the rate at which medical schools are graduating radiologists with the skills and qualifications required to read medical images. This imbalance between supply and demand means that radiologists are expensive; an American radiologist can earn as much as $350,000 a year. In 2002, an Indian radiologist working at the prestigious Massachusetts General Hospital, Dr. Sanjay Saini, thought he had found a clever way to deal with the shortage and expense beam images over the Internet to India where they could be interpreted by radiologists. This would reduce the workload on America's radiologists and also cut costs. A radiologist in India might carn one-tenth of his or her U.S. counterpart . Plus, because India is on the opposite side of the globe, the images could be interpreted while it was nighttime in the United States and be ready for the attending physician when he or she arrived for work the following morning. As for the surgery, here too we are witnessing the beginnings of an outsourcing trend. In October 2004, for example, Howard Staab, a 53-year-old uninsured self-employed carpenter from North Carolina had surgery to repair a leaking heart valve-in India! Mr. Staab flew to New Delhi, had the operation, and afterward toured the Taj Mahal, the price of which was bundled with that of the surgery. The cost, including airfare, totaled 10,000 If Mr. Staab's surgery had been performed in the United States, the cost would have been $60,000 and there would have been no visit to the Taj Mahal. Howard Staab is not alone. Some 170,000 foreigners visited India in 2004 for medical treatments. That number is projected to rise by 15 percent a year for the next several years. According to the management consultancy McKinsey & Co., medical tourism (overseas trips to have medical procedures performed) could be a $2.3 billion industry in India by 2012. In another example, after years of living in pain, Robert Beeney, a 64-year- old from San Francisco, was advised to get his hip joint replaced, but after doing some research on the Internet, Mr. Beeney elected instead for joint resurfacing, which was not covered by his insurance. Instead of going to a nearby hospital, he flew to Hyderabad in southern India and had the surgery done for $6,600, a fraction of the $25,000 the procedure would have cost in the United States. Mr. Beeney had his surgery performed at a branch of the Apollo hospital chain. Apollo, which was founded by Dr. Prathap C. Reddy, a surgeon trained at Massachusetts General Hospital, runs a chain of 18 state-of-the-art hospitals throughout Asia. Between 2001 and 2004, Apollo treated 43,000 foreigners, mainly from nations in Southeast Asia and the Persian Gulf, although a growing number are from Western Europe and North America. In 2004, 7 percent of its revenue came from foreigners. With 200 U.S.-trained doctors on his staff, Dr. Reddy reckons that he can offer medical care equivalent to that in the United States, but at a fraction of the cost. Nor is he alone; Mr. Staab's surgery was performed by Dr. Naresh Trehan, a cardiac surgeon who was trained at New York University School of Medicine and worked there for a decade. Dr. Trehan returned home to India and opened his own cardiac hospital, which now conducts 4,000 heart surgeries a year, with a 0.8 percent mortality rate and 0.3 percent infection rate, on par with the best of the world's hospitals. So will demand for American health services soon collapse as work moves offshore to places like India? That seems unlikely. Regulations, personal preferences, and practical considerations mean that the majority of health services will always be performed in the country where the patient resides. Consider the MRI scan: To safeguard patient care, U.S. regulations require that a radiologist be licensed in the state where the image was made and that he or she be certified by the hospital where care is being given. Given that not many radiologists in India have these qualifications, no more than a small fraction of images can be interpreted overseas. Another complication is that the U.S. government sponsored medical insurance program, Medicare, government sponsored medical insurance program, Medicare, will not pay for services done outside of the country. Nor will many private insurance plans... or not yet anyway. Moreover, most people would prefer to have care delivered close to home, and only in exceptional cases, such as when the procedure is not covered by their medical plan, are they likely to consider the foreign option. Still, most experts believe that the trends now in place will continue. Given that health care costs in America are the highest in the world, it seems likely that increasingly, a small but significant percentage of medical service will be performed in a country that is different from the one where the patient resides. The trend will certainly get a big boost if insurance companies start to offer enrollees the option of getting treatment abroad for expensive surgeries, as some are rumored to be considering Sources: G. Colvin, "Think Your Job Can't Be Sent to India?" Fortune,December 13, 2004, p. 80; A. Pollack, "Who's Reading Your X-Ray." The New York Times, November 16, 2003, pp. 1, 9; S. Rai, "Low Costs Lure Foreigners to India for Medical Care," The New York Times, April 7, 2005, p. C6; J. Solomon, "Traveling Cure: India's New Coup in Outsourcing," The Wall Street Journal, April 26, 2004, p. Al; J. Slater, "Increasing Doses in India," Far Eastern Economic Review, February 19, 2004, pp. 32-35; and U. Kher, "Outsourcing Your Heart," Time, May 29, 2006, pp. 44-47. Case Discussion Questions 1. What drives the medical procedures to start globalizing? Is the globalization of health care a good move to the industry? Explain. 2. Who might benefit from the globalization of health care? And who might lose? Justify. 3. Are there any risks associated with the globalization of health care when it is being outsourced to the developing nations? Discuss