The rise of medical tourism in Thailand : understanding contemporary globalisation

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THE RISE OF MEDICAL

TOURISM IN THAILAND

Understanding contemporary globalisation

Sonia Hoque MSc International Development Studies

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The Rise of Medical Tourism in Thailand:

Understanding contemporary globalisation

Name: Sonia Hoque Student Number: 10634878

Course: MSc International Development Studies 2013-14 Supervisor: Dr Bart Lambregts

Second Reader: Dr Niels Beerepoot

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Acknowledgements

I would like to thank a number of people for their support in completing my Masters and this thesis paper. With their help I was able to complete one of the most challenging endeavours of my life so far, and I am extremely grateful for their time and willingness to help.

Firstly, Dr Bart Lambregts who has been an exceptional thesis supervisor. From suggesting a fascinating topic, helping me design a feasible research proposal and challenging me to improve every draft of this thesis, I would like to thank him for his guidance and time over the past 8 months. His style of

supervision which is informed but allows you to form your own conclusions and opinions, is one of his best assets as a professor and I am extremely grateful for his dedication throughout this process. I would also like to thank all of the respondents who agreed to interview during my fieldwork in Bangkok, and also to the people who gave me contacts and recommendations. It is always difficult to expect time from senior and working people, and from arriving in Bangkok with no contacts at all, to conducting interviews with senior experts was a huge accomplishment. Their time allowed me to write this paper and I hope it will give some interesting insights that can be researched further.

Finally, I would like to thank my father who has always believed in me, usually more than I believe in myself. His continued support throughout my education has motivated me to always work to the best of my ability and challenge myself. He has been an inspiration and the most valuable lesson he taught me is that if I work hard and aim high, I can achieve any of my dreams or goals. I would also like to thank my mother who has worked tirelessly her whole life to make her family and children comfortable and happy. I hope to make them proud with this paper and by completing my Masters programme.

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Abstract

This thesis looks to identify which factors explain Thailand’s success as a hub for medical tourism, which is a particularly unique offshoring phenomenon and has been enabled by contemporary globalisation processes. Consumers are travelling thousands of miles to developing/emerging countries to obtain healthcare which is extraordinary given that the majority are travelling from developed countries where healthcare is generally high-quality.

Unlike India or the Philippines, Thailand has not been particularly successful in most areas of service offshoring and outsourcing, for reasons unknown. Therefore it is extremely vaubable to study the success of medical tourism, which is a new, relatively unresearched industry with a high skills input. Interviews were conducted with industry experts, hospital management and foreign patients in Bangkok, Thailand over 8 weeks from January 2014.

Results show a multitude of complex interrelating and interacting factors. Whereas the existing literature tends to focus on consumers and what drives their decision to travel for healthcare, this study found the producers, i.e. private international hospitals, are driving the success of medical tourism through innovative methods and strong networks. Hospitals targeting foreigners have the advantage of association with the successful tourism industry in Thailand, however this study found limited collaboration between service-providers. This results in a disconnected, and somewhat undefined industry and there is potential to develop further. A recommendation in this paper is for increased collaboration between hospital management, medical associations government organisation, policymakers, and tourism researchers in Thailand to not only ensure survival through the current political crisis, but to ensure sustained growth and development of the medical industry.

Several development implications arose such as the ‘brain drain’ of doctors from rural to urban areas given higher pay in the private sector. Rising costs of private healthcare due to foreign demand is also frustrating Thai citizens and there are tensions regarding the use of public resources to support the growth of the private medical tourism industry.

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List of Abbreviations

List of Figures

Figure 1 - Diamond of National Advantage 13

Figure 2 - Conceptual scheme 16

Figure 3 - Map of Thailand 19

Figure 4 - Department entrance at JCI-accredited hospital 29

Figure 5 - Patient Survey Results – “rate the level of English of hospital staff” 39 Figure 6 - Patient research methods on medical tourism destinations 41

Figure 7 - Interview respondent at JCI-accredited hospital 44

Figure 8 - Patient Survey Results – main reason for choosing this hospital/clinic? 48 Figure 9 - Patient Survey Results - rate the quality of hospital building 49 Figure 10 - Patient Survey Results - rate quality of equipment used 49

Figure 11 - Patient room in leading international hospital 50

Figure 12 - Patient Survey Results - rate the 'friendliness' of staff 50 Figure 13 - Patient Survey Results - compare Thai medical services to your home country 52

Figure 14 - Medical tourism value chain 63

Figure 15 - Extended conceptual scheme 71

List of Tables

Table 1 – Unit of Analysis

Table 2 – Thailand & Asian Competitors in Medical Tourism Table 3 – Regional competitor’s strengths vs weaknesses

AEC ASEAN Economic Community

ASEAN Association of South East Asian Nations

BPO Business Process Outsourcing

FDI Foreign Direct Investment

IDL International Division of Labour

KPO Knowledge Process Outsourcing

MNC Multi-National Corporation

MPH Ministry of Public Health

MTA Medical Tourism Association

MTS Ministry of Tourism and Sport

OECD Organisation for Economic Co-operation and Development

PHAT Private Hospital Association of Thailand

PISA Programme for International Student Assessment

TAT Tourism Authority of Thailand

TMTCA Thailand Medical Tourism Cluster Association

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Chapter One: Introduction

1.1 Background to the study

Over the past twenty years, the advancement of technology has contributed to the expansion of globalisation processes across the world. Developing and emerging countries are increasingly interconnected and the traditional global divide between the ‘rich North’ and the ‘poor South’ is outdated and relations are far more complex. Such countries show a much larger degree of variation in their stage of economic development, both in terms of production and consumption. What is particularly new and interesting however, is the variation that can be seen within such countries. How does a particular industry become more successful than others, and what causes this to happen? More importantly, what lessons can be learnt from this success for future policy-makers and development planners?

The traditional view is that developing countries follow a series of stages, from a focus on agriculture to manufacturing through industrialisation, and finally a rise of a higher margin service-sector. This is in line with economic theory, for example Rostow’s well-known Stages of Growth model describes a country’s ‘take-off’ following industrialisation which is triggered by increased investment in capital (Todaro, 2006:104). However, several developing countries have seen a rise in their service-sector at a much faster rate driven by relocation of services from developed-country firms to developing countries. With the commodification of services (Davenport, 2005:101), production and consumption can be spatially separated. Firms from developed countries are attracted to developing countries due to their competitive advantages, such as low labour costs, technological skills, language proficiency, geographic and cultural proximity to major markets (Gereffi & Fernandez-Stark, 2010:3). Outsourcing and offshoring services to developing countries has changed the international division of labour and has become a key feature of contemporary globalisation - dubbed “next wave of globalisation” (Dossani and Kenney, 2007).

An ongoing debate in the current development discourse has been around the extent to which service-sector based development trajectories result in economic growth and development. Some scholars are optimistic, such as Gereffi and Fernandez-Stark who say “the shift of service jobs from developed countries provides an important opportunity for developing nations to drive growth and improve both social and economic conditions” (2010:6). Others are more tentative, such as Levy (2005:691) who states “the impact of offshore production is uncertain and contingent” (2005:691), and other critical scholars blame the industry for rising inequality and uneven development, particularly in India (D'Costa, 2011, Krishna and Pieterse, 2008).

As skills levels in recipient countries become more advanced, there has been the relocation of so-called ‘white-collar’ jobs to developing countries. Examples of industries where this has happened are financial services, call-centre work and IT services. Companies are known to outsource their entire back-office

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2 operations, such as human resources, accounting and payroll to countries like India and the Philippines, where service-sectors are evolving rapidly (Corbett, 2004:16).

Another service where there has been a trend to relocate to the global South is medical services. For example, some Japanese companies send all their employees to Thailand and Singapore for annual physical examinations (Connell, 2006:1097). The UK and US are known for formally (and in some cases informally) sending citizens to Thailand, e.g. the National Healthcare Service in the UK has subcontracted particular procedures to cheaper countries, for patients who cannot afford private care or where there are long waiting lists (Bies & Zacharia, 2007:1144). This has led to the growth of a related service industry which is the focal point of this study - medical tourism, where people travel overseas to obtain medical, dental and surgical care (Connell, 2006:1094). It is a relatively recent trend and arguably a kind of spin-off from traditional service spin-offshoring – production and consumption are not spatially segregated, but the consumer is physically relocating themselves temporarily in order to obtain a service. Countries that have become successful in this industry include Thailand, Singapore, Malaysia and India and Thailand in particular has had unprecedented levels of success in medical tourism.

Medical services are distinctively different to the other services which are being studied as part of the outsourcing debate. They are much more personal to a consumer, and in ways an irreversible decision – the consequences of a poorly chosen provider could be far greater than a company choosing where to relocate their payroll department. This uniquely human aspect to the offshoring debate, and a clear gap in literature led to the decision to study Thailand’s medical tourism success. How has a developing country with generally poor education levels become highly advanced and successful in medical services which require specialised skills? How have they managed to attract customers from all over the world and establish a place in a self-created global market? What can other industries, and indeed other developing countries learn from their success? This study aims to try to answer these questions.

1.2 Relevance and objectives of study

In terms of the broader relevance of this study to development studies, it is becoming essential to understand the role and impact of contemporary globalisation in developing and emerging economies. Currently, there is intense academic debate around the positive and negative effects of globalisation particularly on economic growth, income inequality and poverty which is briefly discussed in Chapter 2.2. Furthermore, the lack of academic literature and research into medical tourism from a development perspective presents the opportunity to contribute significantly to the debate on service-driven development.

The rise of the offshore service-sector has been an interesting and successful phenomenon in other developing countries which is being studied by many development academics. Thailand, has had limited success in this sector, for reasons which are not yet clear. Therefore, looking into a niche area in which

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3 they have become extremely successful may provide useful lessons to other industries and countries, not only in terms of how to attract inward investment/foreign consumers but how such advanced services developed in the first place. By understanding how the medical services industry has become globally competitive and attracted consumers from developed countries (where high-quality medical services are generally available), factors important to national competitive advantage may be identified.

Moreover, being a relatively poor/emerging economy, the fact that Thailand has excellent medical services is extremely interesting from a development point of view. Many countries struggle to develop their health and education services for their citizens, but Thailand has gone as far as attracting citizens from far richer places. That is not to say that advanced healthcare is available to the whole population, as it is usually only affordable for wealthier citizens. For this reason, this study is also relevant to studies of middle-class growth in developing countries.

The objective of this study is to understand how the medical tourism industry in Thailand has developed, what factors contribute to its success and particularly what makes it unique in a relatively unknown, competitive industry. It also aims to identify how the industry can continue to grow and finally relate lessons learnt from the success of medical tourism as an offshore service, to the wider offshoring sector in Thailand. To some extent, this study may help both Thailand and its competitors to understand what is needed for a globally competitive medical services sector. There is also some potential to inform policy, particularly the Thai medical hub policy which claims to support medical tourism growth.

Finally an objective of this study is to inspire future researchers to look into the several potential development impacts of the medical tourism industry on the Thai economy and society. Given the recent emergence of this industry, there is limited research on the possible positive or negative externalities that may result. This will make it even more relevant to development studies and can take this research beyond the offshoring/outsourcing debate. Although not aimed at covering this, such issues were apparent during fieldwork and are already becoming more important to stakeholders in the industry (discussed in Chapter 9). This study hopes to be the base for continued research into medical tourism in Thailand, specifically its potential for understanding development of services, and the negative impacts of private sector growth.

1.3 Outline of study

This thesis begins with a theoretical framework which discusses the existing debates around globalisation and service-sector offshoring to developing countries. It then goes on to discuss debates on medical tourism and relevant existing literature. Finally Porter’s theory of national competitive advantage, which forms the main theory chosen for this study, is presented and applied to the case of Thailand. It concludes with a conceptual scheme for the study (Figure 2).

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4 Chapter three covers the research design, presenting the main and sub-research question(s). The selection of research location and the unit of analysis is explained, followed by a detailed methodology section which outlines the mixed methods approach used in this research. This chapter concludes with some of the limitations and ethical issues that came up during fieldwork, and how they were mitigated. Chapter four introduces medical tourism in Asia, and provides a background into Thailand as the main case study. Chapter five to eight cover different groups of factors which answer the main research question – what factors explain Thailand’s success as a hub for medical tourism?

 Chapter five; producer-related factors – discusses the development of the high-quality ‘Western standard’ medical services in Thailand through things like hospital networks, promotion etc.

 Chapter six; consumer-related factors – discusses what factors have attracted and enabled foreign patients to have medical service in Thailand, such as cost and quality of services.

 Chapter seven; governance and external factors – discusses external factors which have affected the medical tourism industry. This includes government regulation, regional competitors and political stability in Thailand.

 Chapter eight – discusses three main lessons from the previous chapters; what makes Thai medical tourism unique, how the current industry can be improved and supported, and how it may develop to be even more successful and retain its competitive edge.

The final chapter addresses the main research question and discusses the development implications which came to light throughout the research and provides recommendations for further lines of research.

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Chapter Two: Theoretical Framework

Although there is a fair amount of literature available about the medical tourism industry as a global phenomenon, little academic literature exists on Thailand, or from a development perspective. However there are some important and interconnected theories relevant to this research which will be used as a framework for this study.

2.1 What is medical tourism?

A commonly used definition is from the Medical Tourism Association (MTA) which is a US-based global association which works on raising awareness of international healthcare options for consumers. The following definition is used as a starting point for many medical tourism articles:

“Medical Tourism is where people who live in one country travel to another country to receive medical, dental and surgical care while at the same time receiving equal to or greater care than they would have in their own country, and are traveling for medical care because of affordability, better access to care or a higher level of quality of care.” (MTA, 2013)

However, one major point of discussion currently is the lack of consistency when defining medical tourism (discussed further in Chapter 2.4.1). What can be concluded from various definitions is that tourism which has health-related benefits has been common for several decades, but travelling specifically for medical services, is a newer trend being actively marketed under the term ‘medical tourism’.

The main groups of medical tourists1_{come from developed countries, especially Western Europe, Japan,} the U.S., Canada and Australia, where the cost of medical treatment is very high and waiting times can be very long (Rerkrujipimol and Assenov, 2011:95). Destination countries are usually economically less-developed countries, such as Thailand, India, Singapore, Hungary, Costa Rica etc. (Awadzi & Panda, 2006:76). Thailand has long been seen as a popular tourist destination for people all over the world due to its natural beauty, favourable climate and welcoming culture. Tourism is a significant part of their economy, and the Tourism Authority of Thailand (TAT) is tasked by the Ministry of Tourism and Sports (MTS) with promoting and maintaining the growth of the overall tourism industry, including medical tourism. Although they have very distinct characteristics, the two industries are linked, which becomes clear throughout this study.

2.2 Globalisation and service offshoring and outsourcing

Having briefly defined medical tourism, it is now important to look at the broader development debate into which is falls.

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6 This research sits under the umbrella of ongoing debates on contemporary globalisation processes, which have enabled the growth of the service-sector offshoring/outsourcing industry. Offshoring is defined as the transnational relocation or dispersion of service-related activities that had previously been performed in the home country. Outsourcing on the other hand is the subcontracting or contracting-out of activities to [third party] organisations that had previously been performed within a firm (Bunyaratavej et al, 2011:71). It has become common for developed-country firms to relocate certain production processes in this way to developing countries for many reasons, mainly cost savings. The impacts however, are as of yet relatively unknown as mentioned in the introduction. Offshoring is not a new phenomenon and has occurred for years, particularly in the manufacturing industry (Thailand for example has been a car manufacturing country for foreign companies for many years).

What is new is the application of this process to advanced professional services which is being dubbed as a ‘new wave of globalisation’ (Bryson, 2007:31). The expansion of the internet coupled with relatively cheap and reliable information and communication technologies, makes offshoring/outsourcing to cheaper countries attractive to many firms (Ellram et al., 2008:149). India and the Philippines have been particularly successful in this area, having become leading destinations for many Business Process Outsourcing (BPO) functions such as call-centres and Knowledge Process Outsourcing (KPO), such as I.T work. As mentioned, Thailand has had limited success in this area. Consultancy firm AT Kearney discuss Thailand’s high potential for attracting offshored services activities, but also show the size of the industry is currently quite small and suggest a number of possible reasons, ranging from proficiency in English to lack of government support (2011).

Taking a step back, although service offshoring has been dubbed a new ‘wave’ of globalisation, which gives the impression that it is a natural and inevitable force, globalisation should be understood as a driven, shaped, regulated and enabled process that creates winners and losers (Coe et al., 2010). Many regulations, institutions, certification, accreditations etc. have been created at local, national, and supranational levels which affect the growth of the service-sector in developing countries, several of which are relevant to the medical tourism industry (e.g. importing medical technologies from abroad, hospital quality accreditations etc.). Whereas mainstream development literature tends to focus on the negative impacts of globalisation, Stiglitz is one prominent economist who discusses the potential of globalisation to enable a flow of ideas and knowledge, create a global civil society and environmental movement (2006:4). This is all relevant to studying medical tourism as it demonstrates how health services are expanding, becoming more competitive, and “creating new dimensions of globalisation, all elegantly packaged, and functioning, as the new niche of medical tourism” (Connell, 2006:1100). Free movement of workers, the rise of the internet, the ease of travelling as well as bi-lateral agreements between hospitals and insurance providers in developed countries – all linked to globalisation processes – have undoubtedly contributed to the rise in the industry.

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7 Medical tourism demonstrates a unique form of service offshoring. As opposed to having part of a service done by a labourer abroad, the usual gulf between production and consumption across oceans is closed and the consumer travels to the producer. This presents a new and form of service offshoring which does not fit in entirely with the classic definition, making it a particularly interesting and contemporary case study of globalisation processes. As the medical tourism industry (in Thailand) has grown and expanded from within the country (i.e. not foreign companies investing in or outsourcing there), it may be seen as an example of globalisation ‘from below’. This is opposed to globalisation ‘from above’ through corporate capitalism which is often criticised from the development context, and Kellner believes that this way supports individuals and groups using the new technologies to create a more multicultural, democratic, and ecological world (2002:302). Unlike so many growing industries in emerging counties, medical tourism in Thailand has so far not been dependent on MNCs and FDI, but rather it is an example of a home-grown industry which has gained global competitive advantage.

2.3 International Division of Labour

Although not directly used in the research design for this study, the theory of international division of labour (IDL) is important in the wider context of the service offshoring debate. The rise of the offshore service-sector has been described as a “newer international division of labour” (Hutchingson, 2004:6), and the offshoring of medical services can demonstrate this. The deepening of globalisation processes is leading to the reconfiguration of IDL and the geographic distribution of jobs across many industries, including medical services.

Globalisation and its resulting changes in technological progress, liberalisation of trade/investment, and rising numbers of MNCs are arguably leading to a geographic reconfiguration of production processes. No longer must services be produced and consumed in the same location, it is now becoming common for the two to be spatially segregated. It can be argued that the medical tourism industry represents this to some extent, as expertise and technology from all over the world is being used to produce a service. Medical care no longer is restricted to your local hospital. Here, not only the producer is increasingly mobile and diverse (medical staff who have trained all over the world) but also the consumer, who travels far and wide for a service. Interestingly, it is difficult for foreigners to work in Thai medical services, which significantly narrows the potential pool of labour for the industry. Despite this, healthcare staff have gained the trust of foreigners and gained skills paralleled to developed nations in healthcare. This is explored in Chapter 5.

Research and existing debates around IDL show no reference to a service such as medical tourism where skills and knowledge from all over the world are used by the labour force of a particular country. This was incorporated into the research design in order to understand how international division of labour may

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8 have played a part in the growth of this industry (see operationalization table in Appendix 3 which explores ‘training abroad’ as part of a dimension of the study).

Having defined medical tourism, and then touched upon the areas of development studies into which this research falls (namely contemporary globalisation processes, service offshoring/outsourcing and IDL), we now look at some of the literature specifically on medical tourism as a global phenomenon.

2.4 Existing literature and debates in medical tourism research

There is a plethora of medical tourism research from a variety of academic subject areas. Since the mid-1990s, studies of specific aspects/impacts of medical tourism have been conducted in areas such as nursing, biotechnology, healthcare policy, medical law, human resources, and sociology (Kim, Lee, Jung, 2012:423). Since the 2000’s however, as the industry became more distinct and marketable, other subject academics have begun to study it from areas such as business and tourism studies. This section highlights some of the debates which are relevant to this study.

2.4.1 Defining medical tourism

Chapter 2.1 stated that health tourism was considered distinct from medical tourism but this is also an area of debate. Lunt and Carrera (2010:13) feel medical tourism, when viewed broadly, is a derivative of health tourism which is defined as ‘a planned trip with the purpose of improving, maintaining and recovering individual well-being’. Similarly, Smith and Puczko (2009) define medical tourism and wellness tourism as types of health tourism. From a producer perspective, Goodrich & Goodrich define health tourism as when tourist facilities such as hotels deliberately promote their health-care services to attract tourists e.g. acupuncture, inclusive medical examinations and spa facilities (1987:217). This type of travel has been common since the 1960’s and 70’s, and some more recent authors such as Caballero-Danell & Mugomba (2007:2) use medical tourism and health tourism interchangeably which has led to confusion. The MTA definition of medical tourism places importance on the cost and quality of care, yet another widely used definition by Connell describes it as ‘when people travel overseas to obtain medical, dental and surgical care while simultaneously being holidaymakers, in a more conventional sense’ (2006:1094)2_. This takes into account that many people combine medical care with travel/leisure.

This lack of agreed definition of medical tourism could be for a number of reasons. There are several academic subjects which have shown an interest in the area and produce research from their own perspective. In addition there are varying stakeholders who produce information on the sector and may have a personal interest in its success; for example Deloitte published a report in 2008 on the industry mainly looking at the implications for healthcare service-providers in the US. Moreover on an individual level there is still much difficulty in gathering empirical findings regarding real-world experiences of

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9 medical tourists. Due the involvement of medical treatment, many of the sources which might help identify medical tourists such as doctors and hospitals, are legally bound to confidentiality (Cormany & Baloglu, 2011:710). This lack of reliability, limited data and policies may be due to a lack of a theoretical foundation regarding medical tourism (Ko, 2011:21) and thus inconsistencies can be seen in the literature.

2.4.2 Defining a ‘medical tourist’ and their destination selection

It is important to understand who exactly qualifies as a medical tourist, and more importantly how they choose their destination in order to conduct meaningful research into this area. Cormany & Baloglu (2011:710) argue that little is known about the “medical tourist” and from a tourism studies perspective, it has not been demonstrated that individuals travelling to receive healthcare will share the same motivations, priorities, and criteria for service selection as those who travel for leisure. Wongkit & McKercher attempted a typology which discusses five ‘types’ of medical tourists – suggesting if doctors can understand different types, they will be able to develop and promote more appropriate and satisfactory products and services per customer (2013:5).

Smith and Forgione (2007), developed a two-stage model of the factors that influence a patient’s decision to travel abroad for medical services. They argue that the country choice is made first - characteristics such as economic conditions, political climate, and regulatory policies, influence this. Following that, the facility is chosen taking into account such factors as costs, hospital accreditation, quality of care, and physician training affect the healthcare facility choice. Heung et al., (2011:96) criticised this saying there are many more factors, and it may be that the facility is chosen first (for example a well-known hospital for specialist treatments), and then the country choice is by default.

The role of the internet in facilitating medical tourism also comes up often in the literature. Cormany & Bolaglu argue that perhaps due to the scattered demographics of medical tourists, or being the first tourism industry to fully begin subsequent to the rise of the internet, the foundation of medical tourism could be linked to an online presence (2011:711). Patterson found the internet second only to friends and family as a source of general travel information (2007:530). Other sources of information include published magazines or guidebooks such as ‘Patients Beyond Borders’ by Woodman (2008).

2.4.3 Drivers of the rise of medical tourism

This research focuses on exploring and contributing to this area of medical tourism studies. In general, existing literature usually looks at medical tourism growth from one of two positions – drivers for the consumer to choose to travel abroad, and producer-related drivers of how a country becomes an attractive destination choice. Many factors from both perspectives come up across all reviewed articles, and the most common ones are discussed below in Table 1.

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Table 1 - Factors contributing to the global rise of medical tourism

Factor Author

High costs of treatment in Western countries as healthcare moves from public to private sector.

Connell (2006:1097) Long waiting lists for treatment in home country (for what is not always seen

institutionally as priority surgery).

Cohen (2006:25) Relative affordability of international air travel. Connell (2006:1097) Rapidly improving healthcare systems in destination countries where new

technologies have been imported/developed/adopted.

Connell (2006:1097) Deliberate marketing of healthcare in association with tourism. Connell (2006:1097) Growing interest in cosmetic surgery and dentistry – costly and usually not

covered by private insurance schemes or national medical services

Cohen (2006:25) Availability of alternatives not easily accessible at home e.g. abortions or

surgery below a certain age, fertility treatments (including gender selection methods) etc.

Connell (2006:1097)

Emergence of new middlemen agents and companies between international patients and hospital networks that help patients make choices.

Suthin, Assenov and Tirasatayapitak (2007:96) Accreditation and metrics for measurement – the most internationally

recognised and trusted accreditation institutions is the Joint Commission International (JCI).

Wendt (2012:29)

Cheaper cost of treatment is arguably the most quoted factor, but it can already be seen that some of the reasons listed are interdependent, for example ‘affordability of air travel’ is also a cost factor. Long waiting lists for treatment are also linked to a shift in medical tourism. Whereas travelling for cosmetic or dental surgery has been common for a few years (perhaps due to ‘anonymity of distance’ (Connell, 2006:1097)), the outsourcing of more complex health-related treatments is more recent.

This is by no means a comprehensive list of factors, and there are many more in the literature; some act as ‘push’, ‘pull’ or enabling’ factors. What can be said it that very few studies are based on empirical data or primary research. The majority are from reviews of literature, secondary data, and a selection have conducted some interviews and surveys. Moreover, the extent to which these factors apply to a particular destination varies. As little country specific research has been done, it is difficult to generalise the growth of medical tourism globally. This study will show specific conditions in Thailand drive certain factors (so they are more influential than in other destinations) and also factors are present in Thailand which are unique and thus not mentioned in literature on global trends. For example, ageing populations in developed countries is identified as a driver of medical tourism. Long-term care abroad is becoming increasingly popular, for the elderly and those with ongoing conditions such as Alzheimer’s. Thailand has particularly been successful in creating facilities for these patients due to its climate and geography; a manager of a care home in Chiang Mai is quoted as saying “The idea is that this is a resort, not a hospital” (Gray, 2013).

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2.4.4 Possible negative effects of medical tourism

From a development perspective, it is very important to consider the possible negative effects of the medical tourism industry on local healthcare. Literature reviews thus far do not give any indication of whether medical tourism destinations offer adequate national healthcare services for the locals (Caballero-Danell and Mugomba, 2007:20). There is evidence that the industry has significant socio-economic impacts but exact effects of medical tourism are largely unknown. Ramírez de Arellano (2007:193) says medical tourism can lead developing countries to emphasize technology-intensive care for foreigners at the expense of basic healthcare for their citizens. Connell (2006:1099) highlights the ‘huge drain on the public sector’ saying that expansion of the private sector may be at some cost to the public sector if skilled health-workers move out of that sector – commonly referred to as ‘brain drain’.

Kharas, 2010 (p6) states that by 2020 more than half the world’s middle-class could be in Asia and Asian consumers could account for over 40% of global middle-class consumption. This can be seen in Thailand, particularly in Bangkok and this kind of growth can increase tensions between public and private services such as health and education. The case of medical tourism causes even deeper tensions as private hospitals often focus on attracting wealthy foreigners (but were originally aimed at ‘middle-class’ Thais who can no longer afford them – discussed further in Chapter 4).

2.4.5 Gaps in existing research

Beyond a lack of research into the possible negative consequences of medical tourism, there were several other gaps in the literature. Smith, Alvarez and Chanda’s 2001 literature review on the medical tourism industry states research tends to be on a global scale rather than at country-specific levels, providing a significant gap as conclusions about a global industry can be limited without looking carefully at a national or industry level. Moreover research is ‘characterised by a dearth of data, and discussions are mainly based on speculation rather than on substantive evidence’ (ibid:277), which calls for more primary research. Lunt & Carrera (2010:31) identify several gaps in the literature on medical tourism research.

 The patient/consumer profile of medical tourists3

 What shapes decision-making for patients

 Types of information used, where is it sourced and what types of information is most highly valued by consumers

 The role of the internet and search strategies for destinations

 Medical experiences and outcomes

This research aims to look into several gaps in the literature and the research question has been formulated in a way that they can all be addressed, but remain adaptable to new factors not yet

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12 identified. Having looked at the broader areas of development into which medical tourism research falls, and reviewed the existing literature it was clear this study would have a broad, exploratory scope. Being a country-specific study, a theory looking at the success of an industry at a national-level was chosen to provide a framework in answering the question.

2.5 Regional development and Theory of Competitive Advantage

Before discussing the chosen framework for this study, it is useful to provide some context around the regional development model debates to which it contributes.

Until the 1970s, the dominant regional development models were focussed on factors external to the region (i.e. exogenous) such as increasing exports, attracting leading international firms, and increasing mobility of capital and labour between economically strong and weak regions (all part of neoclassical growth theory) (Todtling, 2009:208). This coincides with the application of unsuccessful development ‘pro-growth, top-down’ policies in developing countries. As a counter to these ineffective, and arguably damaging policies, endogenous models emerged which said that regional development should be ‘bottom-up’, using endogenous endowed factors from the region such as land, natural resources, labour, and entrepreneurship (ibid:208). They also include intentionally created factors, for example universities, research organisations etc. for skilled labour as we will see in Porter’s model - one of the most well-known endogenous development models from this era. Entrepreneurship is a key element in endogenous regional development because new firms often originate from the region, and use local talent and labour, and this element of innovation with regards to medical tourism in Thailand will be explored in this study. However, there are weaknesses to endogenous growth models which also become apparent in the following discussion of Porter’s model of national competitive advantage. Todtling (2009:213) argues they overemphasise endogenous factors, neglecting the fact that successful regional development is usually the result of both endogenous forces and external factors such as mobile capital, technologies, talent, and knowledge. Ongoing processes of regional integration and globalisation means regions and countries are increasingly open systems with ever increasing external flows of goods, services, finance and capital, people, and knowledge. This has led to a new area of literature, known as ‘new economic geography’ which emphasizes the importance of regional development policies designed to support and enhance existing clusters of specialisation as regions are part of a global competitive network system (Nijkamp & Abreu, 2009:204).

Now turning specifically to theories of competitive advantage, classic theories such as absolute advantage (Smith, 1776) and comparative advantage (Ricardo, 1817) focus on a country’s endowed factors of production. However, these theories from the 18th_{and 19}th_{Century were during a time where} low skills were needed in national competition. Natural resources and factors of production were the main source of competitive advantage (Porter, 1990:13). According to Barragan, increased technological

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13 innovation and globalisation, has meant theories based primarily on factor endowments cannot explain either the success of some countries that lack natural resources, or the poor performance of countries that have enormous natural endowments (2005:3).

For this study, the well-known Theory of Competitive Advantage of Nations by Michael Porter was chosen as the theoretical base. It was selected due to its simplicity, adaptability and because the basic unit of analysis for understanding competition is the industry. Unlike commonly used overly-logical economic and sometimes reductive theories in management studies, Porter offers a single analytical framework which provides a convincing explanation of competitive advantage which spans three levels; the firm, the industry and the nation. Importantly, there is a dynamism in the model, particularly through innovation and investment in more complex factors of production (Grant, 1991:547). As this thesis is looking to understand how the medical tourism industry in Thailand has become successful internationally (where others service have not), this theory is particularly suitable.

One aim of this study is to identify how the medical services industry in Thailand became able to compete on an international level, and Porter’s theory can help to structure and model drivers of this growth.

2.5.1 The Diamond of National Advantage Model

Porter's Theory of National Competitive Advantage identifies four sets of variables which influence a firms' ability to establish and sustain competitive success within international markets (Grant, 1991:537).

Endowed factors of production lie at the centre of the traditional theories of international comparative advantage (ibid:537). In Porter’s theory, ‘factor

conditions’ builds on this and extends it to say countries

also create their own advanced factors, such as skilled labour or a scientific base (Porter, 1990:79). This study will aim to identify which factors have been ‘created’ to enable the success of the medical tourism industry in Thailand (and also which are endowed). Governance-related factors (discussed further in Chapter 2.3.2) could be considered a part of this as they manage those factors endowments4_{. Factors such as climate, natural beauty,}

4_{Porter also included ‘government’ and ‘chance’ as possible influences on the diamond model.}

Figure 1 - Diamond of National Advantage Source: Porter (1990)

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14 and geography which are external to the medical tourism industry for example can also be seen as factor endowments in this model.

‘Demand conditions’, stresses the importance of home-demand and allows companies to understand

buyer’s needs. Porter believes a nation’s companies gains competitive advantage if domestic buyers are ‘the world’s most demanding buyers of that service’ (ibid:82). It appears this may not apply to the medical tourism industry as demand is by definition, foreign and it is hard to expect that the majority of residents in low or middle-income countries would be particularly ‘demanding’ buyers of health services.

The corner ‘related and supporting industries’ says that industries which are internationally competitive are an advantage to the industry in question (ibid:82). Porter refers in particular to the ‘ongoing exchange of innovations and ideas’ (ibid:83), and says this applies for both home-based competitiveness and global competition. In this study, relationships between large international hospitals and research institutes, pharmaceutical companies etc. were explored.

‘Firm strategy, structure and rivalry’ says that competition between domestic firms is more ‘emotive and

personal’, and domestic rivalry from a common national platform tends to be more intense than with foreign competitors (Grant, 1991:538). Barragan (2005:6) argues that whether an industry is competitive domestically affects the productivity needed to compete internationally. Porter portrays domestic rivalry as the major spur to innovation and success in international competition (Davies & Ellis, 2000:5). For this reason, the nature of ‘competitiveness’ between private and international hospitals should be explored. Porter stresses the diamond as a system, and says the effect of each point in the diagram will depend on the state of others. This systemic structure creates clusters of competitive industries – geographic concentrations of interconnected companies and institutions in a particular field (Porter, 1998:78). These clusters promote both competition and cooperation, by increasing productivity of companies, driving innovation and stimulating formation of new businesses (ibid:90). He believes they represent a new kind of spatial organisation which is not as ‘arms-length’ as markets but not as close as vertical integration, presenting an alternative way of organising value chains (ibid:80). The Thai medical tourism industry has some of these ‘cluster’ characteristics, particularly in Bangkok, and it will be interesting to see the links between hospitals/clinics and other tourism facilities of different sizes. As Porter says ‘a cluster allows each member to benefit as if it had greater scale’ (ibid:82).

Porter also suggests early-mover advantages may be a factor of competitive success5_{. However, ‘sooner} or later more dynamic rivals find ways to innovate around these advantages’ (ibid:75). He also discusses the role of government as being ‘indirect’, where policies that succeed are the ones which create an environment in which companies can gain competitive advantage rather than being directly involved in

5_{One example of this is Thailand being known as one of the first countries to offer sexual re-assignment}

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15 the process (1990:87). Consultancy AT Kearney suggests the ‘lack of government support’ may be a reason why Thailand is not as successful in service-sector offshoring (2011:16), so it was expected such governance factors may be integral and highly important to the success of this industry.

To summarise, Porter explains that unlike prevailing thinking that factor endowments, labour costs, exchange rates etc. result in competitiveness, rather it is down to innovation and differences in national values, cultures, economic structures, institutions, and histories (1990:73). This led to a question looking to identify the unique national factors and values which led to the success of medical tourism in Thailand.

2.5.2 Critiques of National Competitive Advantage Model

Porter’s model has attracted criticism, mainly for seeing the nation as a closed system and not considering that some countries have weaker points in the diamond. Rugman and D’Cruz (1993) argue that the model may explain the success of countries like the US and Japan but does not explain smaller, open trading countries. For example, Canada does not have strong demand conditions itself, but it has high foreign demand from the US diamond. They created an extended model which shows how the diamond of a particular industry can link to the diamond of another country’s determinants – referred to as a ‘double-diamond’ (Rugman and D’Cruz, 1993:38). They believe globalisation has led to the determinants of the competitiveness of some countries being complemented by other countries (Barragan, 2005:12). This is a highly relevant critique when looking at the medical tourism industry through Porter’s model. The weaknesses of medical services in the USA for example (such as long waiting lists and high cost) is leading to stronger demand for medical services in offshore destinations such as Thailand. It cannot be said that this industry formed purely due to strong home-demand, rather external foreign demand influences the national diamond of Thailand. In order to address this critique of Porter, and adapt the model for this case (especially for an industry where all demand is by definition, foreign), a conceptual scheme and theory was created to incorporate the diamond and double-diamond theories. As opposed to being ignored (arguably as Porter does) or be totally linked (as in the double-diamond theory) the point ‘governance and external factors’ was created as an interacting group of factors which forms part of the theoretical base of this study. This takes the model from being in the endogenous development model group (where Porter’s model sits) to be closer to a newer strand of literature known as ‘new economic geography’. These models indicate that while there needs to be a focus on endogenous factors of growth, globalisation makes it possible to use external factors too.

There are several other critiques of the model, e.g. Metcalfe (1991) criticised Porter for under-estimating the role of government, while British Labour Party politicians Brown and Mulgan (1990) praised him for advocating government intervention (whether he explicitly did this is debateable). Pressman (1991) said an important insight is that firms cannot do abroad what they have not learned at home but expressed

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16 uneasiness that if pursued in more detail, the points in Porter’s diamond turn out to be determined by national character and culture (David & Ellis, 2000:7).

Another critique concerns the meaning of the terms ‘competitiveness’ or ‘competitive advantage’ and the relationship between the competitiveness of an economy and that of the industries and firms which operate within it or for whom it is a ‘home base’, which aren’t clear in Porter’s model (David & Ellis, 2000:11). In this study, competitiveness is referring to the success of medical tourism in terms of a combination of tangible indicators of success (e.g. revenue, numbers of medical tourists) and intangible ones too (image and international reputation as a destination country).

Finally, as explained at the beginning of this sub-section, this theory is being used for its simplicity and more importantly its adaptability. The exact diamond is not used - the conceptual scheme below rather is constructed in a way to try and address some of the above critiques, while also providing a practical scheme to guide data collection. Although his empirical studies were based on ‘developed’ nation industries, Porter’s admirers saw the model as an integrating device between different disciplines, and praised it as a tool which may help to explain success in international trade. They also say it can provide a framework for empirical work and policy prescription that is easily applicable to other countries, all of which is in line with the objectives of this study.

2.5.3 Conceptual scheme

The conceptual scheme in Figure 2 was inspired by Porter’s National Diamond model, and applied to the medical tourism industry. As discussed, Porter describes the National Diamond as a system, and the effect of each point will depend on the state of others. In this case, simply having shorter waiting lists (a

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17 consumer-related factor) will not be enough to explain success. Factors such as equipment quality (producer-related), and financial incentives (governance-related) will be relevant and the combination of factors interacting with each other will be important to a foreigner choosing a medical travel destination. Individual factors also interact with each other e.g. regulations which encourage investment into the industry will interact with producer-driven factors and vice versa. Therefore this scheme proposes that the success of a country in a particular industry is due to interrelating factors which work together as a system. Moreover, the medical tourism industry itself interacts with the groups of factors as shown. For example, if a particular treatment is not easily available at home (a consumer-related factor) then this may be contributing to the success of the Thai industry, as medical tourists seek treatment abroad. On the other hand, when seeing a growing and successful industry, the medical service-providers may be deliberately catering to and developing their treatment offerings based on foreign patient trends. Like Porter’s model, it was expected all the influential factors will be working with each other as an overall system, as well as individually to give Thailand its competitive advantage and success in this sector.

2.6 Concluding remarks

Medical tourism is a unique industry which according to the literature, has been enabled by

contemporary globalisation processes, such as the rise of the internet, increased labour mobility and global transfer of knowledge through improved communications.

Authors cite various challenges in providing affordable and accessible healthcare in developed

countries as major reason that some companies and individuals are choosing to outsource their medical services. However, gaps and scattered data in literature highlight the lack of substantive evidence when discussing what led to the rise of medical tourism and many articles are based on speculation. Given Thailand’s limited presence in the overall offshoring market in Asia, it is particularly interesting to investigate how they have succeeded in developing an advanced private healthcare industry, and gone on to attracting foreigners. With a service as complex as healthcare, it is not sufficient to say that cost or quality factors alone have led to Western, foreign patients choosing to travel to Thailand, and this study will aim to understand what gives the country it’s ‘edge’ in the industry.

Porter’s Diamond of National Competitive Advantage, although widely criticised, still remains a valuable framework to investigate Thailand’s success in medical tourism, and has been adapted and applied to the industry. Although his theory was not aimed at developing countries, his emphasis on the

interaction between causes of ‘competitiveness’ addresses the complexity of the drivers of Thailand’s unprecedented success in an advanced service (in an otherwise-manufacturing focussed country).

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Chapter Three: Research Design

This chapter delineates the research topic and describes the methods used to conduct data collection in the field. The research question and sub-questions are introduced, based on the conceptual scheme in Figure 2. Following this, the research location and unit of analysis is discussed, followed by a detailed methodology.

3.1 Research questions

Main research question:

What factors explain Thailand’s success as a hub for medical tourism?

Given the broad exploratory nature of the main question, it was broken down into sub-questions which are linked to the conceptual scheme, with one per point in the triangle shown in Figure 2. The final sub-question aims to synthesise the concepts and stimulate a broader debate about the role of services in the development of the global south.

Sub-research questions:

1) How has such an advanced and high-quality medical services industry developed in Thailand? 2) How has Thailand attracted and earned the trust of foreign patients, and what factors enable

them to acquire ‘Western-standard’ medical services?

3) What has been the role of external factors and governance/regulations in Thailand’s medical tourism success?

4) What does Thailand’s medical tourism industry teach us about creating and sustaining competitive success (in service production) in emerging economies/developing countries?

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3.2 Research location

The research location for this study is Bangkok, the capital city of Thailand, which is an important global hub for South East Asia and famous for both tourism and business. It is an important global manufacturing destination for cars, electronics and computer hardware production.

Bangkok was chosen as it hosts many medical tourism facilities and related businesses. A large proportion of internationally accredited hospitals are based in Bangkok - 16 of the top 28 JCI accredited hospitals in Thailand are found there (Ministry of Public Health, 2013) (MPH) and are particularly relevant to this research.

Data was collected in Bangkok over an eight week period beginning January 2014.

3.3 Unit of analysis and scale

As the fieldwork was based in one city, yet the research question is about Thailand, there is an issue of scale, as it is ambiguous to discuss a nation’s competitive advantage when only conducting research at one location. However, as Porter addresses with his theory of clusters, ‘a cluster allows each member to benefit as if it had greater scale’ (1998:82). It is important to note that this study does not claim to provide definitive answers but rather presents results and analysis of fieldwork to give an indication of what they might be. Further studies should also look at other regions, and could concentrate on particular services (e.g. dental or cosmetic).

The unit of analysis in this study is the medical tourism industry, and can be divided as shown in Table 2. It shows that each level is expected to compete and function differently6_.

6_{All respondents were asked about their views of medical tourism in Thailand (not just Bangkok), and if}

applicable, about their particular hospital/clinic.

Figure 3 - Map of Thailand

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Table 2 Unit of Analysis

LEVEL UNIT

Macro The overall medical tourism industry in Thailand,

and for the purpose of this study, particular in Bangkok.

Meso Institutions within the medical tourism industry.

These include hospitals, clinics, hotels, medical tourism associations etc.

Micro Individuals with an interest in the medical

tourism industry e.g. patients, healthcare workers, local Thai residents etc.

3.4 Methodology

Data was collected using a combination of qualitative and quantitative techniques, which is known as mixed methods. This method can provide stronger evidence for conclusions through convergence and corroboration of research findings. It is said that qualitative and quantitative research used together produces more complete knowledge needed to inform theory and practice (Johnson & Onwuegbuzie, 2004:21). In this study, quantitative research was conducted in a way to supplement the qualitative data for one particular concept. Due to the variety of actors involved in this research and the broad questions, the researcher felt value could be gained by adapting methods in the field (for example, the actors to be interviewed were left flexible before entering the field where it could be deduced which were most informed and accessible).

3.4.1 Qualitative data

Qualitative methods of data collection can be more flexible and sensitive to the social context in which the data are produced (Snape & Spencer, 2003:4). In this study, 19 semi-structured interviews were conducted. This method gives a structure to the answers but leaves enough room for the respondent to interpret a question before answering. It also gives flexibility in questioning for the interviewer (Bryman, 2008:438). Due to the very different groups of respondents (Appendix 1), the interview guide was modified for each group to be appropriate for them7_.

For the producer side, prior to arriving in Bangkok, all internationally-accredited hospitals listed on the TAT medical tourism website were contacted and asked to participate in the research. Internet research was done on the broader industry (including reports, articles, and promotional material) and several relevant industry experts were contacted, including researchers, professors, hospital management, tourism associations etc.

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21 The consumer side proved to be more difficult, due to patient privacy issues. Several hospitals agreed to interview with management, but did not agree to conduct interviews or surveys with their patients as they felt it would disturb them. Only one clinic allowed access to interview two foreign medical tourists. The researcher decided to broaden methods to find patients as it became apparent conducting a patient survey in a private hospital could several months of planning. After looking through online patient forums, a request for contacts or participants was posted in a Facebook group called ‘Bangkok Expats’ with approximately 18,000 members. Several responses came through, including expat patients willing to interview, and people with friends and family working in the medical tourism industry. Each response was followed up to determine if they were appropriate respondents, and several producer-related interviews came through this search. At this point the definition of a consumer in this research was reconsidered to include expats and general tourists who used Thai private medical care as ‘foreign patients’. The Thai MPH Health Tourism paper (2013) shows they also classify ‘alien residents’ (i.e. expats) as part of their foreign patient numbers, which are widely used in publications and industry reports.

3.4.2 Quantitative data

An online survey was carried out for patients and vacationers in Bangkok who had visited any of the international private hospitals or clinics. The aim of this survey was to find quantifiable data regarding the quality of medical services as perceived by foreign patients, and to some extent, triangulate expert opinions. Several questions were asked regarding choice of treatment, why Thailand, Bangkok, choice of facility, the quality of service etc. Respondents were also asked to compare the service to their home country so that the data could be used to support (or contradict) the assumption made during research design (that services are ‘Western-standard).

Multiple-choice, dichotomous and Likert scale questions were used, and were based upon what had come up in interviews as the most important aspects of medical services to foreigners (as opposed to being based upon the points that came up in the literature review). This was to build an unbiased picture and is an example of how methods were adapted in the field as appropriate. 61 survey responses were collected during the final two weeks of fieldwork.

3.4.3 Secondary data/document analysis

Despite a lack of academic literature, there are many sources of information on medical tourism. Internet searches were used to find media articles, reports, and general information. Other sources include magazines, tourism books, and printed information. The MTA conducted a global medical tourist survey, and another specifically for Bumrungrad International Hospital patients in 2009. Several documents were

The rise of medical tourism in Thailand : understanding contemporary globalisation

THE RISE OF MEDICAL

TOURISM IN THAILAND

Understanding contemporary globalisation

The Rise of Medical Tourism in Thailand:

Understanding contemporary globalisation

Contents

Acknowledgements

Abstract

List of Abbreviations

List of Figures

List of Tables

Chapter One: Introduction

1.1 Background to the study

1.2 Relevance and objectives of study

1.3 Outline of study

Chapter Two: Theoretical Framework

2.1 What is medical tourism?

2.2 Globalisation and service offshoring and outsourcing

2.3 International Division of Labour

2.4 Existing literature and debates in medical tourism research

2.4.1 Defining medical tourism

2.4.2 Defining a ‘medical tourist’ and their destination selection

2.4.3 Drivers of the rise of medical tourism

2.4.4 Possible negative effects of medical tourism

2.4.5 Gaps in existing research

2.5 Regional development and Theory of Competitive Advantage

2.5.1 The Diamond of National Advantage Model

2.5.2 Critiques of National Competitive Advantage Model

2.5.3 Conceptual scheme

2.6 Concluding remarks

Chapter Three: Research Design

3.1 Research questions

What factors explain Thailand’s success as a hub for medical tourism?

3.2 Research location

3.3 Unit of analysis and scale

3.4 Methodology

3.4.1 Qualitative data

3.4.2 Quantitative data

3.4.3 Secondary data/document analysis