Japanese Medical Tourism

Medical Tourism a Non-starter

It is very obvious that the Japanese hospital system is ina state of crisis. In the last couple of years there havebeen frequent reports of people dying in the back ofambulances because hospitals are rejecting them due toa shortage of emergency care doctors. The fact is thatthere is not only a shortage of people -- both doctors andnurses, but also a growing shortage of beds as well, dueto the poor financial condition of many hospitals.

A rare news report on the subject surfaced last year sayingthat of the nation's 7,785 non-psychiatric hospitals, atleast 600-700 of them were operating in the red and that ofthe 80-90 or so hospitals closing down each year (HealthMinistry statistics), about half of them were closingbecause of financial problems.

This deplorable situation is, in our opinion, of thegovernment's and medical profession's own making -- withplenty of help from the nation's aging society and thedomestic economic slump.
The first reason for our placing the blame is based on thefact that it is still illegal for a company to own andoperate a hospital, and instead only qualified doctors mayhead up a facility. This rule could only have been dreamedup to protect doctors' privileged positions in society sinceexperience abroad proves that companies are indeed verycapable of operating a care facility.

Yes, we realize that some companies such as home/officesecurity firm Secom have found ways around this ownershiplaw by appointing doctors to run a facility owned by them,but it's not a strong value proposition for investors whenyou could technically be in breach of the law at any time.As a result, hospitals are seldom run as sound commercialoperations -- and yet they still have to make profits inorder to pay salaries, equipment, and building costs.

Another issue is the "addiction" of general hospitalsnationally to prescription and services reimbursements bythe government as their main source of income. This is ofcourse what happens when you have a universal butcompulsory public health system that pretty much excludesprivate health care and is set up to allow doctors toover-prescribe (up to 50% more prescriptions compared tothe U.K., for example) as a way to make extra cash.

The Japanese public medical system currently allows forabout 5,400 procedures, each of which is strictly regulatedin terms of price and method in order to qualify forgovernment reimbursement. This system does indeed providea certain baseline of public health care, but not muchelse. You can forget about discretionary procedures as wellas new drugs and treatments from overseas that haven't yetgone through the very slow approvals process from theMinistry of Health. If you want options, you'd be best servedhopping on to a plane to Thailand or Malaysia and buyingworld-class services at highly discounted prices.

Then of course there is the fact that the system was neverintended to deal with the current flood of old people.Despite the fact that the Japanese are the healthiestamongst citizens of advanced nations around the world, thedemand for hospital beds and lifestyle disease treatmentscontinues to escalate.

As a result, the pressure is on.

The financial crisis for many hospitals has come about asthe government continues to seek ways to cut its annualspending. Targeted are all types of medical costs, butparticularly the massive amounts of fixed feereimbursements for services and drugs. The cost cutting gota boost with the Koizumi administration in 2002, when theco-payment costs for seniors was increased and an emphasiswas placed on moving from original-maker drugs to generics.The use of generics has since increased dramatically andthe government now has a goal of making 30% of all drugsprescribed to be generics by 2012, up from 18.7% in 2007.

So the scenario is ugly: an ossified system ofself-interested owners (well, the successful ones, anyway)and single-source profits that between them precludeentreprenuership and price/services differentiation. Nowthat the main source of income is getting squeezed off bythe government, what are financially struggling hospitalsto do?

It seems that one idea is to start selling services to anew category of user who is NOT bound by the rules of theJapanese health system and its pricing restrictions -- thatof the medical tourist. The Japan Tourism Agency has saidit will launch a trial program from this April to startattracting wealthy Chinese who might be interested inhaving medical procedures conducted in Tokyo. No doubt theyare trying to follow the lead of the very successfulmedical tourism sector in Thailand, where 1.36m peopletraveled for medical services that cost just 20% to 30%of similar operations/treatment in the USA and Europe.

The Agency is cooperating with about ten hospitals in Japan(mainly in Tokyo) and some university hospitals in Beijing,such as the Tsinghua University hospital. The focus will beon brain surgery, plastic surgery, and oncology. While thissounds like it could be a good idea, the JTA has admittedthat it has a number of challenges, including language,payment methods, and "other" issues.

We spoke with medical industry expert, John Wocher ofKameda Hospital in Chiba, about the feasibility of such aprogram. He pointed out many problems with bringing Chinesepatients into Japan, the least of which is the simplematter of getting cooperation from the immigrationauthorities. Specifically he mentioned the case of a Chinesepatient who was only provided a visa after THREE MONTHS ofsupplying detailed documentation of his medical need to theJapanese consulate in China. The patient was consistentlyrefused a visa despite Kameda's acceptance of the personfor treatment. Finally he was let in on a visa allowing himto visit a relative who coincidentally is living here.

Wocher then went on to say that Korea already has a medicalvisa and it is very easy to apply for. It looks like we have yetanother example of internationalization where the Koreansare leaving Japan behind in the dust.

Other problems with medical tourists are likely to be:

* Logistics -- Specialized transportation may be neededfrom the airport (expensive)
* Language -- Chinese-Japanese interpreter may be needed ona continuous basis (expensive and difficult)
* Legal -- Informed consents for operations, etc., areneeded in Chinese, specific to procedure
* Fees -- How much to charge? Chinese don't have a nationalinsurance system matched by employers
* Payment methods -- Bank transfers, UnionPay?
* Culture -- Wealthy patients are demanding -- are Japanesehospitals ready to treat their patients as customers andnot as children? We wonder...
* Amenities -- Most Japanese hospitals have utilitarianrooms -- which may be quite unsuitable for wealthy patients
* Medical Records -- Need ability to receive adequatemedical history and documentation on existing work done
* Post-operative follow-up -- Who will do this and how willthey communicate?
* Accompanying family -- Do they also get visas?
* Religious Facilities -- How many Japanese hospitals haverooms marked with the direction of Mecca?

Good luck JTA...! We think the answer to making Japanese hospitals more profitable is much simpler:

* Allow people to pay extra to get services on top of government reimbursed treatments, instead of the currentall-or-nothing approach.
* Let companies own and operate hospitals so as to providea parallel private medical care system (freedom of choice)
* Open up the medical sector to commercial competition fromforeign companies (now that's REALLY radical!)

From: Terrie's Take; www.japaninc.com