Health tourism seen as next growth industry

TALLINN - The Estonian Development Fund in October 2010 revealed a study called “Healthcare Services 2018,” which is part of a wider project on Estonia’s service economy that was initiated in 2008. This study analyzes opportunities for Estonia’s export of health and wellness services over the next decade, outlines choices for a strategy, and makes recommendations for action.

The study tested a hypothesis that Estonia has the potential for exporting healthcare services. The hypothesis was based on three assumptions: the continued global growth in healthcare services, the perceived strength of Estonia’s healthcare system and services, and Estonia’s intention to develop a knowledge-intensive, predominantly service-based export-oriented economy.
According to some experts, the basis for justifying the topic of this study was the fact that a commercial presence and outward direct investments, and consumption abroad tied with health tourism, comprise two major ways of cross-border provision of healthcare services (representing 50 percent and 40 percent, respectively, of global healthcare services export turnover).

Imre Murk, an expert at the Foresight Division on the service industry at the Estonian Development Fund, says that after considering different modes of exports and Estonian capacities, it was concluded that the opportunities to increase Estonia’s exports of health services may be primarily sought in health tourism, and therefore the report focuses on this topic.
According to Murk, the quest for better service quality, lower prices and shorter queues are driving healthcare tourism at the level of individuals as well as at the level of national health systems (insurers).

The survey conducted in the course of the study shows that 68 percent of managers of Estonian healthcare institutions and businesses came to the same conclusions. “When European consumers become aware of it, preconditions will be created for the formation of a common market for healthcare service provisions and more active movement of services between member states. The better market position will go to the countries that are ready for this new situation,” Murk explains.
More than half of all Europeans would be willing to consume healthcare services abroad, according to a survey conducted in the European Union in 2007. But only 4 percent (17 million adults) had actually experienced cross-border health services within the past year year. For future oriented strategies, it is important to notice that younger and more educated people are more likely to use, and already use, services outside their home country, and more often.

The general set-up of the Estonian healthcare system provides good conditions for exports of health services. A sufficient supply of state-of-the-art technological resources, together with high-quality expertise and price advantages for some time to come, are the strengths of Estonia. The analysis of the current situation in Estonia’s exports of health services showed that Estonian healthcare providers are familiar with healthcare exports, primarily by serving foreign patients.
The survey conducted in the course of this study in 2009 revealed that 30 percent of all providers have dealt with this, and there are businesses in Estonia in which a lion’s share of turnover derives from such exports.

Murk considers that it is very difficult to calculate the total health services export turnover, though a rough estimate at the moment shows it could be between 16 - 23 million euros. Experts say that most of the business managers believed that exports of healthcare services would increase in the near future, although the majority of them did not make any active effort to achieve this kind of growth. In the short term, the shortage of staff and, in some cases, facilities that do not meet the standards needed for exports, may become inhibiting factors.

The managers of institutions polled consider Estonian healthcare services as very good, but missing the attractive, foreigner-oriented marketing and sales that would bring customers into Estonia. A relatively large flow of tourists to Estonia will provide an important starting point to create sound conditions for building the confidence of potential healthcare clients from abroad, some believe.

To increase the potential of healthcare exports, the study recommends starting with the fields of healthcare services that already have primary export capacity, including providers’ higher capabilities and a desire to invest, and where potential target markets have experienced relatively high and fast-growing demand.

Experts from the Estonian Development Fund claim that a possible model for Estonia to systematically develop healthcare exports would be the use of a public-private partnership platform (e.g. the establishment of a healthcare export agency), which would develop export capacities and cooperation between different players; among other things this would involve presenting early support from the wider healthcare community, and within the wider society in general.

They also say that besides developing export capabilities of health services, related fields such as ICT, biotechnology and medical education should be integrated into a common export strategy from the very beginning. Such an approach would generate a multiplier effect and have a greater impact on all the sectors of a country’s economy. The creation of a successful regional medical center would amplify export potential in related fields, and high-quality research and development would, in its turn, add reliability for Estonia as a possible destination for international patients.

“In deciding to develop healthcare exports, Estonia can choose between different strategies, or even mix them. The fastest growth in exports of healthcare services could be achieved by taking full advantage of the synergy of tourism, wellness and health services. A somewhat more ambitious strategy could involve specializing in the fields where Estonian healthcare providers already have experience in exports and which are supported by a high and fast-growing market demand in adjacent countries,” says Murk.

“But the opportunity may also be hidden in focusing on the major health related challenges of neighboring countries - alcoholism, obesity, elderly related care - and providing innovative service packages there,” he adds. “The goal of the most ambitious strategy option could be the establishment of a high-level international medical hub in Estonia. Despite strategy choices, all of them would require a willingness to make targeted and long-term investments in Estonian medical services and related fields.”

Some of these Estonian experts believe that in order to stand out among other healthcare service exporters, it would be wise to make the best use of related strengths, for example to integrate ICT-based solutions into a value chain of export services. Considering Estonia’s capability in technology, promising areas of exports in the future would probably involve the introduction of innovative ICT-based service and business models and also, through ICT, the incorporation of cross-border components as parts of services. At the same time, this would require additional strategic efforts and will be more difficult to reach, being like the apple at the top of the tree.

When selecting target markets, there are no countries where Estonia could export its healthcare services with little effort and fast profit. Moreover, international experience shows that usually it is more likely to be successful in neighboring country markets. Experts say that for Estonia, the Finnish market might have the greatest potential.
Murk believes that aging and the development of technology forces societies to adapt to unknown conditions. In this context, healthcare systems everywhere face inevitable needs for change. Estonia can take an active stand in this situation and exploit the opportunities that this transformation is creating.

The study also showed that for Estonia, it is possible to increase the export of healthcare services, which will require the following serious efforts: a clear strategy focus, cooperation between different parties and a willingness to make longer-term commitments.

According to the foresight report of the Development Fund, to build up a credible and able system for exporting health care and wellness services, Estonia should start with specializing and proceed to developing a high level medical hub of the region. The future and possibilities to form the export of health care and wellness services into a new growth field for Estonia was the main theme of the Development Fund’s forum ‘Health Care Services 2018.

The sector exporting health care services has so far been marginal in Estonia, but could, through skilful mixing of world trends and Estonian strengths, become one of the fields of new growth of the Estonian economy. According to Ain Aviksoo, a member of the board of the political research center Praxis, who studied the state of and attitude towards health care services exports, the income from this export is now a meager 22.4 million euros, but in the mid-term perspective, this could rise to 128 million euros. “This is comparable to the flow in IT sector exports,” Aaviksoo explains.
Critics point out some problems springing from the pushing of the health services export topic, but international experience shows that, with skilled planning, exports could bring additional assets to the health care system and raise the quality of the whole health care services, both for local and foreign clients.

Only 68 percent of Estonian hospital and health care business chiefs questioned for the research believed in this positive effect.
The forum debated deeper on the possibilities to give a boost to Estonian exports through health care travel. As external factors (e.g. aging of the population in Europe) are favorable and the importance of creating a common strategy for health care has been recognized by some agents in the field, the main question raised was in leading the change in attitude, especially in the public sector.  “Who should give the initial signal to start this joint effort,” has to be answered in the future, adds Murk.
In view of the experience of successful countries, and considering Estonia’s starting position, the development of health care service exports needs long-term cooperation from both the private and public sector. Hence, the report proposes further discussions on concrete ideas of establishing an agency of health care exports. “The agency should not be a real institution, but a virtual cooperation agreement to draw together the interested sides for acting under a common, divisible strategy and for helping to achieve a breakthrough on the international market,” Murk stated.

In addition to the presentations of Estonian experts, the participants of the forum had a chance to listen to some well-known experts’ speeches, such as Keith Pollard, the author of several publications on health care travel in Europe; plastic surgeon Janis Zarzeckis, one of the leaders of the Latvian health care service export alliance Baltic Care, and Richard Petho, the founder of the most successful dental service exporter in Europe, Hungarian firm VitalEurope.
Both the report and the forum are part of the Development Fund’s service industry preparation for the future.