Business opportunities: Medical tourism

Over the years, economic improvements tremendously enhanced the lifestyle and health of the world's population.

According to a Pricewaterhouse Coopers study, 24 OECD countries spent $2.7 trillion on healthcare in 2002. The same study estimated that if this increasing trend in spending continues, the 2002 level will more than triple to $10 billion by 2020.

Meanwhile, dramatic changes in demographics are unfolding. Within the next two decades, the global population aged 65 and over will grow by an astonishing 88 percent, or almost a million people a month.

Back in 2000, 7 percent of the world population (or 420 million people) were over the age of 65. This is projected to double in 2025, when people over 65 will make up 10 percent of the world population (or a total of 800 million people).

These two developments are interrelated. As the population ages, there is more demand for healthcare which in turn, drives the cost of healthcare spending higher.

For every dollar, or yen or pound spent on healthcare, this means one less spent on computers, travel and other personal/consumable items.

While health expenditures increase with growth, reducing these expenditures may be a key factor to fuel economic growth.

Dilemma
Therein lies the dilemma for developed countries. How can they continue to sustain their health systems while battling with the double whammy of rising healthcare cost and aging population?

Globalization offered a solution.

For years, a global convergence in healthcare continues to unfold and already, it has radically altered the way this is managed and delivered.

From its early precursor of pharmaceutical companies who sought to broaden their market base by establishing global partnerships as a means of expanding their market reach, we now see a variety of global solutions employed to solve many local health problems.

The first to ride this wave is the Philippines. Our nurses were among and still the most aggressively recruited staff as many countries experience shortages of skilled health personnel.

Today, delivering the best healthcare is no longer defined by national boundaries.

It is not uncommon now for US physicians to receive training in foreign medical schools. Public private partnerships are making possible the establishment of new hospitals and clinics in more than 50 countries like Brazil, Gulf States, Sweden, Australia, Malaysia and UAE.

The already huge global expenditure for healthcare does not show signs of abating.

Countries are competing for the chance to serve the growing market - and Philippines is one of them.

What business opportunities have emerged or are emerging where Philippines can potentially compete in? These four areas show a lot of promise:

- Medical Travel/Tourism

- Retirement Destination

- Outsourcing opportunities

- Health human resource provider

Medical Tourism
Lauren Garret wrote: "In the newly globalized economy of the 21st century, no part of the planet is too remote, too exotic or too forbidding for travelers or business development."

This is truly opening up the global market for travel in pursuit of health and wellness.

Medical travel is now an attractive alternative to take advantage of health services that would normally be too expensive or too inaccessible because of long waiting lines in a patient's country of origin.

Services sought range from the simple ones like spa and wellness, dermatological services, aesthetic surgeries, executive check-ups and dental make-overs to the more complex ones like hip replacement and organ transplants.

Success stories keep getting repeated in various publications and on the Internet.

Among Asean countries, the early mover was Singapore, which is still working hard to increase its 200,000 tourists a year to a million by 2012 pushing the sector's GDP contribution above $1.6 billion.

Thailand is a serious competitor and has recorded at least 600,000 patients' arrivals a year. This year alone, it is expecting to earn more than $1 billion.

Malaysia, which treated more than a hundred thousand tourist-patients in 2005, is expecting to make $590 million in five years. India's medical tourism business is growing at the rate of 30 percent a year and projected to make at least $2.2 billion a year by 2012.

Let us not forget that these four countries expect to generate more than $4.4 billion by 2012. That is a lot of money for their economies.

The increase in medical tourism market has already overtaken the 4-6- percent growth in general travel bookings predicted for 2006 with the number of medical travelers swelling by 20-30 percent a year. The Philippines is moving to join the bandwagon.

Philippines is a natural for medical travel. Already, we are among the preferred tourist destinations with our amazing beaches, tropical weather, historical landmarks, golf courses and hospitality among many other enticements that tourists find attractive.

On the service delivery side, we have very competent doctors practicing in well-equipped hospitals. We are already a recognized global brand in healthcare and chances are, these tourists have been cared for by either Filipino nurses or doctors in their own countries.

We speak English fluently and what we lack in resources, we make up with our smiles and trademark hospitality. Surely we can give our competitors a run for their money.

An effort is also being made to enable the local players to enter the market. The DOT conceptualized the Philippine Medical Tourism Program in accordance with its mandate to promote and develop tourism as a major socioeconomic activity to generate foreign exchange and employment.

Other agencies likewise supported the initiative among them, the Board of Investments, which included medical tourism in the 2007 Investment Priority Plan, the Development Bank of the Philippines through its Health and Wellness Enhancement Access Loan Program and the Philippine Export Zone Authority through the establishment of medical tourism zones.

BOI, DBP and PEZA had already issued guidelines on how these incentives can be enjoyed by those desiring to invest in medical tourism activities.

Retirement
From a short stay medical travel, we move to a more long-term opportunity for the Philippines as a retirement destination and as a service provider for geriatric care. We are living in a graying world and projections show just how challenging this will be for the planet.

The current estimated over-65 population in US is roughly 13 percent of the total population or about 35 million persons. By 2025, this age group is expected to be almost 63 million, nearly 19 percent of the total population.

Aging population
In Europe, one in five Europeans will be more than 65 years old by year 2025. In Asia - Southeast Asian region, Japan will have the most number of elderly population.

A paper by Misako Ito revealed that the elderly population aged 65 years and older reached 25.33 million in 2005 - one out of every five people is at least 65 years of age.

Between 2000 and 2025, China's 65+ population will grow by 3.5 percent per year while its under-15 population will decrease by 25 percent. By 2015, the percentage of the 65+ population will reach 9 percent in China and Thailand; 10 percent in South Korea; 11 percent in Taiwan; and 15 percent in Hong Kong.

In 1985, children under 15 outnumbered people aged 65 and older by 5 to 1 in East Asia and 10 to 1 in Southeast Asia. These ratios will plummet to 2 to 1 and 4 to 1 respectively, by 2015.

Baby boomers
Why is there so much concern about the aging of the population especially in developed countries?

Two or three decades ago, the baby boomers were active members of the workforce and their contribution to the social fund is enough to support those who were retiring--a much smaller number in relation to the younger ones.

Today, the baby boomers are themselves about to retire--and the deceleration of population growth has considerably reduced the number of younger age group who should be taking over their place in the hierarchy to continue providing support through pension fund contribution.

Countries now face an inverted pyramid scenario with funding support diminishing while retiring employees are increasing, straining its ability to take care of their elderlies.

Governments are now forced to consider alternatives to maximize the depleting pension funds and 'outsourcing' may show them the way out: scout for locations where their retirees can avail of appropriate and affordable housing, enjoy greater independence and better quality of life--and all within their pension allotment.

The growing popularity of medical tourism is hastening the 'buy-in' for the "relocation" of retirement facilities in countries that will have the resources to build such communities and provide the required services that will support the needs of its residents.

Again, Philippines is presenting itself as an ideal second home for the growing retirement market. The cost of living is relatively low (at least, when you consider that foreign retirees will get more pesos for their dollars or euros) and the climate is pleasant and conducive to a more laid-back lifestyle.

The availability of healthcare services is also a major selling point. Retirees are in that age bracket where health worries abound and the presence of many health facilities is a competitive advantage.

The business imperative is to develop and implement a world-class retirement community that will be able to combine the best features in terms of physical infrastructure and use this to create a seamless yet flexible network of health and lifestyle services that will be in step with the age transitions of its senior residents from active to increasingly bed-bound condition.

Outsourcing opportunities
Another area that the Philippines can also explore is outsourcing engagements such as support services for healthcare.

Many disease management programs abroad make use of the services of call centers for monitoring and follow-ups. Our country is already a call center hub--we can extend the service coverage to include healthcare. Medical transcription is already an accepted outsourcing area and we can likewise capitalize on the English proficiency of our manpower to further increase the market.

In the health education sector, we are already linked with countries like Korea and China, which are sending their students for nursing degrees.

Health human resource provider
All three preceding business opportunities require foreign nationals to come to our country to avail themselves of those services. Not all will be comfortable taking this route though because of strong family and cultural ties. Why not reverse the process and explore the opportunity of having our services made available to other countries on a fixed period/rotation basis?

One of the major worries of countries employing staff from overseas is that eventually, they will become citizens with all the entitlements. This, to their view, will strain further their already shrinking social services budget.

The "rotation model" will allow us to deploy staff in a host country where they will work for one to two years then come back to the Philippines who will then send a new batch as replacement. Rotation in the form of fixed employment period will minimize the adverse effects of migration such as shortage of skills for our own health system requirements and the social consequences of family separations.

At the same time, the skills that will be learned from the host country can improve the quality of our healthcare delivery at home. It's a win-win situation and the host countries can continue enjoying the benefits of well-staffed health facilities.

The bottom line is that healthcare is creating new market spaces and is opening up new doors where investments can come in, among them in these two major areas:

1. Infrastructure

Putting up more health and wellness facilities that are geographically dispersed over regions already considered as tourist destinations from spas, specialty clinics to hospitals;

Expansion of tourist accommodation facilities such as hotels, inns, etc.

Establishment of retirement communities including long-term care facilities

2. Services

Operation of transportation facilities

Schools and other facilities for health human resource development and workforce re-training

Operation of boutique travel agencies that cater to this specialized market

Operation of companies that can provide telemedicine services

Operation of lifestyle service companies to provide support services

Now is the time to take advantage of opportunities. Through the joint efforts of agencies such as DTI, BOI, Peza, DOT and DOH, investing in health and wellness initiatives are made more attractive through incentives ranging from income tax holidays to tax exemptions on customs duties ad importation.

In fact, our hospital, St. Frances Cabrini Medical Center has been recently proclaimed by the President of the Philippines as the first Medical Tourism Special Economic Zone—and our hospital has likewise been approved as the first enterprise-locator in this special medical zone.

Growing market
How then can the Philippines penetrate and seize leadership of the growing market in healthcare?

First, we need an engaged travel and tourism industry fully cognizant that medical tourism is a new game where old rules may not apply.

There is a need therefore for new synergies, a retraining of workforce and learning new skills that will allow proper handling of patients' inquiries, complaints and condition.

Second, we need to go beyond great slogans and classy brochures to translate every healthcare service requirement into an excellent experience for the medical travelers from the time of arrival till their exit.

The process flow must be seamless and hassle-free. This means better airport facilities, better coordination between and among government, health facilities and support services.

Third, we must establish track record through consistent performance and delivery. Quality must be a top priority.

It has been said that the healthcare system of the 21st century is a public-private partnership that harnesses the creative impulses of the private sector with the social justice function of the public sector. A public-private partnership has the potential of combining the innovations of the competitive marketplace with the larger social values of solidarity and health justice.

Countries who have successfully positioned themselves in this robust healthcare market leveraging on this partnership went on to reap economic benefits.

The Philippines can likewise become a beneficiary of this niche market.

Beyond profitability, the dollar earning potential of this market offers a unique opportunity to ensure that the gains will redound to the benefit of our countrymen who have poor access to quality healthcare.

The most tangible manifestation will be seen in a bigger budget allocation for health to upgrade and expand public health facilities ensuring equitable access to quality health services.

With the patronage and business from our international partners and clients, we can make this happen.

Healthcare has succeeded in breaking down barriers and making this planet an increasingly borderless world—because we all realize that at the end of the day, caring, healing, empathy and alleviation of pain recognizes neither color, money, country nor race.

So, expect tourists to go home from their travels bringing not only a couple of Batangas balisong, Cebu keychains or Boracay shirts but also a new hip or yes, a brand new face.

JP Morgan: Consumer-led RP growth hollow

Despite the surge in the country’s gross domestic product, economists are saying that the consumer-led growth is hollow and has no real impact on the economy’s productive capacity.

According to JP Morgan, the prime movers of genuine growth have not been moving as they should, with investments which lagging behind the growth in domestic production.

JP Morgan economist Sin Beng Ong said future growth has been "based on faith" that the public sector would be able to deliver its infrastructure spending plan and work as a catalyst for private investments.

The GDP is projected to grow by seven percent this year but Ong said this raises no threat of a bust despite projections that growth in 2008 would drop to six percent.

"There is not going to be a bust because there clearly is no boom," Ong said.

To begin with, Ong said, broad inflation rate had been low not just because of the strength of the peso but also because there was no pressure on the demand side.

"So inflation will continue to be low. There is no second-order pressure outside of the energy sector because demand simply isn’t there," he said.

"The fact that there is no pick-up in demand is not good because that means there is no underlying demand for investments," he added.

The strength of the current accounts in the balance of payments, Ong pointed out, is indicative of lackluster investments which means that there will be a low demand for labor and therefore demand will be low as a whole.

Ong noted that the country also has a wide gap between savings and investments, indicating that investments are being financed largely by foreign borrowings instead of internally-generated funds.

According to Ong, there is strong liquidity but this is not being mobilized into savings and investments. Moreover, he said, credit demand had been dominated by real estate and personal loans with very little showing by the manufacturing sector.

"All of these is a reflection of what we think as hollow growth because there is no pick-up in domestic demand to sustain the growth momentum," Ong said.

"We are not sure why the GDP is so strong despite the yawning S-I gap but if we are looking for possible upturn in 2008, it will be led by the public sector," Ong said.

This means that future growth prospects have become an article of faith, Ong said, dependent on whether or not the public sector would be able to deliver its spending program under the Medium Term Philippine Development Plan.

"The question is whether public investments could catalyze private investments and I don’t know what the answer is," Ong said. "Theoretically, it should, especially if the government could allocate spending in a manner that will have the greatest multiplier effect."

SM Investments rated an outperform

Macquarie Research Equities on Tuesday gave conglomerate SM Investments Corp. an "outperform" rating, saying it is confident that the company will meet its full-year income projection.

"Retail businesses always show higher earnings in the fourth quarter," it said in a recent client note.

The brokerage firm also gave SM Investments a 12-month target price of P395.

In the first nine months, SM Investments' net profit rose 14 percent year-on-year to P8.5 billion, which accounts for 65 percent of Macquarie's full-year profit forecast of P13 billion for the company.

Consolidated revenue for the period almost doubled to P82.6 billion, including contributions from SM Supermarket and SM Hypermarket.

"The results support our outperform rating on SM, which is our preferred pick in the conglomerates sector. Moreover, SM is the best way to play the reflation story in the Philippines given its strong presence in retail, banking and property development."

SM Investments, which is owned by tycoon Henry Sy, is the country's third-biggest company by market value.

Its subsidiaries include mall builder and operator SM Prime Holdings Inc., SM Development Corp. and Banco de Oro Unibank Inc., the nation's second-largest bank by assets.

Joel T. Go: Taking care of business at Ever Gotesco

Joel T. Go is bent on continuing the legacy of his grandfather, Go Tong and his father, Jose Go, the two famous names behind the Ever Gotesco Group of Companies.

This 34-year old graduate of Electronics Communication Engineering was not involved in the family business until after the conglomerate was badly hit by the Asian financial crisis in 1997 when the Gos were forced to close down their banking arm, Orient Bank.

“Our father did not want to involve us in the business then. He wanted us to do what we want to do. He wants to make sure we live our lives the way we want it,” the young Go recalls.

Joel, however, believes that he, together with his brothers, are destined to become the keepers of the family’s business empire which begun in 1975 when the old Gos built their first mall.

“Being part of this family means a lot to me and my brothers. We want the public to know that despite what happened to us in the past, our conglomerate is here to stay and we will continue to stay resilient,” Joel says, with conviction.

The financial setback experienced before by the group, he says, serves as a challenge rather than a misfortune.

“It’s a good thing that we had this problem when we can still manage to repair the damages. Whatever fault we had before, we now have to make sure that we will never commit again,” he says.

Joel started to take part in the family’s enterprise seven years ago. Eldest of three brothers, Joel sees to it that the efforts of the old generation Gos, to establish a business that is anchored on family values will not go to waste. Only 27 that time, he was already a hands-on executive handling full operations and marketing of Ever Gotesco malls.

In 2004, Joel was assigned as president of the Metropolitan Medical Center which the Go family acquired. Along with managing the hospital, he also oversees the over-all operations of its school — the Metropolitan Hospital College of Nursing.

One of the few strategies and techniques injected by the young Go to the traditional business practice in the Gotesco group was the introduction of a middle management which he now heads.

“Our team is constantly on the lookout for fresh ideas to incorporate in our marketing strategies, unwilling to find ourselves behind the competition but always in the middle of it all,” Joel says.

Manned by young and talented group of professionals, the middle management sees to it that every little detail in the company’s operation will be reviewed; and must be consistent with the group’s core ideology which is “Enriching the Lives of the Filipino People.”

“We have been slowly keeping our phase. We have been moving forward. But this time, we have to be more careful. We are studying every step we are making,” he adds. “Continue to run the ‘malls for the masses’ will still be our battlecry.”

To keep up with this momentum, Joel says the group will now focus on the right market and invest on right projects. Being in the third generation of Gos, Joel is proud to say that he is also a “people person” himself.

He asserts that this distinct quality of the Gos will bring the conglomerate to the next level. “We are going to build a company that will last,” Joel says.

Future plans

Based on the company’s five-year plan, it will be spending about P2.5 billion for the construction of four to five medium-sized malls.

“As we observe, we can not really compete with big malls. Metro Manila is saturated. So we will have to concentrate on the unserved market particularly in the suburban areas,” Joel says.

The company is now in the process of identifying the sites for the future malls. Among the areas being explored by the group are Parañaque, Laguna and Dagupan.

Aside from Gotesco Grand Central Mall, the group also runs Ever Gotesco Commonwealth Center, Ever Gotesco Ortigas Complex, and The Manila Plaza (Ever Recto).

Funds to finance these projects, he says, will partly come from internally-generated income. “Our cash flow is getting better. The revenue level of the group is stable,” Joel adds.

Joel says a number of banks have already approached them for possible loan arrangements.

“This only shows that many financial institutions still believe in the company’s ability to recover and expand its operation,” Joel notes.

The business blueprint of the company will also involve the renovation of its existing malls.

Next year, the group will start renovating one of its oldest malls, the five-hectare Gotesco Grand Central Mall located in Monumento, Kaloocan City.

By 2009, they will be putting up the first new mall with an estimated investment of more than P500 million.

Aside from pouring in capital in the expansion and renovation of malls, he says they will be investing P800 million to double the bed accommodation of UDMC to 800.

Modernizing the equipment and facilities of the hospital to cater to more advanced medical needs of their clientele, he says, is also part of the company’s medium-term plan.

The group also owns and manages a secondary hospital and nursing/retirement home in its 400-hectare golf course property in near Tagaytay. The Evercrest Golf Club Resort and Chateau Royal Sports and Country Club are being managed by the group’s Gotesco Land Inc.

A possible joint venture with a US-based hotel/ property developer is being explored by the group to take advantage of the growing potentials of the Batangas-based property.

“We can put an enclosed leisure/entertainment complex that may include spas, casinos in this property. This may also have a retirement home to cater to OFW retirees or even foreigners who want to spend their retirement period here,” Joel says. The idea of putting up a retirement home, he says, is consistent with the Gotesco group’s vision to maintain a family-oriented business.

“For one, our Ever Gotesco Malls shall become the household name for value-added shopping and every Filipino family’s mall of choice,” Joel concluded.