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Developments in Health Economics and Public Policy13

Klaus Schmerler

Medical
Tourism in
Germany
Determinants of International Patients‘
Destination Choice
Developments in Health Economics
and Public Policy

Volume 13

Series Editors
H. E. Frech, Santa Barbara, CA, USA
Peter Zweifel, Zurich, Switzerland
More information about this series at http://www.springer.com/series/6039
Klaus Schmerler

Medical Tourism in Germany

Determinants of International Patients’
Destination Choice
Klaus Schmerler
Martin Luther University Halle-Wittenberg
Halle (Saale), Sachsen-Anhalt
Germany

ISSN 0927-4987
Developments in Health Economics and Public Policy
ISBN 978-3-030-03987-5 ISBN 978-3-030-03988-2 (eBook)
https://doi.org/10.1007/978-3-030-03988-2

Library of Congress Control Number: 2018961404

© Springer Nature Switzerland AG 2018

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Foreword

This volume is a must-read for everyone who wants to be on top of the ongoing
transition in health care, from a service different from all others protected by walls of
national regulation to a tradable commodity subject to the forces of international
competition. Klaus Schmerler, the author of this study, has a clear understanding of
medical tourism as the harbinger of this transition. For decades, patients—to the
dismay of the medical profession, social health insurers, and governments—have
been migrating between domestic physicians in search of the treatment they prefer
(or simply of a prescription or a report testifying their inability to work). Increas-
ingly, however, they cross international borders, lured by both private clinics and
public hospitals who seek to balance their accounts, being exposed to the pressures
of prospective payment in many countries.
In this situation, viewing medical tourism as a form of interregional and interna-
tional trade is an extremely helpful starting point for analysis. Its single special
aspect is a high degree of product differentiation because persons with their char-
acteristics rather than goods move, resulting in a contact with a service provider
and a setting that match their preferences. Far from limiting his research to Germany,
the author provides a wide range of international data on medical tourism flows.
An overview shows that Asia lies at the center of medical tourism with, e.g., South
Korea reporting 267,000 patients in 2014. However, his calculations based on
inpatient and medical visa data arrive at similar numbers for Germany with Russia
being the most important source country.
According to international trade theory, differences between foreign and domes-
tic price induce arbitrage, with the lower-cost country becoming the exporting one
(attracting medical tourists in the present context). As a striking example, the author
cites the cost of a gastric bypass, which is between USD 25,000 and 48,000 in the
United States (quite a range within the same country) as of 2012. The bypass can be
obtained for USD 6000–11,000 in India and USD 15,000–26,000 in Singapore, a
location that has built a reputation for quality. Of course, the net cost to the patient

v
vi Foreword

depends on the portability of health insurance, about which little is known outside
the European Union (where it is subject to conditions). Heterogeneity of consumers,
exporting firms (medical clinics in the present context), countries of origin, and
impediments to trade are added to the basic model, resulting in a comprehensive
relationship between exports (i.e., inbound medical tourism) and a host of determin-
ing factors.
In the case of Germany, the available data at the national level do not permit a
full implementation of this theoretically appealing approach. In particular, price
information is lacking for most source countries. It would have been extremely
instructive to compare the estimated impact of price differentials with the well-
known finding that domestic medical providers hardly compete on price in western
European countries, likely because of almost complete insurance coverage. Still,
the author’s careful econometric work suggests several insights. First, migrant
density in Germany acts as an important facilitating factor across all treatment
categories. Second, European Union (EU) membership of the country of origin
plays a minor role as soon as country heterogeneity is accounted for, again
regardless of whether treatment is elective or not. This is amazing because a patient
who wants to obtain a healthcare service in another EU country must present a
physician report testifying to urgency and lack of a domestic alternative. Third,
elective surgery does stand out in that distance from the country of origin seems to
matter more than for the other types of treatment; since covering the distance often
is a major component of total cost, this points to the importance of cost differentials
noted above.
The author goes on to analyze inflows of patients into the 15 member states of
Germany using regional hospital data. Once again, a full implementation of the
relationships predicted by trade theory is not possible. Hospitals in West Germany
appear to attract more medical tourists than their Eastern counterparts, but the effect
vanishes as the definition of medical travel as a choice to travel for treatment is
enforced and treatments of acute conditions are removed. A hospital’s university
affiliation exhibits the strongest positive effect on international patient inflows, while
it does not seem much of a difference whether the setting is public or private.
Finally, the analysis is completed by interviews with stakeholders and patient
surveys. This information is used not only descriptively but also for modeling
individual choices by means of a discrete choice experiment (DCE, also known as
conjoint analysis). Through their repeated choices between hypothetical settings
that differ in their attributes, respondents reveal their preferences. Not surprisingly,
the presence of a physician specializing in the particular treatment demanded turns
out to be the most important attribute, followed by the country of provision
(location in the Czech Republic and Switzerland is associated with a lowered
probability of choice compared to Germany) and whether or not the hospital is
certified. Interestingly, cost fails to be a significant predictor; however, this may be
due to the fact that it was not possible to measure cost differentials with the country
of origin as the benchmark.
In sum, this well-written volume provides the reader with valuable insights into the
how, why, and where of medical tourism. Especially readers working in the healthcare
Foreword vii

sectors of this world will greatly benefit because growth in income is going to enable
millions of patients to seek care beyond their national borders. Competition for these
patients is bound to intensify—physicians, nurses, hospital managers, and last but not
least policy makers, take note!

Emeritus University of Zurich, Zurich Peter Zweifel

Switzerland
August 2018
Contents

1 A Dearth of Empirical Investigations . . . . . . . . . . . . . . . . . . . . . . . . 1

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 Traveling for Treatment: Taxonomy, Patient Flows and Candidate
Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Medical Tourists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.1 Mode of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.2 Treatment Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.3 Elective Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.4 Cross-Border Operations . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.5 Time Horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Medical Tourism Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2.1 World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.2 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Drivers of Medical Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.3.1 Domestic Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.3.2 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.3.3 Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2.3.4 Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
2.3.5 Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
2.3.6 Proximity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
2.3.7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
2.4 Implications of Medical Tourism . . . . . . . . . . . . . . . . . . . . . . . . 74
2.4.1 Migration and Local Access . . . . . . . . . . . . . . . . . . . . . . 75
2.4.2 Treatment Quality and Continuity of Care . . . . . . . . . . . . 77
2.4.3 Legal Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
2.4.4 Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
2.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

ix
x Contents

3 The Sum of its Parts: A Structured Approach to the Modeling

of Destination Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
3.1 Product Disaggregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
3.2 Consumer Disaggregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
3.3 Supplier Disaggregation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
3.3.1 Physician Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
3.3.2 Provider Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
3.3.3 Country Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3.3.4 Destination Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
3.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
4 Drivers of Medical Travel at the National Level . . . . . . . . . . . . . . . . 119
4.1 The Gravity Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
4.1.1 Basic Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
4.1.2 Multilateral Resistance . . . . . . . . . . . . . . . . . . . . . . . . . . 121
4.1.3 Heterogeneous Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
4.1.4 Heterogeneous Consumers . . . . . . . . . . . . . . . . . . . . . . . 128
4.1.5 Heterogeneous Products . . . . . . . . . . . . . . . . . . . . . . . . . 132
4.1.6 Measures of Distance . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
4.1.7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
4.2 Specification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
4.3 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
4.4 Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
4.5 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
4.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
5 Drivers of Medical Travel at the Hospital Level . . . . . . . . . . . . . . . . 173
5.1 Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
5.2 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
5.3 Estimation and Specification . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
5.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
5.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
6 Drivers of Medical Tourism at the Individual Level . . . . . . . . . . . . . 193
6.1 Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
6.1.1 Hospitals in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
6.1.2 Facilitators in Germany . . . . . . . . . . . . . . . . . . . . . . . . . 197
6.1.3 Facilitators in Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
6.1.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
6.2 Patient Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
6.2.1 Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
6.2.2 DCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
6.2.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
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