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Deploy a blue ocean strategy to profit from health travel

Posted Dec 09 2010 10:04am

by Maria K. Todd , MHA, PhD

In previous posts, I have covered why and how global competition from medical tourism is sure to grow , and then followed up with what U.S. hospitals can do and how they can start to position their competitive response.

Today, I expand the steps you can take and offer additional points to consider as you create an effective strategy for overall revenue integration, marketing, promotional efforts, and creating realistic estimates for volumes and utilization.

Hospitals and physicians have to be on the lookout for clauses in their managed care contracts. Many include subtle "most favored nations" provisions that the hospital and/or its physicians may have inadvertently overlooked during negotiations that could cause problems in advertising packages with high pricing transparency (a necessary competitive element).

These oversights could backfire on the managed care reimbursement forefront. These clauses traditionally required a provider to give the payor the lowest rate that it gave to any other payor (i.e. foreign governments). Payors tend to argue that these clauses are a legitimate and reasonable way to control rising healthcare costs and their impact on premiums.

Finally, simply because you have a new program doesn't mean that patients will beat a path to your door. This business line requires its own marketing and promotional strategy, the likes of which your marketing team may have never before considered, experienced or been taught in school.

Many foreign hospitals face this dilemma daily. They have the pricing strategy, the technology, the websites and a hundred or more internet entrepreneurs hawking their packages on the promise of a commission or "marketing fee" of 6 percent-15 percent of the price of the case to drive scores of health travelers to their doorsteps.

Decide on the wrong "red ocean" strategy and you'll find yourself competing head-to-head with experienced global market players for known customers in the existing health travel market space.

Instead, you'll need to deploy a blue ocean strategy where the hospitals and their medical staff don't compete with each other and other global competitors in the same market space; but instead explore, create and acquire new market spaces by creating new demand through the principle of "value innovation."

Then there's always the compliance aspect and fee-splitting, anti-kickback and Stark regulations to contend with that are not present in international marketing deals these entrepreneurs strike with the foreign hospitals and professionals. Your deals won't necessarily be the same as those in foreign countries without such regulatory compliance concerns and could be potentially less attractive in price and value innovation.

If you're interested, I have a high-level checklist which I can share if you email me your request. It is a simple checklist that will send you on the right path to think through the development of such a program from concept to rollout and beyond. It was the outline for my forthcoming book, the Handbook of Medical Tourism Program Development, due out next year.

Maria K. Todd, MHA, PhD, is the CEO of The Mercury Healthcare Companies , a globally integrated provider network with providers in more than 25 countries contracted with employers, insurers, and governments in several countries and a full-service global healthcare business development and revenue cycle consultancy.She can be reached at mtodd[at]mercury-healthcare.com

Related Articles:
How to drive more international patients to your doors
Why competition from medical tourism is sure to grow
Why hospitals should fear outbound medical tourism

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