Health Tourism and The Shadow Economy

When one is keen to develop a medical tourism destination, it takes market research, and a strong business case to attract public sector support and assistance. I say this after working hands on in developing destinations for medical tourism in the USA and abroad since 1983.

Attracting public sector support

If you don't address key issues of interest and under the aegis of regulators, and public sector authorities (see image below), especially the taxable revenue and tax relief for local residents (by finance authority), you'll face a low likelihood of sustaining or attracting their interest.  Without them, as a private sector business, you have no authority to claim ownership or legitimate power or authority as a destination developer because you haven't been conferred the authority to speak for the destination. You only speak for your private business and your personal interests.

This is a huge problem in countries and destinations operating shadow economies for medical tourism receipts. The shadow economy is perhaps best described by the activities of those operating in it: work done for cash, where taxes aren’t paid, and regulations aren’t strictly followed. In my travels to work on health tourism destination development around the world, I've identified shadow economies in health tourism in more than 40 countries. 

One cannot pass legitimate accreditation surveys while working in the shadow economy

Shadow economy destinations where corruption is rampant will find it challenging to pass an accreditation survey because regulatory compliance is a touchpoint. Throughout Europe, the Wall Street Journal reported in 2017 that, "Among members of the Organization for Economic Cooperation and Development, the so-called rich countries, the average size of the shadow economy is smaller, at around 15%, though for some European countries the figure is as high as 30%."

In my work, I've seen it in Europe and Asia. But where I've also seen it is in the CIS region, the Middle East, Africa, and LATAM/Caribbean. This is consistent with the report in the WSJ that reported, “As a percentage of GDP, it ranges from 25-60% in South America, [and] from 13-50% in Asia,” according to a recent paper by Prof. Cristina Terra, professor of economics at Essec Business School in France, and author of the book “Principles of International Finance and Open Economy Macroeconomics.”

Much of the medical tourism provider marketplace is constrained due to undercapitalization and inability to access capital.

This is often the primary cause of failure to thrive. Shadow market sellers (doctors, dentists, clinics, hospitals, spas, health resorts, etc.) are constrained in their growth. If they grow too large and prominent, they attract attention from the government. So they don't wish to develop or promote a recognizable and trusted prestige brand for the health services they offer.

You can't cultivate a global healthcare prestige brand, a solid global patient-centric reputation and adequately promote your brand from the shadows

I am frequently called upon to speak at keynote events and lead workshops on health tourism marketing, advertising, branding, and open discussions about the value of accreditation and certifications. It baffled me for years why after a great session, nobody ever followed up with requests for consultation or assistance.

Then it dawned on me: When Ilan Geva and I discuss branding as a necessity that then guides marketing and advertising strategy and tactics, the shadow market folks should excuse themselves and go have coffee with the others of the same ilk. That might leave about 10-15% of the attendees in the room who want to grow a legitimate business, pay their taxes, and shout from the highest mountains to promote their brands.

In addition, the shadow market healthcare providers don’t have access to credit markets. So for many of the shadow market health tourism suppliers, they are both undercapitalized to pay for assistance with branding, marketing and advertising to the extent necessary and unable to borrow cash to do the needful. As such, they cannot afford to hire experts and pay for the creative assets to be used in branding, marketing, advertising, sponsorships, or even to be able to afford proper training and professional development for their staff.

This leads them into a vicious cycle: Inadequate promotion means no traction or inbound revenue. To be able to afford promotion through effective marketing, advertising and promotion requires brand cultivation, which for most physicians, dentists and smaller clinics and hospitals is impossible from within. They require assistance from expert consultants to create their international brand which then informs the marketing and advertising strategy and tactics, the targeting of the ideal client source markets and personas likely to buy what they sell. No trust, no authority, no reputation to speak of outside their local catchment area means they could be the greatest practitioner but no one will ever know - or care. With no sales, and no access to capital, they languish until they give up trying to "do medical tourism". Many also make the mistake of thinking that without a brand, they can get facilitators to scratch up referrals to their non-existent brand and no developed product, fully-fledged packages or transparent pricing - which is pure fantasy. What marketing agent should be expected to go all out for a "dabbler" working in the shadows?

About the Author

Maria Todd PhD, MHA is the director of business development for St George Surgical Center. She has assisted in the development of medical tourism program and destination development in the U.S. and 116 countries and is the author of seven internationally published, peer-reviewed business development books on medical tourism services. She welcomes questions from surgeons and healthcare providers and employers and when time permits, she accepts invitations for paid keynote speaking and workshop opportunities about medical tourism. +1 (800) 727.4160.