Most American hospital leaders are looking at international markets these days. While medical tourism may not be bleeding away much revenue right now,they know it may soon. With much-cheaper services available in India, Thailand, Costa Rica and Mexico, to name just a few locations, and a growing movement to certify the safety care along U.S. lines, it’s inevitable that American hospitals will feel the pinch eventually.
How should hospitals respond? Well, one strategy is to jump into foreign markets, rather than wait for foreign markets to swallow them. And that’s just what the University of Pittsburgh Medical Center has done.
Few hospitals have dived into the international market as deeply as UPMC, whose facilities outside of the U.S. generate almost $100 million per year. UPMC’s ambitious overseas programs, which employee 1,300 staffers, are a precursor of things to come, though they may also offer an opportunity to see what can go wrong when American hospitals fan out into foreign waters.
At present, UPMC operates 14 different operations in six countries, including Greece, Qatar, England, Japan, Ireland and Italy, according to a report in the Pittsburgh Post-Gazette. The UPMC overseas network, which developed over 14 years, include general hospitals, cancer centers, a transplant center and a biomedical research facility. That’s one hell of a stretch for a large hospital with an immense operation to take care of here at home.
Of course, UPMC can afford to make big bets. According to the American Hospital Directory, the 1,602-bed medical center took in $9.3 billion dollars in gross patient revenue in 2008. While its profit margin that year was a not-too-impressive 0.7 percent, most hospitals tanked in 2008, the year of the Wall Street meltdown.
To me, the real question is whether it’s practical for smaller hospitals to adopt such a strategy. I have no guess as to what this kind of expansion costs, but it’s pretty obvious it can’t be cheap. While hulking giants like UPMC can plan for the long term, community hospitals may be too strapped to pay their bills or build much-needed facilities.
Still, the unfortunate reality is that even struggling hospitals will have to find a way to walk down this path, perhaps through partnerships if they can’t build out foreign facilities of their own. My guess is that within 10 years, hospitals that don’t are going to take it on the chin. This is no joke, folks.