Medical Tourism: A Tarpit Idea

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Healthcare Tarpit Ideas: The Ones Tried A Million Times

I was recently introduced to the idea of tarpit ideas. These are essentially startup ideas that seem like a great opportunity and have been tried many times before but end with the company not working out. Trust me, you’re not the first person to think of “what if there were an app to tell you cool events around you?”. It’s a particularly midwit idea.

There was a good discussion in Health Tech Nerds about some of the tarpit ideas in healthcare. But I feel like there are more. So this week, I want you all to send in:

‍What is a healthcare tarpit idea? Something that tons of people think is a good idea to build a business but almost always fails. And please explain why it’s a bad idea.

***Don’t send in personal health records or “paying people to be healthy” because we talked about these in-depth before.

I’m looking forward to these; you could be saving someone’s life. Or more realistically, their partner’s life so they don’t have to hear about this for years while they build it.

I’ll start with one I hear a pitch for constantly like tinnitus: a medical tourism marketplace.

The Siren’s Song: Medical Tourism Marketplaces

I get a text, DM, or email every 3 weeks that looks like this. 

The idea of a “medical tourism marketplace” comes to every person with bad insurance that has to get their first procedure or expensive drug. They see the cost difference of surgeries between different countries. “Wait a second, you can buy a flight + hotel to go to India and you’d still save 50%+.” They are a genius, they found the hidden secret that’s eluded all of us - basic math.

The reason medical tourism sounds like an appealing place to build a marketplace on the surface:

1. People already pay cash for medical tourism, so you don’t need to deal with the insurance hijinks and selling directly to consumers is easier.
2. The transaction amounts can be quite high. Dental procedures abroad are usually $1K+ per tooth, hair transplants in Turkey are $2-4K. Plus the stay and travel.
3. It’s a fragmented landscape where discovery of providers is difficult.
4. The quality variance in providers is high, so something like a rating system would create more trust.
5. You get to travel around the world and call it a business expense (legitimately). 

If you use the “I’m ex-Uber and looking into starting something in healthcare” perspective, this looks like a promising place for a marketplace. However, just know that hundreds of others have tried this. 

[I want to make a quick shout out here to Jeff Tang who wrote an incredible series that basically livestreams his thoughts as the madlad went to Costa Rica to see if he could build a medical tourism business. He even made a list of the companies that have tried, and these are just the ones that have gotten press.]

Let me go through a few reasons why this idea ends up being a trap. A few ground rules:

• For the purposes of this post, we’re talking about US citizens getting healthcare services done in a different country for cost reasons. 
• Getting prescription drugs in different countries is a bit of a different beast and more of a regulatory issue (hard to bring large supplies of drugs back, validity of prescriptions abroad, quality issues with compounded drugs in other countries, etc.). Pharmacy tourism is a thing.
• Non-US patients coming to the US is also a different type of medical tourism, which is usually about paying more for care not available in their own country.

On to the medical services tourism marketplace issues.

Issue #1: Quality of Providers

The big issue with medical tourism in general is that it’s very difficult to get a sense of who the high quality providers are in another country. Pick the wrong provider and your thumb is your big toe now. So the question is, how do you figure out if a provider abroad is any good? We can’t even do that in the US lol.

Most patients look up the facilities, see patient testimonials about the doctor, call the clinic, or ask the agencies that plan these trips. But as you can imagine, all of these are going to skew positively unless they’re particularly bad. One way you could try to find a good provider is to see which ones are JCI accredited, an accreditation standard we also use in the US.

But the reality is that most of the good providers in other countries are operating at near max capacity. The goods ones have their own direct portals for international inquiries because they’re well-known and don’t need a middleman. For example, here’s Bumrungrad Hospital’s international inquiry portal. So the ones who are willing to sign up for a marketplace are generally the lower quality ones that less patients go to, or are new (more like bumnewgrad). There’s an adverse selection problem.

In the US the baseline perception of providers abroad is that they’re lower quality whether it’s true or not. Generally, consumers don’t think that getting a “deal” on a procedure is associated with better care. Plus, entire TV segments dedicated to fixing medical tourism horror stories like breast implants being used in a butt lift don’t help. So you’re fighting an uphill battle.

Of all the problems with this idea, this is probably the most solvable and many companies do crack this. You can make the sell to good providers that they’ll get more money from medical tourists vs. local patients, though you’d probably have to offer some guarantees on volume. You can develop your own methodology of curating the best hospitals (get reviews from on the ground, site audits, track outcomes, search the trash of every doctor there, etc.). 

But all of these require a decent amount of upfront capital and logistical complexity. And the stones to try this idea again after everyone told you not to.

Issue #2: Insurance and Legal Recourse

One big issue with this idea is that generally, insurance does not cover medical tourism procedures. They also usually have exemption clauses that won’t cover complications when you come back (you read those documents right?). AND on top of that, you generally don’t have a legal recourse if a doctor abroad really fucks you up.

For anyone that has insurance, this can be a big deterrent. For covered services, your deductible/out-of-pocket max is usually lower than the full cash price you’d pay in other countries if the procedure is above ~$4-5K. Plus you’ll get covered if anything goes wrong, which you can’t say the same for other countries. The perception of lower quality providers doesn't help. There are several medical tourism complication insurance products that have popped up (like Global Protective Solutions) but many of them have restrictive language around what they’ll cover.

This is why most medical tourism from the US ends up being for things insurance does not cover like dental procedures, vision, and cosmetic surgeries. Most people are paying cash for these within the US anyway.

I’ve always wondered why health insurers in the US don’t actively incentivize medical tourism to other countries (including coverage of complications). It’s the insurers that take the biggest hit since they pay the bulk of the procedure cost. However, my guess is that hospitals here would terminate their contracts if insurers started funneling people away from procedures that generate the bulk of their revenue. It’s a free market, but in the Sopranos way.

Issue #3: Distribution 

Remember kids, first rule of startups. Distribution matters more than anything. Your product? Who cares. Your funding? Irrelevant. Your family? Deprioritized, what’s their ROI anyway.

Distribution for a medical tourism marketplace is very difficult! You need to catch a patient at a very specific point in their journey, which is essentially right when their doctor recommends a procedure. 

A few issues with that:

1. Almost no doctor is going to recommend getting a procedure done abroad. They barely recommend doctors here. They want to do the procedure themselves and also they think providers abroad are worse.
2. Insurance companies won’t suggest this as an option because they don’t cover it and broadly do not like you.
3. Direct-to-consumer can work. But Google is extremely restrictive on advertising for anything medical. Facebook is also now very restrictive on advertising targeting medical conditions. Tik Tok will only suggest you get the procedure done in China.

4. Most destination hospitals need 4-8 weeks lead time and there’s a back and forth inquiry process with the hospital to assess what you need to determine a final price. So even if you get in front of patients when they’re high intent, the time delay causes a considerable amount of drop off in interest.

So how do you get in front of patients and convert them? Especially in a way that seems legitimate, since they’re already kind skeeved out about the idea of medical tourism. Maybe a phallic themed subway ad will do it.

Issue #4: Patient Preference

Honestly, I think a big issue is just that patients don’t really want to travel for medical procedures. Let’s take a look at Walmart’s domestic Center of Excellence program as an example. They would cover the full cost for employees including travel to get their surgeries done at some of the best institutions in the world like Mayo Clinic, Cleveland Clinic, etc.

Clearly in this situation the worry of quality is not the issue, and patients are economically incentivized to go since they get full coverage if they go to these places. And yet despite all this, Walmart had to essentially mandate their employees go.

“The retailer has been trying since 2013 to encourage employees to undergo the surgeries at hospital systems known for their quality by offering to pay the full cost of the procedures and travel. But not all workers took Walmart up on the offer, and the retailer continued to pay for surgery elsewhere.

Walmart decided to mandate the travel, starting in January, after finding that half of the workers who volunteered to travel ended up avoiding the high-cost surgery even though their local doctors said it was needed, said Lisa Woods, who oversees the design of the company’s health plan.” - Wall Street Journal

The reality is that it’s just kind of inconvenient to travel for healthcare procedures. Traveling requires being apart from family during the recovery and carving out a significant chunk of time. Especially compared to getting a procedure done down the road, which many people think will be “good enough” and lets them recover with family in a place they’re familiar with. Even if you’re pitching white sand beaches, people would rather recover at home even if it’s in…Arkansas. 

Issue #5: The Economics Problem

Let’s think through the economics of this. I took a look at a bunch of the different procedures that QunoMedical offers. There’s a pretty wide range - on the lower end are dental + hair transplants and heart surgeries + oncology treatments on the higher end. 

Let’s say the average contract value is around $4K (guessing based on perusing prices + knowing it’s weighted more towards dental). Marketplaces take anywhere between 5-25% on a transaction, but let’s say it’s 20%, which is closer to things like Uber and Airbnb. That’s about $800. It’s hard to find reliable sources on the number of people that go abroad for medical tourism, but this article suggests it’s about 700K/year, which feels very high to me. Even if this were true, the revenue of the entire market would be around $560M in the US, which is tiny. 

That percentage of the small market you take also now has to pay for a very complex operation in every single country you expect patients to look at, including:

• Guides for every country that speak the local language and are available with the patient through the journey.
• Customer service and sales - for each of these procedures, patients send an inquiry which is then sent and reviewed by the partner hospital. The contract is sent back and patients always have a lot of questions. Those questions get answered and then travel arrangements need to be made and coordinated with the hospital scheduling team.
• Marketing - for all the reasons above, your customer acquisition cost (CAC) is going to be very high. Rock Health’s survey suggests that a CAC for a consumer digital health company was around $170 per patient and I’m sure it’s much higher now for this use case.
• Insurance and compliance - doing this in a ton of different countries is not fun.

This business is complex because of the number of stakeholders, the bespokeness of each interaction, dealing with multiple geographies, and most importantly: most patients are not doing medical tourism multiple times. If the lifetime spend of a customer were higher, these issues would likely be surmountable, which is how most other marketplaces end up doing well. 

I’d guess that medical tourism marketplaces aren’t an attractive business because of the low customer lifetime value, the relatively small market, and the high complexity of running it. Also because “traveling for work” is only fun if you’re <28 years old.

Conclusion

I’ve actually done medical tourism a few times. I’ve gotten some MRI imaging done in India and went to a dentist in Thailand. At some point you’ve seen every type of temple, you need to vary it up ya know?

But both times I was already in those countries + asked (or knew) people locally to find out where to go. For a low frequency transaction, this approach honestly might make more sense than creating a new marketplace. 

I don’t want to dissuade people from trying ideas that might work - I just want to give you a heads up about some of the problems you might encounter so you can think about how to solve them. It’s also more time efficient for me to write this entire manifesto vs. respond each time I get this pitch, that’s how often I see it. 

It’s also worth trying to think about how a new marketplace would wildly differ from what’s already out there. Here’s a list of all the different medical tourism companies, plus there are lots of agencies that will set up your procedure and travel for you if you know the country you want to go (e.g. Health Tours Thailand).

For what it’s worth, we’ve been focusing on medical tourism dedicated to getting lower prices in other countries. But regulatory arbitrage is another angle where you can do things that are in a legal gray area in the US. I talked before about curative therapy medical tourism as a potential area. There are lots of recreational drug retreats (psilocybin, ayahuasca) targeting different ailments which have marketplaces like retreat.guru. Some people are doing experimental gene therapies trials to produce Follistatin in a crypto city in Honduras (please don’t ask me what that means). 

I don’t think these are venture scale businesses, but you could feasibly build something here. It’s also a great way to make new best friends…with your lawyer.

Anyway, that’s one of many startup ideas that I’ve seen tried many times in healthcare. There are separate newsletters to write about all the other ones…

‍Tell me a healthcare tarpit idea you’ve seen and why you think it doesn’t work. I’ll put the best answers in the next newsletter. You might just save a founder’s marriage.

Thinkboi out,

Nikhil aka. “A good friend that’ll write 13 page manifesto tearing apart your dreams”

Twitter: @nikillinit

IG: @outofpockethealth

Other posts: outofpocket.health/posts

Thanks to Jeff Tang for reading drafts of this

P.S. just finished our season finale of the "Ops I did it Again" podcast where we talk about how Photon automated faxes and calls to change how e-prescribing works. Check it out.

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