Healthcare, China’s Must-Have Overseas Luxury

In Thorstein Veblen’s 1899 economic study The Theory of the Leisure Class, specific goods like silver spoons and corsets represented a certain upper-class status. Fast-forward to the 21st century, and Birkin bags and German sports cars have become new symbols of wealth and prestige. But today’s younger high-net-worth individuals are shifting their priorities from ‘ownership’ to ‘access’ and are distinguishing themselves from the masses by embracing a more inconspicuous consumption. Instead of spending on traditional luxury goods, they’re investing in quality healthcare, education, and enrichment activities. In other words, for them, luxury is less about goods than services. And now, the maturing Chinese luxury market is following suit, with education and healthcare becoming priorities for affluent Chinese consumers. According to the New York Times, “Chinese people took an estimated 500,000 outbound medical trips” in 2016 — a number that’s been trending upwards ever since. But in a country like China, where consumer confidence in the national healthcare system is low and the reputation of the healthcare sector has been tainted by an endless succession of scandals, having access to premium health services can be a matter of life and death. Consequently, medical travel has become popular with elite and middle-class consumers alike. According to Foreign Policy, “the medical tourism firm XK Med says its clientele is mainly middle-class. Its fees (not including travel) start around $10,000 for a trip to Japan, which includes setting up the appointment with the hospital, a place to stay, and a translator’s services.” In recent years, Chinese patients have transformed Japan into a leading locale for medical tourism. While South Korea remains a top cosmetic-surgery destination, Chinese patients seem to prefer going to Germany and Japan for more serious illnesses like cancer or chronic conditions. The most significant contributing factor to Japan’s success as a medical tourism destination is the liberalization of its market. According to Li Xin, VP of the Tokyo-based medical service agency Hibikojyo, the shift occurred “because more hospitals in Japan are ready to receive foreign patients and have loosened the admission criteria.” Furthermore, the statistics released by Japan’s Foreign Ministry point toward a significant increase in foreign patients, and, according to data, only "70 medical visas were issued in 2011 when the government first introduced the special visa category. By 2018, the number had increased to 1,650, 84 percent of which were for visiting Chinese patients.” Despite its status as an emerging market, medical tourism has the potential to become a big business in Japan due to easy access from wealthy Chinese consumers. According to Josef Woodman, CEO of Patients Beyond Borders, medical tourism “isn’t sexy to talk about” and is still seen as a social taboo. This is true to a certain extent, but it doesn’t imply that the industry isn’t a booming business, especially for countries who want to attract upwardly mobile and affluent Chinese patients. Considering that experts estimate the global market value of medical tourism to reach “$65-87.5 billion, based on approximately 20-24 million cross-border patients worldwide spending an average of $3,410 per visit, including medically-related costs, cross-border and local transport, inpatient stay and accommodations,” it could be argued that Western countries and foreign medical facilities still don’t recognize medical tourism’s untapped potential. And since China’s a country with a strong middle-class but a crumbling healthcare system, greater access to global healthcare will surely encourage Chinese patients to seek treatment abroad. Health care inequality is a serious problem in China which struggles to provide decent medical services to its 1.38 billion residents. Its aging population and the rise of “so-called lifestyle diseases, such as cancer, heart disease, diabetes and other chronic illnesses” have brought new challenges to the country’s already struggling system. According to a report by the World Health Organization (WHO), “China accounted for 3.07 million newly diagnosed cancer cases, 21.8 percent of the global total,” and the Chinese Journal of Cancer Research mentions that the “cancer incidence rate was higher in females for population between 20 to 54 years but was higher in male for population younger than 20 years or over 54 years.” Additionally, the WHO announced that China has recorded an “explosive” growth in diabetes. “Almost 10% of all adults in China — about 110 million people — currently live with diabetes,” says a WHO press release. Data from the same report shows that by 2040, China will reach 150 million diabetes cases. China’s broken health care system is also a major issue. Hospitals are understaffed, modern technologies are missing, healthcare practitioners are stressed and exhausted, and long waits are very common. Angry patients are displeased with their lack of services. Worst of all, Foreign Policy says that some hospitals employ undertrained medical practitioners, and, “according to a study in the Lancet, lack even a bachelor’s level of education, instead qualifying for their posts through limited vocational courses.” Overall, these gloomy conditions have created a system of general mistrust and paranoia. As stated in a 2013 survey from China Youth Daily, 67 percent of interviewees were not confident in their treatment or diagnosis. This concern further pushes Chinese patients to seek help abroad. As mentioned earlier, this trend presents an incredible opportunity for receiving countries. According to the Shanghai Medical Tourism Products and Promotion Platform, each year roughly 60,000 Chinese patients travel outside their country in search of medical treatments. But despite the high number of Chinese engaged in medical tourism, there’s still a disconnect between patients and the global medical industry. Foreign hospitals still prefer to chase American baby boomers instead of attending to China’s emerging market of wealthy patients. Just as importantly, wealthy Chinese are not turned off by the high costs associated with medical treatment abroad. As an example, the “average spending on cancer treatment in Japan is estimated to be between $50,000 (¥5.47 million) to $100,000, triple the cost in China,” according to the National News Daily. But prices aren’t a concern for Chinese patients. Instead, their main focus is on facilities with impeccable services, state-of-the-art technology, and professional and courteous staff. Japan understood these drivers for their high-net-worth Chinese patients and created a range of mid- to high-level services. Apart from state-of-the-art medical treatments and facilities, Chinese customers flock to Japan even more so because of the country’s personalized packages. According to NHK-World Japan, “one hospital has a room specially designed for overseas visitors who undergo preventive medical examinations.” NHK-World Japan also mentions that the majority of patients are Chinese executives with very high expectations, and their treatment packages cost “an average of 4 thousand dollars, including massages and meals.” Furthermore, the hospital’s concierge is prepared to “take patients to a department store, a two-hour drive from the hospital.” Some hospitals even send their medical staff to mandatory Chinese lessons. Nevertheless, there’s room for more to be done. The days when affluent Chinese consumers focused only on luxury shopping sprees are ending. All signs point towards them maturing and investing more of their assets into intangibles rather than luxury products. This shift shows that the priorities of Chinese elites are starting to align with mature consumer behaviors in Western societies. Taking this into account, Western countries have to consider the opportunities inherent in cross-border healthcare. According to Oscar Zhou, CEO of Ryavo Healthcare, “hospitals that want to receive more Chinese patients should offer a comprehensive set of services and solutions tailored for the Chinese market.” While discovering those specific solutions will require detailed research, the new luxury of medical tourism will undoubtedly offer Western businesses some exciting opportunities.

Healthcare, China’s Must-Have Overseas Luxury

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Published August 14, 2019

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Healthcare, China’s Must-Have Overseas Luxury