Thai hospitals to profit from AEC, but public healthcare risks catching a cold

Author: Sutapa Amornvivat, Ph.D.

Published in Bangkok Post newspaper / In Ponderland column 20 May 2015

Amid all the handwringing that Thailand has lost its export mojo, let’s keep some good news in mind. In “exports” of services, a few Thai industries are thriving. Healthcare is especially successful, thanks in part to inbound medical tourism, which has helped Thai private healthcare providers enjoy solid growth for five years. During this time, the industry's listed companies have consistently outperformed the rest of the Thai stock market.

Now Thai private hospitals are gearing up to take advantage of the ASEAN Economic Community (AEC), which begins at the end of 2015. With the most competitive healthcare industry in Southeast Asia, Thailand is positioned to expand its role as a medical hub. For the Thai healthcare system, there is much to gain from the upcoming integration. This rising income of this sector will benefit the shareholders and employees of private hospitals, and help the government collect more taxes. However, there is also a potential downside risk that warrants a cautious policy direction.

Already Thailand is the world's most popular destination for medical tourists. Some 850,000 arrived here in 2012 according to the Ministry of Health. From 2001 to 2007, the number of international patients grew by 21% per year. Thailand has an edge over competitors like India and Singapore thanks to a combination of state-of-the-art medical facilities, affordable cost, and robust travel infrastructure like hotels and transport.

Currently, Thailand has 32 private hospitals that are certified by the Joint Commission International, the sector's top accreditation body. Yet medical fees are lower than in many countries. One of the leading private hospitals in Thailand offers bypass surgery with a week-long stay in rooms comparable to a five-star-hotel for roughly $19,000. In the United States, the same procedure costs at least $80,000 for patients without health insurance. And the waitlist is much shorter in Thailand as well. Thai hospitals, which were among the first to focus on customer satisfaction, have won favor for their warm hospitality.

The AEC will boost this rising industry by increasing economic growth, trade and travel in Southeast Asia. As the CLMV region becomes integrated into regional supply chains, a large share of the population will enjoy higher living standards, increasing demand for quality medical services. The existing healthcare infrastructure in these countries is unlikely to be able to cope with the rise in demand, and Thai providers can fill the gap. As they do so, Thailand's healthcare system as a whole ought to benefit, because growth of high-end hospitals should help raise local standards and strengthen the cultivation of medical expertise here.

Rapid growth of the industry will create a stronger demand for already scarce skilled labor. As of now, Thai schools graduate just 2 doctors and 12 nurses per 100,000 population each year; which is about one third or one fourth the rate of Singapore. Nursing schools in the Philippines produce 6 times as many graduates each year as their Thai counterparts. At this rate, the supply of health workers in Thailand would not be able to catch up with the fast growing demand.

For these reasons, Thai hospitals will need to recruit doctors, nurses and technicians from abroad. Potentially, the rules on cross-border hiring will become easier under the AEC. And the AEC will increase harmonization of standards and technical regulation, making it easier to integrate foreign staff. Yet, several obstacles remain, including the language barrier and licensing procedures. It will take time to agree on setting professional qualifications across borders. Caution is appropriate, given the need to ensure high standards and safety.

If the limited pool of health professionals is left unresolved, the rapid expansion of the health care industry could threaten the public healthcare system by draining resources into the private sector. The so-called “internal brain drain,” or a flow of human resources from public to private hospitals, has been ongoing, because of the scarcity of medical staff. When the AEC kicks in and propels growth of the industry, this phenomenon could exacerbate disparities in healthcare access in Thailand. Already the pay gap between the public and private sectors in Thailand remains as high as 6-11 times for physicians since 1997. At the country level, a 2011 research paper in Lancet, one of the top medical journals, shows that the distribution of doctors and nurses in Thailand becomes increasingly skewed toward private hospitals in urban areas over time.

Among the first group to flow into the private sector are specialist physicians, since their services are in high demand by medical tourists. Public hospitals already lack enough specialists, as reflected in long waiting times for advanced procedures. To make the matter worse, Thailand has become an aging society, and senior citizens will comprise 20% of the population by 2035. Most of Thailand's elderly are in the low-income group and will therefore rely heavily on public hospitals. Furthermore, the “internal brain drain” might also erode medical education in Thailand, because a large number of specialists might leave public medical schools to private hospitals.

To cope with these challenges, the government should relax immigration rules on language fluency in order to slow down the "internal brain drain" process in the short term. Indisputably, quality control is most crucial. The public’s health must first and foremost be protected. Both local and foreign personnel need to show their competence in exams and clinical skills. Yet, physicians serving patients who are mostly or entirely foreigners should not be required to have proficiency in speaking Thai. Hiring foreigners would allow private-sector hospitals and medical tourism to continue to grow without luring away as many of the healthcare professionals who now serve Thais at public hospitals.

Bridging the HR gap in the long run requires education reform, so that more doctors, nurses and technicians are trained in Thailand. The current rate at which the system produces medical workforce is, and will be even more, inadequate. Severe shortage of physicians, nurses, and pharmacists would hamper Thailand’s aspiration to be a top-notched medical tourist destination. The reform may extend to hospitals and public health facilities re-organizing work processes to make more efficient use of limited human resources.

Public hospitals can adopt business models that improve retention of high-skilled workers. For example, some renowned public teaching hospitals have recently opened private facilities that provide services equivalent to those of high-end private hospitals. This allows them to bridge the pay gap for physicians, while generating revenues that can help support their public healthcare operations.

These changes will take considerable amount of time to deliberate and implement. Taking action now will help ensure that the success of Thailand's high-end hospitals does not sicken the nation’s overall healthcare system.