Interview with Bumrungrad's Group CEO, Curt Schroeder (transcript)

David Williams: This is David Williams, CEO of MedTripInfo.com. I am in Washington, D.C. this week, for the International Medical Tourism Conference.

Earlier today I interviewed Curt Schroeder, Group CEO of Bumrungrad International of Bangkok, Thailand.

We spoke about numerous topics, including the magnitude and drivers of cost differences between Thailand and the U.S., the role of information technology at Bumrungrad, and Microsoft's recent purchase of Global Care Solutions, which has partnered with Bumrungrad on software development.

We also discussed the number and nature of foreign patients, outcomes measurements, accreditation, and the future of medical tourism.

Curt, thanks for joining me today.

Curt Schroeder: Great to be with you.

David: Curt, can you tell me what are the basic cost differences between hospitals in Thailand and the U.S.? And, what are the drivers of those differences?

Curt: I think, typically, the price differential has been about 80 percent of the overall U.S. cost, so quite a bit less; a factor of four or five times. Obviously, the primary drivers of that are things like lower cost of personnel, which are quite noticeable, but I think beyond that is the actual model to deliver the care. It is substantially different in Thailand.

We have a very large, essentially multispecialty group practice made up of 700 or 800 physicians all operating as independent practitioners, but under one roof. What you get with that, is a very large clinic taking care of 1.2 million people a year, backed by a 550 bed hospital.

With that, you also get all the advantages: the economies of scale and the efficiency of the practice, so there is very little duplication; the doctors have access, as appropriate, to the medical records of the patients if they are being treated by other team members.

Altogether, it is not only a very inexpensive, but also a very efficient way of treating patients. Together with the obvious lower cost environment and less litigious environment, in terms of medical malpractice, this makes it a very cost effective comparison.

David: How much of the difference is attributable to just the model of care versus the labor side, if you are able to break it down? Also, on the malpractice side, I know there is a direct cost difference, in terms of the actual malpractice premium that you might pay, or pay outs that might have to be made. Does it also affect the style of care? Does it enable a different sort of a model, if you are operating in a different kind of litigation environment than you would be in the U.S.?

Curt:: Certainly. A lot of it has been talked about in the U.S. with the litigious environment of defensive medicine. I think I have been able to see both; I have been a CEO of hospitals in the U.S., as well as other countries in addition to Thailand.

I have seen the actual effect, when physicians are nervous about litigation. They order more than, perhaps, they need to to protect themselves. Frankly, there is also a lot of overordering related to poor coordination of care, when doctors do not know what other doctors are doing in real time. Taking advantage of, for instance, a common electronic medical record that we use, you reduce a lot of that duplication.

In addition, when you are not so worried about lawyers coming after you, you tend to practice more what you got taught in medical school, which is what you actually need to do to diagnose and treat a patient. I think all those are pretty powerful, in terms of the overall cost reduction.

How much is related to the local cost, for example: our salaries? When you look at salaries as a percentage of the cost in the United States, it is upwards of 50 to 60 percent. In Asia, it is closer to the mid-teens at Bumrungrad, it is about 16 percent. Of course, that is on the back of costs that are 80 percent less, so you can do the math and figure out how much less it costs.

These are all baccalaureate trained nurses giving excellent service. Our physicians are, of course, all board certified in their specialties. 250 of our physicians at Bumrungrad are U.S. board certified, fully certified by boards in the U.S. Therefore I think that the value which can be delivered in that environment is incredible.

If you look at the physician fees, the physician fees are equally good value. The average doctor fee, to see as an outpatient at a place like Bumrungrad, is about $14. To see a board certified cardiologist or a gastroenterologist --this is pretty good value internationally.

You may ask, "Why is that?" I attribute it to a couple of things, not the least of which is the fact that, I think, the physicians' expectations of income in Asia are less than they are in the U.S. and developed world. They do live well. They send their kids to good schools, but they are not considered the multimillionaires that they might be in other areas.

In addition to that, they have the advantage of working in these large multispecialty clinics, where they have very little overhead. The overhead offered to a physician in the U.S. is probably 50 to 60 percent. In Thailand, it is probably five or six percent, because they are working in a very large, multispecialty type of clinic, where there are thousands of patients going through a day. They get the advantage of that economy of scale.

They do not have to buy their own space; they do not have to rent; they do not have to buy their own computers; they do not have to worry about all of these complicated insurance forms. That is all taken care of by the hospital. Therefore they can afford to get much better pricing, where their overhead throughput is much, much higher.

David: I was going to ask you about billing and collections, and what impact that had on costs. One reason for asking that, is that as we start to talk about insurance companies in the U.S. potentially covering medical tourism, might that actually erode some of the cost advantage if you have to deal with the same sort of things that hospitals are dealing with here, on the receiving side in Thailand?

Curt: It could, but I think we have contracts now with over 120 international insurance companies. Right now, the insurance companies are actually thrilled to just see the low prices. They are not that concerned about all the paperwork and all the preutilization, authorizations and these types of things. It does streamline things substantially.

One of the favorite stories I like to tell, is one of the American insurance companies, which is paying for an emergency appendectomy for a patient, who came off a cruise ship, and whom we treated. We sent them the full bill about three days after the patient had been discharged. We got a nice email back saying, "Thank you for your request for deposit. Let us know when the rest of the bill is ready." The email track went back and we said, "No, this is the entire bill." And they said, "Well, it can not be. What about the doctor fees?" "No, this is included," we replied.

This email trail went back and forth. They were so incredulous that it could cost, literally, one-tenth of what it would in the U.S., that they literally could not believe it. They came close to calling us liars.

I think that, obviously, whenever you are dealing with third-party payers, you are going to be dealing with a longer leadtime and a slower payment. Right now, 70 percent of the revenue collected at Bumrungrad Hospital is paid by the patient at the time of service. Only 30 percent is extended over time. As we pick up more and more third-party agreements, you have to expect there to be at least a 30 day delay in payment, and that does cost money over time.

We are hoping that we can avoid the traps that the providers, insurers and third-party payers got into in the U.S. by creating such a morass of paperwork that had little value added in protection for the patient, the provider or the insurer, and driving up costs, requiring 50 or 60 people in an office just to process paperwork. Hopefully, we can avoid that.

David: Talk a little bit more about the role of information technology. In particular, you have a close relationship with a company called Global Care Solutions that Microsoft is in the process of acquiring. Can you tell me about that relationship, and what it does for you?

Curt: In my opinion, it has been one of the most critical core success factors, the way we are able to treat so many patients efficiently and do it in multiple languages. We had a great working relationship with our sister company called Global Care Solutions, started by a group of Americans and others who saw a need to establish a complete enterprise solution for health care.

15 years ago, we went looking for a system that could deal with up to 3,000 outpatients a day, would have an electronic medical record, all digital x-rays and so on. Frankly, we could not find a single solution. It was just a patchwork, which is largely the way it is being solved today.

Therefore we worked with a sister company to come up with a total enterprise solution. Effective around 1999, we went live with a complete electronic medical record as well as a complete digital x-ray system. It has continued to be improved over the years, so much that it attracted the interest of Microsoft, who was actively looking to develop an application software beyond their normal platforms.

We have been using Microsoft SQL Server and their usual development tools to develop the information system for our hospital. By developing it, we have now had it installed in the Philippines, the Middle East, Malaysia and Vietnam. It attracted the interest of Microsoft, and after looking around the world and shopping a bit, they decided to make this their core purchase for moving into health care applications. That sale was announced in November and they actually bought the entire intellectual property.

The good news is that they are staying and growing the business, using Bangkok as their base for their international development of a health care product. What that means for Bumrungrad is that we continue to be at the forefront of being able to provide health care very quickly and efficiently. In simple terms, we get all the new toys first and we will be able to continue to be at the leading edge of health care IT.

David: Is there any talk about how this acquisition fits in with what they have done with Azyxxi, which has a similar relationship with the MedStar Group? Is there synergy between the two systems, would you expect?

Curt: I think they are planning the synergy to do that. We are actually the second main acquisition by Microsoft . The first was of Azyxxi. We plan to integrate Azyxxi into the Hospital 2000 product. Azyxxi is very helpful in terms of visualizing data from multiple sources and it is an excellent analytical tool. Right now, the plan is to use Bumrungrad as the beta testing site, for merging these two great systems together.

David: There is a lack of information about just how big medical tourism is in the flow of patients. There are numbers that are thrown around that are not necessarily connected with what people might see on the ground.

As someone at the center of medical tourism, can you provide a little granularity in terms of how you are seeing the numbers? When you look at your foreign patients, how many of them are coming from where? How many of them are coming explicitly to have medical services rendered versus how many happen to be in the country, or in the region, and have something happen that needs to be taken care of?

Curt: There is a lot of excitement about medical tourism right now. People are pretty excited and that usually generates some optimism, in terms of the potential numbers that are out there. I can only speak for us in terms of how far it has come. If you look back in 1996, we took care of about 50,000 non-Thai patients. This last year, it was 430,000. If you look back to the year 2000, there were about 5,000 Middle Eastern patients that we took care of, and after the events of 9/11, we saw a huge shift in that business from Europe and North America to Asia. Last year we saw 92,000 Middle Easterners.

Now, Bumrungrad is actually the largest provider of medical care to Americans outside the United States. We are the largest provider of care to Middle Easterners outside the Middle East. There have been huge swings, very often caused by geopolitical and major economic events, rather than just as a recognition of Thai health care.

The numbers are increasing; they are organic; they are coming from an increasingly broad spectrum of places. We do treat patients every year from 190 different countries and territories and we ranked them from top to bottom I always look at the bottom of the list because I find it interesting to see about Antarctica, the Farrell Islands and Falkland Islands; we actually get patients coming from those places, one a year, or so.

When you look at the top 10, they have not changed that much. After Thai, you will be looking at the US and the Middle East as a group; individual countries: United Arab Emirates, Oman and Qatar, are in our top 10. Also Cambodia, Myanmar, UK, China and after that, you go through most of the South Asian and Southeast Asian countries.

David: What would be a typical amount of revenue that you would get from a US patient? How does that compare with one of the other nationalities you mentioned, either Middle Eastern or somebody else in Asia?

Curt: When you look at the overall revenue, which you might call --excuse the expression-- 'yield' from each patient, it is significantly different between the Thai patients and the foreigners as a group. In general, the foreign patients are about 50 percent more intense in terms of revenue. We charge exactly the same, as a matter of ethical concern, between Thais and non-Thais. We do not care whether you are a President, a King, a Queen or noodle vendor. The price is the same at Bumrungrad.

The overall cost per discharge is about the same for Americans and Middle Easterners. You are looking at a cost of, maybe, 40,000 Baht, or about $1,200 a day. On an average length stay of five days, you are talking $6,000 per admission or per discharge for Americans.

David: You talked earlier about some of the quality indicators and having a lot of physicians board certified within the country as well as a large number of them being board certified in the US. Are there other sorts of measures that you look at for quality and outcomes that you record and then publish, either internally or externally?

Curt: I think Bumrungrad has established very early on a reputation of making sure that the product is, essentially, of good quality. I think the founders of the company have been very clear on their priorities. They want to be proud of the hospital and they want it to produce good quality results and the business will come. Bumrungrad was the first ISO 9001:2000 certified hospital in the world and its first Thai-accredited hospital. In the year 2005, it became the first hospital in Asia to be Joint Commission International accredited.

We monitor hundreds of quality indicators. We benchmark ourselves against what we find to be the best hospitals in the world, whether it is the Top 100 hospital survey in the US, or if we find one particular hospital doing something exceptionally well --whether it is in Thailand, Singapore or UK-- we use that as a benchmark.

I will say, it is notoriously difficult to get good comparative data, where you are collecting it the same way. I think it is one of the things that a lot of the international players are looking at, to get a good, level playing field, where we can collect data the same way and compare it. I think any good hospital wants to know where they really stand. Whether they want to publicize it or not is a different issue, but they certainly want to honestly know where they stand. If they do not, that is a problem.

David: Do you want to publicize it? Is it something that you have done? Is the comparison good enough to be able to do that and be confident in it?

Curt: Yes, I think we publicize data. Certainly, anything that is required by law and others, we publicize. We also are increasingly sharing this information with third party providers. As we begin to see more of a B2B types of relationships developing, particularly with US insurance companies, they want to see real data. They are not swayed too much by the fancy brochures and the nice websites. When they start to send American patients abroad, they want to see real outcomes data.

I think we can provide that on an as good, or better, basis than in a U.S. hospital. As you would know, in the U.S. it has been notoriously difficult. It is hard enough to compare two hospitals in Philadelphia, let alone try to compare them between Bangladesh, Thailand, Singapore and UK. That being said, our information is an open book and we publish information with regards to incident density rates, slip and fall rates, infection control rates, medication error rates and all those things. We are very happy to show those, because they are our own benchmarking; they are upper five percent.

David: There is a lot of discussion now about price transparency in the U.S., because the idea of getting a price from a hospital has been sort of an oxymoron until now. Are you able to actually publish price lists, or does it tend to be the case that you have to see the patient and see how it works out and add it up at the end?

Curt: We can do both. If you were to go to the website, at Bumrungrad.com, you will be able to see almost a hundred pre-priced, fixed priced packages, which are available to anyone including third party payers. In addition to that, we have a consultation service that helps price and does mean, median and mode. It gives people an idea what the range will be, based on our actual billing. That, I think, is enough transparency. As you point out, if you try to get similar types of pricing information from a U.S. hospital, it is more problematic; it is more difficult.

We have sort of grown up very much in a retail environment in Asia. The Asian population is used to seeing prices be clear. They want to know what it is going to cost. In 1997, when we began doing significant overseas business, we had to be transparent, because people who were coming, they had no idea what it would cost.

Some countries, they need to know exactly what it is going to cost, because they have to mobilize the money. Some countries, like Vietnam, have very strict currency export regulations so we have to set up offices to help collect the money for them. To do that, you have to know what it is going to cost. Providing that level of predictability is helpful. After the '97 crisis in Thailand, the Thai patients became very aware of pricing as well.

The ability to provide pricing in a package way was something that gave predictability to health care. It is not easy to put together those packages, but on the other hand, it is not that hard, either. We have been doing it since 1996, and I think that has just made a very natural segue for things like medical tourism or medical outsourcing, because that is what the payers were looking for, and that is what the patients wanted to know. They want to know predictability; they want some sense of what it is going to cost.

That being said, trying to tell what patients will qualify for gets very complicated when you are 12,000 miles away and you are talking through email. We always have the proviso that any estimate is still pending a hands-on assessment by a Bumrungrad physician in Bangkok, because until they see, feel and touch the patient, it is unrealistic to expect we can know exactly what has to be done. All we can say is: "If this is what needs to be done, here is what it will cost."

David: You have been involved in accreditation, presumably both in the US and in Thailand. Can you offer any insight on contrasts between the JCAHO accreditation process and JCI? Are there significant differences in those?

Curt: I have been in Thailand for 15 years. I have found the Joint Commission International actually quite refreshing. The process is very much the same. It is very different than accreditation in host countries and in places in Asia or abroad, where it is more of a licensure process: how many nurses you have; how wide are your hallways. It is a type of a physical assessment; a checklist.

Joint Commission has, for quite some time, been a process of finding out, "Does your hospital have the systems in place that can ensure quality?" They have a way to measure when you are not following the system; "Are you correcting it and making it better?"

Their survey process very much involves talking to patients, talking to the workers not talking to managers, and certainly not CEOs like me, they do not care about. They want to know that people at the bedside know what the processes are, and that they are following them, as well as and, if there is a variance, that they know how to fix it. I think that is unusual and rather unique to the U.S. JCAHO type of accreditation, and they have extended that same methodology.

What they have stripped away, though, is all of the noise that came in the U.S. as a result of legal regulation and Medicare certification which, as you know, was combined with Joint Commission many years ago. That has all gone away, and it is, frankly, rather refreshing that they get back to the fundamentals: "Do your people know what they are supposed to be doing and are they doing it?" To me, it is the purest form of accreditation.

David: How is the competitive environment changing for Bumrungrad, both within Thailand and throughout the region and the world?

Curt: When you are a pioneer in the business, the good news is you have 100 percent market share when you start out. The bad news is, whenever anybody enters, you have less than 100 percent.

The good news is: the pie is getting bigger, so we continue to play a dominant role, although we are not 100 percent market share anymore. Actually, I am very happy to see other Thai hospitals coming up and stepping up to the bar with Joint Commission Accreditation. To the extent that a place like Thailand can continue to shine with 10 hospitals that are operating at that standard, we will continue to benefit from that.

We see that the more hospitals that are getting into it, that are taking it seriously, doing a quality job, the better it bides for the overall industry. As the pie gets bigger, we are happy to take a fair share of that.

David: What is the impact of having a large medical tourism industry on the economy and on the health care system in Thailand?

Curt: Each country looks at it differently as does each ministry within each country. The Tourism Authority of Thailand sees it as another excuse for a tourist to come, so they take it from that angle. The medical industry may look at it differently, asking, "Does this put a strain on personnel and does it take valuable resources away?" That may be a different view of medical tourism.

The Commerce Ministry likes it, because it means more revenue coming in. They see it as a way to bring in foreign currency. There are disparate views even within a country, but I think, generally, it has been viewed as positive.

David: What can you tell me about the future of medical tourism, and whatever you want to tell me about Bumrungrad's future plans? Also what impact might medical tourism have on the US health care system?

Curt: We have had so much interest from people coming in and touring the hospital. We have so many foreign patients that people come and are saying, "I want to do this in my own country; I want to develop better health care. I want to become a medical tourism hub." As a result of that, several years ago we created a subsidiary called Bumrungrad International Ltd., which does all our international investments. We now have hospitals in the Philippines, in the Middle East in Dubai and Abu Dhabi. We have 76 clinics now in six countries, including Tokyo, Korea, Taiwan, Philippines, Malaysia and Singapore. The simple throughput of all these foreigners coming through Thailand has generated a lot of deals and opportunities, which we are trying to take some advantage of and continue to develop.

In terms of U.S. health care, I think that it is still in its early stages beyond the fact of individuals coming over. I think that, for the first time maybe ever, insurance companies, both large and small, have started to take a serious interest in it. They are coming to seminars and symposia; they are listening; they are trying to figure out how to fit this new, strange animal into their zoo and figure out what it means.

I think medical travel has legs. I think it is here to stay. I think the fundamental economics are just too compelling. I think people will take a look at it, I think U.S. employers will look at it. I also think that over the next couple of years, we will begin to see how big it possibly could be.

David: I have been speaking today with Curt Schroeder, who is Group CEO of Bumrungrad International.

Curt, thanks very much for your time today.

Curt: Thank you.