How to profit from 'medical tourism'

What is medical tourism?

Travelling for the good of your health. This isn't new. In ancient Rome, the wealthiest citizens enjoyed restorative breaks in Cyprus, and Alexandria, on the Egyptian coast, was a top destination for Greek medical tourists in the third century BC - attracting people owing to its climate, political stability and reputation as a centre of medical excellence. Then, in the 19th century, well-off Britons toured the Continent to take the waters at German spa resorts. Today, rich people from Western and other countries are increasingly travelling great distances to get medical treatment - even surgery. However, they are often doing it not because they can't get the same treatment at home, but because it is cheaper abroad.

What's fuelling modern medical tourism?The same things that expanded health-related tourism in the 19th century: cheap travel and large numbers of well-off people with excess income. Combined with too-expensive, or hard-to-come-by domestic treatment options, and the information revolution sparked by the internet, this means growing numbers of people are prepared to seek treatment abroad. According to Martin Spring's On Target newsletter, medical tourism worldwide is already worth around $40bn a year, and is growing at an annual rate of up to 30%.

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What kinds of procedures are we talking about?

Everything from dentistry and hip replacements to IVF, and even open-heart surgery. In Europe, the main direction of travel is from West to East. Germans (and also Americans) have been travelling to Hungary for years for high-quality, low-cost dental work, for example, but since joining the EU, Hungary and Poland have seen a surge in medical tourism. Polish dentists and cosmetic surgeons, and Czech and Polish fertility clinics (prices tend to be around half the German levels) are booming as a result. In Britain, people have the legal right to seek surgery abroad if they face undue delay' at home - and the NHS now has several pilot projects in place to send patients to France and Germany for routine operations.

And further afield?

Private hospitals in developing countries such as Thailand and India are actively promoting themselves internationally. For example, complex open-heart surgery that would cost up to $150,000 in the US or $75,000 in Britain can be carried out in India's best hospitals for $10,000. Even with more routine operations, such as hip replacements, hefty savings can be made: a hip replacement that costs $3,000 in India costs $39,000 in the US. Another draw is that some countries have long track records in specialised surgery that is not generally covered by health insurance - sex change operations in Thailand and cosmetic surgery in Argentina or South Africa, for example. In South Africa, several firms offer trips that combine cosmetic surgery with safaris or beach-based holidays.

How do governments feel about this?

They love it, especially in Asia, where the fast-growing sector is a nice little earner. India attracted 150,000 medical tourists last year and a recent report from McKinsey consultants forecasts that Indian medical tourism will be a £2bn business by 2012. Singapore, Malaysia and the Philippines all have small but growing medical-tourism sectors, with government strategies in place to foster growth. But the biggest player of all is Thailand, which attracted one million medical tourists.

Are there opportunities for investors here?

Yes. There are several private hospital groups looking to take advantage of the boom in transnational healthcare listed on Asian stock exchanges. Martin Spring suggests that Bumrungrad Hospital (BAK:BH) in Bangkok is particularly worthy of investigation. It was the first hospital in Asia to be certified by the US-based Joint Commission on Accreditation of Healthcare Organisations and was recently rated by Asia Money magazine to be the best small-cap stock pick in Thailand. Of Bumrungrad's patients, 40% are medical tourists, and the group now has branches in China, the Middle East and in other southeast Asian countries. The shares trade on a reasonable forecast p/e of 15 times. Otherwise, in Singapore, where the government has set a target of attracting a million foreign patients by 2012, Raffles Medical Group (SIN:R01) - which offers tourists products such as a US$1,000 "comprehensive health-screening package", incorporating 25 tests and three nights' accommodation - is worth a look. It has a strong balance sheet, good management and trades on a p/e of 14 times. Finally, Spring points to Parkway Holdings (SIN:P27), Singapore's oldest and largest private medicine group.