TT-553 -- Medical Tourism a Non-starter, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, February 14, 2010 Issue No. 553


- What's new
- News
- Candidate roundup/Vacancies
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It is very obvious that the Japanese hospital system is in
a state of crisis. In the last couple of years there have
been frequent reports of people dying in the back of
ambulances because hospitals are rejecting them due to
a shortage of emergency care doctors. The fact is that
there is not only a shortage of people -- both doctors and
nurses, but also a growing shortage of beds as well, due
to the poor financial condition of many hospitals.

A rare news report on the subject surfaced last year saying
that of the nation's 7,785 non-psychiatric hospitals, at
least 600-700 of them were operating in the red and that of
the 80-90 or so hospitals closing down each year (Health
Ministry statistics), about half of them were closing
because of financial problems.

This deplorable situation is, in our opinion, of the
government's and medical profession's own making -- with
plenty of help from the nation's aging society and the
domestic economic slump.

The first reason for our placing the blame is based on the
fact that it is still illegal for a company to own and
operate a hospital, and instead only qualified doctors may
head up a facility. This rule could only have been dreamed
up to protect doctors' privileged positions in society since
experience abroad proves that companies are indeed very
capable of operating a care facility.

Yes, we realize that some companies such as home/office
security firm Secom have found ways around this ownership
law by appointing doctors to run a facility owned by them,
but it's not a strong value proposition for investors when
you could technically be in breach of the law at any time.
As a result, hospitals are seldom run as sound commercial
operations -- and yet they still have to make profits in
order to pay salaries, equipment, and building costs.

[Continued below...]

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[...Article continues]

Another issue is the "addiction" of general hospitals
nationally to prescription and services reimbursements by
the government as their main source of income. This is of
course what happens when you have a universal but
compulsory public health system that pretty much excludes
private health care and is set up to allow doctors to
over-prescribe (up to 50% more prescriptions compared to
the U.K., for example) as a way to make extra cash.

The Japanese public medical system currently allows for
about 5,400 procedures, each of which is strictly regulated
in terms of price and method in order to qualify for
government reimbursement. This system does indeed provide
a certain baseline of public health care, but not much
else. You can forget about discretionary procedures as well
as new drugs and treatments from overseas that haven't yet
gone through the very slow approvals process from the
Ministry of Health. If you want options, you'd be best served
hopping on to a plane to Thailand or Malaysia and buying
world-class services at highly discounted prices.

Then of course there is the fact that the system was never
intended to deal with the current flood of old people.
Despite the fact that the Japanese are the healthiest
amongst citizens of advanced nations around the world, the
demand for hospital beds and lifestyle disease treatments
continues to escalate.

As a result, the pressure is on.

The financial crisis for many hospitals has come about as
the government continues to seek ways to cut its annual
spending. Targeted are all types of medical costs, but
particularly the massive amounts of fixed fee
reimbursements for services and drugs. The cost cutting got
a boost with the Koizumi administration in 2002, when the
co-payment costs for seniors was increased and an emphasis
was placed on moving from original-maker drugs to generics.
The use of generics has since increased dramatically and
the government now has a goal of making 30% of all drugs
prescribed to be generics by 2012, up from 18.7% in 2007.

So the scenario is ugly: an ossified system of
self-interested owners (well, the successful ones, anyway)
and single-source profits that between them preclude
entreprenuership and price/services differentiation. Now
that the main source of income is getting squeezed off by
the government, what are financially struggling hospitals
to do?

It seems that one idea is to start selling services to a
new category of user who is NOT bound by the rules of the
Japanese health system and its pricing restrictions -- that
of the medical tourist. The Japan Tourism Agency has said
it will launch a trial program from this April to start
attracting wealthy Chinese who might be interested in
having medical procedures conducted in Tokyo. No doubt they
are trying to follow the lead of the very successful
medical tourism sector in Thailand, where 1.36m people
traveled for medical services that cost just 20% to 30%
of similar operations/treatment in the USA and Europe.

The Agency is cooperating with about ten hospitals in Japan
(mainly in Tokyo) and some university hospitals in Beijing,
such as the Tsinghua University hospital. The focus will be
on brain surgery, plastic surgery, and oncology. While this
sounds like it could be a good idea, the JTA has admitted
that it has a number of challenges, including language,
payment methods, and "other" issues.

We spoke with medical industry expert, John Wocher of
Kameda Hospital in Chiba, about the feasibility of such a
program. He pointed out many problems with bringing Chinese
patients into Japan, the least of which is the simple
matter of getting cooperation from the immigration
authorities. Specifically he mentioned the case of a Chinese
patient who was only provided a visa after THREE MONTHS of
supplying detailed documentation of his medical need to the
Japanese consulate in China. The patient was consistently
refused a visa despite Kameda's acceptance of the person
for treatment. Finally he was let in on a visa allowing him
to visit a relative who coincidentally is living here.

Wocher then went on to say that Korea already has a medical
visa and it is very easy to apply for. It looks like we have yet
another example of internationalization where the Koreans
are leaving Japan behind in the dust.

Other problems with medical tourists are likely to be:
* Logistics -- Specialized transportation may be needed
from the airport (expensive)
* Language -- Chinese-Japanese interpreter may be needed on
a continuous basis (expensive and difficult)
* Legal -- Informed consents for operations, etc., are
needed in Chinese, specific to procedure
* Fees -- How much to charge? Chinese don't have a national
insurance system matched by employers
* Payment methods -- Bank transfers, UnionPay?
* Culture -- Wealthy patients are demanding -- are Japanese
hospitals ready to treat their patients as customers and
not as children? We wonder...
* Amenities -- Most Japanese hospitals have utilitarian
rooms -- which may be quite unsuitable for wealthy patients
* Medical Records -- Need ability to receive adequate
medical history and documentation on existing work done
* Post-operative follow-up -- Who will do this and how will
they communicate?
* Accompanying family -- Do they also get visas?
* Religious Facilities -- How many Japanese hospitals have
rooms marked with the direction of Mecca?

Good luck JTA...! We think the answer to making Japanese
hospitals more profitable is much simpler.
* Allow people to pay extra to get services on top of
government reimbursed treatments, instead of the current
all-or-nothing approach.
* Let companies own and operate hospitals so as to provide
a parallel private medical care system (freedom of choice)
* Open up the medical sector to commercial competition from
foreign companies (now that's REALLY radical!)

Don't forget our entrepreneur seminars coming up this
weekend, Saturday February 20th in Tokyo and next week
Saturday February 27th in Nagoya. For more info, go to:

...The information janitors/


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+++ NEWS

- High-paid executives to be named?
- Body found in landing gear of Delta jet
- Beer sales at record low
- INCJ fund choosing targets to buy into
- JAL and AA apply for antitrust immunity

-> High-paid executives to be named?

The Financial Services Agency (FSA) may require companies
paying senior managers more than JPY100m in salaries and
other forms of compensation annually to disclose such
individuals names and pay details. Right now the proposal
is being floated for consideration, but if accepted will
become law by the end of March this year. Apparently the
FSA will require ALL private and public companies that
produce financial statements as a basis for public
financings and other public activities to participate.
(Source: TT commentary from, Feb 13, 2010)

-> Body found in landing gear of Delta jet

Unbelievably, a Narita airport mechanic found the body of a
man who stowed away on the landing gear of a Delta jet,
while servicing it in Japan. Apparently the man, who had no
identity on him, had boarded the jet in New York and had
either frozen to death or died from lack of oxygen during
the trip. ***Ed: You'd have to be either desperate or
stupid to try this on a 13-hour flight to Tokyo...**
(Source: TT commentary from, Feb 13, 2010)

-> Beer sales at record low

Domestic beer shipments fell to their lowest level in 17
years due to a dramatic reduction in alcohol consumption
by young Japanese seeking to cut back personal expenses.
Overall, January shipments fell 12.9%, with regular beer
down 11.9% and low-malt happoshu beer dropping 32.8%. As a
result, Kirin announced that its earnings fell almost 39%
in the current fiscal year. (Source: TT commentary from, Feb 11, 2010)

-> INCJ fund choosing targets to buy into

The government's investment fund, Innovation Network
Corporation of Japan (INCJ) has said that it has received
investment requests from about 200 companies, including
Toshiba, Alps Electric, and others with clean and green
technologies. The fund, which started in July 2009, has
about JPY900bn (US$10bn) to invest. It will start making
investments later this year and is targeting auto makers,
electronics makers, measuring equipment firms, and others
with expertise that could be applied to the greentech
sector. (Source: TT commentary from, Feb
12, 2010)

-> JAL and AA apply for antitrust immunity

With JAL having made its decision to continue with existing
partner American Airlines over a counterbid from Delta
Airlines, the two firms moved this week to quickly to ask
the U.S. Department of Transportation (DoT) for antitrust
immunity as its first step towards being part of the
planned Open Skies agreement proposed between Japan and the
USA. (Source: TT commentary from, Feb 13, 2010)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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Entrepreneur's Handbook Seminar 20th of Feb, 2010

If you have been considering setting up your own company,
find out what it takes to make it successful.
Terrie Lloyd, founder of over 13 start-up companies in Japan,
will be giving an English-language seminar and Q and A on
starting up a company in Japan. This is an ideal
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specific questions that are not normally answered in
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EXTRA: If you live in Nagoya, catch our Feb 27th seminar.

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Topic: Cloud Computing: Fact or Fiction?

Details: Complete event details at
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Date: Thursday, February 18, 2010
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members)
Open to all. Venue is Foreign Correspondents' Club of Japan



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