In a global medical tourism industry which, taking into account the latest figures from various countries (and ignoring travellers who get sick, expatriates, and spa/wellness) is in the region of 5 million medical tourists, the Cayman Islands is miniscule and of no apparent importance. Even more so if you realize that the top twenty destination countries probably account for four-fifths of volume, leaving some 300 or more others to scrabble around for the rest.
But in how a government encourages medical tourism by changing laws, including those on malpractice, medical registration, and tax, the Cayman Islands is worth examination.
IMTJ has regularly reported the plans for Dr Devi Shetty to establish a medical tourism hospital in the Caymans, and how some local doctors are opposed to the proposal. The hospital is very much dependent on attracting US medical tourists, which as we have discussed here in recent weeks may not be the ‘ many millions’ promised by some forecasters.
What should raise some concerns within the medical tourism industry is how the developer, according to the local press, has effectively held the government to ransom, before spending a solitary dollar in investment.
Medical tourism at a price
The Caymans is a group of three islands with a population of 55,000 – a British territory that has never taken full independence but became a significant offshore financial centre. It has a large finance industry attracted by its tax exemptions and privacy and is home to 70 per cent of hedge fund registrations worldwide and is also a significant banking centre. The UK government in 2009 lent it $59 million to bolster public finances. It may seem strange that a tiny offshore financial centre needed a financial bailout. The Cayman Islands thrived as a place to conduct international business with a reputation for tax efficiency; strong professional services saw finance account for 55% of national GDP. But cracks appeared in Cayman’s domestic economy after spending on personnel and ambitious infrastructure projects far outstripped public income.
In March 2010, the Miller Report – the result of an independent commission set up to analyze Cayman’s fiscal sustainability – revealed that the British overseas territory’s economy has problems. The global economic downturn tested the resilience of most offshore centres but the negative impact on public revenues was most prominent in jurisdictions that rely heavily on tourism and construction and Cayman suffered badly. The Miller Report showed that the Cayman government made plans for expansionist spending programmes and then when the economy went sour, they found themselves in a bind. In March 2011 the UK government announced a new strategy on overseas territories which basically says they will offer help and advice, but no cash, either as aid or a loan; effectively leaving the Caymans to sort out their own economic problems
With tourism and offshore finance suffering, the government has to find a way of getting revenue and increasing employment. This suggests why the local government is bending over backwards to get Dr Shetty’s scheme live. The most that other countries have done on legislation to attract medical tourism is to offer simpler visas, change laws to enable existing hospitals to attract medical tourists, and alter ownership laws to encourage investment. Cayman has taken much more significant steps, with changes to malpractice laws hand doctor registration, plus planned changes on organ donation laws. Dr Shetty’s plan is to offer lower cost medical treatment in a very high cost country, by paying doctors more than they would get at home in India, but much less than they could get a few miles away in the USA. Dr.Shetty has regularly been quoted in the US and Cayman press as saying that he would charge $10,000 for cardiac bypass surgery, much less than in the USA.
A 2000 bed hospital targeting US patients
The 2000-bed healthcare city in the Cayman Islands will target American patients. It will cost about $2 billion and could include a hospital, medical university and assisted-living facility. Construction is set to begin this year on the initial $100 million phase with a 200 bed hospital opening in 2013 that expects to get 50 % of its patients from US medical tourists and the rest from locals.
Earlier reports indicated that all the funding would come from the Shetty family's Bangalore-based hospital group, Narayana Hrudayalaya Private Ltd. Latest reports indicate that the bulk of the money will come from outside investors in India and the US, including a US insurer, US bank and Indian investor. But Dr Shetty is refusing to confirm who the investors are. This is already making some islanders nervous, as being an offshore finance centre they have had their share of dubious investors, including the notorious Bernie Madoff. Dr Shetty has been quoted in the Cayman and US press as expecting much business to come from US insurers. This is curious on two fronts- US insurers never pay the quoted price of any operation, and many US insurers could be nervous of doing business in a country where the medical negligence laws have been amended so that US court actions on negligence will not be enforceable by local courts.
Opposition from local doctors
Despite rigorous protests by members of the Cayman government that the hurriedly rushed in laws have nothing to do with the medical tourism hospital deal, that the two are linked is obvious to several locals. Chief opponent of the changes is the Cayman Islands Medical and Dental Society’s entire executive council, whose spokesman Ezzard Miller has pointed out numerous problems with the law changes.
The doctors are very concerned that the registration of health practitioners is being removed from the authority of legitimate professional bodies and placed in the hands of politicians. The Caymans' incentive package for the new hospital includes duty waivers on $800 million of medical equipment, recognition of Indian medical credentials and a discount of up to 30 percent on work permit fees for the influx of foreign workers expected to staff the hospital.
The Medical Negligence (non-economic-damages) Amendment bill 2011 was passed by the Legislative Assembly, despite the Law Reform Commission having recommended against it .The law will not only cap the awards that a court may give to a victim of medical negligence in Cayman but will also prevent any awards given in courts outside the jurisdiction in connection with doctors or hospitals that have practised there or incidents that have occurred there that exceed the $500,000 limit. The limit is a total one irrespective of how many individual incidents or doctors or hospitals are involved.
The law overrules international law and all other local law. So if a US medical tourist sued in the USA for treatment that had happened in the Caymans, won the case, and had been awarded damages, clause 4 of the law says” a foreign judgement, arbitral award or monetary compensation award is not enforceable by courts in the Islands if it exceeds the amount of damages awarded in the islands.” This latter clause means not only is it impossible for anyone to sue for more than $500,000 in the USA, if the local Cayman courts rule that there are no damages or say $20,000 only, then that is the limit that a US court can rule on. US lawyers could argue that a local law, which effectively says international law does not apply here, is actually illegal under international law. Also, the Caymans are not independent, but a UK overseas territory, so lawyers could argue that UK law can be used to overrule any local law.
The government has also made changes to the health practitioner’s law, which introduced a second tier of medical staff who will not be required to reach the normal practice standards, as long as they have medical qualifications from India and other listed countries not previously accepted in Cayman. Another legal change yet to be completed is one that the hospital has allegedly sought is a need to allow organ and tissue transplant and donation. A new committee will examine what type of legislation would be required and begin drafting that law.
You could be forgiven for thinking that with all this hurried legal flexibility from the government, that the investors have spent lots of money locally. But in a mid-March interview with local news service CNS, Gene Thompson, who has been working with Dr Shetty to help get the proposed hospital project off the ground, confirmed that a site has not yet been chosen, despite wide speculation that it may be in East End. So we have five major changes or proposed changes to the laws of the land, for a hospital that as yet has no land and no planning permission.
Gene Thompson of the Narayana Cayman University Medical Centre made a presentation in August 2010 to the Cayman Islands Tourism Association. CITA Harry Lalli of CITA put it in context, "The tourism industry in the Cayman Islands is suffocating from a perfect storm of increased fees, decreased services, decreased visitors and a declining population, and a project like this has the ability to put hundreds of millions of dollars into government immediately and billions over the life of the project. That can give tourism and all businesses here the breathing room to get back to profitability and more so, to begin to grow again." The presentation highlighted
- Of the forecasted US$2 billion in capital expenditure, US$200 million would be spent in the first two years.
- Investments in the hospital and accommodations will total US$200 million in the first phase
- An additional 10,000 rooms will be needed by 2024 and this will generate US$1.2 billion in construction spending
- Room tax will generate US$4.4 million in 2013 growing to US$56 million by 2024
- Tourist arrivals to increase by 87,600 for 2013 and continue up to a 1 million increase by 2025.
The mathematics of the investment are puzzling. The Caymans is a very expensive place to live and even allowing for the importation of low cost foreign workers and Indian doctors paid far less than they could get a few miles away in Miami and assembly line medical treatment, the costs will be considerably more than in India. Unless the hospital is working at or near full capacity, and getting the quoted rate rather than insurers paying a third of that rate, and dealing with high cost short-term treatment rather than the full gamut of treatments needed by locals and visitors, I am struggling to see how any investor is going to get a return on the $ 2 billion investment.
It is far from clear on what basis the projected numbers were quoted; 87,000 extra tourists in the first year of business and 1 million by 2025.The chances of getting those numbers as medical tourists are remote, but a lot may depend on what they build in the medical city. It is hard to see anyone can make sustainable profit from a medical university and assisted living. The only way I can see the investment delivering those numbers and making money is by adding hotels, holiday properties, or even a casino to the development.
Medical tourism still suffers from criticism that low cost is accompanied by increased risk of medical problems, that intermediaries are only there to make a quick profit while the boom lasts, and that some in the business are only interested in a quick buck. Much has been done to dispel these criticisms with the professional approach of most of those in this business. So when a government changes laws on medical malpractice, doctor registration, and more to entice a speculative medical tourism proposition, we should voice concerns.