Health City Cayman Islands

Overview

Health City Cayman Islands (HCCI) is a conglomeration of multiple-specialty hospitals within a single campus in medical tourism, a new business industry in the Western Caribbean Sea. Established in 2014 with initial investment of $70 million, HCCI has achieved some economic success thanks to its proper business strategy; however, it is also facing some potential challenges which need certain measures to tackle.

1. Please analyze the strategy of Health City Cayman Islands. 40%

Business model (WHO, WHAT, HOW)

HCCI chose to target broad customer segments. They may have different economic circumstances (“the more so for the less affluent”, “pediatric patients with congenital heart problems” vs. “retired expats”).

In terms of geographic regions, its target customers are mostly Caymanians, 38 million inhabitants of the Caribbean, and 950 million people in the Americas and the Caribbean Islands, especially those who consider medical tourism as an option to save healthcare expenses.

HCCI aims to develop medical tourism as the third leg of the island economy by replicating and applying Narayana Health (NH) model. Low-cost and high quality medical services are value propositions HCCI tries to bring its customers through several phases of development. In its first phase, HCCI will offer a limited number of specialties, then will expand the hospital in scope and size by setting up a medical college, and develop assisted-living homes for seniors during its subsequent phases.

HCCI has adopted several innovative measures to minimize the construction costs, save electricity bills, make use of local labors and supply sources, utilize technology in management. At the same time, HCCI still can ensure its high-quality services that patients received better care from nurses, and are more exposed to natural light which helped the healing process. In addition, the support from Cayman government has contributed significantly to its cost leadership strategy. Accordingly, HCCI is exempted from all tax liability for 25 years irrespectively any changes to tax laws; HCCI would not pay any customs duty on the import of medical supplies for the first $800 million; Cayman government also cover damages in malpractice cases to $620,000. This has greatly reduced the insurance cost for HCCI.

To encourage more international customers coming to HCCI, Cayman government has agreed to grant new tourism visa for patient approved by HCCI within 48-72 hours. Besides, HCCI planned to gain accreditation from US-based Joint Commission International (JCI) after the first year of operations. The accreditation by JCI validated the high quality at the hospital and this would surely lead to an increased number of patients visiting the hospital. Supporting potential customers with convenient travelling procedures has helped HCCI attract more customers; high quality recognition from reputable organization helped to retain customers and manage their relationships with HCCI.

Looking at HCCI’s business model, it is clear that HCCI has made a set of reinforcing choices between it target customers, what and how to create value for its customers. Realized that in 2007, 100,000 – 150,000 Americans traveled abroad for medical care given the high health care cost in the US; also realized that the economy of Cayman Islands needed to be diversified after recession and medical tourism is the potential industry; acknowledged the easy access to Cayman Islands of surrounding residents and the island’s reputation as a preferred tourism destination, HCCI has catered for their needs by establishing the islands as a medical tourism hub.

Its cost leadership strategy is a perfect match for its target customers (Caymanians, expatriates, medical tourists) who seek both more affordable and quality tertiary care in the Caribbean. At that moment, the more cost-effective options available in the US’s neighbor countries and the two existing hospitals in the Islands had limited capability to deliver tertiary care while it took a long and complicated visa process for Caymanians in need of treatment to be flown to hospitals in Florida. HCCI’s proper strategy is to attract and retain customers by convenient visa process high quality accreditation. To achieve that, various measures to lower construction and operation cost, supports from Cayman government have contributed to its success. Besides the above mentioned, modern technology implications and effective training program provided to HCCI’s staff to ensure that patients from any country would feel comfortable with its service have modified HCCI’s strategy: “charge less, treat more”. Overall, HCCI’s business strategic choices seem to be externally and internally consistent and closely reinforced each other.

Industry factors analysis

Medical tourism is a potentially profitable industry in Cayman Islands since:

1. Competition in the industry

There are not so many competitors in medical tourism industry, also the products and services they offered are limited. Countries like Colombia, Costa Rica, Cuba, and Mexico focused on cosmetic and dental procedure; two existing hospital in the Islands are not specialized in tertiary care. What’s more, medical tourism is one of the fastest growing segments in the healthcare industry. Considering these factors, HCCI did not face fierce competition when entering the market.

2. Threat of entry

While it requires high capital requirement and a firm must overcome all complicated legal barriers to establish a hospital, HCCI has taken advantages of its “process efficiencies and economies of scales to drastically reduce the cost of medical care” (Dr. Chandy). As an extension of Narayana Health (NH), a very successful hospital based in Bangalore providing affordable health-care services to the large low-income population in India, HCCI has superior access to channels of distribution. Therefore, we can see that from the beginning HCCI did not face strong barriers to entry as time and costs are favorable, hence consolidating its power to entry.

3. Power of supplier

HCCI’s strategy is to source and get cheap supplies from India. Also, the HCCI team decided to construct its own dedicated oxygen generation plant instead of procuring from exorbitantly expensive oxygen cylinders from outside the island. This has freed them from passive dependence on suppliers.

4. Power of buyers

Customers of HCCI do not have much bargaining power when it comes to hospital expenses. While the demand for tertiary care is on the increase, customers have weak ability to drive price down or to switch to other more favorable options given the high cost of medical service in the US compared with low-cost, high-quality at HCCI.