Malaysia was the fore runner when it came to offering medical tourism facilities. But now other countries are doing much better in this industry than Malaysia - why is this so?

Because malaysia has become expensive due to so many expats working and living there. There is also racial tension in malaysia between various ethnic countries.

Other countries like phils, india, israel medical tourism service has improved by leaps and bounds.

One cannot hope to be leading always, unless they are a cut above the rest. Malaysia has a lot to offer, but so do the other countries, and some times more so. As mentioned above India, Israel etc have excellent facilities and highly skilled medical treatments to offer, coupled with economical prices. The tourism facilities are also at the top, so it is not surprising that Malaysia has to compete harder to stay on top.