By John C. Goodman
Originally posted at Forbes, April 2016
Have you ever wondered why hospitals don’t compete on quality? Say there is a hospital in your area that has lower mortality rates, lower infections rates and lower readmissions rates than any of its competitors. In any other market, the business would be scrambling hand over foot to make sure every potential customer knows about its superiority.
But not in health care. What is true of hospitals is also true of doctors. You could be living next door to one of the best specialists in the country. But odds are the doctor will never tell you about it.
Why is that? The short answer is one I gave at the Health Affairs blog not long ago. (See here and here.) Providers who don’t compete on price typically don’t compete on quality either. And the reason we don’t see price or quality competition in health care is that normal market forces have been systematically suppressed for well over a hundred years.
But hold on. Things are about to change and I predict that they will change rapidly. Turns out, there is more to Grand Cayman Island than white sand, blue waters and the opportunity to feed squid to sting rays.
Health City Cayman Islands (HCCI) is open for business and it’s getting ready to target American patients big time. HCCI offers package prices that include airfare, ground transportation and hotel arrangements for the patient and a caregiver. Unlike US hospitals, patients know in advance what procedures are going to cost and it’s typically about one-third of what they would pay in this country.
What about quality? Here is something I have found to be generally true in all health care markets. Wherever patients pay a fixed package price, quality tends to be higher. There are two reasons why. First, providers who compete on price almost always compete on quality as well. Second, higher quality medical care is often lower cost medical care.
In the United States, hospitals make money on their mistakes. If a patient in a hospital gets an infection, more care is needed and that creates more opportunities to bill the third party payers. Ditto for readmissions. A patient who is released prematurely or one who was not properly cared for, is a patient who is more likely to return. That gives the hospital yet another opportunity to bill.
The incentives are reversed for providers who are paid a fixed price, regardless of the outcome. In that case, the hospital pays the cost of infections and readmissions, not the patient. That creates strong incentives to avoid these adverse outcomes.
As I wrote previously, HCCI not only quotes package prices, it readily discloses quality data as well:
- Out of 290 orthopedic procedures, there have been only two readmissions.
- Out of 107 cardiac surgeries, there has been only one readmission.
- Out of more than 1,000 total surgeries there have been four mortalities – and all four were patients who came through the emergency room, as opposed to normal elective surgery.
- Out of 1,500 inpatients, there have been only 6 infections and one bed sore.
These are remarkable numbers. In the United States readmission rates of 20 percent are not unusual and 75,000 people a year die from hospital acquired infections – twice the number who die in auto accidents.
How does HCCI do it? By paying meticulous attention to all of the ways germs spread. For example, HCCI completely clears and replaces the air in its operating rooms to insure an infection free environment. Many US hospitals do that too, but not as often as they do it at HCCI.
There are other reasons why American patients might want to consider traveling to Grand Cayman. The drug of choice for hepatitis C in this country costs $1,000 a pill, or $84,000 for a three month regimen. Patients can get the treatment at HCCI for about one-third of that amount. US patients can also get very expensive cancer drugs for 20 to 30 percent of what they would pay back home.
HCCI not only offers state of the art medicine, they often follow Europe’s lead rather than our much slower FDA on approving drugs and procedures. Take blood, for example. HIV will typically not show up in a blood test until three months after the infection as occurred. At HCCI, no one has to wait three months, however.
Using state of the art technology, HCCI technicians can separate blood into red blood cells, platelets and plasma. Then, they take what they want and return the remainder to the donor – an important ability on an island where the number of blood donors are few and the need to conserve is high. They are now able to use UV processing to make sure the platelets are pathogen free. In the near future (after European approvals) they will be able to do the same with red blood cells and plasma. In the United States, by contrast, we are awaiting FDA trials on all of this.
One of the investors in Health City is Dr. Devi Shetty, a world renowned heart surgeon who owns and manages about 32 hospitals in India. Moreover, HCCI is staffed by some of the best surgeons who trained at Dr. Shetty‘s hospitals in India.
But why do we have to travel to Grand Cayman to take advantage of high-quality, low-cost care? Why doesn’t HCCI come here?
Part of the reason is ObamaCare. The Affordable Care Act put a moratorium on all new, doctor owned hospitals in the United States.