Better Care at One Tenth the Cost

By John C. Goodman 

Originally posted at Forbes, March 2016 

“The problem with Obamacare is that it is focused on finding the money to pay for what good health care costs; instead we should be focused on lowering the cost of health care so that people can afford it.”

So says Dr. Devi Shetty, a world renowned heart surgeon who owns and manages about 32 hospitals in India. At 62 years of age, he has already performed over 20,000 surgeries. That’s about 5 or 6 times the number a typical American surgeon performs over a life time. Remarkably, he has successfully performed surgery on a fetus while it was still in the womb. He was the personal physician to Mother Teresa.

What is most important to know about Dr. Shetty, however, is that he has discovered a way to provide high quality health care (better than what most American patients receive) for about one-tenth of the cost that we typically pay.

Dr. Shetty’s methods have been studied by such institutions as Stanford and Harvard. He practiced medicine at Guy’s hospital in London before returning to India. Today he is able to perform heart surgery for about 1/3 less than what it cost him in India 26 years ago.

Think about that. There is nothing in American medicine that costs less that it did 26 years ago. In fact, you probably can’t find a medical service that costs less than it did a year ago.

So, given the importance the Obama administration has placed on lowering the cost of care and the billions of dollars they have spent pursuing that goal with pilot programs and demonstration projects,  you would expect that Dr. Shetty was in on the ground floor when the Affordable Care Act (ObamaCare) was being created.

In fact, he wasn’t even consulted. Worse, the ACA actually contains a moratorium on doctor-owned hospitals. Dr. Shetty cannot come here and show Americans how to produce high-quality, low-cost care, even if he wants to. Not to be deterred, Shetty has set up a demonstration hospital right on our door step — in the Cayman Islands — and it’s recruiting American patients at this very moment. More on that below.

Dr. Shetty’s success is not a secret. The Economist notes that:

He has … applied the production line techniques of Henry Ford to cardiac surgery and has brought sophisticated healthcare to millions of low-income Indians.

About Shetty’s flagship hospital, Narayana Hrudayalaya, a Harvard Business School report says:

The purpose of the hospital was to offer health care for the masses….. The interesting aspect of its business formula was its ability to offer such complex surgeries as CABG (popularly known as bypass surgery) for about $2,000, which was substantially less than other similarly equipped hospitals in India.

A Wharton school publication says:

Patients at his hospital get cardiac care at a cost lower than any other hospital in the country and at a fraction of what it would cost elsewhere in the world…

A report sponsored by McKinsey, focusing on disruptive innovation in the British National Health Service, says:

Those in need of heart surgery could do a lot worse than jump on a plane to India’s Narayana Hrudayalaya Hospital, one of the world’s leading cardiac centres, which is doing open-heart surgery for roughly $1,800…  This is the kind of innovation that can transform health care for patients.

So how does he do it? Shetty believes that higher volume leads to higher quality, under the right circumstances. The more operations surgeons perform, the better they get at it. An American surgeon typically does 3 or 4 surgeries a week. At Shetty’s hospitals, they typically do 2 or 3 surgeries a day – six days a week.

“American surgeons rarely do surgery on Friday,” Shetty tells me. “So they really only work 4 days a week.” In India, they work 6 days.

“Practice makes perfect,” he says. There is learning by doing. “The more times you do something, the better you get at it.”

Another factor is team work. Physicians at Shetty’s hospitals work in integrated teams. That means care is integrated and coordinated – instead of having each physician work in their own silo.

Part of the teamwork concept is making group decisions about what implants to buy and what drugs to use. Instead of each doctor choosing his own knee or hip joint replacement, for example, the doctors as a group decide on single supplier and then negotiate with that supplier for steep discounts. That technique cut the cost of a surgical stent in half.

In the United States, hospitals typically profit from bad out comes. Hospital acquired infections, for example, are an excuse to bill patients and their insurance companies more money. Ditto for readmissions.

In India, the reverse is true. Since almost no one has private health insurance, patients are typically quoted a price in advance. Infections and readmissions add to costs without any corresponding increase in revenue. So in Dr. Shetty’s world, there are strong economic incentives for doctors and hospital personnel to do things that lower the infection rate and reduce the probability of readmission.

Dr. Shetty’s current goal is to bring some of the fruits of his discoveries to the western hemisphere. Health City in the Cayman Islands, spearheaded by Gene Thompson, is his current effort.

“There are 40 million people living in the Caribbean” Shetty tells me. “Before Health City the only option for serious medical care was the United States – assuming the patient could afford it. Now there is an alternative.”

The Grand Cayman hospital is staffed by some of the best surgeons who trained at Dr. Shetty‘s hospitals in India. It is a prime example of medical tourism.

Health City has already signed a contract with some of the major cruise lines and it is in negotiations with a number of large employers in the US. The hospital is competing with US hospitals as well as medical tourist facilities in Costa Rica, Puerto Rico, Dominican Republic, Columbia and other such countries.

It doesn’t offer care for a tenth of the US cost, but it does average about one-third of what Americans typically pay. It 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 care is going to cost and the hospital will supply indicators of quality (mortality rates, infection rates, readmission rates, etc.) that appear to be far superior to our own hospitals.

See my previous post on how Indian hospitals are so much more efficient than our own. I’ll have more to say about all of this in a future post.

This article was originally published at Forbes on March 2, 2016.