Tag Archives: narayana health

A Caribbean Hospital: Healthcare’s Solution?

Health City Cayman Islands (HCCI) is a three-year-old, 104-bed Caribbean hospital outpost of the Bangalore, India-based Narayana Health System. Just an hour’s flight from Miami, its island location is comfortably familiar to Americans, is English-speaking and is modern.

Specializing in complicated or severe conditions, HCCI has developed care and business models that are so focused on quality and efficiency that it could radically change the standards by which U.S. hospitals are judged. Most importantly for patients and employers, it provides very high quality care — it has been awarded the coveted Joint Commission International (JCI) quality credential at one-half to one-sixth of U.S. pricing.

HCCI’s performance is the culmination of a deep commitment to access, efficiency and excellence. Narayana Health’s (NH) founder, Dr. Devi Shetty, who, earlier in his career was Mother Teresa’s personal physician, began with the mission-driven awareness that healthcare is an essential need that must be affordable to be accessible. He spearheaded an enterprise-wide focus on process optimization to deliver the best care possible at the lowest possible price.

The results have been remarkable. Fifteen years ago, NH’s bundled costs for open heart surgery in India averaged about $2,000. Now, they are about $1,400, or about 1% of the average U.S. costs.

The costs at the Caribbean hospital are higher, but they are still low compared with U.S. standards. A coronary artery bypass graft that typically costs about $151,000 in the U.S. is $32,000 at the Caribbean hospital. Heart valve replacements, about $174,000 here, are $31,000. Hepatitis C treatments, which run about $75,000 here, are $19,000. Knee replacements, which cost $60,000 here, are $16,000.

See also: A Hospital That Leads World on Transparency  

A relentless willingness to rethink

HCCI’s capacity to consistently deliver low costs and high-quality outcomes is rooted in a relentless willingness to rethink and execute better, more pragmatic approaches. Hospital common spaces — atriums and open areas — are smaller than we’ve come to expect in U.S. hospitals, significantly reducing overhead. Each patient room has its own heating and air conditioning unit and ducting, isolating the room’s air flow, which dramatically reduces infection. Operating rooms are connected to the laboratory by pneumatic tubes, so surgeons can get immediate information about patient specimens. Equipment, supplies and drugs are purchased in Europe or India at a fraction of U.S. prices. Rather than receive a bewildering array of bills, HCCI uses bundled, all-inclusive pricing that is so simplified that its billing department needs only three people. Every aspect of hospital function and care process is open to re-examination, which facilitates lots of minor (and sometimes major) improvements. Just after HCCI’s gala opening in April 2014, Robert Pearl MD, the CEO of the 19,000 physician Permanente Medical Group, wrote in Forbes: “Based on everything I saw in the Cayman Islands, the operational approaches in Dr. Shetty’s hospital are about 10 years ahead of those used in the typical U.S. hospital.”

HCCI’s health outcomes and pricing represent an opportunity for self-insured employers and unions — as well as for self-pay patients — to get genuinely superior care at far more affordable rates. While getting employers to consider sending patients outside U.S. borders for care has been a challenge, the trickle of those who have become convinced that the quality is strong enough to merit their consideration is growing rapidly.

Imagine how local and state governments, financially strapped by excessive healthcare costs, could benefit from a higher value resource such as this. Florida’s Medicaid program, for example, has some 20,000 patients with Hepatitis C. Even with a discounted U.S. rate of, say, $54,000 each, HCCI’s bundled rate of $19,000 — a difference of $35,000 per patient — could save the state about $700 million, funds that surely could be used more productively.

It is important to acknowledge that there are U.S. hospitals that have achieved superb quality or very notable cost streamlining. But rarely do we see a single-minded organizational emphasis on both affordable cost and quality excellence that is consistently delivered. That is HCCI’s innovation.

See also: Survivor: Hospital Edition  

The bottom line

Against a backdrop of systemic healthcare excess, American employers will increasingly opt for equal or better care at lower cost from facilities such as HCCI. This could force domestic hospitals to follow suit and could help to bring American healthcare back into balance.

This article originally appeared on Jacksonville.com.

New Way to Lower Healthcare Costs

Managers are more likely to limit rental cars to $30 a day than limit an open heart surgery to $100,000 — for ethical and regulatory reasons, many executives steer clear of involving themselves in healthcare decisions, other than selecting the broadest possible network access. But few expenses that executives know so little about matter more than those involved in healthcare do.

This article speaks to a cultural shift that could provide tremendous impact for employers. They can now lower costs while also improving outcomes.

Until now, employers have used two main strategies:

–They offloaded costs to employees, hoping that giving them more skin in the game would reduce their spending on healthcare. But the continuing lack of transparency about healthcare costs, combined with costs that rose faster than employers shifted them, resulted in insurance picking up more cost and consumerism being driven down.

–Employers also invested in wellness programs. But wellness programs are most attractive to the already healthy. And they attempt to reduce how often enrollees encounter the system. But we know that everyone will encounter care at some point. It is each encounter’s volume and cost that is at the heart of this out-of-control system.

The new, better approach was demonstrated in a whirlwind, 48-hour trip I took with some incredible healthcare leaders.

First, we met with the executives of Rosen Hotels in Orlando, who have saved hundreds of millions of dollars compared with average employer healthcare costs. Rosen’s single-digit employee turnover would delight most employers, but it is spectacular in the hospitality industry. Rosen achieves this turnover with a benefit-rich plan most employees would drool over: e.g., no-cost prescriptions, $750 max hospital out-of-pocket.

How does Rosen accomplish this? First, its healthcare thinking is based on what it wants to achieve rather than what it has to provide. Beginning with the CEO, Rosen’s top executives really care about every one of their employees, as evidenced by the more than a few employees who have been there for 40-plus years. (Remember, this is a hotel chain, not a hedge fund with six-digit salaries). The strategies deployed vary, but they mainly support making the highest value care as accessible as possible.

Value—a fair return or equivalent in goods, services or money in exchange for something—is seriously lacking in American healthcare. Rosen took it upon itself to provide healthcare whenever and wherever possible, using its clout to lower costs. The company arranged special prescription drug discounts with Walmart. Rosen has on-site medical directors who personally engage with each employee’s health. The directors visit employees in the hospital and help arrange home delivery of costly specialty medications from lower-cost pharmacies. The company monitors and supports sick employees’ recovery and progress. It also built a health-and-wellness center for all employees and dependents with primary care, prescriptions, fitness instruction and more. I know all this sounds expensive, but the impact far outweighs the cost.

The second part of our adventure involved a flight to the Caribbean island of Grand Cayman, just south of Cuba, a beautiful tropical setting an hour-long flight from Miami (and with direct flights from a dozen other U.S. cities). The morning after our late arrival, we enjoyed the beautiful sunrise for exactly 20 seconds before we were bused to a facility called Health City Cayman Islands (HCCI). The single building on 200 acres (with significant future expansion plans) is clean, new and functional, though it is not nearly as grand as many U.S. mega-hospitals. Now two years old, HCCI is a joint venture between Ascension Health (a non-profit U.S. health system) and Narayana Health, a top Indian health system based in Bangalore. HCCI’s Indian roots are very important, because that country has no national healthcare or insurance system. The Indians have a novel approach to healthcare: You pay for it.

Narayana Health, which has achieved Joint Commission International (JCI) accreditation, performs a volume of procedures unprecedented in most hospitals. This volume is produced by a highly experienced team with quality outcomes that equal or exceed the best U.S. hospitals, but the team does it at far lower cost. Dr. Devi Shetty, Narayana’s founder and a cardiologist who has performed more than 25,000 heart surgeries, is focused on reducing the price of an open heart surgery to $800. (It currently sits around $1,400). Compare that with a 2008 Millman report that pegs U.S. open heart surgery costs around $324,000.

Some employers—Carnival Cruise Lines, for example—are so convinced of HCCI’s value (better health outcomes at far lower cost) that they will pay for all travel, including a family member’s accommodations for the length of a stay, and often waive an employee’s out-of-pocket costs associated with the procedure.

While HCCI’s pricing is higher than its Indian sister facility, many people could afford to pay for HCCI’s care with their credit card, if that were necessary.

HCCI charges a single, bundled fee that covers all associated costs, plus the cost of most complications — the director says, “Why should the patient pay for something if it was our mistake?” Compare that attitude with that at U.S. facilities, which have financial incentives to deliver as much care for as long as possible, and which get paid more if they make mistakes. HCCI’s upfront pricing model creates a serious incentive for efficiency and quality, because the facility is financially responsible for complications, infections and extra tests.

Patients and purchasers (i.e. employers and unions) should realize that nearly all U.S. healthcare—hospitals, doctors, drug companies and even insurance carriers—are structured to benefit from more care, rather than good, efficient or innovative care.

This means that purchasers and patients must use any available levers to get the best healthcare value they can. As Rosen and HCCI have proven, those levers are increasingly available.

Why Can’t U.S. Health Care Costs Be Cut in Half?

Technological improvements in health care have given us the quality of life we enjoy today. But chronic conditions, end-of-life care, and an aging society will bankrupt the United States if it doesn’t make dramatic changes to its health care system. America — and many other countries — need an audacious goal to get off the unsustainable path.

What if the United States set itself the goal of cutting healthcare costs in half — without sacrificing quality, and in about a decade?

Sound undoable? In “Delivering World-Class Health Care, Affordably,” we argued that some Indian hospitals are delivering high-quality care at 5% to 10% of U.S. prices. Of course, the United States is not India, so its costs will always be higher. But even with all the constraints, cutting U.S. healthcare costs in half is not preposterous. After all, it’s been done in other industries, sometimes in less time (think computers or consumer electronics).

Or take the example of autos. When Karl Benz introduced the Mercedes Benz in 1876, each car was handmade from start to finish. Every customer was assumed to be unique and so was every car. Making autos was a craft, and very few people were skilled enough to put one together. Buyers visited the Benz factory and stayed for a week to test drive the car and fix any bugs before taking delivery. The net result: The craft approach produced only a few automobiles at extremely high cost for the very rich.

Enter Henry Ford, who revolutionized the industry with his manufacturing innovations, lowering the price of cars from $2,000 in 1908 to just $260 by 1925 — an 87% reduction! He didn’t do it by making cars shoddier or offshoring production to low-wage countries. His secret was mass production in a “focused factory,” using interchangeable parts, specialization, and the assembly line. (See this HBR article on attempts to apply the focused factory concept to health care.) By making only one type of car (Model T) in volume, he cut unit costs dramatically. Ford shifted the auto industry from craft to mass production, and the Japanese later took it a step further to lean production. At each step, costs fell sharply yet quality improved.

If we go back a hundred years, medicine had to be practiced in a craft mode since each patient was unique and our ability to diagnose diseases and treat them was rather limited. Knowledge and technology have advanced at a such a rapid pace that today that quite a number of medical conditions can be treated using a “process” approach. Yet, too much of U.S. health care is stuck in the craft mode. It is producing a Rolls Royce for each patient! Why can’t U.S. health care go vastly farther in streamlining operations, standardizing protocols, and rationalizing facilities to create focused hospitals for heart surgery, hernia repairs, cataract surgery, hip and knee replacements, organ transplants, or even cancer treatment — anything that’s not an emergency procedure and can be scheduled in advance?

Many U.S. health care providers are going down this road (see “Fixing Health Care on the Frontlines”). But the most innovative Indian hospitals are doing much more. Narayana Health in Bangalore, India, uses the focused-factory approach to perform open-heart surgeries for $3,000, versus $75,000 to $150,000 in the United States. The total number of open-heart surgeries performed in the United States is about 550,000 — six times India’s — but this volume is spread across too many hospitals. The same can be said of other procedures that might lend themselves to mass or lean production.

Aravind Eye Care in Madurai, India, performs cataract surgery in assembly-line fashion. Doctors focus their time on diagnosis and the most intricate aspects of surgery, while less-skilled paramedics take care of everything else. Care Hospitals in Hyderabad performs angioplasties with remarkable efficiency and efficacy. Lifespring focuses on uncomplicated maternity care for the urban poor. HCG Oncology performs advanced diagnoses and procedures in its Bangalore “center of excellence,” while its spoke facilities provide radiation and chemotherapy treatments. Onco-pathologists and medical physicists, who are scarce in India, sit in Bangalore and provide services remotely, using telecommunication links to patients at spoke hospitals. (See this HBR article on how to redesign knowledge work, including health care.)

Changing U.S. health care to achieve a 50% cost reduction will require patients, providers, insurers, and others to make major adjustments. But such changes happen routinely in other industries. With costs spiraling out of control, the day has come when the same must happen in health care.

Authors

Vijay Govindarajan collaborated with Ravi Ramamurti in writing this article which first appeared in the Harvard Business Review. Ravi Ramamurti is the D’Amore-McKim Distinguished Professor of International Business and Strategy, and the Director of the Center for Emerging Markets at Northeastern University.