A Leaf Out Of India's Best Practices

Reverse innovation flows from poor countries to rich countries. Authors Govindrajan and Ramamurti in Reverse Innovation in Health Care  show how Indian innovations in healthcare delivery are already inspiring new practices in the US. Govindrajan, a professor of Strategy and Innovation at the Tuck School of Business and Ramamurti, a professor of International Business and Strategy at Northeastern University studied how some Indian hospitals were able to provide world class healthcare at ultra-low prices. They screened over 40 Indian hospitals, selected 16 for an in-depth study and then identified seven exemplars. These seven Indian healthcare organisations are consistently delivering world class care at ultra-low prices. The authors then explored the potential for reverse innovation from India to the US by looking for US organisations that were adopting Indian practices and principals to improve quality, lower cost and expand access to healthcare. The authors discovered several examples, even under the current US regulatory and “fee for service” environment. They selected four US organisations and have reported their findings in this book.

The book opens with the story of George and Deep.

George went to the emergency room in Texas because he was short of breath. Diagnosed with pneumonia, he was discharged after four months and given a bill of $474,000 – his share of the total cost. Deep, an 18-month-old child was diagnosed with a heart condition in a small village near Bengaluru. He was treated at Narayana Health and his parents paid a small fraction of the $2,100 the hospital normally charges for heart surgery.

The authors point out that while the US is home to the world’s best hospitals and doctors, it is also the most expensive in the world. In 2016, the US spent $3.3 trillion, almost 19 per cent of GDP on healthcare. Costs are going up quickly, leading to increasing health insurance premiums and co-payments. Despite record spending, the quality of care is uneven, with frequent errors, inefficiencies, waste and abuse. The healthcare in the US costs too much and too many people can’t get the care they need.

The authors correctly point out that India’s health metrics are abysmal. Per capita spending is only $75 ($10,348 in the US), infant mortality is seven times US and four times China, 63 million Indians live with diabetes, 2.5 million with cancer and most will be never diagnosed or treated. Less than 5 and of the 2.5 million Indians who need heart surgery will get it.

India has a huge, poor, rural, uninsured and price conscious population. Private medical care is too expensive as our average per capita income is only $2,000 and over 70 per cent of healthcare costs are out of pocket. At the right price and quality level, India is a vast untapped market of healthcare consumers. The challenge posed by India’s aching poverty has provided founders of the Indian exemplars with a strong sense of purpose and has motivated them to make bold innovations to solve the problems of quality, cost and access.

The book explains how Indian exemplar hospitals are able to deliver high quality care to rich and poor – and make money doing it. It explains how they have created cultures, organisations and practices the foster value-based care.  The authors cite the example of how Narayana can perform heart surgeries at $2,100, 1-3 per cent of US costs, provide 50 per cent free or discounted procedures and yet produce outcomes that are world class. . Narayana’s bypass mortality rate 30 days after surgery is 1.4 per cent versus the US average of 1.9 per cent. It outperforms the US on complication rates, average length of stay. Despite low costs, discounted and free procedures, Narayana makes money. In FY 2017, the company’s operating margin was 13 per cent compared to 6.3 per cent for Mayo Clinic and 10.3 per cent for Cleveland Clinic.

Similarly, Dr Venkataswamy created Aravind Eye Hospital, which performs over 1,000 eye surgeries a day. At a cost of $50 per cataract operation, it outperforms UK’s National Health Service on quality metrics. Venkataswamy wanted to dedicate himself to curing 4 million cases of cataract related blindness and wondered why cataract surgery could not be performed with the same speed, cost and consistency with which McDonald’s makes burgers.

The book also focuses on other Indian exemplars: Care Hospitals, Deccan Hospital, HCG Oncology, LV Prasad Eye Institute and Life Spring Hospital.

In the second part of the book, the authors provide details of four US organisations that are using Indian style innovations. The most direct example is Health City Cayman Islands (HCCI), which is promoted by Narayana Health. The others are the University of Mississippi Health Centre, who use tele-medicine in a hub and spoke network; Ascension Health, who have sent dozens of key employees to India to study Narayana and co-invested in HCCI and Iora Health, a Boston-based primary care system.

This is a well written book, easy to read and full of interesting stories, facts and figures. I would recommend it to hospital managers, health insurance professionals, policy makers, doctors, medical professions, and everybody who has an interest in healthcare.

While it is inspiring that parts of the US healthcare system are implementing Indian innovation, the bigger question is  whether the Indian healthcare system is learning from Indian innovations. In India, the seven exemplars are exactly that – islands of excellence, outliers and exceptions to the private healthcare system. It would be wonderful if more Indian organisations would learn from the Indian innovations in the delivery of healthcare and solve the problem of quality, cost and access for millions of fellow citizens. Reading this book would be a good first step.