Bloomberg Business reports on Narayana Health, a 23-hospital chain in India. Cardiac Surgeon and founder/Chairman of the Health System, Dr. Devi Shetty opened the first Narayana Hospital in 2000. Originally devoted only to Cardiac Surgery the hospitals now have expanded to include most major operations and have set up regional hospitals that could treat patients with complex conditions into its two largest facilities.
Designed for efficiency in a hyper-low cost environment, the system charges $14 for an endoscopy, $2,000 for a CABG, and a Heart Transplant costs $11,000. The low cost apparently doesn’t come at the expense of quality as the Narayana Cardiac hub is JCAHO certified and outperforms US counterparts at 30 day mortality for many high end CV procedures.
How can they provide high quality care at a fraction of the US and even other domestic Indian hospitals? The fundamental approach is based upon a business school concept called upskilling. Everyone involved in a complex process works at the top of their qualifications, leaving simpler tasks to lower-paid workers. This allows surgeons to only participate in the most challenging part of the procedure, completing far more procedures in a day. The hospitals also cut costs throughout the supply chain, squeezing turnover time to 15 minutes, sterilizing and reusing surgical tubing, repairing rather than replacing machinery, etc.
Despite their impressive thrift and enviable pricing power, even Narayana is under reimbursement pressure. The new National Health Plan implemented by the Indian government (dubbed “Modicare”) has come out with an initial fee schedule which reimburses far below the current pricing of the Narayana hospitals.
Indian hospital operators such as Narayana surely benefit from structural, regulatory and employee compensation tailwinds to help maintain profitability at rock bottom pricing. However, US operating room leaders should look at processes which may be transferable to our own system. Clearly reimbursement in the US is under constant pressure and low cost, high quality providers will be well positioned to thrives… sounds like an opportunity for disruptive innovation to us! With documented good outcomes, and a massive price differential, this article also raises concerns of the loss of high cost procedures to Medical Tourism. The competition for market share may not only be from local hospitals, regional referral centers or tertiary care US facilities, but from locations across the world.