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Low-cost healthcare: US can take cue from India

business Updated: Oct 17, 2013 01:08 IST
Yashwant Raj

The United States may be good at innovations in medicines, procedures and equipment. But it should learn from India how to keep health care affordable, says a new study.

India's private hospitals provided world-class health care at a fraction of US prices using innovative ways to manage costs, personnel, equipment and even real estate.

These hospitals, said the study published in the Harvard Business Review on Tuesday, should serve "as a wake-up call to hospitals in Europe and the United States."

Authors Vijay Govindarajan, of Dartmouth, and Ravi Ramamurti, of Northeastern University, argued that for all the innovations in medicine the US has made "too little progress" in the field of health care delivery.

Health care became unaffordable without insurance, as a result.

US President Barack Obama tried to address it through a reform law, which is at the heart of the current fiscal crisis, extending insurance to all. But not by cutting costs.

The authors studied nine private hospitals in India, including Narayana Health, Apollo, HCG, Aravinda Eye Care, CARE Hospitals, LV Prasad Eye Institute and Vaatsalya.

Most of them were accredited either with a non-profit that certifies more than 20,000 hospitals in the US, or with its Indian equivalent. In short, they were all world-class. And affordable. The study discounted salaries as a factor. Even after adjusting salaries to match US levels, procedures at Narayana, for instance, cost 4% to 18% less than in any US hospital.

And equipment cost many times more in India.

So, how did they stay affordable? Here are a few of the findings:

Hub and spoke distribution of assets: Hospitals bought only a few of the most complex, and costly, equipment, and kept them at the hub, bringing patients for treatment from distant branches. US hospitals tended to buy more even if they were kept idling at low-requirement stations.

Frugality: Narayana didn't throw away single-use $165 steel clamps used in beating heart procedures. Apollo ordered packets with shorter sutures after it noticed surgeons didn't use a third of the standard length.

Innovations: Beating-heart procedure, which is less expensive than heart-lung machines was pioneered in India, for instance. Cheaper manual incision for cataract treatment at Aravinda.

Doctors: Let doctors do what they do best. Forcing them to take on nursing duties to cut costs -- as has happened in the US -- makes them less productive. And allow nurses and other staff to scale up their responsibilities.

Fixed prices for common medical treatments in most Indian hospitals kept costs down for patients by preventing doctors from ordering unnecessary procedures.

Doctors get fixed salaries, not bonuses or incentives for internal referrals, which tended to drive up costs.

The authors found many more examples for US hospitals to follow or consider. And they concluded that while the Indian system was not completely transferrable, it could work.

"The hurdles," they said, "may be lower than many suppose."