It has been established beyond doubt that the health care in the U.S. is the most expensive in the world at 8.508 per capita. Implementing the Affordable Care Act will be meaningless unless the U.S. finds ways to reduce overwhelming health care costs without sacrificing the quality of care and improving access for patients. An article in the Washington Post by Vijay Govindarajan, Professor of International Business at Tuck School of Business, Dartmouth College and Ravi Ramamurti, Professor at Northeastern University and Director of its Center for Emerging Markets, points out that U.S. hospitals can take a cue from hospitals in India on how to provide quality treatment at affordable prices – rates that are a fraction of what U.S. hospitals charge.
The authors based their study on nine Indian hospitals, seven of which are for-profit hospitals and two, not-for-profit. According to the authors, these Indian hospitals provide cataract surgery, Caesarean-section delivery, knee and hip replacement, angioplasty, cancer radiation treatment and open-heart surgery at 5 to 10 percent of U.S. prices. For instance, this study reports that in India, cataract surgery costs $120, a Caesarean-section delivery costs $250, and open-heart surgery costs $3,200. Now compare this with the costs of same procedures in the U.S.
- A 2012 report commissioned by AllAboutVision.com from a leading industry analyst reported that on average, straightforward cataract surgery in the United States would cost $3,429 per eye.
- A report by Truven said that the average price of a C-section was $50,000 in the U.S., with private insurers covering an average of $18,329 and $27,866.
- A 2013 Bloomberg report stated that artery-clearing coronary bypass surgery cost $1,583 in India and that the same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services.
Most of the Indian hospitals in the Washington Post report are accredited by the U.S.-based Joint Commission International or its Indian equivalent, the National Accreditation Board for Hospitals & Healthcare Providers and deliver medical services equivalent to that of good hospitals in U.S. in terms of complication rates or post-treatment survival rates. It is estimated that even if these Indian hospitals paid U.S. level wages (which are 20 times higher) for all their staff, their costs would be only one-fifth of U.S. levels.
The Indian hospitals accomplish the goal of quality care at lower prices using the following innovative strategies:
- The hospitals have on a hub-and-spoke approach in which hub hospitals are located in metros and spoke hospitals in rural areas. With best equipment and expertise, specialists in the hub hospitals serve the spoke patients remotely through telecommunication links. This serves to reduce cost and allows the hub specialists to quickly develop their skills in specific procedures to provide quality treatment. This picture is very different from the U.S. where hospitals are not well-coordinated so that specialized care is duplicated and unaffordable. If they do consolidate, the aim of U.S. hospitals, is to gain an advantage over health insurers rather than to reduce the costs of their services.
- In many Indian hospitals lower-skilled staffs are trained to perform routine tasks. This again frees up physicians to focus on their core tasks of treatment and care. In comparison, many U.S. hospitals reduce costs by doing away with support staff and shifting non-medical tasks such as medical billing to the doctors, which takes up a lot of the valuable time that could have gone into enhancing care. It is estimated that surgeons in Indian hospitals can perform two to three times as many surgeries as surgeons in the U.S.
- The costs of setting up a hospital and running it is also much lower in India. In India, hospitals are built at a fraction of the cost spent in the U.S. High quality indigenously manufactured devices are used in place of imported ones. Certain devices such as clamps for open-heart surgery are sterilized and reused whereas these are routinely discarded after a single use in the U.S. Doctors in Indian hospitals are paid a fixed salary unlike in the U.S. which has a fee-for-service payment model.
U.S. hospitals are constrained by regulations and norms unlike those prevailing in India. So it would not be easy for them to replicate the Indian model. Even so, Washington Post report points out that some progressive U.S. hospitals are adopting some of these exemplary practices. Modern Health Care magazine reports that Franciscan Missionaries of Our Lady Health System in Baton Rouge, La implemented the Healthy 2016 program that aims at cutting $165 million in operating expenses over the next three years.
Other studies have established that the U.S. ranks below many other developed countries in health indicators such as life expectancy at birth, wait times for treatment, teen pregnancy, and more. It is high time that U.S. healthcare providers take note of these observations and do whatever’s needed to bring the nation’s healthcare system on par with that of the other democracies doing a much better job.
Rajeev Rajagopal, the President of OSI, has a wealth of experience as a healthcare business consultant in the United States. He has a keen understanding of current medical billing and coding standards.