NCPA - National Center for Policy Analysis


November 4, 2008

In India, fewer than one in seven people purchase health insurance.  Yet two-thirds of Indian households rely on private medical care -- a preference that cuts across classes and even extends to rural and paramedic care, says Health Affairs.

Because Indian patients are paying for health care out-of-pocket, providers necessarily compete on price and quality.  Even though middle-class incomes are quite low, Indian hospitals have to keep costs down to make care affordable.  These hospitals must also compete in an international marketplace, so the quality must be very high.  The result: open heart surgery that would cost $100,000 in the United States is offered for $6,000 at Indian hospitals that rival their U.S. counterparts on quality measures, says Health Affairs.

How do they do it?  By using the same continuous quality improvement techniques capitalist entrepreneurs employ in other businesses around the world, says Health Affairs:

  • Keeping services patient-centered by importing routines from the hotel industry.
  • Redefining job descriptions to delegate tasks to nurses and physicians' assistants where M.D.-level skills are not required.
  • Maximizing the use of capital equipment -- through continuous use, say, of scanning devices and efficient operating room turnover.
  • Managing the supply chain by finding the lowest-cost items (subject to quality control) in a world market.
  • Vertically integrating where appropriate, including one hospital group that manufactures its own stents and diagnostic catheters.
  • Investing in information technology and telemedicine.
  • Using real-time monitoring of provider behavior to reduce unexplained variations in clinical practice.

Above all, these institutions have discovered that cost reduction and quality improvement often go hand in hand, says Health Affairs.  Minimizing adverse events achieves both objectives.   As one executive explained, "we can't afford to have complications."

Source: Barak D. Richman et al., "Lessons from India in Organizational Innovation: A Tale of Two Heart Hospitals," Health Affairs, Vol. 27, No. 5, October 6, 2008.

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