Ravi Ramamurti, D’Amore-McKim School of Business, Northeastern University, Boston

Indian Healthcare Delivery Can Set Examples For Developed Economy

Ravi Ramamurti, D’Amore-McKim School of Business, Northeastern University, Boston talks about his research on Indian Healthcare, innovations in healthcare delivery that can help US  health care to achieve a 50% cost reduction

What was your research project about?

We ( Vijay Govindarajan and Ravi Ramamurti) wanted to understand how some private Indian hospitals were able to provide high quality  medical care (comparable to Western standards) at very low prices (compared to Western costs) using scalable models to serve both rich and poor patients. We were aware that on average the conditions of healthcare in India leave a lot to be desired, especially for the poor. Our study focused on innovators whose models might be replicated by other hospitals.

What was the aim of the study? 

The study’s aim was to extract lessons for other hospitals in India, as well as in other developing countries, and even for hospitals in the West.

Which hospitals participated in the study?

The article is based on nine hospitals that we studied: Aravind Eye Care System, LV Prasad Eye Institute, Narayana Health, Care Hospital, HCG Oncology, Deccan, Lifespring, Vaatsalya, and Apollo Group (which played an important role establishing the corporate model for hospitals and for establishing accreditation standards. We don’t claim that these are the only Indian hospitals that deserve to be studied.

Why did you choose to study only private providers?

Much of the innovation in healthcare delivery in India is happening in the private sector—both for-profit and not-for-profit, thus we choose to study private sector.

What were the key findings of the study?

We found that these hospitals configure their assets efficiently (hub-and-spoke design, with focused hospitals for particular medical conditions), task-shifting, and a frugal mindset, backed by many cost-saving process innovations. These hospitals have shown that costs can be lowered dramatically while improving quality. These are not conflicting goals, as is often assumed.

What is the significance of these findings?

The methods of mass production and lean production, rather than “craft production” ( in which each product is unique and custom-made for each customer), can be applied to healthcare to bring quality healthcare to more people affordably. Countries like the US can learn valuable lessons from these Indian hospitals. Indian hospitals are delivering high-quality care at 5% to 10% of U.S. prices. Of course, the United States is not India, so its costs will always be higher. But even with all the constraints, cutting U.S. healthcare costs in half is not preposterous. After all, it’s been done in other industries, sometimes in less time (think computers or consumer electronics).

What effect will this have on the current healthcare sector in India?

We hope more Indian hospitals will adopt the practices of the hospitals in our article. The gap between healthcare supply and demand is enormous in India and we cannot afford to copy Western approaches to healthcare that waste scarce skills, equipment, and facilities.

What is your impression of the healthcare sector in India?

There is enormous unmet demand for healthcare that cannot be tackled by “business as usual.” Hospitals have to find innovative ways to provide quality service at low cost with scalable models. They have to stretch the available resources to do more with less. Not-for-profit hospitals must apply modern management methods and be financially disciplined, following the examples of Aravind Eye Care System in Madurai and LV Prasad Eye Institute in Hyderabad (among others). For-profits should remember that serving both rich and poor patients can help hospitals simultaneously achieve high quality and low cost.

Many providers feel that the government should pay for the healthcare delivery and the private sector should deliver healthcare. Do you think this is a logical, viable solution to India’s healthcare delivery problem.

This is an important question, but it is beyond the scope of our article. One thing we would point out is that India must not blindly copy Western models of health insurance, which are threatening to bankrupt their governments. Also, as government regulations are tightened in India they must not blunt the incentive for hospitals to innovate.

What are your recommendations for a better healthcare delivery in India?

Get rid of artificial barriers to producing more well-trained doctors, nurses, and setting up hospitals. In India, there is no shortage of demand for healthcare; all the bottlenecks are on the supply side, including the politicization of medical education.

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