Indian Super Specialty Hospitals Provide a Safe Haven as the US Government Rations Care and Throttles Access to Medical Breakthroughs

Formal patient and provider appeals to Medicare took an average of 21 months, and only a small fraction of Medicare's denied claims—about 5%—are ever formally appealed because its process is so impenetrable. What will you do if a life-saving procedure is denied by Medicare? Obamacare?

We all know that private insurance companies have been rationing care for years, and that private payers limit access to health care. What you may not know is that Medicare has been doing this for years, in a far more sinister way than you may have imagined.

Forget about the outcome of Obamacare legislation...consider the existing $450 billion Medicare program. In recent years, Medicare's staff has been aggressively restricting coverage for costly treatments. Looking for ways to control spending on medical products—and preserve the illusory "trust fund" that pays Medicare claims—is what shapes the culture of the organization and motivates the agency's staff.

This often means limiting access to the costliest technologies. To do this Medicare relies on its rationing and pricing systems. National coverage decisions (NCDs) are assessments issued by Medicare's medical staff that define who is eligible for new but often expensive treatments. Medicare then assigns medical products and procedures with "codes" that determine which regulated category they fall into. Finally, price "schedules" are developed by Medicare's staff each year to assign each unique code with its own updated payment rate. The process for getting a favorable code on a new product is a source of intense lobbying. It can make or break a technology.

For a remote agency like Medicare, far removed from clinical practice, it's easier to try and manage the use of a high-cost but specialty treatment than a much lower-cost but very widely used product. Yet cheaper, more commonly used products can still be mispriced and account for more total cost to the agency. For example, low-tech orthotic devices and other "durable medical equipment" are a known source of wasteful spending. These medical products often evade Medicare's attention in favor of less used but more expensive items such as a biological cancer drug.

Take the agency's tortured decisions concerning the use of implantable defibrillators that jump-start stopped hearts during cardiac arrest. Medicare sharply restricted their use in the 1990s. Mounting research proved that the $30,000 devices could be saving many more lives. So in 2003 Medicare adopted a novel theory to expand coverage to some, but not everyone, who needed one. The agency said only patients with certain measures on their electrocardiograms (called "wide QRS") seemed to benefit.

It was an easily measurable but ultimately imprecise way to allocate the devices. After another major study firmly refuted the QRS theory, Medicare expanded coverage again in 2005, potentially saving 2,500 additional lives according to a press release issued with that decision.

That experience wasn't unique. From 1999 to 2007, Medicare denied access in a third of the treatments it evaluated through its coverage process, taking an average of eight months to complete its reviews. When coverage was granted, in 85% of cases the treatments were restricted, usually to patients with more advanced illnesses.

Medicare is lately increasing its use of the national coverage process and is becoming more tightfisted. Since 2008, according to my review of Medicare data, it conditioned access in 29% of its reviews and denied new or expanded coverage in fully 53% of cases.

Medicare's methods can also be arbitrary. Take the travails of the pharmaceutical company Sepracor and its drug Xopenex, an innovative respiratory medicine that competes with the chemically distinct and much cheaper generic albuterol. Both are inhaled aerosols used to treat asthma and chronic obstructive pulmonary disease. Xopenex has the same benefits as albuterol, but some believe fewer of its cardiac side effects. Medicare didn't agree.

The agency tried to make a "national coverage decision" on Xopenex but couldn't come up with a clinical justification to limit the drug's usage. So Medicare manipulated its payment process, saying it would pay Xopenex a price equivalent to the "least costly alternative" form of generic albuterol, 10 cents a treatment compared to about $2.50 for Xopenex. Then Medicare was sued by a patient, and a Federal court recently ruled the agency exceeded its authority.

Medicare finally succeeded in reigning in the use of Xopenex with its coding system. By issuing Xopenex the same classification as generic albuterol, it was able to pay both products the same "blended" price—an average of the cost of each individual drug. That lowered the price on Xopenex, but ironically increased what Medicare paid for the generics.

It's not a stretch to say that Medicare spent hundreds of cumulative man-hours focusing on Xopenex while other priorities languished. The question is why? There weren't safety concerns. Xopenex may have been used in lieu of a cheaper alternative, but at peak Medicare sales of about $300 million it represented far less than one one-thousandth of the agency's budget. Simply put, a few staffers inside Medicare were consumed with the drug and its higher price—revealing a process that is capricious and often disconnected from science.

Worse still is how impenetrable these programs have become. Drug and device companies spend millions of dollars trying to influence Medicare decisions. The hundreds of consultants they hire to advise them typically command $20,000-a-month retainers.

Formal patient and provider appeals to Medicare took an average of 21 months, according to a report issued in 2003 by the Government Accountability Office (using 2001 data), with delays in "administrative processing" due to "inefficiencies and incompatibility" of data systems eating up 70% of the time spent processing appeals.

There's nothing inherently wrong with a program like Medicare seeking value for taxpayers. But it shouldn't make up the rules as it goes. When private plans ration care, patients can appeal directly to an insurer's medical staff. People can also switch insurers, and in many cases patients chose a policy because it matched their preferences in the first place. These options will not exist in any US government health program.

These options do exist...today...in India.

Annual US Preventable Medical Mistakes versus 234 years of US Combat Deaths

Do you know any one who is outraged about the loss of life in Iraq? Of course you do...but where is the outrage at the loss of life in our US hospitals...year after year...after year...?

Since the start of hostilities in the American Revolutionary war, the United States has lost about 626,566 men and women from combat deaths in 234 years. It takes US doctors and hospitals just 3.1 years to cause the very same number of deaths to US patients.

Preventable medical mistakes and infections are responsible for about 200,000 deaths in the U.S. each year, according to an investigation by the Hearst media corporation. The report comes 10 years after the Institute of Medicine's "To Err Is Human" analysis, which found that 44,000 to 98,000 people were dying annually due to these errors and called for the medical community and government to cut that number in half by 2004.

Military casualties suffered by the United States of America in war or deployments:

Deaths ... Other... Wounded... Total.....

American Revolutionary War	1775–1783	8,000	17,000	25,000	50,000
Quasi-War	1798–1800	20		42	62
Barbary Wars	1801–1815	35		65	100
Other actions against pirates	1800–1900	10		21	31
Northwest Indian War	1785–1795	1221+		458	1679+
War of 1812	1812–1815	2,260	~17,000	4,505	~25,000
First Seminole War	1817–1818	30
Black Hawk War	1832	60+
Second Seminole War	1835–1842	328
Mexican–American War	1846–1848	1,733	11,550	4,152	17,435
Third Seminole War	1855-1858	26
Civil War: total	1861–1865	212,938
Union		140,414	224,097	281,881	646,392
Confederate		72,524
Indian Wars	1865–1898	919		1,025
Korean expedition	1871	3		9	12
Spanish–American War	1898	385	2,061	1,622	4,068
Philippine–American War	1898–1913	1,020	3,176	2,930	7,126
Boxer Rebellion	1900–1901	37		204
Mexican Revolution	1914–1919	35+		70
Occupation of Haiti	1915–1934	146		26+
World War I	1917–1918	53,402	63,114	204,002	320,518
Northern Russian Expedition	1918-1920
American Expeditionary Force Siberia	1918-1920
China	1918; 1921; 1926-1927; 1930; 1937	5		78	83
US occupation of Nicaragua	1927-1933	48		68	116
World War II	1941–1945	291,557	113,842	670,846	1,076,245
China {Cold War}	1945-1947	13		43	56
Berlin Blockade	1948-1949		31
Korean War	1950–1953	30,880	2806	92,134	128,650
Russia {Cold War}	1950-1955	32		12	44
China {Cold War}	1956	16			16
Bay of Pigs Invasion	1961	4			4
Vietnam War	1957–1973	47,424	10,785	153,303	211,454
Invasion of Dominican Republic	1965-1966	13		200	213
El Salvador Civil War	1980–1992	9		35
Beirut deployment	1982–1984	256		169
Persian Gulf escorts	1987–1988	39	0	31
Invasion of Grenada	1983	18	1	119
Invasion of Panama	1989	23		324
Gulf War	1990–1991	149	151	467
Somalia	1992–1993	29	14	153
Haiti	1994–1995	1		3
Bosnia-Herzegovina	1995-2004	1		6
Kosovo	1999	1	19	2+	22+
Afghanistan*	2001–present	532	224	2,379	3,125
Iraq War US Hospitals	2003–present 2003-present	3,788	540	46,132	50,460 ~1,000,000

The Obama Healthcare Plan: Windfall for Medical Tourism

Part 1 of 2/Medicare reimburses healthcare providers less than the cost of care now. The new Obama healthcare plan could overlay 48 million people at this reimbursement rate to $13.4 trillion of existing unfunded obligation.

Even before we get a handle on the effects of the Obama 'stimulus,' we are now faced with the prospect of Congress making sweeping changes to nearly 20% of the economy. This ambitious plan is comprehensive in scope, sparse in detail and uncertain in its cost and savings estimates.

What we do know is that the plan represents an unprecedented grab by Washington for control of healthcare dollars and decisions - and accelerating the federal domination of the US healthcare system.

Let us be clear that there is little new in the Obama plan, with most initiatives recycled from the ill-fated 1993 Hillary plan, the 2004 Kerry plan and proposals from the Commonwealth Fund, a prominent liberal think tank. This latest attack uses the honey of offering affordable, comprehensive and portable coverage; containing spiraling healthcare costs and improving quality of care; and promoting and strengthening public health.

While these goals are appealing, the coercive means to accomplish them will be far less attractive.

How the Obama plan will seize control. The Obama plan proposes a massive expansion of federal regulatory power over healthcare, including the definition of what constitutes "quality" care. This is a radical departure from the decentralized decision-making system that sets the United States from other developed countries. The plan includes several initiatives that would give the government extensive control of the financing, delivery and management of healthcare.

These government initiatives would likely precipitate a rapid evolution toward a federal monopoly over the healthcare sector.

These initiatives include:

• New federal provision and control of healthcare. Obama's new government-run national health plan would compete directly with private health plans in a National Health Insurance Ex­change. Federal officials would not only run the new government plan but also use the exchange as a "watchdog" over participating private health plans. The federal government would decide the level of health benefits that Americans would re­ceive through the exchange.
  

• Additional federal involvement in employer-based coverage. The Obama plan would man­date that employers provide a federally approved level of health benefits to their workers or pay a tax to help finance the government’s new health plan. The plan does not specify the level of the employer contribution, value of the required health benefits package, or size of the payroll tax. The federal government would also assume the high-end costs of employer-based coverage and provide a new taxpayer subsidy to small busi­nesses to encourage them to offer coverage. In any case, the Obama prescription would end employer-based health insurance as millions of Americans know it.

• Expansion of existing government health programs, restrictions on state experimenta­tion, and mandated coverage for children. The plan calls for unspecified expansions of Medicaid and SCHIP and would severely limited states’ ability to develop health care reform pro­posals on their own.

• Federal regulation of health care delivery. The federal government would regulate the delivery of medical care through specific initiatives, such as those that would govern medical reimburse­ment and determine the "comparative effective­ness" of medical treatments and procedures. It would also increase the federal regulation of medical liability reform, prescription drugs, and health insurance.

Differing Estimates

Analyzing proposals based on campaign documents and media accounts is inherently difficult, as these materials lack the level of detail necessary for a rigorous econometric analysis.

The best independent research shows that the Obama plan would cover roughly half of the 45 million uninsured through an expansion of public coverage; rely on soft methods of cost-savings; and require significant increases in federal expenditures.

• Coverage. According to the Lewin Group, the Obama plan would reduce the number of uninsured by 26.6 million in 2010 if fully implemented in that year. The plan would also bring about significant shifts in sources of coverage. While 21.6 million people would lose their private health insurance, 48.3 million people are projected to obtain public coverage through Medicaid, SCHIP, or the new National Plan. Private employer-sponsored coverage would decline by 13.9 million, and private non-group coverage would decline by 7.7 million. Meanwhile, 18.6 million employees would buy into the new public plan through their workplace (as their employers switched to this plan from private coverage), 13.1 million individuals would buy into the public plan in the non-group market, and 16.6 million individuals would become newly enrolled in Medicaid or SCHIP. Therefore, the expansion of coverage under the Obama plan would be driven by enrollment in public coverage. This would entail a crowd-out of existing private non-group and private employer-sponsored insurance.

• Estimates of sources of coverage, however, are sensitive to assumptions about the level at which provider reimbursement is set for the National Plan. The figures above are based on the assumption that the National Plan would reimburse providers at a level halfway between private market rates and the lower rates set by Medicare. In an alternative scenario modeled by Lewin, reimbursement was reduced to Medicare payment levels. Enrollment in the National Plan reached as much as 42.9 million, contributing to a 32-million-person decrease in private health insurance and a 60.1-million-person increase in public coverage. While sources of coverage would change significantly, there would not be a significant change in the net reduction of the uninsured.

• Lewin applied a type of model known as a micro-simulation. Health Systems Innovations Network (HSI) conducted an analysis (funded by the McCain campaign) also using this type of approach. It found that the plan would reduce the uninsured by 25.5 million. It also found that 24.6 million people would enroll in the new public plan through employers or in the non-group market. However, the HSI study did not look at the proposed expansions of Medicaid and SCHIP that would further increase enrollment in public coverage.

• In contrast, the Tax Policy Center (TPC) applied a different type of model known as an elasticity-based approach. The TPC estimated the Obama plan would reduce the number of uninsured by 18.4 million in 2009. In that year, 4.3 million people would gain employer sponsored insurance, 5.8 million would obtain non-group coverage, and 8.3 million would enroll in public coverage. The TPC did not take into account the differences in provider reimbursement between the National Plan and private insurance. Moreover, the results are somewhat confusing because it is impossible to determine enrollment in the National Plan.

Currently, there are 44 million Medicare beneficiaries.

The Medicare hospital trust fund will exhaust its reserves in 2017, rendering it insolvent two years earlier than the trustees predicted last year. Its unfunded obligation is $13.4 trillion, $1 trillion higher than last year's estimate. That amount would have to be deposited in an interest-earning account today in order for Medicare's hospital trust fund to be able to pay all its scheduled benefits over the next 75 years. Medicare's total unfunded obligations, including its programs that use general revenues to pay for doctors' fees and prescription drugs, have reached $37.8 trillion.

Medicare reimburses healthcare providers less than the cost of care now. The new Obama healthcare plan could overlay 48 million people at this reimbursement rate to the new national health plan.

The government is currently unable to fund the existing Medicare program, let alone fund what is essentially doubling the federal healthcare insurance program's size.

All one really needs to do is briefly review Adam Smith's Wealth of Nations to get an idea of what the future looks like. The number of 'unapproved' or 'non-covered' services will increase...and age limits for procedures will start high and start coming on down.

For whom the bell tolls, it tolls for thee.

Prepare for the Economic Recovery with a Global Healthcare Strategy

Companies can't just focus on cutting costs...your competitors are already thinking about the next expansion.

How many times have you been exhorted to 'think out side the box.' After this 'most recent discomfort' of the economic cycle has churned through, there may be even more boxes to think about.

Vijay Govindaragan at Tuck School of Business advocates thinking about two more boxes of innovation. The first box we are all familiar with: sales margins go down, so you cut costs. This is the box that most everyone is focusing on now. The problem with this tunnel vision is that expansion always follows recession...and lasts longer and is more robust than the recession.

But the recession we are in has changed the competitive landscape - there are new winners and new losers. So during the recession is the best time to prepare for the expansion, as assets and talent are cheaper and more available.

The second box deals with two types of innovation - adjacency innovation, which is a little less risky because you are innovating in a business area adjacent to your existing core business, and breakout innovation, where you go multiple steps outside your core business. During a recession, when serious mistakes cannot be made, breakout innovations tend to ignored, even though the high risk may result in a high reward.

The third box is essentially creating your company's future in 2025. But while you may not actually plan for the year 2025, you can prepare for it.

If your executive staff is not quite ready for gaining consensus on the big, nonlinear shifts that will impact the business, why not get some practice and consider implementing an adjacency innovation in box number two?

Implementing a global healthcare option plan that co-exists with existing healthcare benefits may be one of the highest return/low risk programs for corporate HR to consider. Consider the upside potential of a relationship with premier Indian super specialty hospitals:

• As a self insured corporation, you already have the necessary infrastructure to manage healthcare benefits
• It is doubtful that you are conveniently located near a US center of healthcare excellence. Your employees will now have access to 'world class' medical outcomes at exceptional, high practice volume healthcare facilities.
  
• Offering India as an option for a select number of very expensive orthopedic, cardiovascular, bariatric and bone marrow transplant will significantly reduce healthcare benefit costs
  
• Your company's willingness to import global healthcare competition can be a wake up call for the local hospitals to reconsider their pricing models...just as global competition has forced you to do for many, many years
• After the first employee/patient returns, word-of-mouth marketing of the experience typically drives acceptance of the program at a surprising rate.

So when the expansion does roll around, why not take some innovative steps to offer higher value, lower costs benefits than your competitors...so you can remain on the winners list.

Tort Standards Pose a Litigation Risk for Innovation in US Hospitals

Part Eight/Tort law locks US hospitals in to expensive and conventional practices and exposes potential disruptive innovators to liability. Don't expect innovation in US healthcare until negligence law is overhauled.

In addition to the burdens of having no way to fund innovation in US hospitals, there is also the ever present threat that any innovation may be labeled a deviation from the 'community standard.' This vulnerability exposes would-be innovators to liability that does not threaten incumbent providers, who abide by a strict status quo.

And amazingly, even though certain doctrines in negligence law have been known to hold providers liable when when courts find the community standard too low, no such doctrine allows providers to escape liability by arguing that a widely held community standard is too high.

US medical malpractice law penalizes innovation that cannot match the quality of the current paradigm, even if the innovation offers cost advantages and even if the innovation's quality improves over time. Initial offerings that do not meet a community standard will be deemed malpractice.

An Incredible Journey in Medical Tourism - Our Pioneering Work is Recognized in Amitabh Kant's New Book

Perseverance furthers...we join industrialist Ratan Tata in launching this outstanding publication

Amitabh Kant just published an excellent book "Branding India - Incredible journey." India is a magnificently diverse country- with twenty-eight states, seven union territories, eighteen official languages and 1.12 billion people. In this complex and massive exercise, Amitabh Kant, former joint secretary in the ministry of tourism, and his colleagues cutting across various government departments achieved a global milestone as they put India on the World Tourism Map with their ‘Incredible India’ campaign.

Here is an excerpt highlighting my visit to India in 2007 as a guest speaker at the Indian Healthcare Summit in New Delhi:

"Paradigm Shift

In reality, there is a paradigm shift taking place and the primary healthcare doctors have only just begun to realize that there is a good quality treatment available outside the US. In these formative years, it will require professionals like Tom Keesling (founder and President of IndUShealth, USA) to act as a facilitator and catalyst. Keesling, whom I met at the Indian Health Summit in Delhi in 2007, told me that economics makes it a highly attractive option to send patients from the US to India. According to his calculation, the savings are of almost US$ 1000 per flying hour - almost US$30,000 for the thirty-hour return flying time from the US to India and back. According to him, the economics are obvious to chief financial officers (CFOs) but it is important to convince CEOs that the patients about the quality of healthcare in India being at par with the best in the US.

Keesling is recognized as a pioneer in making safe and affordable healthcare available to individuals and companies in the US. Speaking at the healthcare summit, Keesling said that more than incurring expenditure on promotion and marketing, it is essential that Indian hospitals have independent studies on medical outcomes of patients and get them regularly published in international journals to establish that they can match the world's best - Mayo and Johns Hopkins. The approach has to be similar to that of Indian hotels, which figure prominently amongst the finest in the world. Indian hospitals like Max, Escorts, Apollo and Wockhardt and Artemis (a phenomenal new hospital in Gurgaon) need to figure in the list of the best hospitals in terms of their medical performance. This will give them enhanced credibility for referral purposes. Dr Naresh Trehan, who has aggressively driven the Indian Helath Care Foundation, aims to achieve this excellence through the establishment of his Medicity in Gurgaon."

The conference that Amitabh references featured a surprise visit by His Holiness Dalai Lama that occurred just before my presentation. His quote, "...less prayer, less meditation...more actions!" has certainly been echoed in our efforts to introduce the outstanding advantages of Indian healthcare to American patients and corporations.

As I think back to the seemingly random path from Indiana, to reading the Bhagavad Gita during my study of Eastern philosophy in college, to the ten years of hospital CEO experience...and yet another chapter of healthcare reform... I find myself referring to one of my favorite quotes from Rajesh Rao, co-founder of IndUShealth,

"there is no such thing as luck, only destiny"

Kathleen Sebelius and Healthcare's Newspeak/reducetheincrease

It's good time to revisit Orwell's 1984 as the Obama presidency begins 'healthcare overhaul'

Many of us have seen Apple's memorable '1984' Super Bowl ad and it resonates because it was probably on some required reading list during our formative years. Now that we have more years under our belts, we have a sense of unease that George Orwell's 1949 classic dystopian novel 1984 is hitting a bit too close to home.

The novel (whose original title page is shown), became famous for its portrayal of pervasive government and control, and government's increasing encroachment on the rights of the individual. Newspeak was the fictional language in 1984.

As the Obama administration begins to take another obligatory whack at 'healthcare reform,' commentators such as Peggy Noonan observe that the deliberate obscurity of official language is intensifying our underlying fear of government.

In the May 16, 2009 WSJ she observes that the language surrounding the healthcare rhetoric of Ms. Sebelius..."accessing affordable quality health care, "single payer plan vis-à-vis private multiparty insurers" and "key component of quality improvement" was little more the "New Class gobbledygook."

This newspeak gobbledygook, which is more prevalent than ever, is also more destructive than ever...because government itself is doing more than ever. There are two major fears among thinking Americans right now, and the deliberate obscurity of official language is only intensifying them.

The first is that Mr. Obama's government, in all its flurry of activism, may kill the goose that laid the golden egg. This is as dreadful and obvious a cliché as they come, but too bad, it's what people fear. They see the spending plans and tax plans, the regulation and reform hunger, the energy proposals and health-care ambitions, and they—we—wonder if the men and women doing all this, working in their separate and discrete areas, are being overseen by anyone.

The second great fear is that the balance between those who pay taxes and those who need benefits will be left, after the great flurry, all out of whack. When this balance is deeply disturbed or distorted, when the number of those who need to take from the system truly overwhelms those who work to provide America's wealth, a tipping point occurs.

Do members of the administration speak obscurely because they can't help themselves, or do they speak the way they speak because they really aren't all that keen to have people understand them?

Wonder what newspeak term Big Brother would have for euro-style socialized medicine?

plusgoodhealthjoy

...now don't we feel better...

If Mount Olympus Was Subject to Medicare DRG Reimbursement, Would Zeus Have Been So Innovative With Eternal Damnation?

Part Seven/The Deck is Stacked Against Organizational Innovators in the US...there is simply no way to get paid for the innovation.

Sisyphus was a clever fellow, and he thought himself as clever as the gods. Zeus, however, was a god, and displayed his own cleverness by binding Sisyphus to an eternity of frustration. Today, pointless or interminable activities are often described as Sisyphean.

Few tasks can be more interminably frustrating then trying to get a hospital paid for a service. Rather than receiving a payment appropriate for a given service and the costs associated with it, the diagnosis-related group (DRG) payment system forces innovators to find an appropriate rate from an existing DRG.

The shackling of innovation by the DRG system has several consequences for the US hospital innovator:

• The DRG system restrains price competition by sustaining overly compensated but inefficient incumbents and dilutes any cost advantage brought by innovation.
• The lengthy and cumbersome procedures to establish new DRGs can discourage innovators with new business from entry because they will not be provided with appropriate reimbursement.
• US hospitals cannot price flexibly, as Indian hospitals do, and have no incentive to find price points that are appropriate for different market segments.
• There is no means to negotiate with the Centers for Medicare and Medicaid Services (CMS) to secure reimbursement for innovative procedures or business models.

Private insurance reimbursement also impedes price competition, because the insurers have difficulty negotiating with the large hospitals that have market power. Insurance networks are forced to include all of the clustered services that a hospital chain offers...including those services that would normally be targeted by a more efficient entrant.

It comes as no surprise that with all this insurance comes an enormous administrative burden. While the US patient sees Case Managers whose primary focus is to arrange for insurance reimbursement and getting them out of the hospital as fast as possible, the Indian patient is being attended to by support personnel from the nation's hospitality industry...who are dedicated to improving the patients comfort and satisfaction.

Abandon All Hope Ye Who Believe that Indian-Style Innovation Can Easily Be Adopted in the US

Part Six/Specialty hospitals in the US do not appear to compete on either price or quality

It is almost as if Dante and Gustave Dore were divinely inspired to provide generations of US healthcare commentators with a rich source of visual illustrations to supplement the topic at hand.

Just as with the boat ride with Charon across the river Styx, the American patient must pay to navigate the complex healthcare system. But unlike Charon who seemed quite reliable, patients sometimes have no idea of what they are really paying for.

The only reasonable comparison between a US and Indian hospital is perhaps India's new specialty heart hospitals and US specialty hospitals.

In the US, specialty hospitals promised to deliver a higher quality healthcare at a lower cost than local general hospitals by specializing in specific offerings and capabilities, producing a higher volume of service and reducing costs.

The actual achievements of these US specialty hospitals is mixed, and an assessment of their operations reveals the basis upon which hospitals really compete in the US. First, the quality of care is in dispute. The higher margins and lower costs were essentially driven by "cream-skimmed" patients who offered the most lucrative procedures and fewest complications. The Medicare Payment Advisory Commission (MedPAC) found that 94% of these specialty hospitals were located in states without certificate of need requirements. The financial success was not as result of efficiency, but exploiting hospital reimbursement policies.

Since payment to hospitals in the US is not based on quality or clinical outcomes, the US specialty hospital's business models seems to be not much more than careful patient selection. In fact, MedPAC and the US Department of Health and Human Services (HHS) concluded that there is little evidence that an efficiency-based business model was ever developed.

So, it appears that US specialty hospitals evolved to take advantage of financial loopholes within the payment system, rather than to exploit an opportunity for high quality and lower cost. It seems that the US regulatory environment has had the effect of actually discouraging value-based competition and throttled the organizational innovation that is now shaping the Indian market.

Reverse Engineering Jobs to Lower Costs Yet Maintain Quality

Part Five/US Hospitals can't easily reduce their personnel costs...Indian hospitals already have

There are literally hundreds of healthcare professional societies in the US. There are hospital associations and societies for every imaginable job type. They all have various certifications and annual meetings and accreditations which seem to become inexorably woven into the human resource job descriptions over time.

When you diligently work at creating standards that require the most expensive human resource cost inputs for a given task...under the wildly waving banner of quality care ...you end up with some very expensive procedures. In the US, these costs are passed on year after year as reasonable and customary.

In India, where there is negligible market penetration by insurance carriers, patients are payers are better able to shop for medical procedures by comparing prices. In this true healthcare market, there is a continuous drive for maintaining quality and lower costs. To this end, hospitals have adopted the strategy of "de-skilling."

De-skilling is the mirror image of the US healthcare labor strategy. Every procedural function is reverse engineered, to determine the lowest level of training needed for a given task. De-skilling not only cuts costs by substituting lower-cost labor when possible, but it also addresses local labor shortages in skilled and trained personnel.

This is yet another cost saving strategy that would be nearly impossible to adopt in the US, as any gains realized would be wiped out with the very first law suit alleging failure to provide the prevailing standard of personnel for a task.

Differential Pricing Strategies are Impossible if the Customer Can't Determine the Cost of a Service

Part Four/ Can any patient find the advertised final price of any cardiovascular or orthopedic surgery in America?

I remember responding to an opportunity in Michigan to provide clinical laboratory services for non-time critical tests at the very capable ACP accredited Clinigene lab in Bangalore. Even with recruiting the services of an insurance carrier to help decipher the bills, it was literally impossible to determine the price of an individual test. While we were easily able to price our services...we could not determine the savings because the customer could only provide a quarterly billing statements.

Every community seems to have a newsworthy story about a local who ended up with an astronomical full charge bill from the hospital that has turned over the account to an aggressive bill collection agency and is forced to declare bankruptcy.

Of course, if you are Amish, and the elders shell out over $5 million per year for your religious community's health care, you might be able to deal with the local hospital for a discount against these full charges.

The core issue is that the US healthcare consumer is shielded from the price of any procedure, as well as any information on quality that could be used to measure value. The only valid explanation for this in a free capitalistic society is that a monopoly has been created and consumers are either forced or tricked in to buying the service.

This is in stark contrast to the Indian healthcare delivery model that has adopted the practice of price discrimination (differential pricing) to target multiple segments of the Indian population. Tiered pricing allows for the provision of standard services, and also the charging of higher fees for comparable services to higher-income segments of the patient base.

This differential pricing allows the organization to provide services with minimal margins or below full cost (but above variable costs) to about 75% of the patients. There is an explicit focus on limiting fixed costs to achieve budgetary goals while maintaining quality...so price discrimination occurs primarily on capital costs and less on technology and services. Indian patients can choose to pay more to enjoy five star amenities...but the technologies used for procedures are the same for all patients.

The posh rooms allocated to IndUShealth for the international medical tourism patient are a key part of the differential pricing strategy...so every patient in the hospital can access the latest technologies.

So the Indian hospital strategy enables the the hospitals to maintain high volume and low overhead costs. These high volumes also allow healthcare professionals to keep their skills at peak levels.

Meanwhile, US hospitals were busy with $35 billion in construction projects in 2008, generally going towards entirely private rooms, with high end Hill Rom beds. The only selection available to the consumer is the five-star accommodation, and those most able to afford it are given the highest discount on the rates. Those that cant afford (and have no intention of paying for) the service are generally given carte blanche access to the premium services.

And the unlucky minority who have just enough resources to be a target for the hospital's collections agency pay the inflated accounting fiction called "the full charge."

There is simply no financial mechanism available for the US hospital to compete with their Indian counterparts via price discrimination.

American College of Surgeons Releases Statement of Support for Medical Tourism

IndUShealth standard business practices are unerringly aligned with ACS Position statements

These encouraging statements were developed by the Committee on Perioperitve Care and approved by the Board of Regents at its February 2009 meeting:

"The ACS encourages patients to seek care of the highest quality and supports their rights to select surgeons and health care institutions without restriction."
"The ACS encourages its Fellows to assist all patients in reaching informed decisions concerning medical are, whether at home or abroad."

The anticipated caveats in this statement are just as important, as the ACS is not suggesting US patients book passage without careful consideration. It is interesting to note that IndUShealth anticipated each of the concerns now expressed by the ACS early in the business planning stages of the company. These caveats are:

1. Make sure you understand the laws of the country and have legal recourse in case there is liability for an injury.
2. Choose hospitals that have met the standards of the US Joint Commission.
3. Seek care from surgeons who are certified in their specialties through a process equivalent to those established by the member boards of the American Board of Medical Specialties
4. Obtain a complete set of medical records prior to returning home and coordinate follow-up care prior to travel.
5. Understand the risks of international flights with anesthesia and surgical procedures.

The ACS is essentially stating that when a US patient feels the real or perceived need to seek surgery outside the US, that the Fellows of the ACS should be supportive. However, it is probably unreasonable for the US patient or corporate healthcare benefits executive to anticipate that the US surgeon should provide the necessary peer review, case planning, medical records and follow up coordination required for medical/surgical tourism.

Rather than taking a protectionist stance on medical/surgical tourism, I believe that a hospital and surgical staff could establish a network for international patient support. Providing access to lower cost options with an Indian hospital partner would seem to be an innovative strategy to create superior competitive advantage.

Managing Hospitals Designed to Compete on Quality and Cost

Part Three/Fragmenting care to optimize reimbursement does not generally enhance the customer/patient experience

The growth of India's consumer market is worthy of careful study, such as can be found in McKinsey & Company's Bird of Gold report. In general the Indian middle class is currently about the size of the entire US population, and will grow to 583 million by 2025. Indian hospitals have targeted the healthcare needs and budget of this sector. They have focused on high-demand services, such as cardiovascular surgery, and built a large capacity to provide high quality service at an affordable cost. The organizational innovations that keep these costs competitive in India are also quite attractive to the US purchaser of healthcare services.

This is a much different approach than the US healthcare system, where the byzantine reimbursement schemes require hospitals to vacillate between mutually exclusive goals of healthcare being a right, or a privilege. Healthcare is sometimes a right when two heart lung transplants are performed on an illegal immigrant, and sometimes a privilege when hospitals begin to collect the charges for a procedure that a patient had no way of finding out what it was going to cost.

The Indian hospitals recruit managers with complementary experience in the hotel industry, so patient care can be managed in the context of the customer's experiences and expectations. In contrast, the US hospital is built around the financial models required to maximize reimbursement for services...which many times bear little resemblance to what is necessary for the practice of medicine.

The result of the customer approach is that when an IndUShealth patient visits an Indian hospital, they are completely surprised by the level of personalized care, in contrast to their previous US hospital experiences.

Disruptive Innovation Requires New Entrants

Part Two

Early in the formation of IndUShealth, we were contacted by Clay Christensen of Harvard Business School to explore the dynamics of how our new model of global healthcare/medical tourism may be serving as a catalyst for disruptive innovation for the US healthcare system.

As explained in his popular The Innovators Dilemma, the disruptive innovation theory is that innovation-intensive industries regularly undergo major changes and cycling of industry leadership. New entrants challenge industry leaders with low-cost technologies to achieve better performance, and force the incumbents to undergo organizational change.

The US healthcare system has been remarkably resistant to innovation, with the same industry leaders from a generation ago in generally the same, moribund position. Disruptive innovation requires new entrants, and the US healthcare market has managed to neutralize challenges presented by any newcomers.

Rather than focus on any frustrating attempts to try and integrate the innovations from Indian hospitals in to the US healthcare system, it seemed much easier to extract the US patient from the inefficient high cost system and place them in an environment where they are welcome.

Patients who are motivated by pain and financial distress routinely think outside the US healthcare box...and are rewarded with superior healthcare value in India.

An Analysis of Organizational Innovation in Indian Hospitals: why they can deliver the best medical tourism value in the world

Part One

Once again, another President begins the process of 'reforming' the US healthcare system. This drama has played out over and over again for decades...with healthcare emerging as an enormous drain on current American productivity. Swaddled in the protective monopoly of the medical industrial complex, innovation from the US healthcare system has stagnated and costs have soared.

Do we remember the amusement shown for the first six Honda employees that opened shop in Los Angeles in 1959? Honda is now the largest engine manufacture in the world and has surpassed Chrysler in vehicle sales here in the US.

Seeing that the healthcare industry has generally adopted the assembly line methods of Henry Ford, it is not much of a stretch to imagine the parallel destinies of industries who have internalized the belief that they have no global competitive threats.

For the first time, the US healthcare system is now faced with global competition.

And while the headlines read "US-trained physician performs $100,000 heart surgery for $16,000 in New Delhi," there are few details as to how these hospitals provide the highest medical outcomes for the lowest cost in the world.

In their excellent report Lessons From India in Organizational Innovation: A Tale of Two Heart Hospitals, Barak D. Richman, Krishna Udayakumar, Will Mitchell and Kevin Schulman published in Health Affairs, Vol. 27, Nov. 5, 2008 use the examples of two IndUShealth network hospitals, Fortis Hospitals in New Delhi and Narayana Hrudayalaya Heart Hospital in Bangalore, to highlight the divergent trajectories of innovation between the US and India.

There is a lot more going on here than low labor costs. I would like to highlight these textbook examples of innovation throughout the following posts, and explore why they can't be duplicated in the US.

Wockhardt Raises the Bar for Surprise and Delight for the Medical Tourism Patient and Family

I have enjoyed the personal satisfaction of watching hundreds of patients leave the United States in physical pain and financial worry, and returning from our partner hospitals in India having benefited from an extraordinary medical and personal experience . As a former hospital CEO, I have marveled at how quickly the Indian healthcare system has evolved...and wondered if the US system could ever provide the same value if we could magically remove third party payers, and the other unique burdens of capitalism.

Beyond the new facilities, 128 slice CT scanners and the latest healthcare technologies, I am continually surprised by how the very simple act of listening to patients can provide unexpectedly positive returns.

The husband of one of our patients took the occasion of her cervical disc replacement visit to Bangalore to join his wife for the trip of a life time. While at the Wockhardt hospital, the staff learned that they were celebrating their wedding anniversary. Unbeknownst to the patient and her husband, the hospital team took the occasion of a previously arranged tour of the city to treat them to a surprise wedding anniversary dinner at a local restaurant...complete with music and chocolate cake.

On the surface, this seems like yet another example of one of India's premier super specialty hospitals moving the customer experience up yet another notch. But we also find that there is an important surgical recovery benefit to these surprise outings.

The Indian surgeon has a much different post-surgical goal than his US counterpart. In the US, the patient only needs to be ready for discharge from the hospital...in India, the patient must be ready for the journey back home. So Indian post-surgical physical therapy is immediate and continuous right from the surgery. Because patients are up and walking so quickly, they sometimes over estimate their abilities to transition back to normal physical activities. Sometimes a visit to the market, or a surprise wedding anniversary dinner, is all that is needed to reset the patient expectations for activities to be more in line with their physician's recommendations.

The end result of these efforts is an extraordinary healthcare experience that simply cannot be duplicated in the US.