By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    improving patient experience
    6 Ways to Improve Patient Satisfaction Within Hospitals
    December 1, 2021
    degree for healthcare job
    What Are The Health Benefits Of Having A Degree?
    March 9, 2022
    custom software development is changing healthcare
    Digital Customer Journey Mapping and its Importance for Healthcare
    July 21, 2022
    Latest News
    Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
    May 16, 2025
    Learn how to Renew your Medical Card in West Virginia
    May 16, 2025
    Choosing the Right Supplement Manufacturer for Your Brand
    May 1, 2025
    Engineering Temporary Hospitals for Extreme Weather
    April 24, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    Can Thinking Younger Make You Live Longer?
    April 20, 2011
    Image
    Obesity’s Outlook Unchanged
    June 13, 2011
    When It’s An Emergency Elderly Not Treated As Well in Hospitals
    July 16, 2011
    Latest News
    Building Smarter Care Teams: Aligning Roles, Structure, and Clinical Expertise
    May 18, 2025
    The Critical Role of Healthcare in Personal Injury Recovery: A Comprehensive Guide for Victims
    May 14, 2025
    The Backbone of Successful Trials: Clinical Data Management
    April 28, 2025
    Advancing Your Healthcare Career through Education and Specialization
    April 16, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: India’s Secret to Low-Cost Health Care
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Policy & Law > Global Healthcare > India’s Secret to Low-Cost Health Care
BusinessGlobal Healthcare

India’s Secret to Low-Cost Health Care

Vijay Govindarajan and Ravi Ramamurti
Last updated: October 26, 2013 8:00 am
Vijay Govindarajan and Ravi Ramamurti
Share
8 Min Read
Image
SHARE

Image

First published in the Harvard Business Review

Image

First published in the Harvard Business Review

More Read

Modern Health Practices
What Does Science Say About Modern Health Practices?
How To Get Capital For New Equipment For Your Healthcare Business
How to Secure Data in Healthcare
Stop the Pilot Programs
Healthcare Companies Are Now Technology Companies?

A renowned Indian heart surgeon is currently building a 2,000-bed, internationally accredited “health city” in the Cayman Islands, a short flight from the U.S. Its services will include tertiary care procedures, such as open-heart surgery, angioplasty, knee or hip replacement, and neurosurgery for about 40% of U.S. prices. Patients will have the option of recuperating for a week or two in the Caymans before returning to the U.S.

At a time when health care costs in the United States threaten to bankrupt the federal government, U.S. hospitals would do well to take a leaf or two from the book of Indian doctors and hospitals that are treating problems of the eye, heart, and kidney all the way to maternity care, orthopedics, and cancer for less than 5% to 10% of U.S. costs by using practices commonly associated with mass production and lean production.

The nine Indian hospitals we studied are not cheap because their care is shoddy; in fact, most of them are accredited by the U.S.-based Joint Commission International or its Indian equivalent, theNational Accreditation Board for Hospitals. Where available, data show that their medical outcomes are as good as or better than the average U.S. hospital.

The ultra-low-cost position of Indian hospitals may not seem surprising — after all, wages in India are significantly lower than in the U.S. However, the health care available in Indian hospitals is cheaper even when you adjust for wages: For example, even if Indian heart hospitals paid their doctors and staff U.S.-level salaries, their costs of open-heart surgery would still be one-fifth of those in the U.S.

When it comes to innovations in health care delivery, these Indian hospitals have surpassed the efforts of other top institutions around the world, as we discussed in our recent HBR article. Today, the U.S. spends $8,000 per capita on health care; if it adopted the practices of the Indian hospitals, the same results might be achievable for a whole lot less, saving the country hundreds of billions of dollars.

A key to this is that, faced with the constraints of extreme poverty and a severe shortage of resources, these Indian hospitals have had to operate more nimbly and creatively to serve the vast number of poor people in need of medical care in the subcontinent. And because Indians on average bear 60% to 70% of health care costs out of pocket, they must deliver value. Consequently, value-based competition is not a pipe dream but a reality in India.

Three major practices have allowed these Indian hospitals to cut costs while still improving their quality of care.

A Hub-and-Spoke Design

In order to reach the masses of people in need of care, Indian hospitals create hubs in major metro areas and open smaller clinics in more rural areas which feed patients to the main hospital, similar to the way that regional air routes feed passengers into major airline hubs.

This tightly coordinated web cuts costs by concentrating the most expensive equipment and expertise in the hub, rather than duplicating it in every village. It also creates specialists at the hubs who, while performing high volumes of focused procedures, develop the skills that will improve quality. By contrast, hospitals in the U.S. are spread out and uncoordinated, duplicating care in many places without high enough volume in any of them to provide the critical mass to make the procedures affordable. Similarly, an MRI machine might be used four to five times a day in the U.S. but 15 to 20 times a day in the Indian hospitals. As one CEO told us, “We have to make the equipment sweat!”

U.S. hospitals have been developing similar structures, but there are still too many hubs and not enough spokes. Moreover, when hospitals consolidate, the motive often is to increase market power vis-à-vis insurance companies, rather than to lower costs by creating a hub-and-spoke structure.

Task Shifting

The Indian hospitals transfer responsibility for routine tasks to lower-skilled workers, leaving expert doctors to handle only the most complicated procedures. Again, necessity is the mother of invention; since India is dealing with a chronic shortage of highly skilled doctors, hospitals have had to maximize the duties they perform. By focusing only on the most technical part of an operation, doctors at these hospitals have become incredibly productive — for example, performing up to five or six surgeries per hour instead of the one to two surgeries common in the U.S.

This innovation has also reduced costs. After shifting tasks from doctors to nurse practitioners and nurses, several hospitals have even created a lower tier of paramedic workers with two years’ training after high school to perform the most routine medical jobs. In one hospital, these workers comprise more than half of the workforce. Compare that to the U.S. system, where the first cost-cutting move is often to lay off support staff, shifting more mundane tasks such as billing and transcription onto doctors overqualified for those duties — precisely the wrong kind of task shifting.

Good, Old-Fashioned Frugality

There is a lot of waste in U.S. hospitals. You walk into a hospital in the U.S., and it looks like a five-star resort; half of the building has no relation to medical outcomes, and doctors are blissfully unaware of costs. By contrast, Indian hospitals are fanatical about wisely shepherding resources — for example, sterilizing and safely reusing many surgical products that are routinely discarded in the states after a single use. They have also developed local devices such as stents or intraocular lenses that cost one-tenth the price of imported devices.

These hospitals have also been innovative in compensating doctors. Instead of the fee-for-service model, which creates an incentive to perform unnecessary procedures and tests, doctors at some Indian hospitals are paid fixed salaries, regardless of how many tests they order. Other hospitals employ team-based compensation, which generates peer pressure to avoid unnecessary tests and procedures.

Innovation has flourished in the U.S. in the development of new pills, clinical procedures, devices, and medical equipment, but in the field of health care delivery, it appears to have been frozen in time. In too much of the U.S., system, health care is viewed as a craft and each patient as unique. But by applying principles of mass production and lean production to health care delivery, Indian doctors and hospitals may have discovered the best way to cut costs while still delivering high quality in health care.

Original Post

TAGGED:healthcare costsIndia
Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

Clinical Expertise
Building Smarter Care Teams: Aligning Roles, Structure, and Clinical Expertise
Health care
May 18, 2025
Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
Health
May 15, 2025
Learn how to Renew your Medical Card in West Virginia
Learn how to Renew your Medical Card in West Virginia
Health
May 15, 2025
Dr. Klaus Rentrop Shares Acute Myocardial Infarction heart treatment
Dr. Klaus Rentrop Shares Acute Myocardial Infarction
Cardiology
May 13, 2025

You Might also Like

ACOs
BusinessFinanceHospital Administration

Have ACOs Failed to Incentivize Providers?

September 23, 2014
HIMSS 2014
BusinessHospital AdministrationTechnology

HIMSS14: Who’s Afraid of Big, Bad Data? Or, How to Eat an Elephant

February 26, 2014

Telemedicine Market Shows Strong Growth Due to Healthcare Changes

November 19, 2014
Image
BusinessFinance

Bonuses for Broccoli

June 4, 2015
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?