Medical Walmartinization

I had the opportunity earlier this week to utilize our local, top-notch medical system for a treatment of a serious, but not life-threatening, condition and emerged much improved if not cured.  We here in Boston have medical care in-depth, ranging from physicians and therapists of every type to high-tech centers for cardiology and oncology.  The industry is a major state employer and attracts patients and medical trainees from around the world.  It is expensive, too, with the highest cost per resident in the country, but all the responsible parties- insurers, hospitals, and government- have been making a serious effort for several years to get everyone insured and contain costs.  It seems to be working and, for the better I hope, it provided models for many of the provisions of the Affordable Care Act, the consequences of which we’ll all get to experience.  For an instructive and humorous read on the Act, I suggest the graphic book by Jonathan Gruber and Nathan Schreiber, “Health Care Reform” (four stars and less than $10 at Amazon books).

One thought I had while recovering in the Recovery Room (a good place to do it) was if and how the potent and expensive medical system we enjoy here can replicated through out the world.  It is a daunting task given the vast disparity in countries’ economies that are available to be applied to the problem:  there is a 40 times difference between the gross national income of the United States and Uganda and even a 5x difference for the soon-to-be-largest world economy, China (World Bank data).  One key is to bring costs down.  While progress has been made in increasing access to low-cost care through multi-national efforts, private charities, and governments which have recognized their responsibilities, I think there is a place for commercial efforts, too.  In several past posts, I put my amateur economist hat on and wrote about ways companies powered by profits could address unmet medical need affordably, for example, through insurance programs for basic essential health services (could be under $100 per person per year, “Boot Straps”) and utilizing alternative delivery methods to the current donor-to-government-to-public provider system (“Affordability Revisited”).

One example of a relatively new and successful commercial approach to medical care provision that I have mentioned before is the Narayana Hrudayalaya Hospital system of India (NH system).  Founded in 2001, it now includes 14 hospitals, a telemedicine practice reaching more than 100 facilities (Wiki article), and an insurance program with millions of subscribers (Yeshasvini scheme).  The founder/visionary of the system is Devi Shetty, a former cardiac surgeon, who has focused relentlessly on the  mechanics of delivering quality care, taking what he has called “the Walmart approach” to bringing costs down.  Some specific methods given in a Fast Company article and a review by the Wharton on-line business journal, India Knowledge @ Wharton (Wharton review) are:

  • operating on a very large scale (the largest center has 3,000 beds, more than 20 times as many as the average US hospital);
  • buying directly from suppliers and negotiating best price;
  • minimizing paperwork for surgeons through a large support staff;
  • paying surgeons a fixed salary instead of per operation so the cost to the hospital drops as the number of procedures increases;
  • treating any and all patients from the poorest to foreign medical tourists with services priced by ability to pay; and
  • monitoring costs of operations and reimbursement daily and adjusting the mix of patients to maintain service and income.

As with Walmart, the system has plans for expansion with a goal of a hospital in every major Indian city and overseas joint ventures, for example, in the Cayman Islands and Miami.  Dr. Shetty’s utopian vision:  reducing health care costs by 50% and achieving affordable access to most Indians in 5-10 years (NH press release).  A laudable goal and I wonder if the progressive medical minds of Massachusetts have taken note.


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