Borderless Economics: health care

Chapter 4 of Borderless Economics examines how global networks of people impact innovation. Starting on page 103, Guest profiles two Indian brothers, both with MBAs from Duke University, who founded Fortis Healthcare:

The Singhs are not doctors; they are businessmen. Both are obsessed with getting not only the best out of the their employees, but also the most. A top surgeon in America might perform 250 to 350 operations per year. A surgeon at a Fortis hospital will perform 1,200. The difference is partly due to regulation: American doctors are barred from doing much more, for fear that they will become exhausted and make mistakes. India can ill afford such tight rules -- it has so few doctors that it must make the most of the ones it has. 

Fortis does this by ensuring that its surgeons waste as little time as possible. Unlike doctors in rich countries, they spend almost no time wrestling with paperwork or administration. Surgeons in America sometimes even make their own coffee, marvels Shivinder. Not in a Fortis hospital. 

An army of helpers takes care of all the mundane tasks, leaving surgeons free to operate -- often. The economic logic is compelling. Doctors are more expensive than support staff everywhere, of course, but in India the gap is gigantic. Doctors are scarce and therefore well paid; cleaners and form-fillers are plentiful and cheap. The average wage for a doctor at a Fortis hospital is about $60,000 a year -- a small fortune in India. Star surgeons can make more than $1 million. That would be a tidy sum even in America. Yet Fortis's prices are much lower than those at American hospitals. A kidney operation that might cost $100,000 in America costs less than $10,000 at a Fortis hospital.

This is a great example of a regulation in the US that is directly raising health care costs. Was there any mention of this rule being repealed during the health care debate of 2009-10? Not a peep. Anyone who thinks that the hours worked by India's highly-productive surgeons cause a danger to their patients, meanwhile, needs to read this WSJ article, which profiles an Indian hospital with much the same approach:

Some in India question whether Dr. Shetty is taking his high volume model too far, risking quality. 

"On one level, it's a damn good idea. My only issue with it comes from the fact that if you pursue wholesale volumes, you may give up something -- which is usually quality," says Amit Varma, a physician who serves as president of health-care initiatives for Religare Enterprises Ltd., a publicly listed financial services group in Delhi. Religare is part of a conglomerate that also owns Fortis Healthcare Ltd., a rival hospital chain. 

"I think he has reached the point where if you increase volume any more, you could compromise patient care unless backed up by very robust standard operating procedures and processes," Dr. Varma says. 

But Jack Lewin, chief executive of the American College of Cardiology, who visited Dr. Shetty's hospital earlier this year as a guest lecturer, says Dr. Shetty has done just the opposite -- used high volumes to improve quality. For one thing, some studies show quality rises at hospitals that perform more surgeries for the simple reason that doctors are getting more experience. And at Narayana, says Dr. Lewin, the large number of patients allows individual doctors to focus on one or two specific types of cardiac surgeries. 

...Dr. Shetty's success rates appear to be as good as those of many hospitals abroad. Narayana Hrudayalaya reports a 1.4% mortality rate within 30 days of coronary artery bypass graft surgery, one of the most common procedures, compared with an average of 1.9% in the U.S. in 2008, according to data gathered by the Chicago-based Society of Thoracic Surgeons.

Guest also, in something of a useful non-sequitur, looks at what is wrong with US healthcare:

US clinics are often paid according to how many medical procedures they carry out, regardless of whether those procedures are necessary. As a result, American doctors massively overprescribe every kind of test that an insurer will pay for. If they don't, they risk being sued. All these costs are passed on to ordinary Americans, as either higher taxes (to pay for Medicare, the government plan for the elderly, or Medicaid benefits for the poor) or lower wages (to make up for the soaring cost of employer-provided group health insurance). 

The waste in the system is incredible. Paul Grundy, a doctor who is the head of health-care technology at IBM, told me a revealing anecdote a few years ago. A middle-aged IBM executive was having chest pains. He had excellent health insurance, so he went straight to a specialist. His cardiologist put him through a bunch of tests, including a computerized tomography scan. The radiologist conducting the scan noticed something odd in his neck, so the executive saw a neck surgeon, who checked him out and found nothing. He went back to the cardiologist, who ordered an angiogram, which caused dangerous complications and landed him in the hospital for a while. In all, he ran up more than $150,000 in medical expenses before the chest pains disappeared on their own. 

When they reappeared several months later, he spoke to Dr. Grundy, a doctor of preventive medicine by training. Dr. Grundy asked him if his lifestyle had changed recently. The executive mentioned that he had taken up gardening again. Dr. Grundy quickly established that his chest pains sprang from a muscle he had strained through overzealous Weedwacking.

But instead of attempting to de-emphasize the central role played by health insurance to help get such costs under control, the plan supported by President Obama and congressional Democrats actually sought to further cement it. This will not end well.