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Offshoring American Health Care: Higher Quality At Lower Costs

Robert Pearl, M.D. Contributor


3/27/2014 @ 1:00PM

The Cayman Islands are nestled in the Caribbean Sea some 430 miles south of Miami. The three-island cluster is known for its inviting coral-sand beaches, laid-back island culture and tax-free status.


While it lures many tourists and big banks, it’s not the first place you’d expect to find the future of American health care. That may change soon.


Last month, I flew to the Caymans to moderate an afternoon-long panel on delivering high-quality, affordable health care. Earlier in the day, more than 2,000 attendees from around the world gathered under a large tent to celebrate the opening of a new 104-bed hospital.


Why all the fuss? Because this new facility is the work of Narayana Health chairman and India’s most renowned heart surgeon, Dr. Devi Shetty.


As featured in the Wall Street Journal and the widely cited Harvard Business School case study, Narayana is internationally regarded as a low-cost, high-quality health care provider. Its newest hospital, Health City Cayman Islands, is the organization’s first development outside of India.


It has American health care providers watching closely and anxiously.



Rendering of Health City Cayman Islands, a 104-bed hospital that opened in February 2014 and just might represent the future of American health care. (Photo courtesy of Narayana Health)


Narayana Health Positioned To Deliver Quality Care To Americans


At the end of 2013, Narayana Health was operating 18 hospitals across 14 cities in India. With a laser focus on efficiency and quality, the average Narayana cardiac hospital performs 40 heart surgeries a day for less than $1,600 a case.




That’s about 2 percent of the average heart surgery cost in the U.S. with outcomes that rival the best American facilities.


With the first phase of the Cayman Island hospital completed in February, Dr. Shetty plans to expand Health City Cayman Islands to 2,000 beds over the next decade. And both his vision and strategy extend well beyond this Caribbean destination.


In the United States, there is about 1 hospital bed per 333 people. The Grand Cayman Island has about 50,000 residents. When Dr. Shetty completes his expansion plans, his newest hospital will feature 1 bed per 25 Grand Cayman residents. It doesn’t take a heart surgeon to see Dr. Shetty is thinking way beyond the Caymans.


Given the hospital’s close proximity to Miami, Dr. Shetty must be planning to attract patients from the United States. That would certainly explain the 5-star hotel he built next door with a foot bridge connecting the two world-class structures.


Today, Health City Cayman Islands focuses on cardiac and total joint surgery. It will add cancer care and transplant services in the near future. Plans are already underway to construct an international medical school and a variety of high-quality residency training programs. He expects this facility to become a global academic medical center and a destination for the best medical school graduates.


Some American health systems may scoff at the idea that Americans will travel to Health City. But if Dr. Shetty can match the performance of his hospitals in India, his vision is likely to be a reality sooner than they imagine. Already, the Cayman Island’s business-friendly government has allowed Dr. Shetty to move ahead with development much more rapidly than he ever could in the U.S.


Dr. Shetty’s Strategy: Charge Less, Treat More  


In this new Cayman Islands facility, Dr. Shetty will charge less than half the average U.S. price for surgical procedures with quality outcomes that are likely to match or exceed the very best U.S. hospitals.


His approach to cost cutting is not based on paying lower wages. The Cayman Islands enjoy a similar standard of living and wage structure as the U.S. And he won’t be purchasing inferior supplies or medical implants. Nor will he use shabby construction or outdated technologies.


In fact, his approach is just the opposite.


Dr. Shetty buys only the best heart valves and orthopedic implants. He invests heavily in state-of-the-art medical and information technologies. And his construction team tested the new hospital’s windows for hurricane conditions by battering them with two-by-fours, launched at over 100 miles per hour.


How then could he possibly reach this level of cost and quality? His approach builds on his personal passion for quality, a fervor for operational excellence and a commitment to technology.


The Power Of Purpose And Vision


As Dr. Shetty addressed the audience of 2,000 during the dedication ceremony, his passion radiated.


He began by reiterating that human life should not be determined by a price.


“One hundred years after the first heart procedure was performed, only 10 percent of the world can afford to have one,” he said. “We can and must do better. The future cannot be just an extension of the past. It must embrace new technology, implement innovative approaches and aim higher than people thought possible before.”




For those who doubted it can be done outside the U.S., Dr. Shetty pointed out that “the greatest leaps forward happen when a nation goes from nothing to the modern age.”


As an example, he pointed to India’s recent communications boom. In less than a decade, the nation went from limited telephone access to 850 million mobile phones. Without an existing landline infrastructure, India could bypass the time and cost of installing fixed phones in every home.


The same is true for hospitals. A facility that offers very few advanced procedures today can quickly leapfrog world-leading hospitals because – instead of slowly replacing old technologies – they can immediately implement sophisticated, modern technologies and cherry-pick the most innovative operational designs.


“[Health care] affordability will not come from the United States or any of the current world leaders, but rather from those nations of the world that have little today and have no choice but to perform at the highest levels possible in the future,” he said.


Dr. Shetty understands that institutions must be economically viable. But he is also a mission-driven leader. On that warm day in February, he concluded his remarks by reminding attendees, “The day we turn anyone away from this place of healing for an inability to pay is the day we have failed as an institution and betrayed God’s commandment.”


How Dr. Shetty Achieves High Quality At Lower Costs


So, what’s his secret? Dr. Shetty and Narayana Health incorporate a four-part blend of sophisticated technology and economies of scale to deliver exceptional quality while managing costs:


1. Utilizing real-time data


Patient care at Health City Cayman Islands is supported by state-of-the-art technology that uses a robust electronic medical record (EMR) system to augment clinical care.


Every patient admitted to the hospital receives a low-cost mobile tablet that’s manufactured in India. The device contains each patient’s medical information collected throughout his or her stay.


Doctors and nurses access the encrypted information through Google Glass devices and Bluetooth-enabled watches as they make their rounds. These devices allow patients to communicate with doctors and nurses from anywhere in the hospital while also staying connected with their loved ones far away.


When the patient leaves the hospital premises, all medical information is immediately erased from the tablet and stored on hospital servers.


A central care area with four large wall-mounted computer screens allows physicians to continually monitor patients. Three of the screens offer video monitoring of individual patients along with their comprehensive medical data. The fourth screen shows real-time performance metrics across the medical center, paying particular attention to medical care delays.


2. Eliminating medical care delays


According to Dr. Shetty, time is the enemy of quality and cost savings.


“When patients have potentially life-threatening problems such as a low blood-oxygen level, diminished blood pressure or an untreated infection, their health deteriorates with every passing minute,” he said.



Doctors can minimize this deterioration by responding rapidly when unexpected clinical findings surface. This allows the patient to recover much faster and reduces the total cost of care.


You might think every hospital would do this, but that isn’t the case.


To heighten the hospital’s focus on rapid response, the EMR system Dr. Shetty built contains a list of lab results and clinical findings that predict potentially significant medical problems. Whenever a patient’s lab tests fall out of an acceptable range or a nurse records an abnormal finding, the computer system launches an internal clock, which records the speed of response. Once treatment begins, the system documents the time it takes for physicians and nurses to respond appropriately.


The hospital-wide average time for an appropriate response in one of Dr. Shetty’s hospitals is seven minutes. He hopes to cut that time in half. In the typical U.S. hospital, this time delay is not measured. A best guess would yield 30 minutes during the day and as long as an hour at night.


As Dr. Shetty explained, “These delays mean prolonged hospital stays, increased medical complications and even death.”


3. Leveraging global time zones


Dr. Shetty recognizes that time of day can predict the quality of care in a hospital.


“Hospitals are most dangerous after midnight, since that is when the least experienced nurses work and there are the fewest number of physicians available,” he said.


His goal: To provide excellent care around the clock.


To accomplish that, he staffs the central-care monitoring area with experienced physicians who closely monitor patients – not just those in the Cayman Islands, but patients and medical information half way around the world.


When it’s daytime in the Cayman Islands, it’s nighttime in India. Therefore, during the day, the Health City Cayman Islands doctors help monitor video feeds of post-operative patients in India and quickly alert their colleagues at the slightest sign of a problem. At nighttime in the Caymans, physicians in India return the favor.


4. Taking advantage of scale


The higher the volume of patients in a hospital and the more experienced the surgeons, the better the care. When the volumes rise even more, physicians can sub-specialize in particular operations, further improving quality outcomes.


But the advantages of higher volumes are more than just higher quality. Higher volumes lower the capital investment needed per patient and reduce supply costs. Higher volumes help smooth out the daily variation in demand, allowing for optimal staffing levels. And high volumes allow hospitals to expand their use of their facilities into the evening and on weekends so teams of physicians and nurses are more readily available, further decreasing the time to treatment.


To achieve “scale” – that is, to enjoy the benefits of increased volume – Dr. Shetty is focused on maximizing the productivity of his staff and utilization of his facilities.



And to blaze the path, he sent his most experienced surgeons and nurses from India to Health City. They understand what is needed to run the operating rooms and cardiac catheterization areas 12 hours a day, 6 days a week, and deliver high- quality, efficient care starting from day one.


The result is productivity double that of the typical U.S. hospital.


What Does This Mean For U.S. Health Care?  


At the end of Dr. Shetty’s ceremony, I asked him why others before him had not adopted the same approaches.


“The future is in front of them, but they can’t see it,” he said.


Based on everything I saw in the Cayman Islands that day, the operational approaches in Dr. Shetty’s hospital are about 10 years ahead of those used in the typical U.S. hospital.


It may take a decade for him to complete his 2,000 bed construction and attract the volume of patients necessary to fill each bed. But if I were the CEO of a hospital in Florida, I would be rushing to match his outstanding clinical outcomes and low prices today. Once Health City Cayman Islands is fully operational and filled to capacity, it will be too late.

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