Wednesday, September 10, 2008

U.S. Hospitals Could Benefit from Indian Approach

U.S. hospitals and policymakers could find many valuable lessons in recent accomplishments in the Indian hospital market, according to an interdisciplinary team from Duke University’s schools of business, law and medicine, whose work was published in the Sept. 10 issue of Health Affairs.

Indian hospitals are developing innovative ways to produce low-cost and high-quality patient care, the Duke team concludes. Important attributes severely lacking in the U.S. market – price and quality competition, innovation that improves quality and reduces costs, and affordable care to middle-class budgets – are present in many Indian hospitals.

For example, open heart surgery performed by U.S.-trained surgeons can cost as little as $6,000 in India, as compared with $100,000 in the states, the authors say.

Driven by cost-based competition and a growing middle-class with increasing but limited resources to purchase health services, Indian hospitals have introduced innovations in areas ranging from customer service to labor practices to manufacturing. Most of the innovations reflect new organizational practices and market-oriented strategies, rather than simply relying on low-cost labor.

“As a market for private health care has emerged in India, so have dramatically innovative practices for refining the delivery of services,” said Duke law professor Barak Richman.

The result is greater choice of providers at reasonable prices as hospitals seek to differentiate themselves in the marketplace. “Within this competitive environment, we see dynamic innovation, as economists would expect would emerge from competitive markets. The big question is why the same innovation has not occurred in the U.S.," he said. "Indian accomplishments thus offer lessons both on how to innovate and, more significantly, how to organize a marketplace that will foster valuable innovations.”

The authors cite the example of Care Hospitals, a series of facilities around Hyderabad, and the Fortis Hospital network of hospitals in New Delhi. Both groups of hospitals provide high-quality health care services. The two groups both view patients as consumers, but cater to different markets. Care focuses on providing services to budget-conscious patients, while Fortis delivers services for middle-class patients, but also offers the potential for more luxurious amenities for wealthier clientele.

“These hospital groups have defined their target markets and, while largely maintaining consistent quality standards for clinical care, are providing non-clinical amenities and services at a level commensurate with their patients’ abilities to pay for care,” said Krishna Udayakumar, assistant professor of medicine.

Indian hospitals have pursued innovations in nearly every aspect of their operations, including the identification of new and more affordable sources of labor, integration of engineering management approaches to using data to improve quality, and the introduction of novel ways to increase organizational efficiency.

The authors contrast the development of specialty heart hospitals in the United States that emerged over the same time period as many of the Indian hospitals they examined, but which do not achieve the cost and quality combinations reported in India. They argue that the administrative framework for the health care system in the United States serves as a barrier to achieving the desirable outcomes of organizational innovation.

The authors argue that U.S. hospitals have much to learn from Indian practices.

“We’re excited about the study of organizational innovation and its relationship to the cost and quality of health care," said Will Mitchell, J. Rex Fuqua Professor of International Management in the business school. "We wanted to contrast these two markets to see how organizations respond to these very different market environments, and to see if there are innovative organizational models in the dynamic India hospital market that have lessons for North America.”

Added Kevin Schulman, professor of medicine and business administration, “As we search for policy solutions to the health care crisis in the United States, it’s critical to find examples of solutions in other markets. With these data, we can have the courage to reassess some of our traditional frameworks as we try to re-engineer our system.”

By Laura Brinn

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