Social Heart & Business Brain: Success Mantra for Healthcare

Our research found that health care organisations with a social heart and a business brain can be quite profitable, sometimes more profitable than so called profit-maximising hospitals. Ravi Ramamurti, University Distinguished Professor of International Business and Director, Center for Emerging Markets at Northeastern University

The Indian hospitals we write about, such as Aravind Eye Care, are delivering world-class care at about 1-3 per cent of US prices through all kinds of process innovations. We should replicate these models in India if we want to bring quality health care to the masses at affordable prices, suggests Ravi Ramamurti, University Distinguished Professor of International Business and Director, Center for Emerging Markets at Northeastern University. He is co-author with Vijay Govindarajan of Reverse innovation in health care: How to make value-based delivery work (Harvard Business Review Press, 2018) which explores the potential for reverse innovation of value-based practices from India to the US. Excerpts from Ravi’s interview with Subhajit Roy:

What’s your opinion on the recent status of health care system in India? How is it different from the US?

In the US, 90 per cent of the population has health insurance, either from private insurers (through employers) or through government-funded programs for the elderly (Medicare) and poor (Medicaid). In India, the situation is exactly the opposite: only 10 per cent are insured and 90 per cent are uninsured. So, most Indians pay a lot out-of-pocket for health care. The new program announced by the Modi government attempts to change that, but the US teaches us that an entitlement program can be inexpensive when it is started but quickly expand as various segments try to benefit from the program. In the US, health care costs today have taken over a huge chunk of the government’s budget. India must learn from America’s mistakes and not repeat them.

Your latest book on reverse innovation in health care is being discussed world-wide. Why reverse innovation is important for a country like India?

It is important when it comes to health care delivery. The US and the other advanced countries are leaders in developing new drugs, devices, and medical procedures, but when it comes to health care delivery they have been much less innovative. Instead they have become inefficient and sometimes ineffective. The US spends 18 per cent of its GDP on health care! India must avoid going down the same path. The Indian hospitals we write about, such as Aravind Eye Care, are delivering world-class care at about 1-3 per cent of US prices through all kinds of process innovations. We should replicate these models in India if we want to bring quality health care to the masses at affordable prices. These health care delivery innovations can then be transferred to other countries, including developed countries. This is what we mean by “reverse innovation.”

Though India has pioneered in ‘low-cost’ healthcare, many patients still opt for getting treated abroad. Why is it so?

People go abroad because they assume that the care will be better there. This is not always supported by the evidence, but if cost is no object and you can afford to spend 10-20 times what a surgery might cost in India, then for this thin slice of society foreign treatment may be a feasible and desirable option. Average Indians, including middle-class Indians, can’t afford that. It is also much more convenient to get care in your own country than to have to fly somewhere abroad, stay in a hotel, eat unfamiliar food, and not have easy access to your doctor for follow-up care.

How do you look at the way forward for ‘value-based’ healthcare in India?

We need to multiply the Aravind and Narayana Health models and apply it more extensively across the country. These organisations are great role models for all health care organisations in India. There is no need to scour the earth for good role models—they are right here in India. We hope other Indian hospitals will learn from these cases and replicate their innovations.

Is it possible to strike a balance between ‘social heart and business brain’ in Indian healthcare?

It is. In fact, our research found that health care organisations with a social heart and a business brain can be quite profitable, sometimes more profitable than so called profit-maximising hospitals. This is because organisations like Aravind want to serve the greatest number of people (“social heart”) but the only way they can finance that is if they run a super-productive organisation (“business mind”). As a result of all their innovations to lower cost and improve quality, and the large volumes of patients they serve, they generate high margins.

When it comes to treating deadly diseases like Cancer, there are only a few hospitals in India and are overloaded. What should be the focus of Central and State governments?

First, the government should prevent this deadly disease from spreading, with campaigns to discourage smoking and tobacco chewing, for instance. Then it must encourage private hospitals, such as HCG Oncology, to expand and build world-class networks that provide affordable treatments. The government can also provide a subsidy to private hospitals for such procedures, although unfortunately this can explode the government’s budget over time and lead to some fraud.

The other thing government should do for healthcare in general is free up medical education and allow the supply of doctors to increase. India has no dearth of talent to produce all the doctors, specialists, and nurses it needs, but medical education is choked by political interference and corruption. This has to stop. If health care supply is increased manifold in the coming decades, India can take care of more of the basic needs of its population in a cost-effective way.

How can India be the preferred destination in the field of medical tourism?

As one person said to me during our research, “before you can have medical tourism, you must have tourism.” That is, India must become a more attractive tourist destination. On top of that the government could make it easier to get medical visas. Right now, many people visiting India for health care come as ordinary tourists. Also keep in mind that in a leading medical tourism country, such as Thailand, many of the patients using its hospitals are tourists who happened to fall sick when visiting. Finally, I would not look to expand Indian exports through medical tourism—there are better ways to earn foreign exchange, because I worry that the very limited supply of doctors and hospitals will be diverted to serving medical tourists who usually are willing to pay more than Indians. As only 5 per cent of Indians requiring health care actually get it, we need to see that percentage go up a lot more before we aggressively pursue medical tourists as a business. I realise many private hospitals will disagree with me, because they welcome the higher margins earned by serving medical tourists.