Lessons From India In Organizational Innovation: A Tale Of Two Heart Hospitals

Worth A Look, Healthcare & Welfare, Frontier Centre

A sign in the Fortis Escorts Heart Institute and Research Centre in New Delhi encapsulates the starkest difference between Indian hospitals and their U.S. counterparts: to celebrate “Heart Month,” Fortis announced a “10% discount on PTCA (Angioplasty) & CABG (Bypass Surgery).”

The recent rise of India’s middle class has meant the emergence of several million new health care consumers looking to opt out of India’s free public hospitals and instead pay for private health care services. Accordingly, India has seen a rise of private hospitals catering to these consumers in the emerging cash-pay market for hospital care. Care Hospital facilities aroundHyderabad, the network of Fortis Hospitals around New Delhi, and many other private hospitals are targeting the 300 million Indians who count themselves among the nation’s middle class.

India presents a stark contrast to the United States. The nation’s entire health sector is estimated to be $20 billion in size (compared to $2.3 trillion in the United States), with more than 80 percent coming from private resources. Fewer than 14 percent of Indians purchase health insurance, and with a national per capita gross domestic product (GDP) of US$820, Indian hospitals understand that their services have to meet the middle-class family budget, even for major surgery. Thus, Fortis Hospitals charges $6,000 for open-heart surgery. Care Hospital charges
slightly less. Narayana Hrudayalaya (NH) Heart Hospital in Bangalore, a charitable hospital, charges just over $2,000. Meanwhile, open-heart surgery at a U.S. research hospital typically bills at more than $100,000. Despite the price difference, private Indian hospitals provide world-class service: doctors with training comparable to that of U.S. physicians (many with medical training in the United
States), the latest technology and equipment, and infection and mortality rates that compare to those of U.S. hospitals.

Why is there such a difference in costs for services with similar outcomes? To be sure, lower labor costs in India play an important role. But much of the Indian success can be attributed to experimenting with, developing, and constantly improving innovative organizational structures to provide care. At the extreme, these structures offer textbook examples of organizational innovation, and they suggest what might be possible if the U.S. health care market were permitted to experiment with new organizational forms.

Read the entire study in PDF (12 pages)