At first glance, India seems an unlikely place to look for breakthrough innovations in health care delivery. After all, India’s performance on many health metrics has been abysmal. Per capita spending on health in 2014 was just $75. Physician density is less than one-third that of the United States and nurse density is roughly one-sixth. The infant mortality rate is almost seven times that of the United States and more than four times that of China. An estimated 63 million Indians live with diabetes and 2.5 million with cancer, but most of them will never be diagnosed with those illnesses, much less treated. Similarly, less than 5% of the annual 2.5 million Indians who need heart surgery will actually get it.
But certain conditions unique to India have bred a form of value-based competition in which a handful of organisations have found the key to delivering high-quality, ultra-low-cost health care for all who seek it. Value-based competition thrives in India because highly motivated companies have found opportunities in three daunting realities of the Indian socioeconomic context.
Reality #1: The Indian population is huge, poor, rural, largely uninsured, and price-conscious.
India has a population of 1.2 billion people, and 90% of them are poor and uninsured. Uninsured Indians can get care in a government hospital free of charge, but, barring a few exceptions, government hospitals are famous for being crowded and understaffed, for providing poor care, and for being fraught with corruption. The alternative, private hospital care, is too expensive for almost everyone in a country where the average per capita income is $2,000 and where people pay 70% of health care costs out of pocket. Daunting? Yes. But seen through the eyes of opportunity, India has a vast, untapped market of price-conscious health care consumers. It is the kind of place where visionary enterprises can find ways to offer high-quality, ultra-low-cost care.
Reality #2: India has to make do with a severe shortage of doctors and facilities. In per capita terms, India has far fewer doctors and medical facilities than the United States or even China. For example, India has nine hospital beds per 10,000 people, while the United States has 30. India’s practitioner density is less than half that of China. And neurosurgery patients often wait a year for a bed in a public hospital. But seen through the eyes of opportunity, India is ripe for innovations that make the most-efficient use of the country’s limited resources, thereby driving up the productivity of medical experts and facilities and increasing access for people who need care.
Reality #3: Indian health care is a wide open industry. In the United States, there are many barriers to innovations in health care, including government regulations, the fee-for-service reimbursement model, powerful insurance and pharmaceutical lobbies, workers unions, an often protectionist doctor culture, certificate-of-need laws that prevent new entrants from competing against established providers, and the constant threat of medical-malpractice lawsuits. The Indian health care industry is relatively unfettered by regulation. It operates like any other market: consumers pay for what they consume, seeking value for money, while suppliers compete for business with rival offerings. Seen through the eyes of opportunity, India offers a health care environment in which value-based competition can flourish.
Poverty is a great motivator. It produces an intense pressure to create value. The Indian hospitals we write about…pursue innovations in every facet of their operations, with a determination that is hard to imagine in rich countries, where medical resources are plentiful and third-party reimbursement is the norm. In fact, it is India’s aching poverty that motivated many of the founders of our Indian exemplars to embark on their bold experiments in the first place. Readers will notice that these founders were typically medical doctors raised in India but trained in advanced countries, who wanted to bring modern medicine to the Indian masses. We call them doctorpreneurs , because they are part physicians, part entrepreneurs, and part philanthropists. Their goal was not to make money through health care but to put health care within reach of the greatest number of people. Profit made it possible to do that, but it was not the end objective.
Excerpted with the permission of Harvard Business Review Press from Reverse Innovation in Health Care: How to Make Value-Based Delivery Work by Vijay Govindarajan and Ravi Ramamurti. We welcome your comments at email@example.com.