APPENDIX II-REVERSE INNOVATION IN HEALTHCARE

The Reverse Innovation in Healthcare book was written by the following authors:

Vijay Govindrajan, Ravi Ramamurti

A Part one:

1. An unhealthy problem meets an unlikely solution.
2. Breakthrough business model of Indian exemplars.
3. Value-based competition in action.

Narayan a health charges  $ 2000.00 for complex pediatric heart surgery, 10% of charges in the USA for similar surgery.

 Examples:  GE  Portable U/S from China  developed a smaller, cheaper U/S used in many countries, John Deere’s cheaper smaller tractor in many countries including the USA, solar-powered desalination unit in southern India being used in many other countries, Walmart innovated small-format stores in South America and built similar stores in the USA.

Five core principles are: a driving purpose-healthcare format, a hub-and spoke configuration,, an enthusiastic use of technology,task-shifting and continuous process improvements, and a culture of ultra-cost-consciousness.

Health City, Cayman Islands (HCCI) attacking high costs, Iora Health focusing on primary care.

B Part two:

1. Breakthrough model of Indian exemplars:

How value-based competition works

• How India got value-based healthcare
• Reality #1 The Indian population is huge, poor, rural, largely uninsured and price conscious
• Reality #2 India has to make do with a severe shortage of doctors and facilities
• Reality #3  Indian healthcare is a wide-open industry.
• India’s doctorpreneurs-   examples: Dr.Devi Shetty is the director of Narayana health,(Dr.Shetty trained at my alma mater- Guy’s Hospital Medical School, London )

Dr. Venkataswamy, 58 years old, founded Aravind Eye Hospital in 1976. Gullapalli Rae established LV Prasad Eye Institute. Dr. Ajaikumar started HCG Oncology around 2015. Dr. Soma Raju founded Care Hospitals for low-cost cardiac procedures in 2016.

5 principles: 

1. Principle #1-pursue an inspiring purpose: quality health for all. Subsidiary goals: turn need into demand, target everyone, rich and poor alike, view profit as a means to an end.
2. Principle #2 – configure assets in a hub-and spoke design: (I) it concentrates the use of expensive equipment in a hub, avoiding costly duplication in spokes:example HCG Hospital Bangalore  has expensive$ 8 million cyberknife), it centralizes scarce expertise, it turns hubs and spokes into focused factories, the hub-and spoke design accelerates learning and skill development, it facilitates the development of system-wide protocols, it encourages ultra specialization.
3. Principle #3- leverage technology ( examples- promote Telehealth services, support home care for chronic conditions- Deccan hospital’s home-based peritoneal dialysis, engineer cheaper, locally manufactured supplies, embrace value-added technological innovation, create IT and its systems.
4. Principle #4: Adopt task-shifting (examples: create new job categories, pursue process innovations, encourage self-service.

5. Principle#5: create a culture of ultra-cost-consciousness- examples avoid needless waste,  avoid unnecessary procedures, offer bundled pricing, control variable costs, be frugal in capital expenditures, focus doctors’ attention on the consequences of their decisions. 

                      

India? Really?

1. Countering skepticism about transferring practices from India to developed countries.
2. Skepticism about results: Are Indian exemplars really achieving high-quality, low-cost care for all, and are they really making money at it?
3. Were the Hospitals’ charges really that low, or were there hidden charges?
4. Was the care actually high quality, despite these ultra-low prices? Several hospitals were accredited by the Joint Commission International (JCI)
5. Did the Hospitals cater to the poor or just to the rich?
6. Don’t most of these Indian innovations involve pretty simple procedures and practices?
7. Did the Indian hospitals really make money?
8. Skepticism about reverse innovation: can US Hospitals really apply Indian practices?
9. What about labs costs? Don’t they account for most of cost savings in India? 
10. 5 questions: Medical personnel cost around 40%-50% of US costs.

• the cost of capital is as high as 14% , more than double in USA
• What about volume? How can the USA ever achieve India’s economies of scale?( Indian exemplars achieve cost advantages in ways unrelated to volumes.)
• But aren’t these Indian hospitals spared the overhead costs of running educational and research programs?
• But isn’t regulation killing innovation in the USA? However, Indian Hospitals don’t face that problem.
• Unless there is a system-level change, how can US Hospitals benefit from Indian-style innovations? Can bottom-up change really work?
• Bottom line-don’t dismiss the experience of Toyota in the 1960s in manufacturing automobiles in the USA.

                                                

Health-care delivery diagnostics:

 5 principles: Healthcare Diagnostics.

1. Pursuing an inspiring purpose.(How can for-profit organizations develop a “social heart” and NGO’s develop a “business brain “so that both have social hearts and business brains” .?
2. Configuring assets in a hub-and spoke network. ( “focused factories).
3. Leveraging technology.
4. Promoting task-shifting and continuous process innovations.
5. Creating a culture of ultra-cost-consciousness