Medical Tourism

My colleague Dr. Martin Stack teaches among other things international business and has particular expertise in how healthcare is reaching into international markets in ways that might be surprising. Yesterday he taught on this very subject to our Executive Fellows class and coincidentally the WSJ had a front page feature (The Henry Ford of Heart Surgery) on a surgeon, trained in London, who has taken his practice back to India and has built a practice serving hundreds of people who otherwise couldn't afford heart surgeries.

This video does a good job of explaining how it works.

What interests me is how this happened as it seems like another example of business entrepreneurship. Dr. Shetty saw a gaping need in India (and other developing countries) of people needing surgeries but not affording it under normal business models. So he changed the business model to adopt the same "innovations" that Henry Ford did over a hundred years ago. He created a large hospital (and is looking to expand) employing over 40 surgeons allowing them to create scale efficiencies on the various high tech equipment needed. Size also allowed the hospital to negotiate great deals on supplies and equipment -- right now they do 12% of the cardiac surgeries in all of India. As Dr. Shetty says, "What health care needs is process innovation, not product innovation."

The pricing is strategic as well. Poor nationals who are in the State insurance system are charged only $1,200 for a heart procedure -- less that the $1,500 needed to break even. Since these are 30% of their patients; they make it up on the rest where they charge $2,400.

Quality seems to be quite good -- in part because the surgeons are well trained (usually in the U.S. or Europe) and very experienced as they do many more surgeries in a week than those in the States. A good test of quality is that now more Americans looking to save money are travelling to Bangalore to get bypass surgery. So now this business model could disrupt health care in developed countries.

Wine Tasting

Among the many things that confuse me are pizza menus (too many choices) and wine lists (arcane literature). Last week I decided instead of buying one bottle of wine I would buy two so I could compare and learn what was good. Anyway, many wine drinkers have favorite brands of wine; wine connoisseurs have real expensive favorite wines. Yet, an article today (WSJ, "A hint of hype, A taste of illusion") casts doubt on the idea that wine tastes can be objectively discerned -- some wines brag of having 8 different flavors. In fact, it is very difficult for even experts to evaluate wine tastes or accurately discern flavors.

The wine industry has its own rating system for the taste of wines. In addition, high stakes taste testing contests are held frequently with some wineries spending over $1 million dollars trying to win or "medal" in at least one of these. The problem is that there is a lot of evidence that wine testing suffers from poor reliability; for example, a medal winning wine is as likely to be a bad loser in another contest, even one with the same expert taste testers! Empirical tests where the taste tester does not know the actual wine brand confirm their is little objective basis for wine tastes.

A few decades ago, Pepsi took on Coca Cola by sponsoring a number of taste tests that showed consumers preferred Pepsi over Coke. Well, in the 1980s Coca Cola got spooked and started believing the taste tests and decided to change their formula in order to compete with Pepsi, coming up with New Coke. Well, its loyal drinkers reacted swiftly -- it was unAmerican to do that. It didn't take long for Coca Cola executives to reverse course and bring back the old drink (Coke Classic).

You see it was not about the taste; Coke learned quickly they were selling an experience. Taste is a subjective thing. The consumer brings all kinds or perceptions and attitudes to the tasting. Changing the formula was changing the experience -- the consumers determine the taste.

So back to wine . . . since my wife and I are amateur wine drinkers and I struggle deciding among the MANY choices on the shelf, I simply have to convince myself that that $5.99 bottle of Beringer Merlot or White Zinfidel is simply exquisite. And I would be right . . . as long a my wife agrees, that is.