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.