To Lower Health Care Costs, Look to International Innovations

September 10, 2019

It’s hardly surprising that health care is shaping up to be a central issue of the 2020 U.S. presidential campaign. Despite several plans floated by Democratic candidates, much of the debate still comes down to one question: Who will get stuck with the bill?

That’s a good question, to be sure, but it misses the most important point. That bill is outrageously high: More than $3.6 trillion in 2018. Instead, the first question lawmakers should be asking is this: Can America provide quality health care for less money?

The answer is yes, and that’s evident by the health care delivery innovations seen in many developing countries. Take India as an example: In 2018, more than 70 million people lived in abject poverty, and much of the state-run health care system is terrible. Yet some privately-owned Indian health care systems are providing services that rivals the quality of care found at the best U.S. hospitals—and for a fraction of the cost.

One of those companies is India’s Narayana Health, a private for-profit hospital system, which also made Fortune’s Change the World list (at no. 33). While it would cost a patient anywhere from $20,000 to $100,000 in a U.S. research hospital, Narayana performs heart surgeries for around $2,100. And its outcomes are excellent, even by U.S. standards. They do it by lowering costs throughout their system. They use generic drugs. They practice telemedicine. They manufacture their own supplies. They train patients’ family members to deliver post-op care. They sterilize and reuse medical devices (like the steel clamp used to hold the heart in place during open-heart surgery).

Narayana Health even provides free or subsidized care to 55% of its patients—and still makes a profit. It might seem that the more subsidized patients the hospital treats, the more money the hospital would be expected to lose. Narayana’s mission to serve the underserved drives cost innovations to high levels, and the resulting ultra-low-cost position boosts profit margins on the paying patients. Consequently, the hospital is financially sustainable despite the charitable care.

Could Narayana’s cost-saving strategies work in the first world? Some could and some are. In fact, Narayana has its own operation in the Grand Cayman, where it built a 105-bed tertiary care hospital in 2014. There, most medical care is priced 60% to 75% below prices charged in the U.S.

Meanwhile, Narayana’s approach to telemedicine is saving money and lives in rural Mississippi. In India, Narayana’s telemedicine network connects its 24 urban-based specialty hospitals to 800 centers, extending its reach into Indian’s vast and impoverished countryside at very little cost. Telemedicine enables a hub-and-spoke system to efficiently and economically serve patients seeking care, thereby lowering the out-of-pocket expenses (lost wages during time away from work, the cost of travel, and room and board) for the patients in rural areas. In Mississippi, the state with the worst patient-to-physician ratio, a similar network connects 17 rural hospitals and more than 200 health care sites to medical specialists at the University of Mississippi Medical Center in Jackson. The network allows patients to receive expert consultation and care near where they live, saving the high costs that they would pay at specialty hospitals. It also makes it easy to regularly monitor patients with chronic conditions, like diabetes, which can decrease the frequency of emergency room visits.

There are other innovations borrowed from the developing world offered in medicalized urban centers. For instance, Boston-based Iora Health, a primary care provider, depends on a service model that co-founder and CEO Rushika Fernandopulle saw practiced in parts of Africa and the Caribbean. The company uses health coaches rather than doctors to handle the vast majority of patient observation and care, and the highly-trained coaches cost much less than doctors. Iora reports that their primary care focused model has reduced patients’ hospitalization by 40%, and emergency room visits by 20%.

And such innovations born in developing countries also include technological advances. In 2016, Forus Health, a Bengaluru medical startup, won FDA approval for its inexpensive and portable imaging device that scans for cataracts and other eye problems. And, that same year, Forus launched a California-based subsidiary to market its products—another example of health care innovation from a developing country being adopted in the U.S., and bringing down costs.

These companies are showing health care providers can make a profit while providing more access to services for a reduced cost. So it’s time to stop arguing about who pays what, and start slashing that $3.6 trillion bill. And focusing on health care delivery innovations offers a way to do just that.

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and co-author of Reverse Innovation in Health Care: How to Make Value-Based Delivery Work.