Are cost advantages from a modern Indian hospital transferable to the United States?
Michael J. Mack M.D.
Erhun, F., R. S. Kaplan, V. G. Narayanan, K. Brayton, M. Kalani, M. C. Mazza, C. Nguyen, T. Platchek, B. Mistry, R. Mann, D. Kazi, C. Pinnock, K. A. Schulman, J. Xue, D. Ballard, M. Mack, B. James, G. Poulsen, J. Punnen, D. Shetty and A. Milstein (2020). “Are cost advantages from a modern Indian hospital transferable to the United States?” Am Heart J 224: 148-155.
BACKGROUND: Multiple modern Indian hospitals operate at very low cost while meeting US-equivalent quality accreditation standards. Though US hospitals face intensifying pressure to lower their cost, including proposals to extend Medicare payment rates to all admissions, the transferability of Indian hospitals’ cost advantages to US peers remains unclear. METHODS: Using time-driven activity-based costing methods, we estimate the average cost of personnel and space for an elective coronary artery bypass graft (CABG) surgery at two American hospitals and one Indian hospital (NH). All three hospitals are Joint Commission accredited and have reputations for use of modern performance management methods. Our case study applies several analytic steps to distinguish transferable from non-transferable sources of NH’s cost savings. RESULTS: After removing non-transferable sources of efficiency, NH’s residual cost advantage primarily rests on shifting tasks to less-credentialed and/or less-experienced personnel who are supervised by highly-skilled personnel when perceived risk of complications is low. NH’s high annual CABG volume facilitates such supervised work “downshifting.” The study is subject to limitations inherent in case studies, does not account for the younger age of NH’s patients, or capture savings attributable to NH’s negligible frequency of re-admission or post-acute care facility placement. CONCLUSIONS: Most transferable bases for a modern Indian hospital’s cost advantage would require more flexible American states’ hospital and health professional licensing regulations, greater family participation in inpatient care, and stronger support by hospital executives and clinicians for substantially lowering the cost of care via regionalization of complex surgeries and weekend use of costly operating rooms.