CASE STUDY FRUGAL INNOVATIONS IN HEALTH CARE DELIVERY NOVEMBER 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India Andrea Taylor Erin Escobar Krishna Udayakumar Senior Research Manager Research Manager Director Innovations in Healthcare Innovations in Healthcare Duke Global Health Innovation Center PROGRAM AT A GLANCE KEY TAKEAWAYS KEY FEATURES: Narayana Health, one of the largest chains of Narayana Health, one of the multispecialty hospitals in India, relies on a highly efficient largest multispecialty hospital chains in India, combines delivery system and innovative technology to expand access to innovative technology with a high-quality, affordable care. highly efficient delivery system TARGET POPULATION: The growing number of Indians with to optimize productivity and minimize costs. heart disease and other conditions who require surgery and other specialty care but can’t afford the out-of-pocket costs of treatment. Clinicians deliver treatment The model also may appeal to health insurers seeking more outcomes on par with those affordable treatment options for tertiary care. in the United States, but at a fraction of the cost. WHY IT’S IMPORTANT: In India and many other countries — including the United States — many people lack affordable Payers and providers in the U.S. access to tertiary care. U.S. payers and providers could learn and other countries could learn from Narayana Health’s approach to substantially reducing costs from Narayana Health’s approach without sacrificing quality. to reducing specialty care costs without sacrificing quality. BENEFITS: Narayana Health clinicians deliver treatment outcomes on par with those in the United States, but at a fraction of the cost, thus greatly expanding access to high-quality care. CHALLENGES: Recent efforts to spread this model to the Cayman Islands have encountered challenges related to differing work cultures and the need to build sufficient patient volume to achieve efficiencies. Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 2 BACKGROUND This case study describes the Narayana Health model and the challenges the health system has faced in opening a Health system leaders worldwide are searching for new hospital in the Caribbean island of Grand Cayman. It innovative care delivery models that lower costs, improve also offers lessons for U.S. health care payers and providers quality, and increase access to services. India’s Narayana on ways to dramatically reduce costs while maintaining Health is one of the best-known examples of a health high-quality tertiary care. system that has achieved these goals. U.K.-trained cardiac surgeon Devi Prasad Shetty, M.D., who served as Mother Teresa’s personal physician after operating on her following her heart attack, founded Average Cost of $100,000 Narayana Health in 2001 in Bangalore. Its mission: to Open-Heart Surgery provide high-quality, affordable cardiac care to everyone, regardless of ability to pay. Changes to Indians’ lifestyle at Narayana Health and diet in recent decades have led to an unprecedented Versus at a U.S. increase in heart disease.1 Around the time Narayana Research Hospital Health was founded, approximately 2.4 million Indians required heart surgery annually, but prohibitive costs and a shortage of providers meant only 60,000 received it.2 This gap inspired Shetty to create what is today one of India’s largest multispecialty hospital chains, comprising 31 tertiary hospitals across 19 cities. By combining innovative technology and a highly efficient delivery system, Narayana Health is able to optimize productivity $2,000 and minimize costs. This has enabled it to both increase treatment capacity and expand the number of specialty services offered. In early 2016, the company’s share price rose more than 35 percent in its initial public offering. Narayana U.S. research Health hospital Around the time Narayana Health was founded, approximately 2,400,000 Indians required heart surgery annually, but prohibitive costs and a shortage of providers meant only 60,000 received it. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 3 KEY PROGRAM FEATURES are typically disposed of after a single use. Centralized Narayana Health is designed for India, where the majority purchasing allows the system to take advantage of (58%) of health expenditures are paid out of pocket, given economies of scale. Bar coding of stock enables precise that most people finance their own care.3 The success of inventory counts at any time, minimizing storage costs and the model is achieved through several complementary preventing unnecessary spending. mechanisms. These include: In addition to offering services at its own facilities, • leveraging economies of scale Narayana Health has one of the world’s largest telemedicine networks, connecting 800 centers globally. • using assembly line concepts for surgery The system has treated more than 53,000 patients through telemedicine programs, increasing Narayana’s reach • reducing the average length of stay without requiring investment in physical infrastructure. • reengineering the design, materials, and use of medical Mobile outreach vans, meanwhile, increase access to equipment to reduce the cost of ownership. diagnostic and consultation services in semiurban and rural areas of India. Because of these innovations, the average cost of open- heart surgery, as reported by Narayana Health, is less than A production-line approach to surgery, combined with $2,000. The same procedure at a U.S. research hospital task-shifting among staff, create an extremely efficient typically costs more than $100,000. 4 operating theater, resulting in many more procedures completed per day than is typical in the U.S. and elsewhere. A Tight Focus on Efficiency Each surgeon performs 400 to 600 procedures annually, Narayana Health has achieved savings through smart compared with 100 to 200 in the U.S.6 All staff members use of equipment and telemedicine as well as efficient work at the top of their scope of practice: surgeons staffing procedures. The health system has built reliable perform only the tasks they are uniquely qualified to do, and low-cost supply chains in India over the past decade while other clinicians perform tasks such as preoperative and leverages economies of scale to further drive down preparation, patient education, and charting. This enables prices. Utilizing a pay-per-use model with suppliers for many surgeries to be performed in a row, with surgeons some diagnostic equipment, it minimizes capital costs. 5 completing one procedure and quickly beginning the next Strict sterilization procedures, permitted by the Joint on a fully prepped patient. This high volume drives lower Commission International, enable reuse of some devices, costs and better-quality outcomes, with surgeons quickly such as guide wires and certain cardiology catheters that gaining experience and mastery. The construction of Health City Cayman Islands incorporates natural light in all areas of the hospital, especially operating rooms. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 4 Narayana Health’s well-known brand, social mission, higher-income patients pay more for nonclinical amenities, and strong leadership — in addition to competitive such as private recovery rooms. Since the total charges compensation and incentive packages — attract and are still far below the cost of comparable services at other retain highly qualified cardiac surgeons and other private hospitals, Narayana Health is still an attractive tertiary care specialists. The system has approximately option for such consumers. The health system’s business 16,000 employees, with 11,000 clinicians spread across model is sustainable because of its ability to attract so the company, and 4,000 people are subcontracted for many patients who can pay full price. housekeeping and security. SPREAD TO THE CARIBBEAN Smart Use of Data to Reduce Costs, Monitor Performance In 2014, Health City Cayman Islands (HCCI), a 101-bed Use of information technology and data promote efficiency tertiary care hospital that follows the Narayana model, and standardization throughout Narayana Health. A opened in the Caribbean island of Grand Cayman, which centralized cloud environment connects all the hospitals, is part of the United Kingdom’s Cayman Islands territory. helping to streamline administrative tasks and enable performance monitoring. The venture is a partnership between Narayana Health and Ascension Health, the largest nonprofit and largest faith- The finance team generates profit-and-loss statements based health system in the U.S. (See Appendix for details for executives every day, allowing them to identify and of HCCI’s business and staffing models.) Local factors have address capital flow issues as they arise. Financial data are affected the implementation and success of the Narayana reviewed monthly with unit heads and the CEO. model in the Caribbean, in both positive and negative ways. Key performance indicators for individuals and departments are monitored daily, and a real-time patient- Facilitators of Success complaint process provides a simple and powerful tool to The choice of Grand Cayman was driven by a convergence identify and quickly correct performance issues. of factors, including the enthusiasm of local business leaders, the Caymanian government’s need to diversify its Providing Affordable Care to All economy in the wake of the recent global recession, and Narayana Health hospitals serve anyone who needs care, Narayana Health’s desire to establish a presence in the regardless of their ability to pay. Each year, more than half region (see box on next page). The island’s well-developed of patients receive free or subsidized inpatient care, with tourism industry, strong infrastructure, low crime rate, an average discount of 15 percent. This is accomplished and geographic proximity to multiple new markets made it through philanthropy and a cross-subsidy model, in which an attractive location. MRI machine (left) and i-Kare tablet (right) are connected to a centralized cloud environment, streamlining administrative tasks. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 5 The Caymanian government’s willingness to make sweeping changes to the regulatory and policy KEY PARTNERS IN HEALTH CITY environments to accommodate HCCI was critical. The CAYMAN ISLANDS government changed nine laws and 13 regulations in Caymanian businessmen Harry Chandi and two and one-half years, including its health practice law, Gene Thompson were critical in the genesis which now recognizes Indian medical qualifications of HCCI. Chandi, a Cayman resident of Indian and approves Indian doctors and nurses to practice in the Caymans. Tort reform capped medical malpractice origin, became friends with Narayana Health awards at $620,000, thereby reducing insurance costs for founder Devi Prasad Shetty, M.D., after he the hospital.7 Immigration law was changed to support treated Chandi’s father in India. Thompson was expedited visa processing for people from countries Chandi’s business partner and a third-generation that require a visa to enter Grand Cayman, and the duty Caymanian director of Thompson Development tax was waived for imported medical supplies. The Ltd., a major development company. government also preapproved expansion to match the The Cayman government had approached project’s 15-year master plan (see Appendix). Thompson about developing avenues Efficient methods (e.g., building with insulated concrete for economic diversification. Chandi and forms that decrease air conditioning use by 40 percent) led Thompson, inspired by Shetty’s vision, were vital to fast and affordable construction of the HCCI hospital, in brokering relationships between Narayana resulting in completion within budget in 12 months. Health and the Cayman government and developing the project’s master plan. “Ignorance Challenges is empowerment,” said Thompson. “We knew In its early stage, several factors threatened to hinder no boundaries, limits, barriers; we only saw the success of the model in Grand Cayman, including differences between the Narayana and local work culture, opportunities.” higher operational costs, and prevalent misconceptions At the same time, Ascension Health, the largest about the hospital that discouraged local patients from faith-based and largest not-for-profit health seeking services. system in the United States, was drawn to HCCI imports most of its clinical staff from India, a practice Narayana Health’s mission-driven approach. that may be difficult to continue as it grows. Hospital A subsidiary of Ascension, TriMedx, had leaders are working to embed the Narayana Health work been collaborating with Narayana to service culture, including continuous improvement, balancing equipment beyond its usual lifespan, resulting in multiple roles as needed, and task-shifting, among local reduced capital expenses and operating costs. clinicians. However, the model will also need to adapt to The executive leadership team at Ascension cultural norms in the Cayman Islands. saw the investment in HCCI as a way to provide Higher operational costs and the supply chain logistics affordable health care while affording the of an island also present challenges. Hospital leaders are opportunity to test innovative quality- and cost- looking for ways to reduce operational costs through improvement strategies that could apply to the approaches such as use of solar power, and are importing United States. some supplies from India to find lower prices. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 6 HCCI has also had to dispel myths that discouraged local patients from seeking EFFICIENCY IN care, including perceptions that low cost means low quality, that the hospital is CONSTRUCTION a medical tourism institution that would not serve locals, that Indian doctors weren’t as good as Western doctors and might not speak English, and that HCCI’s construction the only services offered were through telemedicine. To help address these integrated many concepts misconceptions, HCCI provided care to a few notable Caymanians, who then from India, including became advocates for the hospital. Shetty’s philosophy of incorporating natural light Plan for Growth into all areas of the building, In the short to medium term, HCCI is marketing its services to Caymanians especially operating and other Caribbean residents and Latin Americans covered by government or rooms. There was a firm private insurance, as well as wealthy patients who pay out of pocket. Through a commitment to lean and partnership with the Heart to Heart organization, HCCI also provides subsidized green hospital design. cardiac surgery for Haitian children. U.S. residents covered by traditional insurance are not the immediate target of patient growth, though self-insured For example, on-site oxygen companies may be willing to partner with HCCI. manufacturing, use of solar power, and recycling To date, HCCI’s clinicians have focused on orthopedic surgery (32%) and water for nonpotable uses, cardiology procedures (26%), with 15 percent in cardiac surgery, 13 percent in general surgery, and 14 percent in other specialties. As the volume of patients mitigated environmental increases, HCCI is expanding its specialties. New services include medical concerns, and should oncology, spine surgery, bariatric surgery, neurosurgery and neurology, plastic lead to long-term cost- surgery, and urology. A sleep lab, sports medicine, surgical oncology, and a savings “The sum total of cancer institute with a radiation unit are expected. multiple efficiencies in the construction process had The long-term plan also includes expansion to 2,000 hospital beds within 15 greater impact than one years, opening of a medical university, and a 1,500-unit assisted living facility that will serve people needing day-to-day medical supervision as well as healthy silver bullet of saving,” says retirees wanting medical services nearby. Pharma-tourism — whereby people Thompson, a Caymanian travel to purchase cheaper medicines — is also seen as a potential growth area. businessman who helped develop HCCI. A production- The hospital was built line approach to surgery, combined at $420,000 per bed, with task- shifting among compared with an average staff, creates an of $1 million per bed in the efficient operating theater. United States. HCCI has just over 100,000 square feet, less than half the size of a typical Western hospital. This small footprint has also led to operational savings. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 7 RESULTS to develop a model to measure the time and cost of each part of the patient encounter, from walking in the door Narayana Health through follow-up. Colleagues at Duke University are The Narayana Health model has been rigorously studied working with HCCI to develop a similar model, which will and its impacts on clinical quality and outcomes, access to care, and costs are well documented in the peer-reviewed allow managers to target specific ways to drive efficiencies. literature. In 2007, the health system was responsible for 12 percent of all cardiac surgical procedures performed Health City Cayman Islands in India, with 25 procedures completed daily, six days Although it is too early to analyze HCCI’s treatment per week.8 As noted above, its surgeons quickly develop outcomes, the hospital’s cost advantage is evident. HCCI’s expertise, resulting in patient outcomes that rival those in bundled pricing structure is typically set at 30 percent to 50 the United States. For example, Narayana Health reports percent of U.S. fees for the same procedures. For example, a 1.4 percent mortality rate within 30 days of coronary coronary artery bypass graft (CABG) surgery typically artery bypass graft surgery, compared with 1.9 percent in costs $100,000 or more in the United States, while HCCI the U.S.9 It also reports a 1 percent mortality rate for mitral charges around $25,000. HCCI is focused on expanding valve replacement, and a door-to-balloon time of less services and reducing costs further, with the ultimate than 90 minutes for 91 percent of cases; both rates exceed goal of providing CABG surgery for $15,000 and joint international benchmarks (Exhibit 1).10 replacement surgery for $10,000. Narayana Health’s operations in India are profitable. Eighty percent of its total revenue is generated from inpatient HCCI appears to be well positioned to change the status visits, 10 percent from outpatient visits, and 10 percent quo related to the costs and processes of surgery for the from remote consultations and diagnoses. To identify cost Americas and the Caribbean. However, sustainability drivers and support efforts to further increase efficiency, will depend on the company’s ability to increase patient the system is working with Stanford University researchers volume in all clinical areas. Exhibit 1. Select Health Outcome Data for Narayana Health Narayana Indicator Definition Health rate Benchmark Benchmark source Door-to-balloon Number of cases for which door-to- National Infarct Angioplasty time under 90 balloon time is within 90 minutes / 91% 75% Project, National Health Service, minutes total number of cases * 100 United Kingdom 30-day mortality Number of acute MI deaths in a after acute The Society of Thoracic month / total acute MI discharges 15% 15.50% myocardial Surgeons, United States and deaths in a month * 100 infarction (MI) Number of valve replacement Mitral valve deaths in a month / number The Society of Thoracic replacement 1% 4.50% of valve replacement surgeries Surgeons, United States mortality in a month * 100 Data: Self-reported data from Narayana Health, Narayana Institute of Cardiac Sciences, Quality Department. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 8 POTENTIAL FOR SPREAD IN THE UNITED STATES Narayana Health is a proven model of what’s known as TARGETING MULTIPLE MARKETS “frugal innovation,” providing high-quality outcomes In the Cayman Islands, employers are required for lower cost and thereby expanding access to critical by law to offer health insurance coverage to their services. It shows that the combination of several different, employees. Those who do not have employer- focused innovations can lead to dramatic results, without sponsored coverage are covered by government necessarily having to disrupt existing systems. While it is plans, resulting in nearly universal insurance unlikely that the model could be replicated wholesale in coverage and very low out-of-pocket expenditures the U.S., because of the regulatory changes that would be for patients. HCCI reports that for its Caymanian required, it offers lessons on how to significantly reduce costs. patients, 95 percent of health spending is through insurance, an anomaly in the Caribbean. HCCI has One aspect of the Narayana Health model that is contracted with insurance providers in the Cayman particularly relevant for the U.S. — which spends more Islands and is working to attract local residents, on health care than other high-income countries but including higher-income patients who typically has worse outcomes — is its focus on finding efficiencies have gone abroad for specialty care because local in every aspect of operations and putting the savings to services have been scarce or unavailable. work to increase access and affordability for patients.11 However, Cayman Island’s population of just 55,000 At Narayana Health hospitals, each receptionist, billing is not sufficient to drive the efficiencies that are the specialist, nurse, lab technician, and physician knows the costs of every material they use and every procedure they hallmark of the Narayana Health model. Therefore, recommend. Similar tools to identify cost drivers could be the HCCI marketing team is analyzing health care adopted in the U.S., building on existing efforts to promote service gaps in the Caribbean market. It is working price transparency. Having more data on the costs of care with insurance companies, self-insured companies and out-of-pocket costs to patients could motivate U.S. (which have greater incentives than do traditional health care providers to increase efficiency, particularly if insurers to cut costs), and cruise lines. The main reducing costs meant that more people could receive high- targets for near-term growth are Jamaica, Turks and quality, affordable care. Caicos, the Bahamas, Trinidad, St. Maarten, and the Dominican Republic. There is also opportunity in the U.S. to rely on advanced practice providers, including physician assistants and In April 2015, HCCI earned accreditation by the nurse practitioners, to provide many more aspects of Joint Commission International, making it one of medical and surgical care. Such task-shifting, combined the youngest hospitals to receive the international with a “focused factory” approach to patient throughput, certification. This has given the hospital significant could clear bottlenecks in surgery and lead to higher credibility and should strengthen its ability to attract volumes, better outcomes, and cost reductions.12 Some customers from regional and international markets. U.S. providers are following similar approaches, including HCCI’s medium-term strategy will be to target CareMore, which manages a Medicare Advantage plan patients from the United States and Canada, with that uses nurse practitioners and other team members to longer-term prospects from South America and offer chronic disease management services and deploys Europe. In Canada, for example, marketing strategies physicians to care for sicker patients. Iora Health employs target people for whom the opportunity cost of lay health coaches to encourage behavioral changes in waiting for surgery outweighs the price of paying patients, freeing up time for clinicians to concentrate on out of pocket at HCCI. diagnosis and treatment.13 commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 9 Emerging provider payment mechanisms also may serve Surgical treatment of cardiovascular diseases, cancer, and as incentives for U.S. health systems to adopt many of the orthopedic conditions (including joint replacements) are frugal innovations developed by Narayana Health. The top drivers of U.S. health care expenditures, and demand spread of bundled payments for episodes of care, as well as for these services will increase with the aging population. accountable care contracts that hold providers financially responsible for the quality and total costs of designated Unlike other medical tourism destinations such as patient groups, shift greater financial risk to providers — Thailand and India that require significant travel or thus creating greater urgency to reduce costs while out-of-pocket payments from international patients, the maintaining quality. Large self-insured employers are also HCCI model can be implemented in conjunction with U.S. driving utilization of high-volume centers of excellence insurance companies, which are increasingly covering for high-acuity services, such as the collaboration between medical tourism. BlueCross’ Companion Global Healthcare Lowe’s and the Cleveland Clinic.14 Continued growth program, supported by BlueCross BlueShield of South in such arrangements could promote the Narayana Carolina and BlueChoice HealthPlan of South Carolina, is Health model of high-volume specialization. Finally, the one such framework already in place.15 Insurers and large increasing availability of health care price and outcomes employers could cover the entire cost of travel for the patient data may create incentives for employers to look for more and a companion to Grand Cayman, surgery at HCCI, and efficient health care providers. postoperative care at home and still potentially save half the average costs of the procedure in the United States. By bringing high-quality, low-cost specialty care within a few hours of travel time from the U.S., HCCI has created an While full-scale replication of the Narayana Health model in alternative to U.S.-based care that could, over time, force the U.S. is unlikely, U.S. health care providers can learn and health systems to reduce prices or risk losing market share. apply lessons from this efficient and results-driven provider. Aerial view of Health City Cayman Islands’ facilities. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 10 NOTES 1 R. Gupta, I. Mohan, and J. Narula, “Trends in Coronary 12 C. W. Skinner, “The Focused Factory,” Harvard Business Heart Disease Epidemiology in India,” Annals of Global Review, May 1974. Health, March/April 2016 82(2):307–15. 13 V. Govindarajan and R. Ramamurti, “Delivering 2 T. Khanna, V. K. Rangan, and M. Manocaran, Narayana World-Class Health Care, Affordably,” Harvard Hrudayalaya Heart Hospital: Cardiac Care for the Poor Business Review, Nov. 2013 91(11):117–22. For more (Harvard Business School, Case 505-078, June 2005; information on CareMore, see M. Hostetter, S. Klein, revised April 2011). and D. McCarthy, CareMore: Improving Outcomes and Controlling Health Care Spending for High-Needs 3 World Health Organization, Global Health Expenditure Patients (The Commonwealth Fund, March 2017). For a Database (WHO, n.d.). profile of Iora Health, see S. Klein and M. Hostetter, “In Focus: Redesigning Primary Care for Those Who Need 4 B. D. Richman, K. Udayakumar, W. Mitchell et al., It Most,” Transforming Care, March 24, 2016. “Lessons from India in Organizational Innovation: A Tale of Two Heart Hospitals,” Health Affairs, Sept./Oct. 14 C. Chen, “Cheaper Surgery Sends Lowe’s Flying to 2008 27(5):1260–70. Cleveland Clinic,” Bloomberg, March 7, 2014. 5 V. Govindarajan and R. Ramamurti, “Delivering World- 15 BlueCross and BlueChoice HealthPlan Pioneer Global Class Health Care, Affordably,” Harvard Business Review, Healthcare Alternative (Companion Global Healthcare, Nov. 2013 91(11):117–22. n.d.). 6 Ibid. 7 T. Khanna and B. Gupta, Health City Cayman Islands (Harvard Business School, Case 714–510, May 2014; revised March 2016). 8 P. Kothandaraman and S. Mookerjee, Case Study — Healthcare for All: Narayana Hrudayalaya, Bangalore (Growing Inclusive Markets, United Nations Development Programme, Sept. 2007). 9 G. Anand, “The Henry Ford of Heart Surgery,” Wall Street Journal, Nov. 21, 2009; updated Nov. 25, 2009. 10 Based on personal correspondence with Soumi Dutta, Narayana Health Quality Department, Jan. 15, 2016. 11 D. Squires and C. Anderson, U.S. Health Care from a Global Perspective: Spending, Use of Services, Prices, and Health in 13 Countries (The Commonwealth Fund, Oct. 2015). commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading theIs America’s Health Care Beyond India The Commonwealth Fund How High Narayana Health Model Cost Burden? 11 APPENDIX. HEALTH CITY CAYMAN ISLANDS BUSINESS MODEL insurers. Whereas Narayana Health pricing is transpar- Narayana Health’s mission to serve all patients, regard- ent, HCCI does not publish prices because it needs to less of their ability to pay, is sustained through the health allow for negotiation with insurance companies. HCCI system’s efforts to drive down operational costs, promote uses bundled, fixed pricing, rather than billing by codes, high patient volume, and attract a substantial propor- and typically sets prices at one-third to one-half of tion of full-pay patients by offering high-quality care and average U.S. prices. Eschewing billing codes in favor of lower costs than the competition. The Health City Cayman bundled pricing for procedures results in significant effi- Islands venture seeks to replicate this success, while ciencies for HCCI (it employs only two billing staff for the adjusting its approach to meet the needs of a different entire hospital) and caps risk for insurance companies. population, payer mix, and operating environment. The bundled prices include consultations, preoperative and postoperative investigations, admission charges, The cost of building and launching the HCCI hospital was surgical fees, operating room fees, anesthesia, implant $70 million. Compared with India, the cost of utilities, costs, room and food charges, medications and surgical personnel, and supplies are far higher in Grand Cayman, consumables, transportation, and all physician visits up and many of these costs will remain higher. To help reduce to two weeks after surgery. utility costs, HCCI recycles water for reuse and is planning a solar farm. Some operating costs will be reduced over While bundled pricing would seem to be attractive to time by economies of scale and development of more U.S. insurers, HCCI has learned that most private U.S. efficient supply chains. insurance companies still want to receive itemized bills to match U.S. billing codes, though many are piloting For example, to capitalize on Narayana Health’s low-cost bundled payment models. supply chains, HCCI procures most supplies directly from India. Even though the added time and unpredictable Narayana Health leaders report that about 70 percent nature of sea transport complicate inventory manage- of the patients at its Cardiac Hospital pay in cash at the ment, supplies imported from India still cost a fraction time of service. However, HCCI faces 45-to-50-day waits of what they would cost in other markets. Medicines are to receive payment from insurance companies, making procured from FDA-approved companies in India when cash-flow management more difficult. possible, and the remainder come from the United States or the United Kingdom. As patient volumes increase, HCCI STAFFING MODEL expects to shift from on-demand orders to bulk orders, Like Narayana Health, HCCI utilizes lean management lowering costs. True to the Narayana model, HCCI doctors principles. For example, staffing is planned according to are involved in the acquisition process to ensure they the minimum requirements based on patient volume. consider costs and avoid unnecessary expenses. HCCI staff also typically wear multiple hats as appropri- The Narayana Health business model is designed for ate for their competencies, skills, and training (e.g., the India, where a majority of health expenditures are out head of internal medicine also heads the pharmacy). of pocket (58% of total health expenditures) and most This is partly a function of current patient volume, but patients finance their own care. a To serve the Cayman also reflects a cultural ethos HCCI sought to replicate by Islands and Latin American markets, where the majority bringing teams from India, most of whom were trained of people are insured, HCCI must adjust its pricing, at Narayana. Having the ability to balance multiple billing, and marketing strategies to the preferences of tasks is a key criterion in selecting candidates for HCCI. Internal hiring is also prioritized to maintain the strong a   World Health Organization Global Health Expenditure Database. organizational culture. commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading theIs America’s Health Care Beyond India The Commonwealth Fund How High Narayana Health Model Cost Burden? 12 To date, there are 268 employees at HCCI, with about POLICY AND REGULATORY CHANGES MADE two-thirds recruited from India. The majority of clinical TO ENABLE HCCI’S MODEL staff were recruited from Narayana Health in India, in part The Caymanian government worked with Narayana because there are not enough medical specialists locally. Health and Ascension to change laws and regulations Importing clinicians from Narayana also promotes fidelity to enable the adaptation of the Narayana model to the to its work culture. Caymans. Changes were made to the following laws, which were implemented through changes to 13 regulations. HCCI has committed to the Caymanian government to maintain a minimum of 25 percent to 30 percent local 1. Health Practice Law employees (currently at 30%). To meet this goal over the long term, HCCI launched a student intern program (with 2. Tort Reform Law 300 interns expected) and is working with the govern- ment to strengthen the school science curricula and 3. Organ Transplant Law increase students’ exposure to the health care professions. 4. Organ Importation Law In 15 years, HCCI plans for one-third of its staff across all categories, including clinical, to be Caymanian. 5. Planning Law 6. Customs Law 7. Immigration Law 8. Registered Land Law 9. Local Companies Control Law commonwealthfund.org Case Study, November 2017 Expanding Access to Low-Cost, High-Quality Tertiary Care: Spreading the Narayana Health Model Beyond India 13 ABOUT THE AUTHORS For more information about this case study, Andrea Taylor, M.S.W., is senior research manager at please contact: Innovations in Healthcare (IIH), a nonprofit founded by Andrea Taylor, M.S.W. the World Economic Forum, McKinsey & Company, and Senior Research Manager Duke University that works to increase access to cost- Innovations in Healthcare effective and high-quality health care around the world. andrea.d.taylorduke.edu She manages the research and knowledge development agenda and directs the IIH student programs, including internships and fellowships. Ms. Taylor received her About the Commonwealth Fund master of social service administration degree from the The mission of the Commonwealth Fund is to promote a high performance health care system. The Fund carries University of Chicago. out this mandate by supporting independent research on Erin Escobar, M.P.H., is research manager at Innovations health care issues and making grants to improve health care in Healthcare (IIH). As part of the research and knowledge practice and policy. Support for this research was provided development team at IIH, she leads research in innovative by the Commonwealth Fund. The views presented here models of care, including the development of innovator are those of the authors and not necessarily those of the Commonwealth Fund or its directors, officers, or staff. case studies. Ms. Escobar received her master of public health degree from the University of North Carolina at Chapel Hill. Commonwealth Fund case studies examine health Krishna Udayakumar, M.D., M.B.A., is director of care organizations that have achieved high per- the Duke Global Health Innovation Center. The center formance in a particular area, have undertaken works to accelerate the uptake of successful innovations promising innovations, or exemplify attributes that from abroad and identify U.S. health care systems and/ can foster high performance. It is hoped that other or communities to implement major components of institutions will be able to draw lessons from these or full integrated delivery and payment reforms. Dr. cases to inform their own efforts to become high Udayakumar received his medical degree from the Duke performers. Please note that descriptions of prod- University School of Medicine and his master of business ucts and services are based on publicly available administration degree from the Fuqua School of Business information or data provided by the featured case at Duke University. study institution(s) and should not be construed as endorsement by the Commonwealth Fund. Editorial support was provided by Martha Hostetter. Photos courtesy of Narayana Health. commonwealthfund.org Case Study, November 2017