"As people became more affluent, the cost of healthcare also kept going up"

We are chasing a mirage in healthcare. Even as income levels rose, the cost of healthcare kept going up. The result: the masses still cannot afford good quality healthcare. It’s a vexing problem that governments across the world are grappling with. But there’s one person who might have found a solution to this problem. He has managed to do what was considered impossible so far: deliver world-class healthcare at abysmally low cost. Devi Shetty’s unique model of healthcare has helped save the lives of many across India and elsewhere in the world. And it might just spawn what academic researchers call a “Third World solution” to a problem that the whole world is facing. In this interview, Shetty explains how he has made healthcare affordable, what the role of government in healthcare should be, and why India is rather well-poised to take the healthcare challenges head-on. Excerpts:

The gravity of the situation:
The first heart surgery was done 100 years ago. And 100 years later only 8% of the world’s population can afford a heart surgery. This is a five-year-old statistic: globally around 650,000 heart surgeries are done annually. Out of this, 450,000 heart surgeries are done in the US and the remainder of around 200,000 operations are done all over the world. India requires around 2.5 million heart surgeries a year. And all the heart hospitals in India put together do only around 80,000 surgeries a year.

Now what happens to the rest? The need for heart surgery in India depends on the fact that we are about four times bigger than the US, but we are three times more vulnerable to heart disease as compared to Europeans. It is a genetic predisposition. When I used to work in England, the average age of my patient was 65. In India it is 45. It is not the young son bringing his father for a heart operation: in India it is the other way round. The other thing is that the kind of disease we get here is radically different from the US or Europe. In Europe it is the aging process. In India it is a disease affecting young breadwinners of the family. We are three times more vulnerable than Europeans for getting heart disease.


The healthcare-affordability paradox:
Today if somebody can’t afford a house, a car or mobile phone, it’s okay. When he is in pain and a solution is available but if it is not affordable, that means there is something wrong in the way that business is run. If you look at anything that happened 100 years ago, today it has become affordable to the common man. But healthcare has defied this logic. That’s because policymakers kept saying that people will become more affluent and when they become affluent, they will be able to afford healthcare. What they didn’t realize was that as people became more affluent, the cost of healthcare also kept going up. So it is like a mirage that can never touch. The rise in cost is because of more technology. Twenty years ago if somebody had chest pain, very few centres were doing angioplasty and very few operations were done. Today we operate upon anything that can move. We operate on 90-year-olds. And before the operation there are 25 different tests we perform, each costing Rs 5,000-10,000. That increases the safety of the operation, but it comes at a price. Today there is not even a single agency in the world with a mandate to bring down the cost of healthcare.

All the corporate hospitals, all the entities are trying to make money by treating less number of patients. If you look at the hospitals that are coming up, they are becoming smaller and smaller. Like today there are birthing centres. It just reflects that today healthcare is becoming like a Rolex or an Omega watch. That’s a very disturbing trend. The bulk of the masses will be left alone. If a business model just settles down, what is the incentive for them to reduce the cost.

Dissociating healthcare from affluence:
India will become the first country in the world to dissociate healthcare from affluence. We will declare in this country there will be large number of people living in slums with no running water, no toilet, but when they are in pain, they can access high-tech healthcare with dignity, just like an American or European. There is a gross disconnect between where they live and the kind and quality of healthcare they get access to. Because we strongly believe that the government will become a health insurance provider rather than a healthcare provider. Five years ago, we launched a health insurance scheme with the state government called Yeshasvini. The Andhra Pradesh government has launched a much more advanced programme wherein without any premium paid by the people, they have covered the healthcare of 80% of the state’s people. Eighteen governments are in the negotiation stage to launch similar insurance. Essentially, governments will realize that it is much better for them to offer health insurance rather than managing hospitals. But this will only happen if there are large hospitals which can cater to millions of people at a very, very less price. That’s because these insurance schemes cannot pay lakhs of rupees for a heart operation: they can pay only Rs 60,000-70,000. You cannot do a heart operation in Rs 70,000 if you are doing just 2-3 operations in a day. Like today we are doing 30 heart surgeries in a day. We do the largest number of heart surgeries in the world. It’s mainly because of the huge infrastructure we have created.

The premise on which Narayana Hrudyalaya is based:
When I was at Guys Hospital in the UK, I was involved with finance planning with my boss who was the chief cardiac surgeon. I learnt a lot about maximizing whatever limited resources you have to do a lot of operations. So I realized that if I have to succeed as a heart surgeon, I have to look at the business side of healthcare, else I might remain a good surgeon doing only 1-2 operations a day.

At Guys Hospital on Saturday and Sunday, they as a law, had a heart surgeon, anesthesiologist, perfusionist (the person who operates the heart-lung machine) and nurses on duty, but they didn’t work because it’s a holiday. They are supposed to work only on emergencies. I had my wife and children there but you know how it is in India: we don’t bother much about weekends. And so on every Saturday, I used to schedule so-called emergency cases. That alone added to more than 80-100 extra cases in that particular year. So in the same budget you are doing 100 more operations. As a result, we got a few million pounds from the NHS Trust for that efficiency. There’s one thing in healthcare: in this country 100-200 bed hospitals will not work. You have to build 5,000-bed health cities over 25 acres of land. That is the only model which will reduce your costs, improve your results and patients are better off operated in a very busy centre as opposed to a centre doing only 1-2 operations.

If you look at any surgeon’s results historically, the results of the first 100 surgeries of his life are inferior to the next 100. We are technicians. As we keep on doing it, we keep getting better and better. The results of a surgeon who does four surgeries a day are much much better than a surgeon doing just one operation a day. This is just one part. Then there are the anesthesiologists, perfusionists, nurses. As they keep doing more procedures, they become experts. Historically, it’s a proven fact that the busiest hospitals come up with innovations, do the procedures much better, their results are much better. No hospital in the world is doing more than 30-35 operations in a day.

Why Wal-Mart is the model to follow:
Globally, healthcare and wellness is a $4.5 trillion industry. If you look at healthcare, pharmaceuticals and everything put together, it is the second-largest industry after agro-industries. But it is totally fragmented and lacks efficiency. I worship Wal-Mart. Today every common household in America can afford very good quality food and all the basic essentials of life. All this comes with scale. And then their objective is to drive down price constantly to help middle-class people. I understand that they have been heavily criticized and all that, but they have achieved the objective of making millions and millions of customers happy. Industry-wide they may have hurt a lot of people. If you are asked a question: would you like to look after the people who run the healthcare industry or would you like to look after the lives of your patients? Which one would you choose? The second obviously.

Today 40% of the revenue we generate we give to drugs and disposable companies. That’s the bulk of cost. The rest of it is salaries and maintenance. Now it is very difficult to reduce the salary burden below a certain level because these are technically skilled people. The healthcare industry is run by people. It can never be automated, so people are our main assets. So we can’t reduce the cost. What we can do is reduce the cost of materials. There are two industries in the world where a particular product we buy has no price tag. One is the arms industry and the second one is the medical industry. There is no fixed price. Depending on who is buying, the price can be Rs 1 crore for one machine or Rs 75 lakh for two machines. Bulk of the cost in the healthcare industry for materials is the R&D cost. So to retain big organizations, they are very flexible.

Also, we realize that most of the big MNCs from whom we buy the catheters, balloons, etc., are really not the primary manufacturers. The primary manufacturers are OEM companies in Korea, Taiwan and China. We approach those companies and they are willing to sell to us, but they want volume. India makes most of the generic drugs used in American and European hospitals. But Indian hospitals don’t use those generic drugs – we don’t have access to it. Those companies don’t sell it to us. They prefer to sell their branded drugs. If I have the volume, I can go to one generic manufacturer who is making it for American companies and say you give it to me in these many numbers and he’ll be happy to do that. Right now we don’t do that.

The greatest problem of the healthcare industry in India is that the largest player in corporate healthcare, his turnover is Rs 800 crore or Rs 1,000 crore. Look at any top corporate hospital, listed entities in India. Their revenues are a few hundred crores and the turnover of some of the Maruti car spare dealers is more. So unless you have the size, you cannot challenge the cost of the inputs and the only way you will have the price control is if you have the size. Wal Mart built huge chains of shops all over. So they had the size and they could dictate terms from any company starting from Procter and Gamble to potato growers – they could insist that high-quality potatoes be grown at a price. See, what do farmers want? They want some protection and they want a steady market. So if he’s growing 10 tonnes of potato and someone says you grow 10,000 tonnes, we will fund you for growing, we take the risk. But grow very good quality potatoes. That’s how it is.

India’s big opportunity:
Today we have fantastic products called heart surgery, neurosurgery, joint replacement. The question is “What percentage of people can afford it and what percentage of people have access to it?” Someone very rich in Nigeria can’t get an operation done there. They just don’t have the facilities there. Unless the country invests heavily in creating healthcare infrastructure (i.e., training doctors, nurses and technicians), you can’t build a centre of excellence. A centre of excellence isn’t the building and the equipment, it is the people. We are in a phenomenal position in India because we train the highest number of doctors in the world. The US trains only 15,000 a year. We train 32,000. We are likely to train over 50,000-60,000. We train the largest number of nurses and medical technicians. And outside the US, we have the largest number of USFDA-approved drug manufacturing units. It is likely that in the near future, this country will have the largest number of USFDA-approved pharmaceutical units than even in the US itself. We have all the ingredients for a phenomenal healthcare delivery system but our missing link is that the people do not have cash to pay for it. Now once the government takes the responsibility of being a health insurance provider, that gap will be filled. There will be phenomenal innovations in healthcare. And that innovation will eventually go to the First World as well.

Today the government has to manage massive hospitals and salaries and nothing comes out of it. Very few government-run hospitals do any quality work. We are talking of procedures on the human body. There are two types of healthcare – one is medical care and the other is procedures on the human body. Now bulk of the problems effecting the healthcare delivery are the procedures on the human body. Those procedures on the human body have to be done in large centres like ours all over the country, very efficiently at a very very low cost. For the medical treatment they can go anywhere. As the cost goes down, more people will come. As more people come, results get better. See we are technicians -- we cut and stitch. As we keep on doing that we can grow to infinity. There is nothing like you go to this level and you stop. About the economic part of it, let’s take the analogy of mobile phones. Our country has one of the largest subscriber bases. So essentially Western countries would have developed the technologies to treat, but the mechanism of delivery will be worked out by Indian systems.