India Shows the Way

Necessity spawns innovation. Despite the pressing demand and constrained supply, a few relatively new Indian hospitals have devised ways of providing world-class health care…These hospitals target well-off patients, which forces them to provide care that meets global quality standards. But their purpose is to serve everyone, including patients with very low incomes, which Innovation-Raceputs pressure on the organizations to lower costs dramatically. Such a business model scales because the low costs of these hospitals attract large volumes of patients and allow the overall enterprise to be profitable. As a result, the hospitals are able to sustain their operations not through the usual government subsidies, charitable donations, or insurance reimbursements but through their revenues. Aravind Eye Care System, for instance, has paid for all its expansion projects from its profits, even though two-thirds of its patients receive free or subsidized care. These extraordinary private Indian hospitals should serve, we believe, as an inspiration to those in other developing nations and as a wake-up call to hospitals in Europe and the United States. (More)

See previous my posts on India here and here.

Comments (14)

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  1. JD says:

    “Necessity spawns innovation.”

    This is one of the most fundamental and valuable things that people just don’t seem to understand.

  2. Connor says:

    I’m still not sure if I would go there over higher costs than the US

  3. JD says:

    “These hospitals target well-off patients, which forces them to provide care that meets global quality standards. But their purpose is to serve everyone, including patients with very low incomes, which puts pressure on the organizations to lower costs dramatically.”

    So they are price discriminating? (i.e. having the wealthy people pay more and poor people pay less) How else can you provide high quality care for low prices?

    • Dewaine says:

      “Such a business model scales because the low costs of these hospitals attract large volumes of patients and allow the overall enterprise to be profitable.”

      So, it’s an economies of scale thing. Although, to your point, I don’t see how this explains them attracting both rich and poor.

  4. Sabal says:

    I like the pictures. In the next frame you’ll see all of the other arrows following the innovative one.

  5. Devon Herrick says:

    Despite the pressing demand and constrained supply, a few relatively new Indian hospitals have devised ways of providing world-class health care… These hospitals target well-off patients, which forces them to provide care that meets global quality standards…

    India is the price/quality leader in terms of high quality health care at the lowest price. One caveat, however, is that India benefits from low labor costs. Employing physicians costs one-third to one-quarter of the cost in the United States. Trained nurses costs about 5 percent. Maintenance and constructing workers are even cheaper. India has some other advantages — including less bureaucracy. Still, it’s an example of firms competing on price and quality — something that is severely lacking in our health care system.