Applying Reverse Innovation to Make Value-Based Care Delivery Work
MOLLY CASTALDO: Hello, everyone. I'm Molly Castaldo. I coordinate alumni programming for the Dartmouth Master of Health Care Delivery Science Program.
And it is my great pleasure to introduce our speaker, Vijay Govindarajan, and MHCDS alumnus, Bret Anderson, today.
Bret will be facilitating a discussion following Professor Govindarajan's presentation.
So Professor Govindarajan, widely known as VG, is a global expert on strategy and innovation.
He has a lengthy biography, but for brevity's sake I'm going to highlight just a few of his accomplishments that are most relevant to the work he'll be sharing today about what we can learn from innovators in resource-poor countries to make value-based care delivery in the developed world work.
Professor Govindarajan is the Coxe Distinguished Professor at the Tuck School of Business and a member of the MHCDS program faculty, where he teaches science of health care delivery and strategy for health care organizations.
He took a two-year leave of absence from academia to serve as GE's first professor in residence and chief innovation consultant.
While at GE, he and CEO Jeff Immelt co-wrote an article for the Harvard Business Review titled, How GE is Disrupting Itself, in which they introduced the concept of reverse innovation.
Professor Govindarajan is a two-time McKinsey Award winner for the best article published in the Harvard Business Review.
And he's also a New York Times and Wall Street Journal best-selling author of the book Reverse Innovation.
His latest book with co-author Ravi Ramamurti, titled Reverse Innovation in Health Care, How to Make Value-Based Delivery Work, will be available on July 10.
Bret Anderson was a member of the first class to graduate from the MHCDS program.
He's an engagement manager with the Chartis Group and helps develop and implement their enterprise strategic initiatives.
He has nearly 15 years experience in the health care industry, and has worked with a range of provider clients in both the government and commercial spaces, as well as internationally.
And he's familiar with Professor Govindarajan's recent work, having served as a reviewer and commenter for the upcoming book.
So just a very brief word about process.
We'll begin with Professor Govindarajan's presentation sharing his work.
And then during the presentation we hope that many of you will post questions and comments in the chat box.
I think that some of you have already figured out how that works.
But if you want to use the chat box without having it block the screen so you're able to see the slides and the chat box at the same time, please exit full screen mode on your computer pressing the Escape key,
click on the chat icon at the bottom of your zoom screen, and the chat box will open to the right of the video, enabling you to watch both the presentation and see the chat simultaneously.
Following the presentation Brad may include questions drawn from the group chat in his interview with Professor Govindarajan.
I will now turn it over to Professor Govindarajan.
VIJAY GOVINDARAJAN: What I would like to do is Ravi Ramamurti and I have been engaged in a five-year research project on reverse innovation in health care.
And I would like to share with you some of the highlights from our research.
And as a way of doing that, I want to put this whole research project in a broader context.
If you think about the world, there are 7 billion people on planet Earth.
Out of the 7 billion, 2 billion have the purchasing power to buy the goods and services operations make.
And there are 5 billion people who are too poor to buy those goods and services.
There are 5 billion non-consumers, if you will.
And they are non-consumers of just about every product, whether it is education or energy or health care or food or automobiles.
You name it.
Historically, corporations have focused on the 2 billion, rich, who have the affordability to buy the goods and services.
And they have essentially condemned the $5 billion poor as charity cases--the $5 billion non-consumers as charity cases.
That's an outmoded thinking.
We have to convert those 5 billion non-consumers into consumers.
And we contend that is probably the single biggest growth opportunity for corporations.
Obviously, if you want to convert those 5 billion non-consumers into consumers, you can't give them the business models that consumers are consuming.
If they could do it, they would already become consumers.
If you can do breakthrough innovation, you can actually unlock tremendous value.
And if you want to do breakthrough innovation to convert 5 billion non-consumers into consumers, you have to produce products at a very, very affordable price, and at the same time, good quality products.
And if you can actually convert those 5 billion non-consumers into consumers with extremely affordable products which are high quality, then you can use those products to transform the lives of the 5 billion rich.
This is what we call reverse innovation as a phenomena.
Ravi and I contend reverse innovation is perhaps the single biggest growth platform for corporations.
And when you stop to think about it, reverse innovation is an extremely counter-intuitive idea.
Because it is perfectly logical to see why a rich man's product a poor man would want.
If a rich man is driving an automobile, the poor man wants an automobile.
If a rich man is having a cell phone, the poor lady--she may want a cell phone.
But it is not that logical to see why a rich man would want a poor man's product.
That is the essence of reverse innovation.
And we wanted to test the theory of reverse innovation in the health care industry.
The question is, why would someone in the rich world would want a poor man's health care solution?
And let's explore it this way.
Think about the richest country in the world-- the US.
Think about the health care industry in the US.
First of all, we spend an awful lot of money on health care in the US, $3 trillion, to be precise.
And even after spending all this money, our quality is not consistently best in class.
And even after spending all this money, we cannot guarantee health care to every American.
Even after Obamacare, millions of Americans still don't have access to health care.
So the health care industry in the US is characterized by very high costs.
Not necessarily best in class quality suddenly cannot guarantee universal access.
What Ravi and I found in poor countries there are health care models which are predicated on world class quality at extremely low price.
If that is the case, wouldn't the rich guy not be interested?
In particular, we focused on India.
In India we found seven hospitals which are practicing what we call breakthrough health care delivery innovation.
These are not the typical hospitals.
These are exceptions to the rule.
But they demonstrate what is possible.
These are all private hospitals.
Five of those seven are for-profit, two are non-profit.
And the leaders in these hospitals, we call them doctorpreneurs.
They are part doctors, they are part entrepreneurs.
They are not as famous as the Indian IT sector.
But at the same time they're equally-- in fact, more-- impactful.
Let us meet some of these innovators.
This is Dr. Shivanand Nayak.
He is with Deccan Hospital.
And Dr. Shivanand Nayak and his team had been able to deliver kidney dialysis for $4,000.
This is for the end stage kidney disease.
The same procedure in the US will cost an astronomical $70,000.
But at the same time, the quality is comparable.
In fact, five year survival rate for end stage kidney patients in Deccan hospital is 50%.
In the US, it is 40%.
So the quality is on par.
In fact, every one of the hospitals that we studied in India are JCI accredited.
That is another mark of quality.
Here is Dr. Aravind Srinivasan of Aravind Eye Care.
This is one of the hospitals which did not even apply for JCI certification because they felt regulation will curtail their innovation.
In Aravind Eye Care, cataract surgery cost $150.
Cataract surgery, similar procedure in the US will cost a whopping $3,750.
Yet the quality is on par and even better.
In national health service in UK, complications after cataract surgery is typically 2.4%.
For Aravind Eye Care, it is less than 1%.
Or take a look at Ajai Kumar, who co-founded and the CEO of NCG Oncology, which is one of the largest and more famous cancer hospital in India.
There, a cancer treatment will cost $2,000.
The same cancer treatment in the US will cost 10 times that much.
Yet if you think about, say a five-year survival rate for breast cancer, it is 89% in NCG Oncology.
It is the same 89% in the US.
Or take a look at Dr. Devi Shetty, who founded Narayana Health.
This is Narayana Health Hospital in Bangalore.
This is the lobby of the hospital.
It's pretty impressive.
But what is really impressive is open heart surgery in Narayana Health will cost $2,000.
Open heart surgery in the US costs $150,000.
Because open heart surgery in Narayana Health costs 75 times less, that doesn't mean Narayana Health's quality is 75 times inferior.
I don't even know how you can do poor quality heart surgery.
One measure of quality in a heart surgery is mortality rates 30 days after surgery.
For Narayana Health, their mortality rates 30 days after surgery is 1.4%.
And the US average is 1.9%.
So their quality is on par, maybe even slightly ahead.
And this is one of the main messages we want to get across to you.
Reverse innovation in health care is not about lowering costs.
It is about pushing the price performance paradigm.
It is about offering more for less.
It is about offering lot more for a lot less.
It is about providing world class quality at an ultra low cost.
In fact, counter-intuitive as it may seem, the medical quality that is required by non-consumers in poor countries tends to be higher than the medical quality required by consumers in rich country.
What I mean by that is, suppose you perform an open heart surgery on an American in Mayo Clinic.
The surgeon doesn't have to have the same high skill level to reduce mortality as compared to doing an open heart surgery on an Indian in Narayana Health--the same procedure.
For one thing, Indians tend to have bad hearts.
Not that people's hearts. Indians tend to have genetically weak hearts.
That means the surgeon in Narayana Health has to have a higher skill to reduce mortality.
And as you well know, the pollution in India is horrible.
Hygienic conditions in India are terrible as compared to the US.
That means post-surgery, mortality rates tend to be higher in India.
Therefore, if you adjust for these risk factors, what Narayana Health has achieved is truly remarkable.
And on top of that, Narayana Health does not deny open heart surgery for anyone who needs it.
Narayana Health opened its door in 2001.
It's a 17-year-old hospital.
In the last 17 years they have not denied open heart surgery for anyone who needs it.
If they can't pay, they do it at subsidized rates or even free.
So much so, 54% of the patients receive their open heart surgery at subsidized rates.
I want you to think about that.
And on top of that, Narayana Health is the most profitable cardiac hospital in the world.
Can you believe this?
Here is a hospital which charges only for, say 45%, of their patients.
And even on the 45%, they charge 75 times less than what we charge in the US.
The remaining 55% pay at a subsidized rate.
And they cover the cost of 100% of the patients on 45 full paying patients.
And yet they turn in profits.
The question we asked, Ravi and I, asked in this research is, how come these seven hospitals charge ultra low prices, offer world class quality, and at the same time they are financially sustainable?
Before we unlock how they do it, I want to show you-- in fact, I wish we could show you all the seven hospitals.
But in the interest of time let me just show you a glimpse of what Dr. Divi Shetty has created in terms of a great institution in Narayana Health in India.
NARRATOR: With a population of over a billion, affordable health care is out of reach of a vast majority of Indians.
Nearly 700 million people in India have no access to specialist care, either due to lack of reach, or lack of affordability.
When I came back to this country, there was no cardiac surgery.
So hardly any cardiac surgery.
There was nothing like a pediatric cardiac surgery.
So we started the whole concept of pediatric cardiac surgery.
NARRATOR: In less than a decade since inception, Narayana Hrudayalaya has become Asia's largest cardiac care center.
Surgeons at the hospital perform a large number of different cardiac surgeries and procedures, including complex pediatric surgeries.
Today, the hospital performs as many as 30 to 35 heart surgeries a day and Narayana Hrudayalaya also does the largest number of pediatric heart surgeries in the world.
Each day, about 2,500 patients visit the outpatient department of the Bangalore facility alone.
And yet, the hospital has achieved a price point affordable to the average Indian.
We are essentially a heart hospital, which proved to the world that with $1,800 you can do a major heart operation.
Essentially, we want to reduce the cost of high tech health care, make it affordable to the citizens of this world.
NARRATOR: Those in need of surgery travel to Narayana Hrudayalaya for treatment.
And the hospital treats patients from across the world.
My daughter has a hole in the heart.
Well, let me preface this.
I also have a dual citizenship in the US.
Living in the US for the most part, my mother lived with me.
And she has cases-- she's somebody I had to take to the hospital very often.
She has diabetes [INAUDIBLE].
So I took her-- we live in New York.
So I've taken her to the best hospitals, as far as I know.
And when I came in here to their cardiac unit, I was blown away.
That's the only way I can explain it.
I get back so emotional because there is so many more people than my daughter who can't even afford what I can afford.
And in India they're getting that help.
And then it makes me wonder about countries like mine.
So I'm praying for Dr. Shetty-- am I saying his name right--and people like him to develop this module, not just for India, but for the world.
VIJAY GOVINDARAJAN: Before I talk about how have these hospitals-- these seven Indian hospitals--have been able to achieve this remarkable performance very high quality at very low cost and still financially sustainable?
Typically, when Ravi and I present these ideas, there are skeptics who say, well, India is different.
It is a low labor cost country.
It is true.
Certainly, the cost of nurses and so on so are considerably lower in India as compared to the US.
Even the salaries for surgeons and doctors in India are much less as compared to the US.
Therefore, we adjusted for the salary costs of both the doctors as well as nurses in India, adjusted it to the US levels.
We still find the Indian prices are 10% to 15% of what we charge in the US.
Certainly I already pointed out their quantity is world class.
Because the cost in India is low doesn't mean the quality is low.
The third kind of skeptical comments we get is, US hospitals also do research.
That is true.
They have twin mission--teaching, as well as practicing medicine.
Whereas, what we found in the Indian hospitals that we examined, many of them have the twin missions.
In fact, many of these Indian hospitals have extensive programs to train doctors and nurses.
And they do applied research.
So if salary costs and the dual mission doesn't explain what we find in India, why is it so different from the US?
What is the secret sauce amongst these Indian hospitals?
What we found, there are three important ingredients as to why the Indian hospitals have been able to achieve this remarkable combination of ultra low cost and world class quality.
First is a hub-and-spoke model.
Second idea-- and the hub-and-spoke model includes technology as well.
The second idea is task shifting.
And the third idea is frugality.
But underlying all the secret sauce is a very important ingredient, which is a noble purpose.
All these hospitals feel health care is a human right.
They have got to treat rich and poor alike.
And we got to serve everybody.
We've got to disassociate health from affordability.
Let me just walk through very briefly what these three core principles are.
For hub-and-spoke model I want to invite you to visit HCG Oncology, which is the largest and world-famous cardiac hospital in India.
By the way, one thing interesting we found is, the Indian hospitals have actually borrowed management principals we know for 100 years, which have been practiced in the industrial sector.
They simply taken good management practices from the industrial sector and applying it to medicine.
Hub-and-spoke is a very world concept.
This is an airline concept.
Essentially in the airlines, they set up spokes, and the spokes actually feed volume to the trunk routes.
They simply took that concept and applied it to medicine.
HCG Oncology has a hub-and-spoke configuration where their hub, which is in Bangalore, which is connected by a lot of cancer centers all over India, which are the spokes.
Now in this hub-and-spoke concept, the most expensive equipment is kept at the hub.
This would be a super expensive CT scanner or an MR scanner, or a PET CT scanner, or a cyber knife will be only in the hub.
The spokes will have basic equipment.
This is to do basic diagnosis.
Similarly, hub will have the most expensive surgeons.
And the spokes will have general practitioners.
Now, in the hub-and-spoke there is a technology connection, a telemedicine connection.
Now, how does this hub-and-spoke configuration simultaneously improve quality and lower cost?
It dramatically lowers costs because of four reasons.
First, because the equipment is rationalized, you are not having expensive equipment in every spoke.
Therefore, in terms of cost of equipment, it is a more efficient model.
Similarly, cost of personnel is a more efficient model because you have not duplicating expensive surgeons in every spoke.
But the third and the important thing is economies of scale.
This is what they learn from Ford and Toyota.
Mass production of automobiles drives the cost of automobiles down.
What is happening in the hub-and-spoke model is the spokes, they do basic diagnosis.
And only those who need, say a surgical oncology or complex treatments for cancer are sent to the hub.
Therefore, hub acts as a focus factory, high volume for complex treatments.
And economies of scale drive down costs.
And there's a fourth very important cost saving here, which is for the patient.
Otherwise, without this model, the people who are located on the spot will be traveling to the Bangalore hub.
If they simply needed a simple treatment, they don't have to travel.
So it reduces the cost of travel, saves working day for the patients.
But when we present-- Ravi and I present these ideas to our American colleagues, hey, here is a hospital which is doing mass production at the hub for cancer or for open heart surgery, their first reaction is, quality has to suffer.
We ask why.
We don't worry about the quality of automobiles when it come of an assembly line.
What is so special about health care?
In fact, counter-intuitive as it may seem, quality dramatically goes up when you do mass production of open heart surgery or high volume cancer treatment.
Because in Narayana Health, the cardiac surgeon is doing so many open heart surgeries.
Or in XEG oncology, the oncologists are doing so many cancer treatments, they become experts in their field.
They've seen all possible complications.
Again, there is not just one type of cancer or one type of open heart surgery.
Suppose let's say there are Because of high volume, you can ask someone to specialize in one type.
And specialization leads to high quality.
This is what we learned from the industrial sector.
I just want you to stop for a moment and think about how have we configured the hospital infrastructure in the US?
This is not hub-and-spoke.
In fact, in the US we do most number of open heart surgery.
We treat most number of patients for kidney or for cancer.
For instance, we do 500,000 open heart surgeries in the US.
But we do it in too many hubs.
That is our problem.
Therefore, no single hub has got the volume to bring down the cost and enhance the quality.
So the first principle is hub-and-spoke.
The second principle is task shifting.
I'm going to use the Arvind Eye Care example.
But pause for a moment and think about the simple idea of task shifting.
We practice this in every other business.
Take, for instance, a fancy restaurant.
In a fancy restaurant, the chief chef is not going to be cleaning the floor.
The chief chef is not going to be washing the dishes.
That is not only an inefficient use of his time, it not only increases the cost, but actually quality will suffer because the chief chef is so bored in mopping the floor.
So he may do a poor quality.
Therefore, in other sectors we match skill with tasks.
But somehow in health care we have forgotten the simple principle.
By the way, even in health care we have nurses.
So therefore we already know it is important to shift tasks.
But what these Indian hospital exemplars have done is to take task shifting to a whole another level.
Take, for instance, Arvind Eye Care.
What you see in this photograph are village girls.
These are high school diploma-holding village girls.
Arvind records these village girls, gives them an 18-month training.
They don't get an actual nursing degree, but they get 18 months training to take care of patients.
By the way, 64% of the employees in Arvind are these village women.
Want you to think about that.
For every eye care surgeon, they pad them with six of these what they call paramedics.
Now how does this simultaneously decrease costs and increase quality?
What happens is, if a patient is in Arvind Eye Care System for say, 100% of the time, is taken care of by these paramedics.
That drives the cost down.
The eye care surgeon is only spending time with the patient 10% of the time where only he is performing the highest skill level where only surgeons can do.
Not only that, these paramedics are able to reduce the turnaround time-- that is turnaround between one surgery and another.
In fact, in medicine we spend a lot of time worrying about wheels in to wheels out.
What these Indian hospitals have done is in addition to worrying about wheels in to wheels out, they also worry about wheels out to wheels in.
Wheels in to wheels out is when you wheel in the patient and wheel out the patient.
That is during the surgery.
You can be efficient there.
But wheels out to wheels in is when you wheel out a patient and wheel in the next patient.
That is the turnaround time.
If you are inefficient there, you are wasting a lot of resources.
By overinvesting in these paramedics, they are able to reduce the turnaround time to practically zero.
They have also taken task shifting to a whole other level by involving a free resource to take care of health.
And that free resource is family members.
For instance, Narayana Health, one of the Indian exemplars, they give a four-hour video so that after open heart surgery the family members can actually take care of the patient in the post-op in the ward, when they are still in the hospital.
Actually, the family members do what typically a nurse will do.
They are trained to do it.
That dramatically lowers cost because there is a free resource.
Not only that, anyone would love to be taken care of by their own family members.
It is also compassionate.
Not only that, when the patient goes home, the patient receives the same high quality care at home, which reduces readmission.
I again want you to think about what we do in the US in task shifting.
Not only we don't practice the kind of breakthrough innovation in pass shifting that we see in India, we actually practice exactly the opposite.
Most of the US hospitals we have reduced investments in semi-skilled and lower skilled employees with the result, say in the Mayo Clinic 50% of the time the doctor is spending on administrative work because there is not enough administrative people.
It is not only a highly inefficient use of resources, the quality suffers, and there is tremendous burnout amongst doctors because they are doing things they don't enjoy doing.
This is like asking the chief chef in a fancy restaurant to mop the floor.
That's what people are doing at Mayo Clinic.
The surgeon is doing things he or she does not enjoy.
Similarly, think about task shifting in another context, chronic conditions.
Chronic cases in the US are treated in the most expensive resource, which is the hospital infrastructure.
Whereas these Indian exemplars do chronic conditions at their patient's individual home.
And simply using technology, they are able to monitor the patients.
Task shifting, the second core principle.
The third quarter principle is frugality.
These Indian hospitals practice frugality to the tilt both in operating expenses as well as in capital expenditure.
As an example, Narayana Health, talk about operating expense, steel clamps.
These are-- steel clamps is what you use to hold the heart in place when you do an open heart surgery.
A steel clamp costs about $160.
In the US we throw away a medical device like that after each surgery.
So if you throw it away after each surgery, the steel clamp cost would be $160 per surgery.
Narayana Health reuses it 100 times.
Of course, thorough sterilization, et cetera.
By the way, JCI approves reuse of such medical devices.
So if you reuse steel clamp 100 times, a steel clamp that cost $160 cost per surgery for Narayana is $1.60.
That is the kind of frugality we see.
Similarly, capital expenditure, the picture that you're seeing, is the Mysore Hospital for Narayana Health.
The cost per bed in this facility is $25,000.
Again, I want you to think about that.
Cost per bed in the US is $2 million.
How can our health care costs be contained unless we pay attention to capital expenditures like this?
And a third and very important frugality principle is, all these Indian exemplars empower the doctors with cost data.
The doctors know how much is the profit and loss, how much is cost per surgery.
This is like a principle of Toyota.
Toyota imports the front line employees who incur the costs, give them the data so that they will be conscious and be cost-effective.
The doctors are the ones who incur the costs.
They should be empowered.
And the best way you can empower them is to give them cost data.
Again, I want you to stop for a moment and think about what we do on frugality in the US.
When you visit a US hospital, it looks like a seven star hotel.
Do we need that?
In non-medical areas we actually go overboard in spending.
Again, US doctors, how much do they know about cost data?
Even chief financial officers in hospitals cannot tell us what does it cost to do a procedure?
Much less the doctors.
In summary, what we found in India are those three important principles--hub-and-spoke, task shifting, and frugality.
But underlying all of that is that noble purpose.
That noble purpose says health care is a human right.
And that comes from the leaders.
And the leaders of these hospitals, we call them doctorpreneurs.
And that's what we need in the US.
And the doctorpreneurs have three important characteristics.
First, they are outstanding medical doctors.
In any professional service organization, the leader must understand what they are managing.
If you are managing a university, you'd better be an academic.
If you are going to manage a law firm, you better understand law.
So if you're going to manage a hospital, you better understand medicine.
Therefore, the first requirement is you must be a doctor.
Of course, there are a lot of bad hospitals all over the world which are managed by doctors.
Therefore, what else distinguishes a doctorpreneur from any other doctor managing a hospital?
Therefore they must have a second characteristic, which is compassion.
Only compassionate doctors will have a principle which says health care is a human right.
A compassionate doctor says there is no difference between a rich man and a poor man.
Poor man's heart is the same as a rich man's heart.
Poor man's eye is the same as a rich man's eye.
But of course, compassionate doctors alone--these two characteristics alone-- is not enough
because a compassionate person may get the hospital broke.
Therefore, you must have the third characteristic.
You must be a shrewd businessman.
You must understand cost.
You must understand margins.
You must understand utilization.
You must be a shrewd businessman.
What we found, the Indian exemplars have all these three qualities.
One way I can summarize the Indian model is it starts with the hub-and-spoke.
Hub-and-spoke really generates volume at the hub.
The volume leads to learning.
And learning leads to high quality.
But the volume and high quality attracts rich patients.
And rich patients obviously are fed into that hub-and-spoke volume.
High volume also means economies of scale and specialization.
When you combine that with task shifting, you not only get quantity, but also you get cost.
And frugality is a principle which drives the cost down even further.
When you have low cost, that attracts poor patients.
And the poor patients obviously are going to also force you to be more frugal.
And the poor patients feed into the hub-and-spoke.
This is the virtuous cycle Indian hospitals have created.
Before I turn it over to Bret for some interaction, what I would like to do is to just tell you very briefly Ravi and I also examined the US and asked ourselves the question, can the principles that we saw in India, can they travel to the US?
Because the US regulatory environment is so different.
The US context is so different.
What we found even under the fee-for-service, even under the current regulatory system, we found examples of hospitals who took inspiration from India and put these principles to work.
Hub-and-spoke model, University of Mississippi Medical Center.
Task shifting, Iora Health.
And frugality, Health City Cayman Islands.
This is a picture of University Mississippi Medical Center.
I can elaborate a bit more during Q&A as to how they set up the hub-and-spoke model, which is not only saving costs, but saving lives.
Iora Health is a great example of task shifting.
For every primary care physician there are five health coaches, which is essentially decreasing the health care costs by 15% to 20%.
By investing in primary care, we reduce secondary and tertiary care.
And Health City Cayman Islands is the facility opened by Narayana Health.
Cayman Islands is a one-hour flight from Miami.
And they use the same frugality principles from India.
And they are able to show how you can do an open heart surgery in Cayman Islands at 20% to 30% of the cost it takes to do it in the US.
Essentially, Cayman Islands is a way for them to attract US patients.
Have an open heart surgery and maybe spend three weeks after the surgery relaxing on the Cayman beach.
One way I can cross and then invite Bret to have a conversation is ultimately competition, in our view, will be the best motivation for US health care system to change.
Competition has changed other industries.
There was a time when US steel industry said, nobody can touch us.
There was a time when US automobile industry said, we are invincible.
Global competition brought the discipline in those industries.
Facilities like Health City Cayman Islands, what the entrepreneurs can do.
Iora Health is going to put the same discipline where the US health care providers will have no choice but to embrace breakthrough cost innovations.
And one source for getting those cost innovations could be poor countries.
And that's what we highlight in our book, Reverse Innovation in Health Care, How Value-Based Delivery Will Work.
Thank you very much.
Bret: Thank you, VG.
Wonderful presentation, as always.
I think I speak for a lot of people on the call today in that we're always inspired by your innovative thinking, and especially on this topic.
I'm sure that there's a lot of people that look forward to your book coming out.
And I can testify firsthand that it is very well worth the read.
So I hope everybody picks it up.
I think let's kick off with a little bit of current events here.
I think this week we all heard some really interesting news that the Buffet, Bezos, and Dimon trio that is leading this health care disruption charge have tapped Atul Gawande to lead that new organization.
And I think that Dr. Gawande is certainly notable for some of his delivery reform books.
I'm sure many people have read the Checklist Manifesto better and others.
But I'm curious what sort of advice you would give him if you were having a sit-down meeting down here in Boston and help him shape the thinking and goals of his exciting organization that he's going to be leading.
Are there some, as you put, loose bricks that you can tell him to go after and tackle that you mentioned in your book and are driven by some of your more recent thinking?
I would agree with you, Bret.
I think Atul Gawande is a great choice to lead this new health care venture.
I am so excited.
I think this is somewhat similar to the ACA.
Something big is going to come out.
By the way, before I talk about what advice
I may give this new venture, I think Atul Gawande fits the bill of the doctorpreneur I talked about.
Medical excellence-- he is a professor of medicine in Harvard Medical School.
He clears that bar with flying colors.
He has been working his entire life on public health issues.
He goes to poor countries, studies their health care system, thinks about what he can contribute there.
Compassion, he clears that bar.
For a medical doctor, he really understands efficiency.
In fact, he wrote an article in New Yorker about what we can learn from Cheesecake Factory in terms of laying out a process which is highly efficient.
So he is a classic case of doctorpreneur, a perfect person to lead this venture.
Now what kind of advice, what kind of ideas,
I can offer to this new venture?
Let me give you three ideas.
The first is really a play of the hub-and-spoke model.
What I would suggest is tomorrow they go and open a free health clinic in every one of the Whole Food stores.
Whole Foods, as you know, is owned by Amazon.
And in every one of the Whole Food stores-- they probably got thousands of them-- free health clinic-- things like immunization and basic tests, et cetera.
Now how do you make money when you do a free health clinic?
There are several ways you can make money.
First, it will increase people coming in.
Whenever you offer anything free, people are going to go there.
When they go there you can sign them up for Amazon Prime.
Amazon Prime is a terrific way by which Amazon makes money.
And once a customer signs with Amazon Prime, then because there is no extra cost for shipping, they place more orders with Amazon.
And also health clinic will increase foot traffic into Whole Foods stores.
They will buy grocery.
Not only that.
Amazon can now deliver medicine at home.
And because there is Amazon Prime, it is free delivery.
Instantly they will put CVS out of business.
And of course, because it is free health clinic, people go there and do their lipid tests and basic immunization, et cetera.
These are all health data.
As long as privacy is respected, certainly there are different ways by which you can monetize that data.
That's idea number one.
Idea number two is use of technology, the same use of technology that we saw in India.
You see, Amazon right now is experimenting with a store in Seattle where there is going to be no human being inside the store.
With your iPhone you open the store.
Then you go in, you pick up whatever you want, and you walk out.
And as you're picking stuff, scanners are actually monitoring what you do.
And they automatically take the money from your payment method.
And you walk out.
Now you can take the same technology and put it inside a hospital.
Now inside hospitals today electronic medical records is a problem because somebody has got to input the data.
And doctors hate to input the data.
They think it's a waste of time.
And nurses don't necessarily input the data correctly because of electronic medical records has not been used effectively in the US.
Now that kind of technology that they have experimented with Amazon Atul Gawande can use, and used to do it in all the hospitals.
Now, as you walk into the hospital, the scanners are actually scanning.
Nobody needs to input anything.
And using big data analytics it can actually rationally allocate resources.
You can increase the utilization of equipment.
You can increase the utilization of doctors.
You can sell this service to hospitals, which can save money.
And then the Atul Gawande organization can share in the profits that it's going to generate.
Here's the third idea, which is between JP Morgan and the Warren Buffet's organization and Amazon, you'll have about one million employees.
That is a large enough employee base to try innovative new business models in terms of health care delivery.
So currently they may be insured with whoever else.
Instead of that, they can take over the employee health insurance and try to deliver the health at a much lower cost by innovating different business models.
And the interesting thing is, this is a diverse mix of employees, as well.
Amazon has the more high end employees, technology employees.
Warren Buffet's organization has more middle America kind of employees.
Once you test your business model across a diverse set of employees, now you have got a business model that works across different types of population in the US.
Then you can take that business model and sell it to Walmart, sell it to Home Depot, sell it to General Electric, sell it to Rolls Royce.
So here are three ideas, and just off the top of my head, so to speak.
Bret: Well I certainly hope that he gets the chance to sit down with you and for you to share those ideas because I think those are fantastic.
I think I'd like to feel that a question here from the chat box.
Frank had talked about the kind of cultural transformation that's needed to implement some of these strategies.
And it also reminds me of one of the more famous quotes from a famous business strategist much like yourself, VG, Peter Drucker, who famously said that culture eats strategy for lunch.
Whether it's the transformation of culture from individualism, it's more of a collective benefit.
Or as you put in your book, a culture of frugality and instilling a servant's heart but a business mind.
What are some ways in which you can provide some advice that health care leaders to help instill those sorts of cultural transformations to enable the strategies like hub-and-spoke, task shifting, et cetera?
It's a great question.
This is what I would say, Bret.
When you stop to think about it, people who come in to medicine-- the doctor, the surgeons-- already have a social heart.
Because you wouldn't do medicine unless you have a social heart.
And they are drawn into this field because they want to do good.
But something about our health care system, it gets lost somewhere.
And the doctors and surgeons are highly frustrated because they are doing non-medical things.
They are spending money on administration, et cetera.
Now, how do you change a culture?
But this is what I would say.
The best way cultures change is a result of competition.
What I am seeing in the US today is our health care industry is an unsustainable partner.
We spend $3 trillion on health care.
Everybody agrees this cannot continue like this.
In every other sector cost comes down.
Whereas in health care, costs only keeps going up, and going up tremendously.
And while we are dealing with human life, quality has to be number one.
But interestingly, when you improve quality, cost comes down.
This is a simple principle Indian hospitals have taught us.
Actually, the best way to reduce cost is not to focus on cost.
It is to focus on quality.
And therefore, this doesn't distract from why doctors come into this area.
But still, our system is not changing.
When will it change?
I think it is going to change when smart entrepreneurs, like [INAUDIBLE] in Iora Health, starts a primary care practice which is fundamentally different than the primary care practice in the US.
And then entrepreneurs like that step in.
Then the current status quo will unravel.
It's not going to unravel tomorrow, but 10 years from now, if you're having this webinar, I can assure you we are going to be describing a different health care industry in the US.
You know when Ernest Hemingway went broke, someone asked him, how did you go broke?
He said gradually, then suddenly.
That is what is going to happen in the health care industry.
There will be gradual changes, and then suddenly things will begin to unravel and change.
So I say competition is the best way this culture change is going to happen.
In the interest of time, I know that we're kind of coming up here to the hour.
I want to leave the group here.
I know that we're a very provider-centric group on the webinar.
You talked a lot about, especially towards the end of your book, VG, about some, as you call them, loose bricks, some areas for opportunity.
We have to start somewhere as we look to implement some of these reforms, changes, new strategies that you talk about in your book.
Where do we start?
If you were to advise a large, or even a smaller community hospital leadership, as to how they first start integrating reverse innovative thinking into their practice, where are some of those loose bricks that you would advise them to start at?
VIJAY GOVINDARAJAN: I would give three loose bricks.
The first is a hub-and-spoke model.
Even a place like Hanover, New Hampshire,
where we have the Dartmouth Hitchcock Medical Center.
The state of New Hampshire, there are lots of community hospitals here which can be connected through telemedicine to a wonderful hospital like this, which will simultaneously reduce costs for way better quality.
So hub-and-spoke is something they can do.
It just requires dedication and leadership.
It can be done tomorrow.
The second thing I would say is task shifting.
And I think we need to-- we have already practiced that by recording nurses and so on and so forth.
We just need to think one level beyond and say, can we actually recruit semi-skilled and unskilled people and invest in them so that we release?
Task shifting is not about lowering costs.
It is somewhat actually providing very good quality, but by saving the time of doctors and surgeons on the right things.
And the third thing I would say, Bret, is technology.
We are blessed in this country with Silicon Valley.
And Silicon Valley is a hotbed for technology innovation, and it has disrupted other industries like music or travel.
And that industry has to wake up and say, you know what?
Digital health is a humongous opportunity.
These three things are I say we can get started.
And I guess just a follow up there, and kind of dovetailing off of that, you know, there were a few comments in the chat box about mobile apps and digital technology.
Can you share any of the mobile apps, the digital technology?
Where do you see or what have you been personally impacted by in the digital health world?
Where do you see the most promise?
Or I mean, maybe there's some interaction you've had with your own physician on a mobile app.
I'd love to hear your personal take on it.
VIJAY GOVINDARAJAN: I think that digital health has tremendous possibility in the prevention area and just promoting health all the way from wearable devices.
You said all systems technology is geared to empowering individuals to take care of their own health.
It certainly can play a role in diagnosis.
It also plays a very, very important role to deal with chronic patients.
Because chronic patients should be actually treated in their own home.
And digital technologies is the best way to be sure the chronic patients have connection to the exports.
That is another way we can truly provide compassionate care at a dramatically lower cost.
So digital technologies can play a role in all parts of the value chain in health care.
But I say that prevention promoting health space is probably a wonderful place to start because the more we invest in prevention, the less we have to invest in actual treatments.
I'll turn it over to Molly.
Thank you again, VG, for letting me be engaged with this wonderful opportunity.
And hope everybody got a lot of value out of today's webinar.