Building Affordable Health Care in Paradise

By some accounts, only 5 to 6 percent of people around the world get the cardiac treatment they need to survive. The rest perish. This statistic highlights the stark need for affordable, quality health care that can be delivered at scale, and a solution to that staggering problem has sprung up in, of all places, the Cayman Islands. Professor Tarun Khanna explains how a new hospital with a revolutionary cost structure and service model is making a name for itself on an island better known for bright sunshine and sandy beaches.

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This transcript has been edited for length and clarity.

Brian Kenny: For some, the Cayman Islands conjures up images of gentle trade winds, white sandy beaches, and turquoise waters. Others think about it as a center of international finance where 80,000 companies are registered and 281,000 banks sit on a land mass smaller than the city of Boston. On the other hand, pretty much no one thinks of going to the Cayman Islands for medical treatment. That, however, may soon change. Today we'll hear from Professor Tarun Khanna about his case entitled Health City Cayman Islands. I'm your host Brian Kenny and you're listening to Cold Call.

Professor Khanna teaches MBA and doctoral students as well as executives at Harvard. He is the chair of the University’s South Asia Institute. He's also an expert in strategy, corporate governance, and international business. I guess we can add health care to that list. Tarun, thank you for joining me.

Khanna: Thank you Brian. It's nice to be here.

Kenny: Can you start out by telling us how the case begins? Who's the protagonist and what's on his mind?

Khanna: The protagonist is (it must be set up) a friend of mine, a pediatric cardiac surgeon, Devi Shetty, who is straight out of central casting. He's an amazing surgeon. He was a pro-bono surgeon to Mother Teresa before she died, and has movie star good looks. He's also, I think, one of the best pediatric cardiac surgeons of the world. He has taken a model that he pioneered in Bangalore, which I was involved in from the ground floor watching, studying, advising, cataloging, always at arm's length. That model has now begun to rule across the world. This is the first significant fully-owned hospital that they've done in a joint venture with the Ascension Health, which is a large Catholic owned hospital chain headquartered in Saint Louis.

Kenny: Dr. Shetty is not a saint, but he is actually a doctor to a saint, which I guess is pretty close.

Khanna: He is a doctor. That's what he wants to be known as—a doctor and healer.

Kenny: A doctor and a healer. What prompted you to write the case? Why were you interested in this topic?

Khanna: I'm mostly interested in developing countries and how we can develop business models that serve the mass markets, serve the poor in these countries. Fully five out of seven billion people in the world are locked out of the mainstream. That's why Devi and I like hanging out with each other because we have the same ethos in some way—that we should be doing something for the world's poor and we should be doing it in a way that's sustainable, that meets the bottom line but can scale and be open to technology. I just think this is one of the coolest models I've come across in my 25 years of studying this. It seemed natural to be there again on the ground floor with one of my current doctoral students to document the opening of the Health City Cayman Islands.

Kenny: Tell us a little bit more about Dr. Shetty. He does have a very interesting background. What motivates him to work in this way?

Khanna: Well, I think if you meet Dr. Shetty—he often comes to our classes. He starts his sessions always by saying what percentage of people who need cardiac treatment get it? And the answer is 5 or 6 percent or something like that. What happens to the 94 percent who don't get it? Well, they die. That's very sobering to start that way and then you realize that of the 6, 7 percent who would get it, most of them are in the United States. Then of that percentage, most of them are in wealthy places like Boston. Really this is a disease and a set of diseases that we know how to treat or at least make it a chronic condition, but most people in the world just don't have access to it.

He has dedicated himself initially in cardiac care, but since then his hospital has spread to essentially all areas with tertiary medicine. He's dedicated himself to finding business models that—this oversimplifies it but it's like a factory model that lowers the cost relentlessly, inexorably, lower and lower and lower, and the cost numbers are truly, truly shocking and inspirational at the same time, because then you can pass on all the gains to the poor people.

The other very, very cool thing about the mother hospital in Bangalore is that nobody has ever been turned away.

Kenny: Wow.

Khanna: If you come in and you say—I go there with my kids. My kids volunteer in the hospital, my teenage kids. You go there and you sit there and you see endless poor people coming in and many of them just have no money. They have $1 in their pocket and they get in for free.

Kenny: How do they do that?

Khanna: Generating enough surplus, being sufficiently efficient, generating enough surplus from the paying patients. And there are a lot of paying patients. Some patients will pay more than the ask price because the ask price is very low. That goes into a very interesting control system that monitors cash balances and IT systems and phones to keep track of how much cash they have. That allows you to decide how many patients you can treat on a given time period for free.

Kenny: I was really struck at the fact that they found a way to do this in India and we haven't found a way to do this in the United States. The economics are so different here.

Khanna: So this is the heart of the case discussion in the classroom. Let’s just say the health care system in this country is not receptive to a very low cost entry coming in. The decision was to open it somewhere close by. We tried Mexico, it didn't really work. The Cayman Islands just emerged serendipitously as the case describes, as a place that's within a very, very short flight from Miami. The hospital is going to put pressure on Miami and Dallas and all these hospitals who are currently the recipients of very lucrative med-evac patients every day from the Caribbean. That's the genesis of how it came about.

Kenny: The Cayman Government, on the other hand, was quite open to this idea.

Khanna: I think the Cayman needs a new act also, right? I mean it's got these financial operations as your opening comments suggested. Those are always under discussion, shall we say, by the British government, which is what the Cayman Islands fall under. The U.K. financial authorities are even more robust and stringent than the American ones, so you can imagine how that's going. Climate change and tourism, well that's something to worry about. Ocean levels rising.

There's no tertiary care in the Caribbean at all or I would say even the Western Yucatan and Northern Latin America. Even if nobody comes from the United States, which is already proving not to be true, there are plenty of people coming. I think the hospital becomes viable anyhow as a proposition.

Kenny: I also thought it was interesting if you go back to the Narayana Health Clinic, the hospital that they set up there. They were able, by the process of repeating the procedure over and over and over again, to get better health care outcomes than we typically see even in US hospitals or in western hospitals.

Khanna: I think that's right. When we teach the case, we spend a lot of time on the core model from which the Cayman Islands Hospital has evolved. The core model is Narayana Health City in Bangalore. In fact, I was just there with my kids a couple of weeks ago during their spring break. As you say, relentless repetition. Practice makes perfect. That's basically it, coupled with being open to new ideas and trying out new materials.

One thing that my students from Executive Education, who are doctors and surgeons here in our health system in Boston (which is so fabulous), always say is the thing that's so cool about this is that in the US medical system, we boxed ourselves into a corner. It's very, very difficult to experiment in our system. Now, it must be said that’s for good reason. The reason we put these restrictions on ourselves in a creeping fashion with 30, 40, 50 years is patient safety, efficacy, all good things. I just think when there's a balance between innovation and experimentation, which definitionally comes with some degree of risk, we've overcorrected. We don't allow there to be almost any room for our doctors and so on to experiment and innovate.

I want to be clear that there lots of things that our system here does much, much better than Narayana. Narayana is a factory model. It doesn't do any cutting-edge research on materials or drugs and those sorts of things. It's a recipient of that know-how. Equivalently, it's willing to share its know-how and process, which is far advanced compared to anybody else in the world, with us back. We just haven't figured out how to tap into it yet.

Kenny: Let's talk about some of the complications of exporting this model from India to the Caymans. There were issues that they encountered in Grand Cayman that they haven't had to deal with. They're having to do with everything from the inability to import some things as important as oxygen, and they found ways around those. Can you talk about that?

Khanna: I would be the first to say that it's a work in progress. It's been two years, roughly, since the hospital opened. I think the first year was slow. Since then, they've done some extremely complicated surgeries and have come on the map to do these things called LVADs, which is a left ventricular assisted device. It's a very complicated surgery. Suddenly the technical competence became clear, but there are lots of issues. There are the logistical issues that you alluded to: how do you get stuff to the Cayman Islands? It's very difficult to get to. More significantly, some of the main constraints are the human resource constraints. In the long run, you have to build up a human capital core in the destination country. That I think is going to be very challenging perhaps for five, ten years and currently it's staffed by doctors who are shipped over. Sometimes they're underutilized and they're used to working at a very, very fast clip with lots of patients and they are waiting for patients to come. Again, it's a lot, lot better than a year ago and rapidly approaching the point where it should start doing extremely well. Other staff issues, nurses in this country, in the western world are used to corresponding with the patients, talking to them, giving advice. Nurses in India tend to be very quiet and stand in the back. I can imagine it's probably unnerving to western patients to have a nurse that's standing there like a statue. Telling the nurses that you're participants in the health care delivery.

Kenny: Well, you're even describing a case that both the doctors and the nurses had to go through some cultural training to make that transition.

Khanna: Absolutely. We're all guilty of our own cultural biases. I am, you probably are. The nurses and the doctors are no exceptions. They have to become familiar with what it takes to treat a patient from a different background.

Kenny: This is all part of what you describe in the case, too, as both the caregivers and the patients having to learn how to adapt to this new model.

Khanna: The nice thing about the Narayana model—and it's not unique to them, I think there are other hospitals around the world who have done this—is that they take a very systemwide view of the healing process and the caring process, and where it's appropriate have involved others in the process as well, family members and so on. If you go to the core hospital in Bangalore, there's an entire mini city that's popped up around the hospital because these are all mostly poor people and they're coming from deep inside the villages in India. They may have had to give up work for a long time. They need long-term housing. There’s this entire infrastructure that's popped up around it. What the hospital has done is rope in everybody in delivering the care in some way, and that's a set of protocols that I think it would be neat for us to have here as well. I know we're trying. We in the US, we're trying in different ways. I think that ethos is being transferred over to the Cayman Islands hospital as well.

Kenny: How do the MBA students react to this when you teach it in class, when Dr. Shetty comes?

Khanna: Oh, they love it. They love it, Executive Education, MBA simply loves it. I mean, he's just such a compelling person, like he’s from central casting. It's very hard not to embrace it. One dynamite discussion in the US or the European classroom is why the heck do we care about this? iIt's some guy in India creating a model to treat some poor people. The answer is Medicare pays for a CABG surgery, coronary artery bypass graft, about $60,000. I think most hospitals lose money on it because of fully-loaded cost structures. In this hospital, we're able to do this for $700. Something absurd.

Kenny: Really the numbers were just astonishing when you look at the case.

Khanna: It's just outrageous. Even if I'm exaggerating by an order of magnitude, we still are better off, so how can we not look at it and study it? That's what I want to know. That's what I keep asking my buddies in the health care system in Boston: how can we not look at it? But it is so interesting as an academic to see the reasons we conjure up for why this is not going to work here. Oh, you know, it's different, it's a poor country, who knows, cutting corners, all nonsense.

Kenny: Well, I think we should be glad that you're looking at it. At least this case is great I think for anybody who's interested and really seeing the economics and how the stark contrast between the differences.

Khanna: That's great. I hope you will take a look at it. It's really fun.

 Read more

This transcript has been edited for length and clarity.

Brian Kenny: For some, the Cayman Islands conjures up images of gentle trade winds, white sandy beaches, and turquoise waters. Others think about it as a center of international finance where 80,000 companies are registered and 281,000 banks sit on a land mass smaller than the city of Boston. On the other hand, pretty much no one thinks of going to the Cayman Islands for medical treatment. That, however, may soon change. Today we'll hear from Professor Tarun Khanna about his case entitled Health City Cayman Islands. I'm your host Brian Kenny and you're listening to Cold Call.

Professor Khanna teaches MBA and doctoral students as well as executives at Harvard. He is the chair of the University’s South Asia Institute. He's also an expert in strategy, corporate governance, and international business. I guess we can add health care to that list. Tarun, thank you for joining me.

Khanna: Thank you Brian. It's nice to be here.

Kenny: Can you start out by telling us how the case begins? Who's the protagonist and what's on his mind?

Khanna: The protagonist is (it must be set up) a friend of mine, a pediatric cardiac surgeon, Devi Shetty, who is straight out of central casting. He's an amazing surgeon. He was a pro-bono surgeon to Mother Teresa before she died, and has movie star good looks. He's also, I think, one of the best pediatric cardiac surgeons of the world. He has taken a model that he pioneered in Bangalore, which I was involved in from the ground floor watching, studying, advising, cataloging, always at arm's length. That model has now begun to rule across the world. This is the first significant fully-owned hospital that they've done in a joint venture with the Ascension Health, which is a large Catholic owned hospital chain headquartered in Saint Louis.

Kenny: Dr. Shetty is not a saint, but he is actually a doctor to a saint, which I guess is pretty close.

Khanna: He is a doctor. That's what he wants to be known as—a doctor and healer.

Kenny: A doctor and a healer. What prompted you to write the case? Why were you interested in this topic?

Khanna: I'm mostly interested in developing countries and how we can develop business models that serve the mass markets, serve the poor in these countries. Fully five out of seven billion people in the world are locked out of the mainstream. That's why Devi and I like hanging out with each other because we have the same ethos in some way—that we should be doing something for the world's poor and we should be doing it in a way that's sustainable, that meets the bottom line but can scale and be open to technology. I just think this is one of the coolest models I've come across in my 25 years of studying this. It seemed natural to be there again on the ground floor with one of my current doctoral students to document the opening of the Health City Cayman Islands.

Kenny: Tell us a little bit more about Dr. Shetty. He does have a very interesting background. What motivates him to work in this way?

Khanna: Well, I think if you meet Dr. Shetty—he often comes to our classes. He starts his sessions always by saying what percentage of people who need cardiac treatment get it? And the answer is 5 or 6 percent or something like that. What happens to the 94 percent who don't get it? Well, they die. That's very sobering to start that way and then you realize that of the 6, 7 percent who would get it, most of them are in the United States. Then of that percentage, most of them are in wealthy places like Boston. Really this is a disease and a set of diseases that we know how to treat or at least make it a chronic condition, but most people in the world just don't have access to it.

He has dedicated himself initially in cardiac care, but since then his hospital has spread to essentially all areas with tertiary medicine. He's dedicated himself to finding business models that—this oversimplifies it but it's like a factory model that lowers the cost relentlessly, inexorably, lower and lower and lower, and the cost numbers are truly, truly shocking and inspirational at the same time, because then you can pass on all the gains to the poor people.

The other very, very cool thing about the mother hospital in Bangalore is that nobody has ever been turned away.

Kenny: Wow.

Khanna: If you come in and you say—I go there with my kids. My kids volunteer in the hospital, my teenage kids. You go there and you sit there and you see endless poor people coming in and many of them just have no money. They have $1 in their pocket and they get in for free.

Kenny: How do they do that?

Khanna: Generating enough surplus, being sufficiently efficient, generating enough surplus from the paying patients. And there are a lot of paying patients. Some patients will pay more than the ask price because the ask price is very low. That goes into a very interesting control system that monitors cash balances and IT systems and phones to keep track of how much cash they have. That allows you to decide how many patients you can treat on a given time period for free.

Kenny: I was really struck at the fact that they found a way to do this in India and we haven't found a way to do this in the United States. The economics are so different here.

Khanna: So this is the heart of the case discussion in the classroom. Let’s just say the health care system in this country is not receptive to a very low cost entry coming in. The decision was to open it somewhere close by. We tried Mexico, it didn't really work. The Cayman Islands just emerged serendipitously as the case describes, as a place that's within a very, very short flight from Miami. The hospital is going to put pressure on Miami and Dallas and all these hospitals who are currently the recipients of very lucrative med-evac patients every day from the Caribbean. That's the genesis of how it came about.

Kenny: The Cayman Government, on the other hand, was quite open to this idea.

Khanna: I think the Cayman needs a new act also, right? I mean it's got these financial operations as your opening comments suggested. Those are always under discussion, shall we say, by the British government, which is what the Cayman Islands fall under. The U.K. financial authorities are even more robust and stringent than the American ones, so you can imagine how that's going. Climate change and tourism, well that's something to worry about. Ocean levels rising.

There's no tertiary care in the Caribbean at all or I would say even the Western Yucatan and Northern Latin America. Even if nobody comes from the United States, which is already proving not to be true, there are plenty of people coming. I think the hospital becomes viable anyhow as a proposition.

Kenny: I also thought it was interesting if you go back to the Narayana Health Clinic, the hospital that they set up there. They were able, by the process of repeating the procedure over and over and over again, to get better health care outcomes than we typically see even in US hospitals or in western hospitals.

Khanna: I think that's right. When we teach the case, we spend a lot of time on the core model from which the Cayman Islands Hospital has evolved. The core model is Narayana Health City in Bangalore. In fact, I was just there with my kids a couple of weeks ago during their spring break. As you say, relentless repetition. Practice makes perfect. That's basically it, coupled with being open to new ideas and trying out new materials.

One thing that my students from Executive Education, who are doctors and surgeons here in our health system in Boston (which is so fabulous), always say is the thing that's so cool about this is that in the US medical system, we boxed ourselves into a corner. It's very, very difficult to experiment in our system. Now, it must be said that’s for good reason. The reason we put these restrictions on ourselves in a creeping fashion with 30, 40, 50 years is patient safety, efficacy, all good things. I just think when there's a balance between innovation and experimentation, which definitionally comes with some degree of risk, we've overcorrected. We don't allow there to be almost any room for our doctors and so on to experiment and innovate.

I want to be clear that there lots of things that our system here does much, much better than Narayana. Narayana is a factory model. It doesn't do any cutting-edge research on materials or drugs and those sorts of things. It's a recipient of that know-how. Equivalently, it's willing to share its know-how and process, which is far advanced compared to anybody else in the world, with us back. We just haven't figured out how to tap into it yet.

Kenny: Let's talk about some of the complications of exporting this model from India to the Caymans. There were issues that they encountered in Grand Cayman that they haven't had to deal with. They're having to do with everything from the inability to import some things as important as oxygen, and they found ways around those. Can you talk about that?

Khanna: I would be the first to say that it's a work in progress. It's been two years, roughly, since the hospital opened. I think the first year was slow. Since then, they've done some extremely complicated surgeries and have come on the map to do these things called LVADs, which is a left ventricular assisted device. It's a very complicated surgery. Suddenly the technical competence became clear, but there are lots of issues. There are the logistical issues that you alluded to: how do you get stuff to the Cayman Islands? It's very difficult to get to. More significantly, some of the main constraints are the human resource constraints. In the long run, you have to build up a human capital core in the destination country. That I think is going to be very challenging perhaps for five, ten years and currently it's staffed by doctors who are shipped over. Sometimes they're underutilized and they're used to working at a very, very fast clip with lots of patients and they are waiting for patients to come. Again, it's a lot, lot better than a year ago and rapidly approaching the point where it should start doing extremely well. Other staff issues, nurses in this country, in the western world are used to corresponding with the patients, talking to them, giving advice. Nurses in India tend to be very quiet and stand in the back. I can imagine it's probably unnerving to western patients to have a nurse that's standing there like a statue. Telling the nurses that you're participants in the health care delivery.

Kenny: Well, you're even describing a case that both the doctors and the nurses had to go through some cultural training to make that transition.

Khanna: Absolutely. We're all guilty of our own cultural biases. I am, you probably are. The nurses and the doctors are no exceptions. They have to become familiar with what it takes to treat a patient from a different background.

Kenny: This is all part of what you describe in the case, too, as both the caregivers and the patients having to learn how to adapt to this new model.

Khanna: The nice thing about the Narayana model—and it's not unique to them, I think there are other hospitals around the world who have done this—is that they take a very systemwide view of the healing process and the caring process, and where it's appropriate have involved others in the process as well, family members and so on. If you go to the core hospital in Bangalore, there's an entire mini city that's popped up around the hospital because these are all mostly poor people and they're coming from deep inside the villages in India. They may have had to give up work for a long time. They need long-term housing. There’s this entire infrastructure that's popped up around it. What the hospital has done is rope in everybody in delivering the care in some way, and that's a set of protocols that I think it would be neat for us to have here as well. I know we're trying. We in the US, we're trying in different ways. I think that ethos is being transferred over to the Cayman Islands hospital as well.

Kenny: How do the MBA students react to this when you teach it in class, when Dr. Shetty comes?

Khanna: Oh, they love it. They love it, Executive Education, MBA simply loves it. I mean, he's just such a compelling person, like he’s from central casting. It's very hard not to embrace it. One dynamite discussion in the US or the European classroom is why the heck do we care about this? iIt's some guy in India creating a model to treat some poor people. The answer is Medicare pays for a CABG surgery, coronary artery bypass graft, about $60,000. I think most hospitals lose money on it because of fully-loaded cost structures. In this hospital, we're able to do this for $700. Something absurd.

Kenny: Really the numbers were just astonishing when you look at the case.

Khanna: It's just outrageous. Even if I'm exaggerating by an order of magnitude, we still are better off, so how can we not look at it and study it? That's what I want to know. That's what I keep asking my buddies in the health care system in Boston: how can we not look at it? But it is so interesting as an academic to see the reasons we conjure up for why this is not going to work here. Oh, you know, it's different, it's a poor country, who knows, cutting corners, all nonsense.

Kenny: Well, I think we should be glad that you're looking at it. At least this case is great I think for anybody who's interested and really seeing the economics and how the stark contrast between the differences.

Khanna: That's great. I hope you will take a look at it. It's really fun.

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