Tagged: health insurance

Devi Shetty’s model for affordable healthcare

On the 26th March 2019 Bloomberg Businessweek published an article entitled, "The World’s Cheapest Hospital has to Get Even Cheaper”, which describes one of India’s largest private hospital chain's - Narayana Health - response to Modicare, a signature initiative by Prime Minister Narendra Modi to provide basic healthcare for 500m of India’s poorest.
Devi Shetty, a world-renowned cardiac surgeon and chairman of Narayana Health, is up for the task. Since Shetty founded Narayana in 2000 it has grown to become a large multi-speciality hospital chain, comprising 31 state-of-the-art tertiary hospitals across 19 cities, employing 16,000 and each year treating over 2.5m patients across more than 30 medical specialities. Shetty’s mission is to provide high quality, affordable healthcare services to the broader population in India and he is convinced that quality and low-cost healthcare are not mutually exclusive. In conjunction with the state of Karnataka, Shetty has created a health insurance plan, which has enrolled some 3m poor people at an annual premium of about US$2.6. More than half of Narayana’s cardiac operations are performed on patients too poor to afford the full cost. In addition to the insurance scheme free or subsidized inpatient care is achieved through philanthropy and a cross-subsidy model, in which higher-income patients pay more for nonclinical amenities, such as private recovery rooms. Since the total charges are still far below the cost of comparable services at other private Indian hospitals, Narayana Health remains an attractive option for such consumers. Narayana Health’s business model is sustainable because of its ability to attract so many patients who can pay full price.  The Wall Street Journal has dubbed Shetty, The Henry Ford of Heart Surgery because he applies assembly line concepts to surgery in order to optimize productivity, minimize costs and leverage economies of scale. Because of these innovations the average cost of open-heart surgery, as reported by Narayana Health, is less than US$2,000. The same procedure at a US research hospital typically costs more than US$100,000.
Since 2012 HealthPad has worked closely with Devi Shetty. We published our first Commentary about Narayana Health and Devi Shetty’s model for affordable quality healthcare in 2013 and in subsequent years published two more. Shetty and his fellow senior surgeons have contributed over 700 videos to HealthPad’s  content library, which address FAQs across 11 clinical pathways. Further, Narayana’s clinicians have featured in HealthPad Commentaries on Chronic obstructive pulmonary disease (COPD),  Diabetes and Kidney Disease and Cardiovascular Disease.  Because of the large and growing international interest in Shetty’s alternative model for affordable healthcare we re-publish lightly edited versions of HealthPad’s three Commentaries about Narayana Health.


Will Devi Shetty have a major influence on global healthcare?
February 3rd, 2016

Devi Shetty’s hospital of the future
October 1st, 2014

The UK’s NHS loss is global healthcare’s gain
August 14th, 2013
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First published on 14th August 2013

The UK’s NHS loss is global healthcare’s gain

In 2011 Devi Shetty, an Indian doctor, received the coveted business process innovation award in London from The Economist for his contribution to global healthcare. Trained as a cardiac surgeon in the UK, Shetty returned to India and started a hospital in Bengaluru in 2000. Today, Shetty is on the cusp of changing healthcare in the 21st century.
Shetty’s no-frills hospital chain
In 2012 Shetty launched the first in a chain of no-frills hospitals: a 200-bed single-storey clinic in Mysore, India. Built in 10 months for US$7m, it charges only US$800 for open heart surgery. Shetty rejected the multi-storey hospital model, because it requires costly foundations, steel reinforcements, lifts and complex fire and safety equipment. Much of the Mysore building was pre-fabricated. Its five operating theatres and intensive care units are the only air-conditioned places and families are encouraged to provide supplementary care for patients.
Shetty’s no-frills hospital chain owes its existence to his pioneering hospital in Bengaluru.
Shetty’s medical city in Bengaluru
In 2000 Shetty started Narayana Hrudayalaya, a specialist hospital for cardiac surgery, which today performs the highest number of heart surgeries in the world for any one hospital: 7,000 annually and does not compromise on quality. “We are only technicians,”  says Shetty. ”We realised that as you do more surgical procedures, your results get better, and your costs go downIn the US the average cardiac surgeon does about 2,000 surgeries in his or her professional lifetime. We have surgeons who have done more than 3,000 surgeries and they’re only in their 30s . . . imagine the expertise that they have, at that young age.
Medicines and associated hospital costs in India are significantly lower than in the West, but Narayana offers Indian patients value for money. The average price for open heart surgery in Narayana is around US$2,000, compared to US$5,000 in the average private Indian hospital and $20,000 to $100,000 in a US hospital.
Shortly after starting his Bengaluru cardiac centre, Shetty acquired a 35-acre site next door and built a 1,400-bed cancer hospital and a 300-bed eye hospital and created Narayana Hrudayalaya Medical City, which has 3,000 beds in Bengaluru and is run at near to full capacity. In total Narayana has some 7,000 beds in a number of clinics and hospitals throughout India, and plans to expand to 50,000 beds in the next five years.
In association with India’s Space Research Organization, Sherry's Bengaluru hospital runs one of the world’s largest tele-cardiology programs, which reaches 100 facilities throughout India, over 50 across Africa and Narayana’s doctors have treated some 70,000 patients remotely. Narayana Health also disperses 5,000 kidney dialysis machines, which makes the company India’s largest kidney-care provider.
Health insurance
With the state of Karnataka, Shetty has created a health insurance plan, which has enrolled some 3m poor people at an annual premium of about US$2.6. Last year, about 60% of Narayana Hrudayalaya cardiac operations were performed on patients too poor to afford the full cost.
Shetty however is not a charity. His hospitals treat a cross section of patients at variable rates but refuse to turn away anyone who cannot pay. “Charity,”  he says, “is not scalable. Good healthcare depends on good business.”  Shetty’s hospital group earns an after-tax profit of 8%, slightly above the 6.9% average for a US hospital.
Health City Cayman Islands
Shetty has now turned his attention outside of India and is engaged in a joint venture with the government of the Cayman Islands and a group of American institutional investors, to construct and operate a hospital in Grand Cayman to capture share from the North and South American healthcare markets.
The first phase, a 140-bed tertiary care facility for cardiac surgery, cardiology and orthopaedics, was opened in 2014 and benefits from the cost-effective healthcare procedures honed by Shetty over the past decade. By 2020, the Cayman enterprise, which also will have a medical university and an assisted-care living community, is projected to expand into a 2,000-bed Joint Commission International-accredited Health City providing care in all major specialties.
Super-size hospitals
At a time when the global healthcare debate is emphasising community based preventative strategies, Shetty’s vision is, “affordable healthcare for everyone in super-size hospitalsToday healthcare has got phenomenal services to offer,” he says. Almost every disease can be cured and if you can't cure patients, you can give them meaningful lives.” Shetty is driven by the fact that a century after heart surgery was developed only 10% of the world’s population can afford it. Each year, India alone needs 2.5m heart operations and yet there are only 90,000 performed.
"Current regulatory structures, policies and business strategies [for healthcare] are wrong,” says Shetty, If they were right, we should have reached 90% of the world's population." Recently, he shocked a UK audience of health providers by suggesting that it would be better if England only had three centres for cardiac surgery rather than 22. 
The Henry Ford of heart surgery
Sir Bruce Keogh, the UK’s former National Medical Director of the NHS Commissioning Board, once suggested that healthcare in England should become more like retail. Shetty thinks like a retailer, views patients as “customers” and has employed mass production techniques used in the early 20th century to automate the American car industry. Known as, “the Henry Ford of heart surgery”, Shetty has demonstrated that high volume complex surgeries mean better outcomes and lower costs. Similar to what Henry Ford did for the auto industry, Shetty has disaggregated clinical procedures into a number of discrete, standardized, unambiguous units, which can be learnt, practiced and repeated. His methods have successfully reduced hospital costs, increased efficiency, enhanced the quality of care and eliminated clinical mistakes. According to Shetty, “Healthcare has huge variation in procedures, outcomes and costs . . . It is the lack of standardization that contributes to hospital mistakes, high costs and low quality of care”.
Change is inevitable
Shetty is convinced that the dearth of health workers worldwide will force change and increase the use of emerging healthcare technologies. An advocate for open technological systems, he says, “In five years a computer will make more accurate diagnoses than doctors. In 10-years it will be mandatory for a doctor to get a second opinion from a computer before starting treatment.
Not only will Shetty’s Health City Cayman Islands be a lower cost alternative for North and South American patients, it will demonstrate how over-priced and inefficient hospitals in the West are. However, it is not altogether clear whether Shetty’s formula for low-cost high-quality surgical procedures will be effective outside of India. This is mainly because high quality ancillary services associated with complex surgeries, which are relatively inexpensive in India, tend to be patchy and significantly more costly outside of India. Notwithstanding, Shetty is determined to provide the world with a model of affordable healthcare.



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How do you develop a patient centred healthcare system that serves vast numbers of transient poor people? India has an answer: Rashtriya Swasthya Bima Yojna (RSBY), which has won plaudits from the World Bank and the United Nations as one of the world's best health insurance schemes. RSBY combines state-of-the-art technology and incentive structures. It is paperless, does not use cash and provides affordable health insurance to millions of people. The overwhelming majority of who, are illiterate, transient people living below the poverty line. According to Dr Anshuman Kumar, Chief Oncosurgeon, Dharamshila Cancer Hospital and Research Centre in New Delhi,

“Since its launch, four years ago, Rashtriya Swasthya Bima Yojna covers some 40 million people many of whom have benefitted from in-patient hospital procedures. The scheme has been so successful that the Government is planning to extend it to India’s old age and disabled pension schemes”.

In developing countries, poverty and ill health are synonymous. Billions of poor people lack access to healthcare while being exposed to multiple health risks. This, not only increases the health consequences for those individuals and their families, but has both a direct and indirect effect on economies. Widespread poverty as well as ill health decreases productivity; lowers competiveness, increases fiscal pressure, creates further poverty and promotes greater inequity.

India is a rising global economic superpower with a GDP roughly equivalent to 3% of the world economy, but has a third of the world’s poor. In 2011 the World Bank reported that 33% of India’s population fell below the international poverty line of US$1.25 per day and 69% live on less than US$2 per day. Although India is on track to meet its poverty reduction goal set by the United Nations in 2000; by 2015, 53 million people are expected to be still living in extreme poverty and 24% of India’s population of 1.2 billion is expected to be still living on less than US$1.25 per day.

India is not unique in being a rich country with poor people. This is a phenomenon shared by several developing countries. For example, Mozambique, rich in gas, oil and minerals, is a fast growing rich country with poor people. Ninety nine per cent of Mozambicans are small scale farmers and a large proportion of these are poor. Mega projects, such as the planned US$6 billion investment by Vale, a Brazilian company, to create the world’s largest coal mine in Mozambique, do not generate large numbers of jobs, do not foster entrepreneurship and because of the tax incentives they receive, only make modest contributions to exchequers. African rich countries with poor people might do well to look to India’s RSBY health insurance scheme.

Like many fast growing developing economies, India needs to fuel economic growth by reducing the percentage of poor and reaping the benefit from her working age population. India’s declining fertility and mortality rates have resulted in a population bulge of about 0.45 billion people between the ages of 15 and 25 years. This gives India the world’s largest share of working age population: a demographic dividend. But, how does India finance and provide healthcare for this vast group, a third of which are illiterate, transient and live below the poverty line? The answer is RSBY.

RSBY employs cost effective, scalable technologies to help satisfy the health needs of a significant proportion of India’s poor. Enrolment of families into the scheme, biometric smart card generation, pre-authorization of admissions, as well as claim submission and approval, all occur electronically. Beneficiaries can use their smartcards in any empanelled hospital across India and therefore travel is no barrier to receiving healthcare. Patient data are transferred electronically between empanelled hospitals and insurance companies and claims are settled automatically. The scheme lowers costs, increases efficiency and reduces fraud.

RSBY is run on shared financial contributions by both central and state governments. Seventy five per cent of the premium is borne by the central government and the rest by state governments and all parties involved benefit. The Indian Government benefits by providing cost effective healthcare to millions of poor people. This helps to reduce poverty and increase productivity. Insurers benefit because they are paid for each household they recruit. Empanelled hospitals benefit as they are incentivised to provide treatment to a large number of participants. Non government agencies benefit because they are paid to find and recruit households. Poor people benefit because the scheme transforms them into customers and provides them access to healthcare, which they never had before. 


Beneficiaries receive hospitalization coverage up to US$560 per year for some 700 in-patient procedures. Central and state governments pay the premium to insurers who are selected by state governments on the basis of competitive bidding. Insurers monitor participating hospitals, which reduces unnecessary procedures and fraud. Beneficiaries need only pay about US$0.75 as an annual registration fee. The scheme has no age limit, it covers pre-existing ailments, provides surgical and health expenses for five family members and covers pre and post hospitalization charges and transport expenses of US$2 per visit.

RSBY’s has its challenges. There are human rights issues associated with biometric identification and the digitalisation and use of confidential personnel data. There have been delays in the issuance of smart cards. Some people have complained that they do not know how and where to utilise the scheme. Some hospital personnel have not been appropriately trained to use card-reading technology and there have been delays in the reimbursement of treatment expenses to hospitals and some hospitals stopped accepting patients under the scheme. On 12th October 2012, the Times of India reported:

Privatehospitals are reportedly milking Rashtriya Swasthya Bima Yojnaby carrying out fictitious or unnecessary surgical procedures on poor patients covered under the scheme. . . . . . When payers do not have a tight supervisory mechanism or do not care since the government is footing the bill, ultimately, hospitals get away with murder. The right thing to do is to align incentives, not put more constables on the hospital watch.”

India is not known for its good governance, especially among public officials, but challenges encountered by RSBY should not detract from the importance of this innovative and ambitious scheme.


Healthcare systems throughout the world are challenged by rising costs, poor quality of care and inaccessibility to healthcare. Healthcare systems will become unsustainable if they continue to focus on diseases rather than patients. Patient-centred care has become one of the principal goals of health advocacy. RSBY, based on digital technologies, makes patients the primary focus of the system and individuals are helped to self manage their conditions. It is not surprising that last summer a delegation of policy makers from Germany, Europe’s industrial powerhouse, spent time in India learning more about RSBY with the intent of changing Germany’s social security systems. Policy makers from rich countries with poor people might think of doing something similar.

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Biometric identifiers are the distinctive, measurable characteristics used to label and describe individuals. In many developing economies health delivery systems are inefficient and subject to high level of losses or fraud. A way to function better would be to have a clear digital identity for those who are being treated. This would be beneficial for running health insurance programs or monitoring patients' adherence to regimes and treatments.

Recent advances in biometric identification technology offer a possible mechanism for poor countries to leapfrog traditional paper-based identity systems. Over the past five years, there has been a proliferation of biometric identification projects in developing countries. We have identified about 154 such systems covering over 2 billion people throughout the world, many in Africa, South America and South Asia.

When used smartly, technology can improve the delivery of health programs. It shifts the cost curve of program administration, giving implementation better results for their money. Technological innovations offer developing countries a way to leapfrog past and often fragmented and inefficient healthcare systems.

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