How To Lower Healthcare Costs In India and China

India and China present different healthcare histories and scenarios that add perspective to today’s worldwide healthcare debate.

Having a sustainable healthcare system that promotes better health for its citizens, reduces the financial risks associated with medical care while simultaneously improving patient outcomes and consumer satisfaction is the goal of every nation, regardless of its resources. An improved level of health demands a preventive and proactive approach backed by better research at macro levels and at the individual level, thus bringing down the costs associated with care, medicine and insurance. Consumer satisfaction lies in knowing that the best care is being provided, i.e., competent and reliable diagnosis and treatment at the lowest possible cost.As home to one-third of the world’s population, India and China are too large to ignore from a global healthcare viewpoint. The two countries present very different healthcare histories and current healthcare scenarios that add perspective to today’s worldwide healthcare debate.India added more than 181 million people to its swelling population over the past decade, growing to more than 1.21 billion people. The population of India – the world’s second-most populous nation after China – almost equals the combined populations of the United States, Indonesia, Brazil, Pakistan, Bangladesh and Japan. By 2050, India is projected to overtake China in terms of population. More than 50 percent of India’s population is below the age of 25 and more than 65 percent hovers below the age of 35. The expected increase of geriatric population from the current 96 million to around 168 million by 2026 represents a huge patient base and creates a market for preventive, curative and geriatric care.The total population for Mainland China is 1.34 billion. China has experienced a steep decline in the average annual population growth rate, down to 0.57 percent in 2000-10, half the rate of 1.07 percent in the previous decade. People above the age of 60 now represent 13.3 percent of the total, up from 10.3 percent in 2000 (see chart). In the same period, those under the age of 14 declined from 23 percent to 17 percent.

The Healthcare Landscape in China

The years 1949-1978 marked the phase of central planning throughout China with a focus on universal, basic, low-cost healthcare and an emphasis on prevention. Starting in the late 1970s and continuing until the end of the century, China’s rural social health insurance system collapsed as healthcare operators were encouraged to generate their own sources of revenue. Access to quality healthcare for the lower socio-economic classes and rural population became problematic, and large chunks of the population outside of urban areas remain vulnerable to epidemics. Due to high out-of-pocket expenses, 39 percent of China’s rural population is unable to afford professional medical treatment.

The Healthcare Landscape in India

From the time of independence in 1947 to the 1980s, the Indian healthcare system focused on a curative approach to healthcare. Both public and private providers co-existed and a three-tiered system was established. Infectious diseases remained the main cause of death during this time, while in China the main cause of death was chronic diseases and an ageing population.Substantial socioeconomic inequalities exist in access to healthcare in India. In 2005-06, national immunization coverage was 44 percent, whereas the coverage was 64 percent for children of mothers with more than five years of education and 26 percent for children of mothers with no education. Similarly, even though rates of delivery in institutions have increased with time, only 40 percent of women in India report giving birth in a health facility for their previous birth in 2005-06. Women in the richest quintile were six times more likely to deliver in an institution than those in the poorest quintile.According to WHO regional advisor Kathleen A. Halloway, a majority of Indians spend about 70 percent of their income on medicines and healthcare, compared to 30 percent to 40 percent in other Asian countries such as Sri Lanka. More than 40 percent of low-income families in India have to borrow money from outside the family to meet their healthcare costs. Almost 16 percent of families had been pushed below the poverty line by this trend.The Indian healthcare sector currently represents a $40 billion industry. Hospitals make up half of the pie, pharmaceuticals claim a quarter of it and diagnostics account for about $4 billion. The rest goes to insurance premiums and medical equipment. The industry is expected to grow to $280 billion by 2020. The World Health Organization (2010 estimates) reports that the healthcare spend on a per-capita basis, both in terms of U.S. dollars (at average exchange rate conversion) and in terms of purchasing power parity (PPP), in India is among the lowest in the world. About 73 percent of the money comes from the private sector – the highest percentage in the world. In contrast, only 55 percent of healthcare costs in China are from the private sector.India and China share at least two common challenges when it comes to healthcare:

1. Scale: Lack of healthcare infrastructure and lack of trained and qualified manpower limit the speed of response in case of epidemics where a section of the population may need to be isolated and responded to quickly to limit the spread.
2. Cost: Unless healthcare is made almost person-specific, it will be hard to bring down costs. Knowing which diseases need addressing at a community level and which ones are driven by individual circumstances forces the system to respond to all diseases in the same manner.

Innovation in Healthcare

Every country wants affordable, world-class healthcare, but what is affordable in a rich country is likely to be unaffordable in a country such as India. How do you provide world-class healthcare to large numbers of poor people? The Aravind Eye Hospitals of India offers one answer.Treating cataracts typically costs between $2,500 and $3,000 in the United States. In an Indian hospital, the cost works out to around $300. However, for a country such as India where most people, especially those in rural environments, earn less than $2 a day, even a $300 price tag puts treatment out of reach.The Aravind Eye Care System is the largest and most productive eye care facility in the world. In 2007-2008, about 2.4 million persons received outpatient eye care and more than 285,000 underwent eye surgery at the Aravind Eye Hospitals. The average cost in the Aravind system is $25, and more than 60 percent of patients are treated for free.A key statistic in medical care is infection rate. The Aravind system has demonstrated a better performance in this regard than many Western hospitals. For example, in 2004 the infection rate was about four per 10,000 cases at Aravind, compared to the United Kingdom’s published rate of six per 10,000. In 2003 Aravind became the largest single cataract surgery provider in the world. The key is its high volume/low margin business model. As a result, world-class care at a hundredth of the cost has made “medical tourism” a thriving business not just at Aravind but throughout India – a business that generates almost $2 billion annually and is expected to grow substantially in the future.India has also been innovative in the area of insurance. “Micro-insurance” is a term increasingly used to refer to insurance characterized by low premiums and low caps or low coverage limits, sold as part of a typical risk-pooling and marketing arrangement designed to service low-income people and businesses not served by typical social or commercial insurance schemes.At Narayana Hrudayalaya Institute of Cardiac Sciences in Bangalore, India, Dr. Devi Shetty oversees cardiac care at a cost lower than any other hospital in the country and at a fraction of what it would cost elsewhere in the world. Cardiac surgeries in the United States can cost up to $50,000. In India, they typically cost around $5,000-$7,000. Depending on the complexities of the procedure and the length of the patient’s stay at the hospital, the price tag increases. At Narayana Hrudayalaya, however, similar surgeries cost less than $3,000, irrespective of the complexity of the procedure or the length of hospitalization. About 45 percent of Dr. Shetty’s patients pay even less. Of these, about 30 percent are covered under a micro-insurance plan for healthcare called “Yeshasvini” that reimburses Narayana Hrudayalaya at about $1,200 a surgery.Collecting and analyzing data on health and illness promises to enhance the quality and efficacy of healthcare and improve and extend the quality and longevity of life. Data-centric methods allow analysts to transform data into predictive models. Predictive models can then be used to generate accurate forecasts or diagnoses about the state of a patient that cannot be inspected directly.

Multiple Stakeholders, Different Information Needs

Any healthcare system has multiple stakeholders who need different kinds of information:1. Patients. Patients need information specific to their individual situation (what health risks do I run because of my hereditary conditions and lifestyle?), i.e., medically valid advice related to lifestyle and monitored on critical parameters in case of certain diseases. Patients will also benefit from knowledge of potential cost of treatment and how their behavior could impact the probability of those conditions. In the case of a life-threatening scenario, can a doctor be informed in time?At all stages from diagnosis to post surgery, patients need to know about progress, side effects, relapse, etc. The cost of a personal genome sequencing report is expected to drop to $100 in the near future, making it much more affordable for individuals (and doctors) to get much better information about a patient’s health. Predictive analytics can then help to build a profile of the individual that is relevant for the doctor, insurance provider, etc.The medical devices industry today tracks patients who need chronic monitoring. A small percentage of healthy people also use these devices to build their health records. Analytics can be used to create benchmarks that can help track and predict health issues in a focused manner, thus bringing down costs while improving accuracy.2. Doctors. Doctors need to have diagnostic data from the patient and weigh it against the latest research findings and fine-tune the diagnostics so that the treatment is more focused. Surgeons need to know what kind of complications and risks may arise due to the specific condition of the patient. Even the support staff has information needs; e.g., the ambulance driver needs to know which hospital would have the doctor who is best equipped to handle the patient’s condition. What is the best route to take to get there? This is where prescriptive analytics can help. Doctors can leverage analytics to answer the following questions:

• How can I provide safer and more effective care?
• Can I be financially rewarded for better performance?
• How do I stay informed of on-going best practices?
• How can I provide predictive and evidence-based care?
• What more can I learn about my patients?

3. Governments. Governments need early warnings on outbreaks of epidemics. Governments need data that can help improve decision-making on prevention and public health. Governments need dashboards on overall health parameters for the population, as well as devices that can unobtrusively track health parameters and send information to doctors or hospitals to provide insights that can predict the outbreak of epidemics at a cheaper cost. Cultural norms and social taboos can be the source of rich insight using analytics to create prescriptive actions that can cut down response times to health threats in a population. Governments can use analytics to answer the following questions:

• How can we enhance care delivering effectiveness?
• How can we improve outcome and financial performance?
• How can we improve the health of our populations and communities?
• Can we predict population-based events?

4. Insurance companies. Insurance companies need to have real-time data on individuals to assess risk and to better identify the relative risks and potential cost of treatment for different medical conditions. Analytics can help bring down the cost of insurance by tapping into public health databases and using those to predict possible patterns of disease and the cost of treatment.5. Pharmaceutical companies. How can pharmaceutical companies lower the cost of clinical trials and the cost of drug discovery? Analytics can help by:

• Tracking company/product performance vis-à-vis competition
• Research to identify opportunities, threats for new, in-line products
• Sales forecasting for product/market using forecasting models
• Analysis and monitoring of market and competition for strategic alliances and brand acquisitions
• Competitive profiling
• Analysis of media expense and planning

High Mobile Penetration is Common to Both

India has almost 800 million active mobile phone subscribers – about one for every two people. Almost 200 million subscribers are in rural areas. India also has some of the lowest cell phone service prices anywhere, and a home-grown, world-class operator, Bharti Airtel. In India, mobile phones are already being leveraged as a way of bypassing obstructive bureaucrats and bringing services to the masses, from mobile banking to accurate crop prices. Meanwhile, China accounts for 950 million of the 5 billion mobile phone users worldwide.With its wide penetration, mobile communications can be a potent medium to disseminate healthcare information, collect individual healthcare information and leverage the power of analytics to improve healthcare not just in India and China, but around the world.This article was originally published in Operations Research & Management Sciences journal in April 2012 | Volume 39 | Number 2 <Click here>----------------What is Predictive Analytics. How do we use it to improve People Decisions <click here>My article in ORMS on Predictive HR <click here>

References

1. http://www-935.ibm.com/services/us/imc/pdf/g510-6268-healthcare-china.pdf
2. http://www.rand.org/pubs/occasional_papers/2008/RAND_OP212.pdf
3. Medical Insurance in China at the Global Conference of Actuaries, Mumbai, February 2010
4. http://articles.economictimes.indiatimes.com/2011-11-01/news/30345823_1_poverty-line-healthcare-medical-council
5. “Emerging Trends in Healthcare,” KPMG white paper presented on 17 February 2011
6. IDFC Securities Hospital Sector report, November 2010
7. http://www.mckinsey.com/Insights/MGI/Research/Americas/Accounting_for_the_cost_of_US_health_care
8. http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2810%2961894-6/abstract
9. Eric Horvitz, “From Data to Predictions and Decisions: Enabling Evidence-Based Healthcare” (Microsoft research).
10. Richard Singerman, “Healthcare Analytics,” IBM.