August 28, 2015

The Coming Caribbean Revolution in Healthcare Delivery

Just south of the no-longer forbidden isle of Cuba, over one of the deepest parts of the ocean in the world, sits a spit of land measuring barely twenty two miles long and four miles wide. World renown among divers for its coral landscapes and teeming underwater wildlife, the island is also the recent birthplace of Health City Cayman Islands (HCCI), an organization that could send ripples through the Western hemisphere’s healthcare marketplace.

No, actually, let’s supersize those ripples to waves—big waves. Why? One word: pedigree. This Caribbean baby is born of the largest non-profit health system in the US, Ascension Health, and arguably the most innovative hospital chain in the developing world, Narayana Health. Narayana, the same hospital chain that smashed the “unbreakable” iron triangle of healthcare of quality, cost, and access to deliver labor-intensive procedures like open-heart surgery for less than 5% of the cost in the developed world, has come west.

Cost, Quality and Access

So what might HCCI mean for the Western hemisphere? Well, let’s talk iron triangle again. First up: cost. If HCCI brings prices anywhere near those seen at Narayana in Bangalore, India, you should expect to see demand skyrocketing. And rightfully so. If your insurance company offered you and your family a two-week vacation at the best resort in the Cayman Islands, a surgical procedure with better outcomes than your local hospital, and then further enticed you with $5000 cash deposit in your checking account on your return, wouldn’t you be tempted? That soon could be possible, if not probable. Using a high volume surgical model, if HCCI could bring expensive procedures like coronary artery bypass grafting to even half the cost of US hospitals (recall Narayana is at less than a 20th of the cost), then insurance companies would have tons of margin to make these types of offers.

Next up: quality. India has already proven that high volume and hyper specialization of physicians (especially surgeons) tends to drive incredible quality rates. Western hospitals are slowly following suit by mandating caseload minimums and accelerating surgical specialty training spots. Oh, and did I mention that HCCI has already received accreditation from the Joint Commission?

Lastly, we’re left with access. Fortunately, that’s HCCI’s wheelhouse. With Narayana’s Yeshasvini successful rural insurance model as an example, it’s no surprise to see Health City Cayman Islands reaching out to the many small Caribbean islands (many of which don’t have adequate tertiary care facilities) as well as Central and South America.

Streamlining Operating Rooms and Measuring Costs

Sold yet? I was. And thus I found myself a way to experience HCCI firsthand: a summer internship through Innovations in Healthcare. Two months of life on a Caribbean island working at a hospital that’s poised to drastically change the industry I want to make my career in, sounded ideal. What I didn’t bargain for: how hard I would work and how much I would enjoy the work.

My summer internship involved two major projects. The first involved streamlining surgical supply allocation to the operating rooms. Coursework from Duke’s Fuqua School of Business provided the foundation for supply chain analysis and ultimately a series of recommendations for improving supply flow and perioperative supply personnel. It culminated with a consulting-type presentation turned to debate involving the COO and supply staff. I was pleased. Debate meant engagement and that HCCI was taking my suggestions seriously.

The second project grew out of a research interest of mine: cost accounting to assess surgical procedures. Though Peter Drucker’s renown catchphrase “what gets measured, gets managed” may have become aphoristic in today’s business world, it is certainly far from anachronistic, especially in the realm of healthcare. Cost accounting emerged as one particular methodology to follow Drucker’s advice, measuring costs in a desperate attempt to manage them. Especially in an era of increasing bundled prices for provider organizations, a flexible model of cost for an entire care cycle is paramount to remaining in the black. Combining the techniques of process mapping from industrial engineering and activity-based costing from accounting, the concept of time-driven activity-based costing (TDABC) helps do just this. But building such a model is not easy. So I spent six weeks mapping patient flow and pushing the start/stop bottom on my stopwatch without being too intrusive (note: if you’re trying this at home be forewarned that no one likes being measured).

The result: a network of Excel spreadsheets cross-linked to calculate cost contributions of equipment, space, consumed supplies, and personnel. Pretty? No. Pragmatic? Hopefully. The elegance of a TDABC model is its granularity. You can ask any question about costs in the cycle of care and obtain an answer with relative ease. How much did it cost for that extra day in the ICU? Where are 80% of our costs coming from for this procedure? How much money could we save if we shifted this task from the surgeon to a nurse practitioner? Beyond these direct cost questions, we can also answer questions about utilization. How many more patients could be added to our daily MRI schedule? How much excess capacity do we have in our Cardiac Operating Suite? How busy is our orthopedic surgeon? TDABC can answer all these questions with relative ease, especially when used in conjunction with current cost models.

The results of this project landed me in the CEO’s office presenting alongside the CFO about hospital cost measurement. As with the operations presentation, I was interrupted for frequent and healthy debate.

So what’s next? How about a parallel study of the same surgical procedures in the U.S.? I’m interested to see the differences cost allocation across equipment, space, consumables, and personnel (including administrative overhead) at a major academic facility in the US as compared with HCCI. Maybe a comparative paper outlining some of these differences? No matter the results, knowing costs and cost drivers in the healthcare setting is only going to increase in importance as the payment models shift away from fee-for-service structures. Health City knows their costs and can take them to the bargaining table. Can you?