Raghuram Rajan on health care in India

by on May 27, 2010 at 4:41 am in Books, Economics | Permalink

Hospitals in the United States could learn more from each other, as well as from hospitals elsewhere, including India, where costs have been brought down by bringing mass-production techniques perfected in manufacturing to health care.  Indian hospitals have found that error rate are reduced when their doctors specialize and perform many procedures of a similar kind.  The time for operations is also cut down, with no loss of safety.  A focus on eliminating unnecessary frills and on utilizing expensive resources like doctor time most effectively also helps even though good surgeons in India earn about as much as surgeons in the United States, the cost of operations is often an order of magnitude lower.  Regulations that force hospitals in the United States to be "full-service" hospitals rather than permitting specialization tend to drive up costs.  Greater competition between hospitals could also bring down costs; an easy way of encouraging cross-border competition is to authorize Medicare and Medicaid reimbursements for procedures performed by authorized hospitals in other countries, like Mexico and Thailand.

That is from Rajan's Fault Lines: How Hidden Fractures Still Threaten the World Economy.  Most of this book is on the financial crisis — and not health care — and it is one of the two or three best books on that topic.

1 steve May 27, 2010 at 6:46 am

Only doable in urban areas. Would also require limiitng choices for patients, but could be done if we were willing to tolerate more governmental influence.

Steve

2 Bill May 27, 2010 at 7:01 am

Disagree with statement that regulations require hospitals in the US to be full service; payment structures do influence the mix of services offered.

In fact, due to the way we pay on the basis of DRG, rather than outcomes, we incent hospitals to expand their offerings. Because there is money, doctors have begun to peel off some of these DRGs, and create standalone “heart hospitals” or “women’s centers” or high level “sports clinics” that do surgical procedures. But for the payment system, it is cheaper to do the surgeries in a hospital; the only efficiency (not sufficient to offset the cost of standalones) is in scheduling doctors time in specialized hospitals. Outcomes are the same, controlling for the number of procedures.

Some call this cream skimming.

I call it overpaying for services and the market figuring it out and someone else trying to capture the rent other than the hospital.

3 DJS May 27, 2010 at 8:54 am

I’m curious as to what people think of this article http://mises.org/daily/4434
Are they mostly good points or is it easy to pick apart?

4 Colin May 27, 2010 at 9:41 am

You can find more about health care in India here:

http://online.wsj.com/article/SB125875892887958111.html

and here:

http://www.salon.com/news/feature/2009/09/03/india/index.html

Both are HIGHLY recommended.

5 spencer May 27, 2010 at 9:51 am

Since the ban on “specialty hospitals” is less than a month old how can you conclude that it has driven up costs?

Also, what about the thesis that speciality hospital “cherry pick” the profitable lines of hospital care and leave the less profitable or unprofitable
types of hospital care to the full service hospitals?

6 John Dewey May 27, 2010 at 10:08 am

I agree with GreenGenes that the AMA will resist Medicare and Medicaid reimbursement of foreign hospitals. But I do not believe the AMA by itself has the power to “not allow” such a practice.

As I see it, there are other interest groups who will collectively prevent politicians from authorizing foreign hospital competition. Medicare and Medicaid spending represent a large part of our economy. It’s not just physisicans but community leaders and taxpayers who will howl about billions of dollars being transferred out of our economy.

Spending U.S. tax dollars to support hospitals in other countries is an idea that will not fly. U.S. health care workers vote and contribute to U.S. political campaigns. Doctors and nurses in Mexico and Thailand do not.

7 John Dewey May 27, 2010 at 10:47 am

“Indian hospitals have found that error rate are reduced when their doctors specialize and perform many procedures of a similar kind.”

How specialized does a surgeon need to be in order to see his error rate reduced? Certainly a U.S. otolaryngologist (ear, nose, and throat specialist) might perform a variety of surgeries – tonsillectomy, nasal and sinus fracture repair, rhinoplasty, inner ear ventilation tubes. But most ENT’s have subspecialties. Not every ENT perfoms cochlear implant surgery, for example. Other surgical specialties have subspecialties as well. I don’t believe the U.S. health system employs many general surgeons.

Based on what I’ve learned from conversations with my wife, an OR nurse with 33 years experience, I would believe that government and insurance regulations are the chief reason that a surgeon’s time is wasted. I’ll have to ask her this evening for a couple of specific examples.

8 Ralph May 27, 2010 at 9:14 pm

John-Many surgeons self select out for some surgeries. Most are hesitant to narrow too much in case reimbursements change suddenly or your kind of surgery disappears or changes drastically, e.g. surgery for GI bleeds used to be one of our most common procedures, but are rare now.

Hospitals are another story. Most communities are not large enough to accomplish what has been suggested in this post.

Steve

9 Aram December 30, 2010 at 1:50 pm

I guess it doesn’t matter the region where you find a hospital aslong as that hospital provides good quality services.When it comes about health things should be easy because when you need medical care you don’t need to sign 100 document to be considered before. needak rebounder

10 NarcononMan March 3, 2011 at 7:39 am

I read a similar article on the Narconon website. The health care can be improved a lot, but that would mean reducing some job offers and of course that competition is beneficial. but I would also like to have efficiency in the hospitals. so when a person comes… she wouldn’t have to wait for a treatment that might be urgent.

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