Why Are Self-insured Employers A Good Marketing Target For Patient Care Services?

BACKGROUND

Health system leaders worldwide are searching for innovative care delivery models that lower costs, amend quality, and increase access to services. India's Narayana Health is one of the best-known examples of a wellness system that has achieved these goals.

U.K.-trained cardiac surgeon Devi Prasad Shetty, M.D., who served as Female parent Teresa's personal physician after operating on her following her heart assault, founded Narayana Wellness in 2001 in Bangalore. Its mission: to provide loftier-quality, affordable cardiac care to everyone, regardless of power to pay. Changes to Indians' lifestyle and diet in recent decades have led to an unprecedented increment in heart illness.^one Around the fourth dimension Narayana Wellness was founded, approximately 2.4 million Indians required heart surgery annually, just prohibitive costs and a shortage of providers meant only 60,000 received it.²

Republic of india's Narayana Wellness: A Model of Efficient, High-Tech Care

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This gap inspired Shetty to create what is today one of Republic of india's largest multispecialty hospital chains, comprising 31 3rd hospitals across xix cities. By combining innovative engineering science and a highly efficient delivery system, Narayana Wellness is able to optimize productivity and minimize costs. This has enabled it to both increase treatment chapters and expand the number of specialty services offered. In early 2016, the company's share price rose more 35 per centum in its initial public offering.

This case written report describes the Narayana Health model and the challenges the health system has faced in opening a new hospital in the Caribbean island of Thousand Cayman. It too offers lessons for U.S. health care payers and providers on ways to dramatically reduce costs while maintaining high-quality third care.

KEY Plan FEATURES

Narayana Health is designed for India, where the majority (58%) of health expenditures are paid out of pocket, given that most people finance their own care.^three The success of the model is achieved through several complementary mechanisms. These include:

leveraging economies of scale
using assembly line concepts for surgery
reducing the boilerplate length of stay
reengineering the pattern, materials, and utilize of medical equipment to reduce the cost of ownership.

Considering of these innovations, the average price of open-heart surgery, as reported by Narayana Health, is less than $2,000. The same process at a U.Southward. research hospital typically costs more than $100,000.⁴

A Tight Focus on Efficiency

Narayana Health has achieved savings through smart employ of equipment and telemedicine every bit well as efficient staffing procedures. The wellness system has built reliable and low-price supply chains in Republic of india over the past decade and leverages economies of calibration to further drive down prices. Utilizing a pay-per-employ model with suppliers for some diagnostic equipment, information technology minimizes majuscule costs.^five Strict sterilization procedures, permitted past the Joint Commission International, enable reuse of some devices, such as guide wires and sure cardiology catheters that are typically tending of after a unmarried use. Centralized purchasing allows the system to take advantage of economies of calibration. Bar coding of stock enables precise inventory counts at whatever fourth dimension, minimizing storage costs and preventing unnecessary spending.

In addition to offering services at its ain facilities, Narayana Health has one of the world's largest telemedicine networks, connecting 800 centers globally. The organization has treated more than 53,000 patients through telemedicine programs, increasing Narayana'southward attain without requiring investment in physical infrastructure. Mobile outreach vans, meanwhile, increase admission to diagnostic and consultation services in semiurban and rural areas of India.

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A product-line approach to surgery, combined with task-shifting amongst staff, creates an efficient operating theater.

A production-line approach to surgery, combined with task-shifting among staff, create an extremely efficient operating theater, resulting in many more procedures completed per day than is typical in the U.S. and elsewhere. Each surgeon performs 400 to 600 procedures annually, compared with 100 to 200 in the U.S.^{half dozen} All staff members work at the tiptop of their scope of practice: surgeons perform only the tasks they are uniquely qualified to do, while other clinicians perform tasks such as preoperative preparation, patient pedagogy, and charting. This enables many surgeries to be performed in a row, with surgeons completing one procedure and quickly beginning the next on a fully prepped patient. This high volume drives lower costs and better-quality outcomes, with surgeons chop-chop gaining experience and mastery.

Narayana Health'due south well-known brand, social mission, and potent leadership — in improver to competitive compensation and incentive packages — attract and retain highly qualified cardiac surgeons and other 3rd care specialists. The system has approximately 16,000 employees, with 11,000 clinicians spread across the company, and four,000 people are subcontracted for housekeeping and security.

Smart Use of Data to Reduce Costs, Monitor Functioning

Use of it and data promote efficiency and standardization throughout Narayana Health. A centralized deject environment connects all the hospitals, helping to streamline administrative tasks and enable functioning monitoring.

The finance team generates profit-and-loss statements for executives every day, allowing them to identify and address capital menstruation problems as they ascend. Financial data are reviewed monthly with unit of measurement heads and the CEO.

Primal functioning indicators for individuals and departments are monitored daily, and a existent-fourth dimension patient-complaint procedure provides a simple and powerful tool to identify and chop-chop correct performance problems.

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MRI auto (left) and i-Kare tablet (right) are connected to a centralized cloud environment, streamlining administrative tasks.

Providing Affordable Intendance to All

Narayana Health hospitals serve anyone who needs care, regardless of their ability to pay. Each year, more than one-half of patients receive free or subsidized inpatient care, with an average discount of 15 percent. This 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 individual hospitals, Narayana Health is nevertheless an attractive pick for such consumers. The wellness system'southward business organization model is sustainable because of its ability to attract so many patients who can pay full price.

SPREAD TO THE Caribbean

In 2014, Health City Cayman Islands (HCCI), a 101-bed third care hospital that follows the Narayana model, opened in the Caribbean island of Grand Cayman, which is part of the U.k.'s Cayman Islands territory. The venture is a partnership between Narayana Health and Ascension Health, the largest nonprofit and largest faith-based wellness system in the U.S. (Come across Appendix for details of HCCI's business organisation and staffing models.) Local factors have affected the implementation and success of the Narayana model in the Caribbean, in both positive and negative ways.

Facilitators of Success

The option of Grand Cayman was driven by a convergence of factors, including the enthusiasm of local business organisation leaders, the Caymanian government's demand to diversify its economy in the wake of the recent global recession, and Narayana Health's want to establish a presence in the region (see box). The island's well-developed tourism manufacture, strong infrastructure, low crime charge per unit, and geographic proximity to multiple new markets fabricated it an attractive location.

Key Partners in Wellness City Cayman Islands

Caymanian businessmen Harry Chandi and Factor Thompson were disquisitional in the genesis of HCCI. Chandi, a Cayman resident of Indian origin, became friends with Narayana Health founder Devi Prasad Shetty, Chiliad.D., afterward he treated Chandi'due south father in India. Thompson was Chandi'south business partner and a third-generation Caymanian director of Thompson Development Ltd., a major development company.

The Cayman government had approached Thompson virtually developing avenues for economic diversification. Chandi and Thompson, inspired past Shetty'due south vision, were vital in brokering relationships between Narayana Health and the Cayman government and developing the project's master plan. "Ignorance is empowerment," said Thompson. "We knew no boundaries, limits, barriers; we only saw opportunities."

At the same time, Ascension Health, the largest faith-based and largest non-for-turn a profit health system in the U.s.a., was drawn to Narayana Health'southward mission-driven approach. A subsidiary of Ascension, TriMedx, had been collaborating with Narayana to service equipment across its usual lifespan, resulting in reduced capital expenses and operating costs. The executive leadership team at Rise saw the investment in HCCI as a style to provide affordable health care while affording the opportunity to examination innovative quality- and cost-comeback strategies that could apply to the Usa.

The Caymanian government's willingness to make sweeping changes to the regulatory and policy environments to accommodate HCCI was disquisitional. The authorities changed nine laws and thirteen regulations in ii and one-half years, including its health practise law, which at present recognizes Indian medical qualifications and approves Indian doctors and nurses to practise in the Caymans. Tort reform capped medical malpractice awards at $620,000, thereby reducing insurance costs for the hospital.⁷ Immigration constabulary was changed to support expedited visa processing for people from countries that require a visa to enter Grand Cayman, and the duty tax was waived for imported medical supplies. The government too preapproved expansion to friction match the project'due south 15-twelvemonth master plan (run across Appendix).

Efficient methods (e.g., building with insulated physical forms that decrease air workout utilise by forty per centum) led to fast and affordable structure of the HCCI infirmary, resulting in completion inside upkeep in 12 months.

Challenges

In its early stage, several factors threatened to hinder the success of the model in 1000 Cayman, including differences between the Narayana and local work culture, higher operational costs, and prevalent misconceptions about the hospital that discouraged local patients from seeking services.

HCCI imports most of its clinical staff from India, a practice that may be hard to proceed as information technology grows. Infirmary leaders are working to embed the Narayana Health work culture, including continuous comeback, balancing multiple roles as needed, and job-shifting, among local clinicians. However, the model will likewise need to adapt to cultural norms in the Cayman Islands.

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The construction of Health Urban center Cayman Islands incorporates natural lite in all areas of the hospital, particularly operating rooms.

Higher operational costs and the supply chain logistics of an island also nowadays challenges. Hospital leaders are looking for ways to reduce operational costs through approaches such as use of solar power, and are importing some supplies from Bharat to detect lower prices.

HCCI has besides had to dispel myths that discouraged local patients from seeking care, including perceptions that low cost ways low quality, that the hospital is a medical tourism institution that would non serve locals, that Indian doctors weren't every bit adept as Western doctors and might not speak English language, and that the only services offered were through telemedicine. To help accost these misconceptions, HCCI provided intendance to a few notable Caymanians, who then became advocates for the hospital.

Efficiency in Construction

HCCI's construction integrated many concepts from India, including Shetty's philosophy of incorporating natural calorie-free into all areas of the building, peculiarly operating rooms. There was a house commitment to lean and dark-green infirmary design.

For example, on-site oxygen manufacturing, employ of solar ability, and recycling water for nonpotable uses, mitigated environmental concerns, and should lead to long-term cost-savings "The sum total of multiple efficiencies in the construction process had greater impact than one silverish bullet of saving," says Thompson, a Caymanian businessman who helped develop HCCI.

The hospital was built at $420,000 per bed, compared with an average of $1 1000000 per bed in the United States. HCCI has but over 100,000 square anxiety, less than half the size of a typical Western hospital. This small footprint has also led to operational savings.

Plan for Growth

In the curt to medium term, HCCI is marketing its services to Caymanians and other Caribbean residents and Latin Americans covered by government or private insurance, also as wealthy patients who pay out of pocket. Through a partnership with the Heart to Heart organization, HCCI besides provides subsidized cardiac surgery for Haitian children. U.Due south. residents covered by traditional insurance are not the immediate target of patient growth, though self-insured companies may be willing to partner with HCCI.

To appointment, HCCI's clinicians have focused on orthopedic surgery (32%) and cardiology procedures (26%), with xv percent in cardiac surgery, 13 pct in full general surgery, and fourteen percent in other specialties. Equally the volume of patients increases, HCCI is expanding its specialties. New services include medical oncology, spine surgery, bariatric surgery, neurosurgery and neurology, plastic surgery, and urology. A sleep lab, sports medicine, surgical oncology, and a cancer institute with a radiation unit are expected.

The long-term plan besides includes expansion to ii,000 hospital beds within fifteen years, opening of a medical university, and a 1,500-unit assisted living facility that will serve people needing day-to-day medical supervision as well every bit good for you retirees wanting medical services nearby. Pharma-tourism — whereby people travel to purchase cheaper medicines — is too seen as a potential growth area.

RESULTS

Narayana Wellness

The Narayana Health model has been rigorously studied and its impacts on clinical quality and outcomes, access to intendance, and costs are well documented in the peer-reviewed literature. In 2007, the health arrangement was responsible for 12 percent of all cardiac surgical procedures performed in India, with 25 procedures completed daily, six days per week.⁸ Equally noted above, its surgeons quickly develop expertise, resulting in patient outcomes that rival those in the United states. For example, Narayana Wellness reports a i.4 percent bloodshed rate inside 30 days of coronary artery featherbed graft surgery, compared with one.9 percent in the U.S.⁹ Information technology besides reports a 1 pct mortality rate for mitral valve replacement, and a door-to-balloon time of less than xc minutes for 91 percent of cases; both rates exceed international benchmarks (Exhibit 1).^x

Narayana Health'due south operations in India are assisting. Eighty percent of its total revenue is generated from inpatient visits, x percent from outpatient visits, and 10 percent from remote consultations and diagnoses. To identify cost drivers and support efforts to further increase efficiency, the system is working with Stanford University researchers to develop a model to measure the time and toll of each function of the patient encounter, from walking in the door through follow-up. Colleagues at Duke University are working with HCCI to develop a similar model, which will permit managers to target specific ways to bulldoze efficiencies.

Health City Cayman Islands

Although it is too early to clarify HCCI's treatment outcomes, the hospital's cost reward is evident. HCCI'south bundled pricing structure is typically set at 30 percent to fifty percent of U.S. fees for the same procedures. For example, coronary artery bypass graft (CABG) surgery typically costs $100,000 or more in the United States, while HCCI charges around $25,000. HCCI is focused on expanding services and reducing costs further, with the ultimate goal of providing CABG surgery for $15,000 and joint replacement surgery for $10,000.

HCCI appears to exist well positioned to change the condition quo related to the costs and processes of surgery for the Americas and the Caribbean area. However, sustainability will depend on the company'due south ability to increase patient volume in all clinical areas.

POTENTIAL FOR SPREAD IN THE UNITED STATES

Narayana Wellness is a proven model of what'south known as "frugal innovation," providing high-quality outcomes for lower price and thereby expanding admission to critical services. It shows that the combination of several different, focused innovations can lead to dramatic results, without necessarily having to disrupt existing systems. While information technology is unlikely that the model could be replicated wholesale in the U.S., because of the regulatory changes that would be required, it offers lessons on how to significantly reduce costs.

I aspect of the Narayana Health model that is particularly relevant for the U.South. — which spends more than on health care than other high-income countries merely has worse outcomes — is its focus on finding efficiencies in every aspect of operations and putting the savings to work to increase access and affordability for patients.^xi At Narayana Wellness hospitals, each receptionist, billing specialist, nurse, lab technician, and physician knows the costs of every cloth they use and every procedure they recommend. Similar tools to identify price drivers could be adopted in the U.S., building on existing efforts to promote price transparency. Having more data on the costs of care and out-of-pocket costs to patients could motivate U.Due south. wellness care providers to increment efficiency, especially if reducing costs meant that more than people could receive high-quality, affordable intendance.

There is too opportunity in the U.S. to rely on advanced practice providers, including doc administration and nurse practitioners, to provide many more aspects of medical and surgical care. Such job-shifting, combined with a "focused factory" arroyo to patient throughput, could clear bottlenecks in surgery and lead to higher volumes, ameliorate outcomes, and cost reductions.¹² Some U.Southward. providers are following similar approaches, including CareMore, which manages a Medicare Advantage plan that uses nurse practitioners and other team members to offering chronic illness management services and deploys physicians to care for sicker patients. Iora Health employs lay health coaches to encourage behavioral changes in patients, freeing upwardly time for clinicians to concentrate on diagnosis and treatment.¹³

Targeting Multiple Markets

In the Cayman Islands, employers are required by police to offering wellness insurance coverage to their employees. Those who practice not accept employer-sponsored coverage are covered past government plans, resulting in almost universal insurance coverage and very low out-of-pocket expenditures for patients. HCCI reports that for its Caymanian patients, 95 per centum of health spending is through insurance, an bibelot in the Caribbean. HCCI has contracted with insurance providers in the Cayman Islands and is working to attract local residents, including higher-income patients who typically take gone abroad for specialty intendance because local services have been scarce or unavailable.

Notwithstanding, Cayman Isle'south population of simply 55,000 is not sufficient to drive the efficiencies that are the authentication of the Narayana Health model. Therefore, the HCCI marketing team is analyzing health care service gaps in the Caribbean market. Information technology is working with insurance companies, self-insured companies (which have greater incentives than practise traditional insurers to cut costs), and cruise lines. The primary targets for about-term growth are Jamaica, Turks and Caicos, the Bahama islands, Trinidad, St. Maarten, and the Dominican Republic.

In April 2015, HCCI earned accreditation by the Joint Committee International, making information technology one of the youngest hospitals to receive the international certification. This has given the hospital significant brownie and should strengthen its ability to concenter customers from regional and international markets. HCCI's medium-term strategy will exist to target patients from the United States and Canada, with longer-term prospects from Southward America and Europe. In Canada, for example, marketing strategies target people for whom the opportunity toll of waiting for surgery outweighs the price of paying out of pocket at HCCI.

Emerging provider payment mechanisms also may serve as incentives for U.Southward. health systems to prefer many of the frugal innovations developed past Narayana Wellness. The spread of bundled payments for episodes of care, as well as accountable intendance contracts that hold providers financially responsible for the quality and full costs of designated patient groups, shift greater financial risk to providers — thus creating greater urgency to reduce costs while maintaining quality. Large self-insured employers are also driving utilization of high-volume centers of excellence for high-acuity services, such as the collaboration between Lowe's and the Cleveland Clinic.^xiv Continued growth in such arrangements could promote the Narayana Wellness model of high-volume specialization. Finally, the increasing availability of health care cost and outcomes data may create incentives for employers to await for more efficient health care providers.

By bringing loftier-quality, low-cost specialty care within a few hours of travel time from the U.South., HCCI has created an alternative to U.S.-based care that could, over time, force health systems to reduce prices or risk losing market share. Surgical treatment of cardiovascular diseases, cancer, and orthopedic atmospheric condition (including joint replacements) are pinnacle drivers of U.South. health care expenditures, and demand for these services will increment with the aging population.

Unlike other medical tourism destinations such as Thailand and India that require meaning travel or out-of-pocket payments from international patients, the HCCI model tin be implemented in conjunction with U.Southward. insurance companies, which are increasingly roofing medical tourism. BlueCross' Companion Global Healthcare program, supported by BlueCross BlueShield of South Carolina and BlueChoice HealthPlan of South Carolina, is i such framework already in place.¹⁵ Insurers and big employers could comprehend the entire toll of travel for the patient and a companion to One thousand Cayman, surgery at HCCI, and postoperative care at home and nevertheless potentially salve one-half the boilerplate costs of the procedure in the United States.

While full-scale replication of the Narayana Health model in the U.S. is unlikely, U.Southward. wellness care providers can learn and utilize lessons from this efficient and results-driven provider.

APPENDIX. HEALTH CITY CAYMAN ISLANDS

Concern Model

Narayana Health's mission to serve all patients, regardless of their ability to pay, is sustained through the health system's efforts to drive downward operational costs, promote high patient book, and attract a substantial proportion of full-pay patients by offer loftier-quality care and lower costs than the competition. The Health Urban center Cayman Islands venture seeks to replicate this success, while adjusting its approach to see the needs of a unlike population, payer mix, and operating environment.

The cost of building and launching the HCCI infirmary was $70 million. Compared with India, the price of utilities, personnel, and supplies are far higher in Thousand Cayman, and many of these costs will remain higher. To help reduce utility costs, HCCI recycles h2o for reuse and is planning a solar farm. Some operating costs will be reduced over fourth dimension past economies of scale and development of more efficient supply bondage.

For example, to capitalize on Narayana Health'south low-cost supply chains, HCCI procures virtually supplies straight from India. Even though the added time and unpredictable nature of ocean ship complicate inventory management, supplies imported from Republic of india all the same cost a fraction of what they would toll in other markets. Medicines are procured from FDA-approved companies in Bharat when possible, and the residuum come from the The states or the Uk. As patient volumes increment, HCCI expects to shift from on-demand orders to bulk orders, lowering costs. True to the Narayana model, HCCI doctors are involved in the acquisition process to ensure they consider costs and avoid unnecessary expenses.

The Narayana Health business organisation model is designed for India, where a bulk of health expenditures are out of pocket (58% of total health expenditures) and most patients finance their own care.^a To serve the Cayman Islands and Latin American markets, where the majority of people are insured, HCCI must adjust its pricing, billing, and marketing strategies to the preferences of insurers. Whereas Narayana Health pricing is transparent, HCCI does not publish prices because information technology needs to allow for negotiation with insurance companies. HCCI uses bundled, fixed pricing, rather than billing by codes, and typically sets prices at one-third to one-half of average U.South. prices. Eschewing billing codes in favor of bundled pricing for procedures results in pregnant efficiencies for HCCI (information technology employs only two billing staff for the unabridged infirmary) and caps risk for insurance companies. The bundled prices include consultations, preoperative and postoperative investigations, admission charges, surgical fees, operating room fees, anesthesia, implant costs, room and food charges, medications and surgical consumables, transportation, and all physician visits up to two weeks after surgery.

While bundled pricing would seem to be attractive to U.S. insurers, HCCI has learned that most private U.South. insurance companies even so want to receive itemized bills to match U.Due south. billing codes, though many are piloting arranged payment models.

Narayana Health leaders report that near 70 percent of the patients at its Cardiac Hospital pay in cash at the time of service. Even so, HCCI faces 45-to-50-day waits to receive payment from insurance companies, making cash-flow management more than difficult.

Staffing Model

Like Narayana Wellness, HCCI utilizes lean management principles. For example, staffing is planned according to the minimum requirements based on patient volume. HCCI staff also typically wear multiple hats as advisable for their competencies, skills, and training (east.m., the caput of internal medicine likewise heads the pharmacy). This is partly a function of current patient volume, just also reflects a cultural ethos HCCI sought to replicate by bringing teams from India, most of whom were trained at Narayana. Having the power to balance multiple tasks is a key criterion in selecting candidates for HCCI. Internal hiring is too prioritized to maintain the potent organizational civilization.

To engagement, in that location are 268 employees at HCCI, with nearly two-thirds recruited from India. The majority of clinical staff were recruited from Narayana Wellness in Republic of india, in part because there are not enough medical specialists locally. Importing clinicians from Narayana also promotes fidelity to its work culture.

HCCI has committed to the Caymanian government to maintain a minimum of 25 percent to 30 pct local employees (currently at 30%). To run across this goal over the long term, HCCI launched a educatee intern program (with 300 interns expected) and is working with the authorities to strengthen the school science curricula and increase students' exposure to the health care professions. In 15 years, HCCI plans for 1-third of its staff across all categories, including clinical, to be Caymanian.

Policy and Regulatory Changes Made to Enable HCCI's Model

The Caymanian government worked with Narayana Wellness and Ascent to alter laws and regulations to enable the adaptation of the Narayana model to the Caymans. Changes were made to the following laws, which were implemented through changes to 13 regulations.

Health Practice Police force
Tort Reform Law
Organ Transplant Police force
Organ Importation Law
Planning Law
Customs Law
Immigration Law
Registered Land Police
Local Companies Control Law

^a Earth Wellness Organization Global Wellness Expenditure Database.