U.S. health care is like movie theater popcorn – ridiculously overpriced and nothing special compared to what you can get elsewhere. We put up with it because we’re captive.
But thanks to Obamacare and new technology, that may be about to change. If foreign competitors use this moment to siphon off enough patients by offering lower prices and equal or better quality, America’s health-care industry will feel the kind of heat Japanese cars put on Detroit in the 1970s.
That’s the scenario laid out by S. Premkumar, CEO of Apollo Hospitals in India, over a recent dinner in New York. Recall that India busted into the U.S. software industry in the late-1990s. Premkumar – then an executive at Indian tech powerhouse HCL – helped make that happen. Now he wants to apply what he learned in software to medicine. “What happened in information technology can be superimposed on health care,” he says.
There are, to be sure, a lot of differences between software and health care. For starters, quips Vasant Kumar, CEO of health-care consulting firm Scriplogix: “Badly developed software does not kill people.”
I asked former Intel CEO Andy Grove about it. He literally wrote the book on inflection points, and does a lot of work in medicine. Of Premkumar’s vision, Grove told me: “I don’t see it.” Software offshoring was about taking advantage of lower labor costs in other countries, he said, and labor is not a big part of sky-high U.S. prices.
Plus, only certain kinds of medical situations can survive travel. When your appendix is about to burst, you’re not going to make it through airport security, much less a 14-hour flight to Singapore.
But starting in 2014, a lot is going to change about health care in the U.S., and the pressure is building. Costs are already driving 900,000 intrepid Americans to go abroad each year for surgeries. Let’s say you’re in Nashville and your doctor says you need a new hip. It could cost $20,000 out of pocket, after insurance, at the hospital a mile away. But it would cost $10,000 or less, with travel expenses plus a few days of sightseeing, in Costa Rica, Thailand, or India. Many of the hospitals that lure medical tourists have the ambiance and service of a Ritz-Carlton – as opposed to U.S. hospitals, which generally have the ambiance and service of a DMV office.
Medical tourism is just the beginning. So far the numbers for that add up to a pimple on the butt of the U.S. health-care industry, but Premkumar is talking about something bigger. He wants to make medicine truly global, so every patient feels that choosing from options around the world is as safe and easy as deciding whether to buy the premium designer umbrella or the Chinese-made version that costs 75 percent less.
This isn’t about a million medical tourists. This is about a constant flow of tens of millions of U.S. patients going overseas.
Obamacare makes the timing right. There are about 48 million uninsured Americans, and even if just half get insurance, that’s 24 million new customers who will flood the market, getting treatments they might otherwise have skipped. The U.S. is already short 20,000 doctors to keep up with current demand, says the Association of American Medical Colleges. If the U.S. medical industry gets overwhelmed, millions of patients will have to look elsewhere. Insurance providers, which generally don’t cover medical tourism now, will have to consider making overseas treatment an option.
At the same time, health care is going digital. Electronic medical records can be seamlessly passed around the world. Wireless sensors can be put on or into patients, allowing them to be monitored from anywhere. Your doctor in Indiana could practically work hand in hand, in real time, with a doctor in India.
This is where Premkumar’s experience in opening software to offshoring gives him an interesting way to think about health care. In the mid-1990s, when U.S. corporations were wary of Indian programmers, Premkumar helped set up HCL’s joint venture with Perot Systems, Ross Perot’s Texas-based tech outsourcing company. That way, Perot Systems could offer customers a choice: Have software built by Perot in the U.S. for one price or built by coders at the joint venture in India for a fraction of the cost. Either way, the customers got their hands held by Perot Systems, their trusted supplier at home.
As India proved it was up to the task, U.S. corporations got more comfortable with a free flow of software work across borders. By the late-1990s, when the looming Y2K bug created an inflection point and spiked demand for software coders, U.S. corporations turned to India, fueling the growth of Indian companies like Infosys and Wipro.
This month, Premkumar bounced around the U.S. pitching his concept: He wants his Apollo hospitals to partner with a U.S. hospital company that would take care of the patient before and after the trip abroad. Technology would keep doctors in both locations connected to help ensure seamless care.
“It’s the onsite-offshore model,” Premkumar says. If the model proves itself, doctors and their patients will get comfortable with offshoring medicine, just as happened in software more than a decade ago. Mindsets will change. Borders will disappear. “Changes will happen at the margin [of U.S. health care], and then move in,” Kumar says.
Yes, Andy Grove may prove to be right. Factors such as government policy and opaque pricing may protect the U.S. health-care industry from too much competition, especially from outside the country. But globalization is a powerful force, and technology enables it. It’s inevitable that someday, some overseas company will crack the code in health care.