Strategy Highlight 6.1 Dr. Shetty: "The Henry Ford of Heart Surgery' Open-heart surgeries are complex medical procedures and loaded with risk. While well-trained surgeons using high-tech equipment are able to reduce mortality rates, costs for cardiac surgeries in the United States have climbed. Difficult heart surgeries can cost $100,000 or more. A heart surgeon in India has driven the costs down to an average of $2,000 per heart surgery, while deliver- ing equal or better outcomes in terms of quality. Dr. Devi Shetty's goal is to be "the Henry Ford of heart surgery." Just like the American industrialist who applied the learning curve to drive down the cost of an automobile Namas Bhojani to make it affordable, so Dr. Shetty is reducing the costs of health care and making some of the most complex medi- cal procedures affordable to the world's poorest. A native This expertise improves outcomes while the learning- of Mangalore, India, Dr. Shetty was trained as a heart sur- curve effects of performing the same procedures over geon at Guy's Hospital in London, one of Europe's best time also drive down cost (see Exhibit 6.7). Other factors medical facilities. He first came to fame in the 1990s when provide additional cost savings. At the same time. he successfully conducted an open-heart bypass surgery Dr. Shetty pays his cardiac surgeons the going rate in In- on Mother Teresa, after she suffered a heart attack. dia, between $110,000 and $250,000 a year, depending Dr. Shetty believes that the key to driving down costs in on experience. Their U.S. counterparts earn two to three health care is not product innovation, but process innova- times the average Indian salary. tion. He is able to drive down the cost of complex medical Dr. Shetty's health group also reduces costs through procedures from $100,000 to $2,000 not by doing one big economies of scale. By performing thousands of heart sur- thing, but rather by focusing on doing a thousand small geries a year, high fixed costs such as the purchase of ex- things. Dr. Shetty is applying the concept of the learning pensive medical equipment can be spread over a much curve to make a complex procedure routine and compara- larger volume. The Narayana hospital in Bangalore has tively inexpensive. Part of the Narayana Health group, 1,000 beds (many times larger than the average U.S. hos- Dr. Shetty's hospital in Bangalore, India, performs so many pital with 160 beds) and some 20 operating rooms that cardiac procedures per year that doctors are able to get a stay busy pretty much around the clock. This scale allows great deal of experience quickly, which allows them to spe the Narayana heart clinic to cost-effectively employ spe- cialize in one or two complex procedures. The Narayana sur- cialized high-tech equipment. Given the large size of geons perform two or three procedures a day for six days a Dr. Shetty's hospital, it also has significant buying power, week, compared to U.S. surgeons who perform one or two driving down the costs of the latest high-tech equipment procedures a day for five days a week. The difference adds from vendors such as GE and Siemens. Wherever possible, up. Some of Dr. Shetty's surgeons perform more specialized Dr. Shetty sources lower-cost inputs such as sutures lo- procedures by the time they are in their 30s than their U.S. cally, rather than from the more expensive companies counterparts will perform throughout their entire careers. such as Johnson & Johnson. Further, the Narayana heart This volume of experience allows the cardiac surgeons to clinic shares common services, such as laboratories and move down the learning curve quickly, because the more blood bank and more mundane services such as catering, heart surgeries they perform, the more their skills improve. with the 1,400-bed cancer clinic next door. Taken together, With this skill level, surgical teams develop robust standard all of these small changes result in significant cost sav- operating procedures and processes, where team members ings, and so create a reinforcing system of low-cost value become experts at their specific tasks. chain activities