Planning a “health city” – will Cayman change the rules of the game in healthcare?

The Cayman Islands is slated to be the stage for a healthcare reform. Dr Devi Shetty, a renowned Indian heart surgeon and healthcare entrepreneur, plans to make the Cayman Islands one of the major destinations for medical tourism and assisted living.

In April 2010, Dr Shetty’s firm Narayana Hrudayalaya Private Ltd concluded an agreement with the Cayman Islands government, outlining a number of laws that the government has agreed to amend or introduce to facilitate the planned medical facilities.

The Narayana Cayman University Medical Centre will be built in phases over 15 years and is set to include in addition to a hospital, a medical university and assisted living homes for seniors.

The hospital will cater primarily to American patients travelling to Cayman for cardiology, orthopedic, cancer, organ transplant and major surgical procedures.

The idea is to offer an alternative to the most expensive healthcare system in the world, that of the United States, by replicating Dr Shetty’s approach of performing huge volumes of surgeries, which has successfully driven down the cost of healthcare in India.

During a busy week of meetings with the government and business leaders on island Dr Shetty took the time to sit down with the Cayman Financial Review to explain the business rationale behind the project.

21st century – driven by the healthcare industry
Policymakers around the world are looking at the healthcare industry not only because healthcare in general is suffering from increasing costs but also as a potential engine for the economy.

Shetty argues that, while the last century was driven by mechanisation and the entire economy of the world was revolving around machines, the 21st century will be driven by the healthcare industry.

“Today it is a 4.5 trillion dollar industry. This second largest industry in the world, and only 8-10 per cent of the world’s population have access to affordable high quality health care. The rest of the world is not going to sit by. They need this industry. So it is going to grow at mammoth proportions.”

In the last five years in the US the only industry that created any jobs was the healthcare industry, whereas every other industry has reduced their workforce, he says.

“If you want to pull the world out of the recession, you will need an industry that can create millions and millions of jobs. And today there is only one industry that can do that, which is the healthcare industry.”

In contrast to every other industry, he notes, the healthcare industry requires a larger number of people as it matures, because with technological development comes a need for more specialised expertise.

Going forward healthcare will be the only industry that is going to drive the world economy, he believes.

Solving the healthcare cost conundrum
Shetty, who is known for lowering the price of healthcare in his hospitals in India, connects his notion of a healthcare boom with the belief that the healthcare industry in the industrialised world ultimately will have to cut costs.

“If you look at any industry, every industry has perfected the art of cost savings to such a level that the cost of services and products has come down,” Shetty says.

“Healthcare is the only industry which defied that logic, because we are passing on our inefficiencies to our clients because they have no choice. This is a monopolistic industry. If you have a heart problem you can only come to me or a few others,” he admits.

But this cannot continue forever.
“Our assessment is that all over the world the cost of healthcare will come down by 75 per cent. The time is gone when you can say it’s a premium.”

Change will not necessarily come from the Western world, he says, referring to his home country of India, which he estimates in five to seven years will overtake the US in “the number of procedures on the human body”.

In India healthcare costs had to come down significantly in order to ensure a system that is able to deal with a population of its size.

“I started my career 20 years ago in India and we used to charge 120,000 rupees for a heart operation. Today we will do the same operation for 65,000,” he says.

This phenomenon that the cost of the procedure could be halved has not happened in the first world yet, he says, but it will happen. “There is no way it will keep going up.”

Ultimately the cost of healthcare has to go down by at least 5 per cent each year and global economies of scale will help to achieve this, Shetty believes. “That is what we have been very successful at doing in India.”

“Today you are able to get a mobile phone for less than a few dollars. Why? Because in the developing countries millions of mobile phones are sought and they add to the volume. The same thing is going to happen to healthcare.

“Today when a cancer tablet is produced, it is very expensive because only Americans and Europeans can buy it. When the whole world can buy it, the cost of the tablet comes down significantly,” he argues.

Essentially healthcare does not need product but process innovation, Shetty says, advocating to radically change the way healthcare is delivered.

The “health city” – a new form of assisted living
He points out that average life expectancy in the US will increase from 74 years today to 94 years over a very short time period. The ability alone to offer a wide range of patients an artificial heart will increase life expectancy significantly, by something like 10 years, he says.

“Today in India there are people living on dialysis for over 30 years,” Shetty gives as another example.

One mistake that is always made is trying to predict the future based on the past, he says.

“Once the life expectancy reaches 84 or 94 years, the resources they have in the US are simply not sufficient.”

Another important point, he argues, is the need for hospitals as part of the care for elderly patients, as traditionally assisted living centres in the US have outsourced healthcare.

“If someone is 85 years old, he has had one or two strokes, his wife is old as well. They are partly suffering from amnesia. Either they take no medicine or they take too much medicine. If they start coughing or if they have any symptoms, they have to go to the hospital.”

However, having to go to the hospital on a regular basis, demoralises them, he says, which in turn has a significant impact on their life expectancy.

In contrast the planned medical facilities in Cayman will combine assisted living with the healthcare services that are required, making a trip to the hospital in most cases redundant.

“We will be able to deliver assisted living services at the fraction of the cost a traditional assisted living place in the US charges,” he claims.

A “health city”, as Shetty envisions it, will include a large hospital, a nursing school and a medical school in addition to the assisted living residences.

“We are going to run an academic institution which is full of doctors, nurses and technicians. They are the ones who will offer a bulk of the healthcare. It is going to be a training ground for the students and at the same time your cost goes down.”

Picking up on the example of the old couple, he explains: “You will have thousands of young people learning. These young nurses will go to the house, examine the old man, check his blood sugar in the morning and give the insulin. At 9am the physiotherapist will come and exercise them. If they have a tummy ache, a nurse or doctor will take the hand-held device and do the ultrasound in the house.

“If they have a cough, the portable X-ray goes there and gets the X-ray done. If they have chest pain they’ll go there and do the ECG. Everything can be done in their house and it comes at a tiny fraction of the cost at the hospital. If you have a health city you can do all that.”

Even if you are a millionaire in the US today you could not afford it, says Dr Shetty.

“See, there are 37 million baby boomers, who are in their 60s in the US. Whatever savings they have today, average people, they will not be able to manage for more than seven, eight years in the US. They have to look for an alternative place to settle down, to look after their healthcare cost and other expenses.”

An assisted living facility in the Cayman Islands would be ideal, he argues. “It is close to their home, their children can visit them, the family can visit and it is like an extension of America.”

The infrastructure available in the Cayman Islands will mean that a sedentary patient only needs to go to the hospital for a CT scan or an MRI. “Otherwise they can stay at home. That is exactly what is required across the world.”

The revenue from this ‘health city’ will not come from one source alone. “You never create one cash cow that is not the idea. You have revenue coming from treating patients, revenue coming from educational institutions, revenue coming from assisted living and so many other activities revolving around that.”

Low cost
At the same time he makes very clear: “We always work on a low cost model on everything.”

Although the Cayman Islands does not have a reputation for being a low cost destination, significant cost savings are achievable when compared with the cost of the US healthcare system, says Shetty.

“Healthcare is frightfully expensive in America.

“When we are talking about the low cost of healthcare in the Cayman Islands and about the cost arbitration, it is primarily because we want to address [the US as] the most expensive healthcare destination.”

His target is to reduce cost by around 50 to 60 per cent of the current prevailing charges in the US.

In practice, health insurers cannot send their customers to destinations that offer cheaper healthcare. However, if a patient comes to Cayman for an operation and produces the bill, the insurance company will reimburse, says Shetty, mentioning his experience with US patients coming for treatment to India.

The difference in cost is immense and it will only get worse, Shetty notes.

“They will come here and get the procedures at half the cost and some insurance companies even pay for the airfare.”

To make the low cost approach of combining tertiary care and assisted living successful, the medical facilities also need volume.

Plans are to start with a 200-bed hospital and once this is operating in the desired way to add the other elements, including a second 500-bed hospital, later on. In total the project developers have given themselves 15 years for the project, but Shetty believes “it will happen much quicker than that”.

Currently the project has government approval for 1,500 assisted living units, but Shetty envisions it to grow much larger: “We need to have at least 10,000 people living in this city in this assisted living facility. It will cover about 500 acres of land.”

But growth will also depend on market demand and on what Cayman’s infrastructure can sustain.

Ultimately, local infrastructure will have to grow with the project. “Once we have a facility of 2,000 beds everything has to change in this country. The current infrastructure won’t sustain that.”

This concerns first and foremost the transport system in the Cayman Islands and would include an upgrade to Owen Roberts airport to handle the number of patients the project aims to attract.

Why Cayman?
Shetty has been looking to export his vision of healthcare provision for some time. Initially approached by a US hospital group seeking a partner to set up a hospital in Mexico, he explained the project started to come undone when medical councils started to get involved.

“One issue is that in Mexico, or for that matter any other country, they will never allow outside doctors to practise in their country. Medical councils in every country are a very powerful lobby.

They won’t allow foreign doctors.”

This in turn will make it difficult to change the salary structure.

A second reason was, he says, that none of the foreign doctors wanted to go to Mexico or any of the other Caribbean countries, which in fact made “fantastic offers”, some them willing to provide the entire infrastructure.

“But our doctors are not willing to go.”

This is not the case in the Cayman Islands.

“The one reason we chose the Cayman Islands is this is a small country with a very responsible government which wants things to happen,” he adds. This includes a willingness to amend or bring in new legislation to allow for foreign medical qualifications, the importation of human organs, tissues and body parts, including non-foetal stem cells, obtained by lawful means for use at the hospital and a cap limiting malpractice and medical negligence awards to a maximum of US$500,000 per person on non-economic loss.

Moreover, the potential for medical tourism in the Cayman Islands is supported by an established tourism product, proximity to the US, political stability and a reputation as a safe destination in the Caribbean.

Financing

Financing the project initially does not require any outside investors, says Shetty, because the first phase, a 200-bed hospital, is “not that expensive to build”.

But he is looking for strategic investors that believe in the idea and are willing to commit longer term for seven to ten years, “primarily because we believe that it is important for the region”.

“For Cayman it will be a landmark project,” Shetty says.

“All the other countries will follow it, because every country wants to promote medical tourism.”

healthcareIISM.jpg

L-R: Dr Devi Shetty, Cline Glidden, Carson Ebanks, Canover Watson, Mark Scotland, Devan Shetty and Premier McKeeva Bush.