Posted By Damjan DeNoble

I want to share an article I came across that made a fantastic analogy illustrating the Asian healthcare system, and then just managed to wiff on the implications of the comparison provided.

While researching material for my upcoming “10 Best ‘Healthcare’ Tweets” of the week, I came across the following ;

@MedTourismRsrch: RT @medeguide How Asia Changes the Game in Cars and Healthcare http://ow.ly/70O8 (great thoughts on competition)

The link leads to an August 21, 2008 piece by Ruben Toral of Bangkok, Thailand (Twitter: @RubenToral) who puts forth a concise and powerful analogy comparing the potential of the Asian healthcare industry today, to that of the once budding, now mature, Asian car industry of the 1970′s.  Mr. Toral is very clever in his personification (or is it autofication?) of the Asian and American health industries as car models that accurately reflect that primary characteristics of each.

Asian car manufacturers changed the game by evolving from the price leader to the quality leader to the innovator.  From the lowly Datsun came the Honda Civic then the Toyota Prius.  Japanese manufacturers entered on price; gained respect and market share on quality, and now lead through innovation. You don’t buy a Toyota Prius because it is cheap; you buy it because it makes you feel good. Toyota changed the game from selling a car to selling environmental awareness – not something that Hummer understands.

Asian hospitals are essentially doing the same thing in the US healthcare market. They are attracting US medical tourists on price, delivering on quality and wowing on service.  Look at Bumrungrad International’s new outpatient clinic – the design is changing the way a hospital looks and feels.  That’s important to people.  US healthcare is over-engineered; building the healthcare equivalent of an SUV, while Asian hospitals are starting to offer the Civic.

Mr. Toral continues by providing a timely example of GM’s winning strategy in Asia (yes, winning) and how it is drastically different from GM’s Detroit operations.

In Asia, GM is making money — $128 million in the first half of 2008 alone.   Back in Detroit, GM is in a death spiral of restructuring, falling sales, layoffs and a record $10 billion dollar loss.

…

Because in Asia, General Motors is quietly reinventing itselfas a profitable producer of small, environmentally friendly cars that use South Korean technology, Japanese production techniques, and Thai labor.

Then, however, when I expect him to illustrate an Asian health care system equivalent of the small-model GM, the article goes in a different direction and seemingly plugs a recent merger between an American hospital system and a property developer;

Like autos, one of the big opportunities in healthcare is in new product and network development through partnerships. Methodist International, a subsidiary of Methodist Hospital Systems out of Houston, Texas has signed a management agreement with EmaarProperties, one of the world’s largest property developers, to build and manage 100 hospitals and medical centers in the Middle East over the next decade.  Dr. Lynn Schroth, the CEO of Methodist International, is positioning the brand to become a “global health care leader with a global network of hospitals”.   World class medical institution partners with world class property developer to serve world class cities in high growth markets.  Now that’s smart.

To say the least, this part does not completely follow from the GM example which shows an American brand thriving by employing Asian market techniques and Asian resources, while contributing both money and technical expertise.  The relationship between GM and its Asian holdings is a two way street because the brand, GM, is getting added value by using components that organically bring its business strategy in line with the Asian market. It is not a simple partnership of convenience whereby the Asian partner eases the entry of an American firm into the Asian market place – something the situation with Methodist Hospital systems seems very akin to.

Instead, the healthcare system equivalent of this would be if, first, an American healthcare group like Kaiser Permanente decided to come into India, and hired managers from the Apollo Hospital Group health system.  Then Kaiser proceeded to set up an Indian cost structure hospital chain using techniques that work in India and are carried out by Indian doctors and medical personnel, while providing money and technical expertise gleaned from its American-based operation. Achieving this, its brand would organically adjust and innovate into the Asian market.

In contrast, the partnership that Mr. Toral cites between the American hospital group and the Asian property developer, seems like a much more traditional market entry strategy , whereby an American team comes into a country and instructs the people there how to provide the best care that America has to offer.

This probably requires an insurance-based earnings scheme that targets the highest income earners in a population, and unlike the organic process illustrated by GM’s activities in Asia, it rarely leads to innovation that makes healthcare more tailored to the needs of a population in the same way that a honda civic is better tailored to Asia than is  a hummer.

To be fair, this may never have been Mr. Toral’s point, as he does describe Bumrungrad Hospital in Bangkok as a model of innovation – which, in many ways, it is.  Mr. Toral’s choice to cite Bumrungrad is significant because it indicates that he is simply intending his article to be read by hospital leaders with aspirations of transferring the same profit model from the US/other private health systems in western countries (insurance based) into a lower cost market.

Bumrungrad is an innovative top-tier hospital for high income patients in both the  global sense of the word, and the local sense of the Asian countries that hospitals like Bumrungrad are located in.  But, ultimately, by trying to emulate Bumrungrad and other’s like it, hospital leaders would simply be getting better at adding to an already established ‘five star’ business model of hospital-based health delivery.

Expansion options for this sort of model are limited because growth depends on factors which are impossible to predict;  how fast is global tourism going to increase? where are global tourists going to go?  when is a large number of people in country X going to be able to afford surgery Y?

The pity of the ‘five star’ strategy then, it that it cheats hospital leaders looking to enter the Asian market of what could truly be a real GM-Asia strategy; a strategy that taps into the local buying power of an Asian region with a lighter, more efficient healthcare delivery network than the one originally designed in the United States/other Western country.

Imagine how powerful ‘best-practice’ American models of patient care could become when combined with Asian-health-context health models being created in an Asian health environment of ‘frugal innovation’ as described in this Economist article from four weeks ago.  People talk about tapping the potential of a multi-billion person market, healthcare is one of the rare industries in which this can actually be done.

To sum up then, Mr. Toral’s Asian car industry analogy is a great way to illustrate the current difference between the Asian health industry, ‘The Prius’. and the American healthcare behemoth, ‘the Hummer’.  But, Mr. Toral does not take the analogy to its natural, and useful conclusion – the Asian health market is a perfect testing ground for American healthcare leaders to come and build lighter and more innovative hospital systems.

Notes:

(What I mean by ‘high income patients in both the  global sense of the word, and the local sense of the Asian countries that hospitals like Bumrungrad are located in‘   is best illustrated by an example:

An American who may not be able to pay 140,000 dollars for a heart bypass in Boston but is able to pay 15,000 for one in Bangkok is still high-earning;  by global standards because that sum represents more than the yearly income of a very high percentage of the worlds population – world GDP per capita is 10,000 dollars; and, by local standards in Thailand where average GDP per capita is only 9,200 dollars.)