Having a Nobel gas

Mike Milken shared a laugh while interviewing three Nobel Laureates in economics yesterday. Myron Scholes gave a plug for Skype in the context of telecom costs going to zero. (IMHO, voice communications will become just another application, marginally priced like email, that runs over a data network. The marginal cost to the consumer should be significantly less than the trillion dollar telecom market of today).

I was also interested in the statistics they provided on the booming medical tourism market in India. Summary: a heart valve transplant that would cost $200K in the U.S. can be obtained for $10K in India, and that price includes round trip airfare, a 2 week vacation visit to the Taj Mahal. In certain categories, the quality of care is much better than what can be obtained in U.S. hospitals. The heart bypass (CABG) death rate is 0.8% in India and 2.3% in the U.S.

This reminded me of an analysis I did back at Bain. I looked at the huge variation in CABG death rates across U.S. hospitals as a function of the cumulative number of CABG procedures performed at each hospital. As one might expect, the patient survival rate followed a perfect “experience curve” which has been seen in thousands of industries involving human activity and learning. One should expect that a heart surgeon’s success rate grows with the number of procedures they have done (same for the post-operative care team).

So hearing the Indian statistics, I would suggest that the experience curve is at work. The average Indian surgeon performs many more procedures per day than their U.S. counterpart.

In a separate panel, Bill Haseltine argued that the U.S. should learn from the Indian private-sector model of healthcare delivery. A U.S. surgeon may do 2-3 eye surgeries per day. Their Indian counterpart at an Aravind Center would perform 50 surgeries in a morning. The surgeon has a bed on each side. While they are performing a surgery at one bed, the next patient is being prepped behind them, and they rotate in place to get to their next patient. Aravind has “reengineered” the system for high volume, high quality service. And the doctors have a wonderful spirit; 70% of their patients are too poor to pay, yet the overall operation is profitable.

(panelists in this photo: Edward Prescott, Gary Becker, Michael Milken, Myron Scholes Here’s a conference summary of the panel.)