Heart Surgery in India for $1,583 Costs $106,385 in U.S.

Do you mind if I ask where you went for such a cheap arthroscopy? I'm possibly in the market for this procedure myself, trying to weigh all the options.

Bloomberg is comparing apples and oranges, to the point of caricaturization. They are also link baiting with false statements.

First, the link bait: "The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services." Funny thing is they actually cite their data source, so I downloaded the Excel sheet and looked for myself. The $106,385 is the "Average Covered Charges" for "238 - MAJOR CARDIOVASC PROCEDURES W/O MCC" at Cleveland Clinic. If you read the definition of "Average Covered Charges", it is not the cost of the procedure. The cost, aka "Average Total Payments" was actually $26,898. That's what medicare pays, including co-pays, deductibles.

I spent a few minutes browsing http://my.clevelandclinic.org/ - the Ohio Cleveland Clinic has over 3,000 physicians and scientists, 1,700 residents and fellows in training, with 47 buildings on 167 acres. They helped develop coronary bypass surgery in 1967.

Shetty (the "Henry Ford of heart surgery") is standing on the shoulders of giants, and as well he should. The Cleveland Clinic and Narayana Hrudayalaya coexist symbiotically, and I'm happy we have both in the world. Coronary bypass surgery has to be invented first at Cleveland Clinic before Shetty can put it on the assembly line.

If you have the time, read the Cleveland Clinic's 2012 Annual Report (http://viewer.zmags.com/publication/71bd62a6#/71bd62a6/1) and you can see what they think they are doing differently to provide the best service, continue driving innovative research, support their local community, and reduce costs. Take a minute to appreciate the breadth of research that goes on in their facilities, in areas including high-performance computing, robotics, 3D printing...

Cleveland Clinic had $228m in Operating Income on $6.2b in Revenue in 2012. Their $6b in expenses are dominated by $3.5 billion in "salaries, wages, and benefits" which unfortunately is not broken down much further that I could find in the report. "Functionally" their expenses are $4.7b healthcare services, $450m on education and research, and $663m on G&A. I was disappointed to see their education and research expenses are less than their G&A, but it's hard to draw conclusions from such high-level data. It was interesting to note they have $1.6b of accumulated pension benefits, which are 68% funded.

Unfortunately there doesn't appear to be anything resembling a financial statement on http://www.narayanahospitals.com/.

Here is what makes up the difference. In America, law mandates that hospitals treat anyone regardless of income, insurance possession or immigration status. Go to the hospital in India as an illegal alien and not only will you not get treatment, you will be jailed, then deported. Covering illegals and the uninsured is a HUGE cost that health care systems have to bear. Of course there are other things in America which drive up health costs, but treating illegals and chronically ill patients who have no insurance is the biggest. There are other major factors as well, but these laws alone bridge the gap in your calculations.

Anecdata is the term I've heard for this situation.

Let me fill in the gaps for you.

First off, this article is comparing the cheapest clinic in India, with the most expensive and most revered Heart center (Cleveland Clinic) in the world. NH is basically like getting your heart surgery done at a non air conditioned WalMart. There are no patient rooms. There is a patient room. A giant room with beds lined up civil war style. The food is akin to gruel, ETC... Of course there is going to be a significant cost difference. This is like comparing staying at a Hostile and getting dinner in the soup line with Staying a night at the Hilton and ordering a New York steak dinner for room service, of course there is going to be a significant cost difference. Leave it to a reporter to compare the cheapest abroad to the most expensive here (a bit of stretching to make the store line a bit more catchy).

Second, the reported cost is false. "NH maintains its costs low, savings that are then transferred to the patient. NH's cost of open heart surgery is USD $2,000. The hospital charges $2,400 to the patient, compared to $5,500 charged at an average private hospital in India." http://healthmarketinnovations.org/program/narayana-hrudayal...

Third, the per capita income in India is $1,000 nominal dollars, in the U.S., it's $50,000.

So the average adjusted open heart surgery in India is actually $275,000 when converting to USD and comparing using the average per capita income. (Narayana Hrudayalaya's "discounted hospitals" only charge $120,000)

I know that the average income does not fairly reflect the true cost differential because India has a disproportionately large population of people living in abject poverty. It does make the cost difference margin quite a bit less though.

If you are wondering just how places in countries like this can operate more cheaply though? I will tell you. US laws. In America the law states that hospitals have to care for anyone even non citizens. It also puts stringent regulations on hospitals. Regulations that do not exist in India. These Regulations are very expensive to comply with.

Narayana Hrudayalaya's establishments are not hospitals, they are not for emergency care. They do not treat non-paying clientele. In America, our medical costs balloon out of control for many reasons, one of the larger ones being the care of non-paying patients. Emergency rooms and therefore hospitals cannot turn away patients for any reason. They must admit illegals and uninsured (even for long term care). They cannot recoup money from these individuals so the paying customers get to flip the bill so the hospital can remain in business.

Just try going to an emergency room in India as an illegal alien. You will be promptly jailed and deported. Try going without insurance or means of payment... Good luck with that (same MO as all these countries where these "cheap procedures" can be had)

There are some countries where these procedures are still cheaper than in the US and they cannot legally turn away illegals and uninsured. They have a slightly different formula. The government flips the bill (subsidizes the hospitals) thus allowing them to compete cheaply (which keeps the costs low).