By Jim Doyle, who covers the business of health care for the Post-Dispatch. (On Twitter, follow the Business section @postdispatchbiz)  

Ascension Health Alliance executives say their joint venture to build a $2 billion “health city” in the Cayman Islands with an India-based hospital group will bring high-quality, low-cost medicine to the Caribbean and South America.

“We’re not considering this a medical tourism facility. That’s not the intent at all,” said Anthony Tersigni, president and chief executive of Edmundson-based Ascension Health Alliance, which runs the nation’s largest Catholic and nonprofit health system. “I’m not sure we’re going to have U.S. patients at the Caymans.”

But the system’s for-profit partner, Narayana Hrudayalaya Hospitals in India, has cast the project in sharply different terms. For years, Narayana’s founder, Dr. Devi Prasad Shetty, has promoted the idea of building an offshore medical centre to serve primarily American patients who cannot afford health care in the United States.

“Cayman Islands is an hour flight from the U.S., and we intend to offer cost-effective treatment for the citizens of the U.S. and also (those) who are under-insured,” Shetty said in Narayana news release in October.

Asked to explain the seeming disconnect, Tersigni issued a one-line written statement saying only that Shetty “shares our commitment to providing care to all, with special attention to those who are poor and vulnerable.”

Associate Professor Leigh Turner, a health care expert at the University of Minnesota, describes the joint venture as “an odd partnership.” The Cayman Islands – which enjoys a standard of living ranked 14th among world nations – seems a strange place to launch a health mission aimed at social justice and health-care access, Turner said.

“That seems like a place where you build a private, for-profit health center,” Turner said.

Another health care industry expert said the Grand Cayman hospital complex, which would be run for profit, is certain to draw U.S. patients. “I think the attraction of doing anything close to the mainland U.S. is that it’s the biggest healthcare market in the world,” with tens of millions of uninsured and underinsured patients, said Tarun Khanna, a professor at Harvard Business School who has studied and written about Shetty’s hospital system in India.

Khanna described Narayana’s flagship complex in Bangalore, which offers high-quality care at fraction of the price of U.S. hospitals, as “probably one of the best heart hospitals in the world. Their productivity is unparalleled.”

He also said that health insurance companies may welcome a lower-cost alternative offshore. “It’s good to have new blood in the system,” Khanna said.

STRETCHING THE MISSION

Ascension Health’s 2011 annual report describes its mission this way: “Rooted in the loving ministry of Jesus as healer, we commit ourselves to serving all persons with special attention to those who are poor and vulnerable.”

Tersigni said the Cayman complex fits right into the system’s mission.

“We’re going to continue to take care of poor people in this country, and to try to take care of poor people in the Caribbean and South America,” Tersigni said. “And we have to be creative in doing that.”

The Cayman project marks Ascension Health’s latest foray into for-profit ventures.

Tersigni, who was paid $3.4 million in 2010, according to tax records, formed a holding company in January called Ascension Health Alliance to foster such new directions, which include a venture capital fund, a medical engineering company, an investment management firm, and other businesses.

Alliance’s nonprofit subsidary, Ascension Health, operates about 80 U.S. hospitals with more than 17,000 patients, and reported nearly $20 billion in assets and about $16 billion in revenue in fiscal year 2011. Alliance has also created a for-profit joint venture with Oak Hill Capital Partners, a leading private equity firm, to purchase struggling Catholic hospitals.

Ascension Health has been working with Dr. Shetty for the past two years, maintaining the medical equipment at the India hospital group’s facilities, Tersigni said. The two partners began working on the Cayman project about six months ago.

“We’ve been impressed with Dr. Shetty in taking costs out of health care,” he said. “We see an opportunity to learn from him … This is an investment in a new model of health care that we hope to learn from, and bring back those learnings not only to this country but other countries.”

John Doyle, an executive vice president of Ascension Health Alliance, emphasized that “the people in the Cayman Islands will have tertiary care (highly specialized care) for the very first time … We believe we have been called to transform health care in this country.”

According to the CIA’s World Factbook, the Caymans enjoy low unemployment and a 98 percent literacy rate. “With no direct taxation, the islands are a thriving offshore financial center,” it states. “The Caymanians enjoy a standard of living roughly equal to that of Switzerland.”

At least one health care expert questioned Ascension Health’s stated goals.

“The idea of being open minded and looking at health care facilities around the world always seems like a good idea,” Turner said. “But you can do all of that without forming a corporate partnership. You don’t need to actually run a hospital together. This kind of fact finding takes place on a regular basis.”

He also questioned how well Ascension Health may be able to translate the India hospital chain’s practices into the U.S. healthcare environment, which has much higher salaries, more costly medications and more risk of malpractice suits.

The financing behind the “Cayman Health City” project remains unclear. Tersigni declined to specify the amount of Ascension’s investment or ownership stake, calling that information proprietary.

“MULTI-BILLION DOLLAR INDUSTRY”

The ultimate success of the project, Khanna and others said, could turn in part on U.S. health care reform and the willingness of health insurers to pay for medical treatment offshore.

Glenn Cohen, an assistant professor at Harvard Law School and an expert in medical tourism, called it “a multi-billion dollar industry” worldwide, luring Americans who pay as low as 20 percent of U.S. hospital costs for care in India and Thailand. But the demand for offshore care may wane if the president’s health reform law is fully implemented. If the U.S. Supreme Court strikes down the law as unconstitutional, he said, medical tourism would likely see a boost.

Putting aside the incongruities in their public statements, the partners appear to have endorsed a mass-market approach to health care — gambling that demand for these services will sustain a major medical center on a small island.

“There’s no shortage of Americans right now who would love access to non-expensive health care,” Turner said. But he added: “I’m suspicious of this idea that there is going to be thousands of people jumping onto airplanes to get treatment in the Caymans.”

A growing number of Americans travel abroad each year to obtain lower-cost medical procedures, said Renee-Marie Stephano, a West Palm Beach, Fla., lawyer who serves as president of the Medical Tourism Association. U.S. health insurers are increasingly paying for low-risk medical procedures offshore, she said, but they hesitate to pay for more complex operations such as spinal surgery, neurological procedures, and cancer treatments.

Smaller medical facilities that cater to Americans, Canadians and Europeans have been established in Cuba, offering treatments from plastic surgery to orthopedic work. Entrepreneurs are establishing a similar center in Barbados. But many Americans are still hesitant to seek treatment overseas.

“These are often people who are in desperate circumstances. They don’t have good options,” Harvard’s Cohen said. “The accreditation process in many foreign countries is often very good, but many patients still have a negative stereotype about physicians from the developing world.”

WAL-MART OF HOSPITALS

Narayana Hrudayalaya, a for-profit hospital chain, is based in Bangalore, India. The private group owns and operates about 14 hospitals in India with about 5,700 beds. Its major equity investors include JP Morgan and American International Group (AIG), the global insurer.

Shetty has promoted his health system’s cost-effective approach to patient care as the “WalMart-ization” of medicine – making quality health care more accessible and affordable.

Harvard’s Khanna said that Narayana’s main cost savings come from lower salaries. Shetty’s doctors also work longer hours and perform more surgeries than U.S. doctors. Narayana performs a high volume of procedures such as cardiac catheterizations, allowing the Indian hospital chain to charge less and negotiate better prices with medical suppliers. Narayana boasts mortality and infection rates for certain heart surgeries that are comparable to U.S. rates. Last year, the break-even cost of open heart surgery at Narayana hospitals dropped to $1,800.

In published interviews, Shetty — a pediatric heart surgeon — has indicated that the Cayman health facilities will be able to provide specialised surgeries and treatment for roughly half the cost of U.S. hospitals. He also plans to build a medical school, a biomedical research facility, and an assisted living facility for seniors on Grand Cayman.

The partners have indicated that the Cayman hospital will perform a variety of advanced surgical procedures, at deep cost reductions, and employ mainly physicians and nurses who do not have U.S. credentials.

According to Cayman press reports, government officials offered incentives and concessions to capture the “health city” in an effort to diversify the nation’s economy and create jobs. That included capping medical malpractice awards at $600,000; amending employment laws to allow India-trained doctors to practice there with no further training; and waiving duty waivers on imported medical equipment and fees on work permits.

Shetty also secured an “exclusivity commitment” not to grant the same “up-to 100-year concessions” to developers of any other “large-scale medical tourism facilities.”
Read more: http://www.stltoday.com/business/local/ascension-health-plans-billion-cayman-health-city-project/article_cbe07d56-8d91-11e1-85c9-001a4bcf6878.html#ixzz1tcRObYao