John Hoffmire: Fighting increasing health care costs with reverse innovation

Published: Monday, Dec. 9 2013 8:55 a.m. MST

A last example is an approach to surgery used by Devi Shetty, India’s most celebrated heart surgeon, which draws on mass production principles pioneered by Henry Ford. Shetty has financed and built hospitals with 1,000 beds, compared to only 160 at the average American heart hospital, focused solely on heart surgery. This specialization and concentration of surgeons provides ample opportunity for new doctors to learn, develop, and be tutored. These facilities are able to provide world-class expertise, as well as avoid several challenges of administration stemming from providing large numbers of services. Because of these factors, Dr. Shetty is able to charge an average of $2,000 for open-heart surgery, compared to $20,000-$100,000 in the U.S.

The most impressive aspect of reverse innovation is that the results are comparable to more expensive products’ performance in developed nations, and sometimes better. This applies not only to surgery as with Shetty, but to diagnostics and fraud protection.

As it stands, reverse innovation is an emerging field that could change the way business is done worldwide. Similar to any new idea or innovation, it faces the challenge of early failures, which discourage future investment. Also, the flow of innovations from developing nations to developed ones is underdeveloped at best. However, reverse innovation provides exciting opportunities that hold great promise and potential for businesses to help the common good through lower-cost, high-quality products, especially in the field of health care.

John Hoffmire teaches at SaÏd Business School at the University of Oxford.

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