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A villager undergoes an eye examination at an Aravind-organized clinic in rural India. (REINHARD KRAUSE/Reuters)
A villager undergoes an eye examination at an Aravind-organized clinic in rural India. (REINHARD KRAUSE/Reuters)

Peter Singer

Look at the developing world to cut health costs Add to ...

As we approach the end of the federal-provincial health accord - a 10-year agreement that went into effect in 2004 and that provides a 6-per-cent increase in health transfer payments each year from the federal to provincial governments - the affordability crisis in Canadian health care will become increasingly clear, since the provinces will no longer receive automatic annual increases in funding. In 2010, Canada spent $192-billion on health care, consuming as much as 40 per cent of provincial spending and crowding out other key functions, such as education.

The crisis is not purely one of affordability (not having enough money), but rather of value (getting the most for the money we spend). "The failure to prioritize value improvement in health-care delivery and to measure value has slowed innovation," Harvard Business School professor Michael Porter writes. Systematically identifying and testing innovations that could dramatically improve value - reduce costs while delivering the same or better health outcomes - should be a major strategy for Canada.

Public figures such as former B.C. finance minister Carole Taylor and Globe columnist Jeffrey Simpson have questioned the wisdom of our current approach - deny that there's a problem, obfuscate the possible solutions and hope in vain for better days ahead - with calls for an "adult conversation" on health care. A TD Bank report on slowing the growth of health-care costs in Ontario made sensible recommendations to promote healthier lifestyles, expand information technology use, alter the way doctors and hospitals are paid, and reallocate functions among health-care providers, among others. The challenge, however, is implementation.

Also needed are innovations that radically improve value. Some of these game-changing ideas will come from an unlikely source - the developing world, which, because it doesn't have the resources, is forced to innovate on value. Translating innovations created for the developing world to the industrialized world has been dubbed "reverse innovation" by General Electric CEO Jeff Immelt. Princeton economist Uwe Reinhardt and former British National Health Service CEO Nigel Crisp have also pointed out that learning from the developing world can decrease health costs in the developed world.

Exhibit A: the Aravind Eye Hospital in India. During the past 20 years, Aravind has performed more than three million cataract surgeries. It has a staff of 3,000, with 200 eye surgeons each performing 2,500 procedures a year. Aravind developed a much less expensive ocular lens used for the procedure, and surgeons are able to go from patient to patient much more quickly because those patients have been prepared for surgery by other team members.

At a total of 300,000 cataracts a year, Aravind does about as many cataract surgeries as are done in all of Canada at a cost of $80 each. Although there's been no direct comparison with Canada, in a comparison with Britain, Aravind's costs were 1 per cent of the total British costs for cataract surgery, and its clinical outcomes were comparable or better.

Other examples of game-changing innovations from India: a psoriasis treatment (price reduction from $20,000 to $100), the Jaipur prosthetic foot (from $12,000 to $28), and hepatitis vaccine (from $20 to less than $1).

These dramatic reductions in cost will not directly translate to Canada, where we have higher labour costs and patient demands that rightfully require excellent quality care. But any cost deflation through innovation would be an enormous accomplishment set against a seemingly inexorable 6-per-cent a year increase. Promoting innovation to improve value - maintaining equal or better outcomes while decreasing costs - should be a key focus of renewal of the health accord.

Peter A. Singer is director of the McLaughlin-Rotman Centre for Global Health at University Health Network and University of Toronto.

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