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Can specialization across the globe lower costs – what are the lessons?

Can specialization across the globe lower costs – what are the lessons? February 25, 2016

Marketing, research and business development consultant in healthcare, human services and senior living.

global specialization

Global Specialization and Lower Costs

A recent Health Affairs blog suggested that the many lessons from India, China and Mexico could provide opportunities in the west to lower costs and improve quality.

The high volume, low cost input locations cited in the blog have opportunities that highly developed systems do not – they’re starting with no legacy systems, no entrenched hierarchy and low consumer expectations. The costs in India, China and Mexico really are lower – a lot lower! Labor, which represents the lion’s share of healthcare service delivery, is far less expensive in Bangalore than in Boston. And the component infrastructure costs in London are far higher than in Guadalajara.

Grafting Low Cost Methods to High Cost Systems global specialization

So perhaps we can take the lower cost, high quality methods out of  India, China and Mexico and “graft” them to the higher cost locations such as US, and the UK.  There are a few wrinkles with this, as the few instances of these attempts demonstrate. Rather than being harmonious isografts as though from the same species they’ve proven to be difficult and unsuccessful xenografts (from different species altogether!)

In developed healthcare systems, especially the US and the UK, the entrenched systems buoy the comparatively high costs. In fact, the actual costs are devilishly difficult to derive. Models and methods exist, but there seems to be little interest in deploying them. Kaplan and Porter describe one method quite clearly, but in reality very few are applying the simple but rigorous cost accounting and allocation methods.

What should we assume? Will we continue to rattle toward 20%+  healthcare GDP?

Marketing, research and business development consultant in healthcare, human services and senior living.

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