GEORGE TOWN, Cayman Islands (Reuters) - A renowned Indian heart surgeon has struck a deal to build a 2,000-bed healthcare city in the Cayman Islands to target American patients and insurers searching for deeply discounted medical care.
The British Caribbean territory agreed to the deal with Dr. Devi Shetty, a low-cost healthcare pioneer renowned as Mother Teresa’s heart surgeon. The Caymans fulfilled its part of the bargain last week by passing legislation that caps medical negligence claims at $600,000.
The tiny, affluent territory west of Jamaica has 55,000 residents and is under pressure from Britain to diversify its economy and move away from its tax haven image.
The healthcare city will cost about $2 billion and encompass a hospital, medical university and assisted-living facility and target American patients and insurance providers seeking deep cost reductions.
Construction is set to begin this year on the initial $100 million phase, with a 200 to 300-bed facility expected to be complete in about 18 months.
The project has attracted significant interest. Templeton emerging markets expert Mark Mobius, who oversees some $50 billion in assets, recently said the project could be very attractive to outside investors.
Shetty would not discuss specific investors, although JP Morgan Chase & Co, American International Group Inc and the chairwoman of Biocon Ltd, a large Indian biotechnology firm, already own more than 25 percent of the Shetty family’s Bangalore-based hospital group, Narayana Hrudayalaya Private Ltd.
Its 1,000-bed flagship hospital performs more than twice as many cardiac bypass surgeries and pediatric surgeries in a year than similarly sized U.S. hospitals.
Citing his high-volume, low-cost hospitals in India as his model, Shetty estimates the Cayman facility will draw 50 percent of its patients from the United States.
U.S. insurers and employers are under pressure to reduce costs for high-tech procedures for heart, cancer, orthopedics, nuclear medicine and organ transplants, Shetty said.
“It will be much easier for insurance companies to buy an air ticket and ask them to go to the Cayman Islands and get a heart bypass done and have a two-week beach holiday and come back at perhaps less than 50 percent of the cost,” he said.
The Cayman Islands are politically stable, English-speaking and close to Miami, which makes the modern large-scale facility an attractive medical tourist destination for Americans, Shetty said.
The Caymans’ incentive package for the new hospital includes duty waivers on $800 million of medical equipment, recognition of Indian medical credentials and a discount of up to 30 percent on work permit fees for the influx of foreign workers expected to staff the hospital.
The average cost for a heart bypass is $144,000 in the United States, five times higher than neighboring Mexico at $27,000. Costa Rica charges $25,000 and Colombia $14,800 for the same procedure, the Medical Tourist Association said.
Even with the higher cost of doing business in the Cayman Islands, Shetty estimates a heart bypass will cost less than $10,000.
Medical tourism is still considered a niche market. But an estimated 1.3 million Americans will seek medical care outside of the United States in 2011 with 35 percent annual growth, according to a Deloitte report.
President Barack Obama’s year-old healthcare overhaul faces significant challenges in court. But as it is implemented, millions of Americans will be brought into the insurance market in 2014, escalating costs well into the double digits, said industry expert Irving Stackpole.
“That will push medical tourism across the chasm from being a sector filled with early adopters to a mainstream solution for healthcare consumers,” Stackpole said.
As Americans travel abroad for medical care, competition will increase in Latin America and the Caribbean to get a piece of the lucrative market, said Dr. Steve Tomlinson, head of the private Chrissie Tomlinson Memorial hospital in the Caymans.
Last month, a 4-year-old Cayman girl was flown to Shetty’s hospital in Bangalore for successful surgery to repair two holes in her heart. Surgeons in Jamaica said the operation was too complex and the child’s medical insurance was insufficient to cover the $800,000 cost of the surgery the United States.
“We could do it virtually free. It is all because of volume,” Shetty said.
Editing by Jane Sutton; editing by Andre Grenon