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Business Model For Narayan Hriduyalaya
Business Model For Narayan Hriduyalaya
Led by Dr. Shetty, NH had a team of close to 100 world-class surgeons and cardiologists on staff who was motivated by a shared vision of serving the needy. They were all trained at the finest of world hospitals such as the Mayo Clinic, Harvard Medical School, and University of Massachusetts, Guys and other British hospitals, and hospitals in Australia Dr. Shetty also had a similar team in Kolkata, and in both Bangalore and Kolkata they had another level of administration that supported the top layer. NH was very conscious of the need for succession planning at its hospitals
The doctors were all dedicated to the mission of the hospital and were not responsible for bringing in patients. NH had built a strong rural network in both the southern, eastern and north-eastern parts of the country through its outreach and telemedicine facility that constantly fed NH with patients Dr. Shetty had built a tremendous reputation for himself and NH that also translated into patient arrivals from several countries. Also, NH had established linkages with small-time family physicians that also referred patients to NH. Doctors remuneration was competitive, and they had discretion to provide discounted treatment for the poor. Each doctor could also recommend a certain amount of discount based on their assessment of each patients needs and availability of funds for that day The doctors worked in ten to twelve hour shifts, while the staff rotated in three shifts to cover patients twenty-four hours per day, every day. The operation theaters opened at 6 a.m. and surgeries were performed even as late as 8 p.m.
STP Segmentation- NH segments the market according to the demography, income etc. Target- the target population for NH is the low income families which are not able to afford expensive hospitals for critical ailments like heart surgery etc.
NH is also targeting the NRI and other foreign nationals who looks for satisfactory medical surgeries at low prices. Positioning- NH has positioned itself as the medical institution which aims at providing quality critical medical surgeries at lowest prices, and even free to the segment of population which dies because of non affordability of fees of private hospitals in India.
4P Product- services including open heart surgery etc. Price- Much lowers comparable to other private hospitals Place-Southern part of India Promotion- word of mouth, consultancy by private doctors
The average price realization, after taking into account the flexible prices that NH charged for different patients, for heart surgery in a typical month was US$2,300 (please see Appendix D for distribution of price); the break-even cost was about US$1,800. NHs revenue stream was sourced from a mix of corporate (patients whose employers or insurance companies paid for the surgery) and individual customers. Sources of funds
In the financial year that ended in March 2005, the hospital turned in 20 percent profits before provisioning for interest, depreciation and taxes (EBIDT)24. When contrasted with the biggest corporate hospital in the country that made 16.33 percent EBIDT during the same year25, this is an impressive showing from NH, an organization that works with the motto that none should be turned away because they cant pay. The business model was underpinned by cost minimization.
6.1 Volume
A high volume of procedures is the basis of NHs cost reductions, mostly attained with a high level of capacity utilization and staff productivity. Larger volumes of open-heart surgeries and catheterization procedures everyday allowed the medical team to decrease the cost of each surgery. Facility use was increased through a shift system wherein the operation theatres worked longer hours. This enabled the hospital to provide more care to more patients. This was not the case in hospitals in countries such as the UK where elective surgeries were performed only during the day shift with the operating theater effectively utilized for only about six hours.
6.2 Procurement
High volumes of patients and procedures enabled NH to have stronger purchasing power for their medical supplies. An interesting aspect to its purchasing practice was to eliminate long-
term contracts and to bargain with suppliers every week. This also brought down their inventory carrying costs and reduced scope for opportunistic behavior by suppliers NH had brought down its prices by almost 35 percent since it started procurement. It did not purchase much medical equipment, opting instead to lease; NH paid only for the reagents needed for the equipment. The high volumes allowed the suppliers to make enough of a profit to enter into such partnerships. Distribution of spending for NH in a typical month
6.3 Innovation
NH also constantly works on technological innovations to bring down costs. In one instance, it brought down the cost of ECG (Electro Cardio Grams) machines from US$750 to less than $300. NH unbundled the software and hardware costs of the ECG machine and had its own software company write the software to read the data from the machine into a PC. NH gave this software for free to anyone that wanted to use it and didnt charge any licensing fee. In another instance, NH collaborated with Texas Instruments (TI) to develop a digital X-Ray plate based on a product that was going off-patent in 2004. The original product cost was a whopping US$82,000 and the product NH and TI developed on this expired patent was only US$300. NH did not plan to profit exclusively from this innovation as Dr. Shetty was quoted in a magazine article: We will give these to government hospitals. They save on film and wont need a radiologist.
6.4 Partnerships
Partnerships included the one with Texas Instruments for technology that will bring down cost of patient monitoring (under development), as well as a partnership with government for health insurance schemes (e.g. Yeshaswini explained later in the case). In partnership with Biocon Foundation and a private company called ICICI Lombard Ltd, NH launched an insurance scheme in 2004 to cater to low-income patients. The scheme was known as Arogya Raksha, and it required individuals to pay Rs 15 (approximately US$3) per month, and the individual was
insured for 1,650 types of surgeries. Their caregivers were the rural hospitals run by both the government and other charitable organizations where they got three days of inpatient care for free and paid half the price for outpatient services.
With these, NH organized outreach camps for cardiac diagnosis and care. Each bus carried the necessary equipment including ECG machines, defibrillators, echocardiography equipment and other essential cardiac care equipment. The vans also carried a generator to counter the problem of infrequent power supply. One experienced cardiologist and two technicians capable of performing echocardiograms ride in each mobile health van. The screenings are done at no cost to the patient. Local charitable associations, such as religious missionaries and Rotary Clubs, help organize such medical visits to distant places at regular. They provided publicity and volunteers for helping with patient counseling. Any patient needing further treatment was then advised to go to the main hospital, NH, where necessary surgical procedures were often provided at cost or with help from the charity trust of NH.
7.3 Telemedicine
As soon as NH was created, Dr. Shetty reached out to state governments and the central Indian Satellite Research Organization (ISRO) to use modern telecommunication technology to increase the access of cardiac health care to the poor in rural areas. The project had two hubs: one in Bangalore (at NH), and the other was in Kolkata, located at AHFs Rabindranath Tagore International Institute of Cardiac Sciences (RTIICS). Cardiologists at these two institutions use satellite technology, ISDN lines and broadband internet to read patient reports, interact with patients in a video conferencing mode and offer free consultations.
NH operated telemedicine mainly through three different networks (see Figure 3). The first was the Coronary Care Unit Network. This network consisted of hospitals or CCUs in semi-urban and rural areas; these were both government and charity-run hospitals where NH trained and placed doctors and staff to provide cardiac care and treat cardiac emergencies. NH also equipped each CCU with beds, ECG machines, defibrillators, ECHO machines and video conferencing equipment for telemedicine. In the second instance, the state government in Karnataka supported the idea and opened up its hospitals in its entire 37 district headquarter towns so that NH could train local doctors in cardiac screening. In this tele-consultation network, patients reported to participating remote hospitals with cardiac symptoms. Local doctors completed the initial screenings. In the third instance, NH established a Family Physicians Network of TTECGs (Electro Cardio Grams that were transmitted online). In this network, private independent general practitioners got an ECG device and free software from NH that ran on a standard PC. The general practitioner (GP) paid a nominal fee for the device. Patients ECGs were transmitted via the internet to NH from the doctors offices and within ten minutes, a cardiologist report was provided to the GP.