The Aravind Eye Hospital, Madurai,

India: In Service for sight.

Case Facts

Aravind Eye Hospital started as a 20-bed hospital, Aravind had grown into a
1,400-bed hospital complex by 1992. It had by then screened 3.65 million
patients and performed 335,000 cataract surgeries, nearly 70% of them free of
cost for the poorest of India's blind population. Aravind's founder, Dr.
Venkataswamy, now 74 years old, had a goal to spread the Aravind model to
every nook and corner of India, Asia, and Africa.

Philosophy of Dr. Venkatswamy

The main mission of Dr. Venkatswamy is to eradicate needless blindness by

providing appropriate, compassionate and quality eye care for all. His long-
cherished dream is the creation of a private non profit eye hospital that would
provide quality eye care. He believes that all of us through dedication in our
professional lives can serve humanity and god and that achieving a sense of
spirituality or higher consciousness is a slow, gradual process. Every morning in
the meditation room at the hospital, he prays to god to become a better tool, a
receptacle for the divine force. His root belief that motivtes him to do all the
work that he does is that ‘You don’t have to be a religious person to serve god.
You can serve god by serving humanity.’ Not just quantitatively, he aspires to
serve people in the best way possible. He wants his staff and doctors to treat
the work as a spiritual exercise and that they need dedication and devotion to
achieve this level of service delivery.
 Operating Expenses
Particulars
Medicine and Cotton
Hospital Linen
Library and Subscription
Building Maintainance
Electricity Charges
Installation and Equipment
Maintainance
Electric Items and Bulbs
Printing andd Statioanry
Postage and Telecom Charges
Bulding Rent
Cleaning and Sanitation
Stipends and Staff Salaries
Employers PF contribution
Bank Commision
Travelling Expenses
Miscellenous expenses
Photography
Resident Doctors Hostel Expenses
Camp Expenses
Vehicle Maintainance
IOL
Cost of Capital
Total Expenditure
1991-1992 1992-1993
1307968 1438764.8
148848.3 163733.13
66519.4 73171.34
1117550.04 1229305.04
1667964.01 1834760.41
774129.46 851542.406
196195.55 215815.105
564841.48 621325.628
447750.3 492525.33
7980 8778
356515.7 392167.27
4285017.7 5356272.13
190208.5 209229.35
9748.08 10722.888
758876.91 834764.601
236508.18 260158.998
181316.9 199448.59
54338.1 59771.91
1347457.9 1482203.69
459361.43 505297.573
2926520 2926520
2880000
17105615.9 22046278.2

The above cost statement is for the year 1992-1993 which indicates a 10%
increase in the expenses taking into consideration the increasing number of
patients leading to an increased demand for medicine, and cotton and the
expenses on other factors. The current cost of IOLs is Rs. 300 which can
probably be further brought down to Rs. 100 which is why it has been left
unchanged. Further the expenses also include an 8% provision for the cost of
capital.The salaries and stipends have been further increased by 25% in order
to sustain the employees. Cumulatively, there is an 28.8 % increase in the
overall cost for the year 1992-1993.

Revenue
1991 -
Particulars 1992 1992-1993
Medical Services 3380985 3719083.5
Operation Charges 23235389 25558927.9
Treatment Charges 2225609.3 2448170.175
Cosulting Fees 3424728.4 3767201.185
Laboratory Charges 857265.49 942992.039
X-Ray Charges 206890 227579
Donations 771474.8 810048.54
Interest 1062889.5 1137291.765
Miscellanous Course and
Others 129666.65 129666.65
Sale of Opthamalogy Books 33835 33835
IOL 6000000
Total Revenue 35328733 44774795.75
The above revenue statement is for the year 1992-93. It indicates a 10%
increase in the income from medical services, operating and treatment
charges, consulting fees, laboratory and X-Ray charges. The amount of
donations have been increased by 5% expecting new donations. A nominal 7 %
Interest rate is expected. To increase revenue further, it is suggested to sell the
surplus IOL manufactured. The selling price should be Rs.400 for the additional
15,000 IOLs that are in surplus after utilizing 15000 defect free IOLs for the
new patients, which will generate a revenue of 6000000. This will lead to a
total revenue of 44774795.75, generating a surplus of 22728517.57 at the end of the
year.

Franchising Model – Yes or No?

There are many pros and cons of franchising. In the case of Aravind Eye Hospital, I
believe it should adopt a franchising model for the new branch at Coimbatore. The
reasons for it being are lower capital cost and better operations as a franchisee also
acts as a controlled outsourced function. Aravind eye hospital lacks optimum logistics
in the free treatment department because of which there is a lot of waiting and
mismanagement of crowd in the hospital. When it gets outsourced a specialized
department can look after it in order to ensure smooth flow of crowd.