This document is authorized for use only in vamnicom's PG; Strategic Management course by Dr.

Manisha Paliwal from Jun 25, 2019 to Sep 12, 2019.

Indian Institute of Management

Ahmedabad IIMA/CMHS0015

Revised 2012

MP Trust Hospital
“Our hospital is an internationally reputed centre for kidney care. Of late, our
business is facing competition from many urologists and nephrologists, who
are opening their clinics nearby and offer the same services at much lower
charges, since they do not have the overheads of an Institution like ours. Our
lab facilities are excellent and we can extend them to patients from general
practitioners, but what exists in the market in terms of remunerating the
general practitioners cannot be done by a hospital like ours. Our operating
profit is showing a decline since a few years. How can we attract more
business to our hospital and manage our hospital resources more efficiently
and effectively?
General Manager - Administration, MP Trust Hospital

MP TRUST HOSPITAL

The MP Trust Hospital (MPTH) was set up in 1978 to provide special care for kidney-related
ailments. The hospital performed its first kidney transplant operation in 1980. The MP Trust
Society for Research in Nephro-Urology was formed in 1984, while the Diploma Programme
in Nephrology and Urology was started in 1993. MPTH was one of its kind in Asia-the first
hospital in India devoted entirely to Nephrology and Urology. MPTH was awarded the ISO-
9001: 2008 certificate for quality management system. An organizational chart of MPTH is
given in Exhibit 1.

By the year 2000, MPTH had performed more than 800 kidney transplant operations. The
hospital had also treated 8,000 kidney stone cases, 4,000 cases of trans-urethral resection of
prostate, and conducted 40,000 dialysis procedures.

Medical Services

The Outpatient Department (OPD) provided facilities to examine six patients at a time with an
Emergency Cubicle equipped to examine and treat critically ill patients. Personal consultations
were arranged with consultant Urologists and Nephrologists by prior appointment. The OPD
department completed all the procedures of consultation, investigation, and diagnosis the
same day.

For inpatient care, the hospital had a centrally air-conditioned facility with a capacity of 140
beds. The hospital offered five types of accommodations; general ward, semi-special room,
special rooms, special rooms with kitchen, and deluxe rooms. More than 60 per cent of the
inpatients were discharged within a week. The Dialysis department handled about 30 dialysis
procedures every day and was the busiest department in the hospital. These medical services
were well supported by the hospital’s well equipped clinical laboratory and radiology
departments. Exhibit 2 gives the load on medical services for a few years.

Prepared by Professor K V Ramani, Indian Institute of Management, Ahmedabad .

Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for class discussion.
They are not designed to present illustrations of either correct or incorrect handling of administrative
problems.
© 1998 by the Indian Institute of Management, Ahmedabad
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Support Services

The general manager was in charge of all support services and coordinated all the activities in
the hospital.

The Administrative section provided support services under the following departments. The
stores department supplied medical, surgical, and general items to the user departments. The
purchase department looked after purchases for the general stores; the hospital pharmacy took
care of the medical requirements of the patients, while the canteen department looked after
the dietary requirements of the patients. The Personnel, Accounts, and Maintenance
departments managed the staffing, financial, and maintenance requirements for running the
hospital.

The stores department was responsible for the supply of all items (medical, surgical, and
general) to the various user departments in the hospital such as Operation Theater (OT), new
Intensive Care Unit (ICU), old ICU, dialysis, transplant ward, etc. Each of these user
departments sent a monthly indent to the stores. Upon checking the stock status, the stores-in-
charge prepared a consolidated statement of requirements for each item (medical, surgical,
general, etc) and sent this statement to the purchase department. The stores department dealt
with almost 1,200 items, out of which 300-350 were stocked items and the remaining 800-850
items passed through the stores directly to the user indenting departments.

At the beginning of every financial year, purchase department requested vendors to submit
quotations to meet its annual requirements. Those with the lowest quotations were selected.
The purchase department maintained a 90-day credit period with its suppliers. There were
about 200 suppliers supplying items to MPTH in any given year. Every month, the
department prepared consolidated purchase orders for outside and local purchases, and
initiated the purchase procedures.

The hospital started its Pharmacy department in July 1993. The Pharmacy was responsible for
supply of medicines to the patients (from the hospital and outside) and not to any department
in the hospital. A computer-based information system supported the pharmacy staff in
monitoring and planning the purchase and sales of medicines.

Management Concerns
Majority of the beds were in the general ward and hence the management could not increase
charges for patient care. Any amount of additional facilities introduced in the special rooms
did not increase the occupancy in the special room category.

Over a period of time, an increasing number of Urologists and Nephrologists started

practicing in nearby places offering their services at lower rates. They could do so since their
overhead expenses were very little, unlike MPTH. The diagnostic facilities in the hospital like
the laboratory and X-ray department were not used to the maximum. To increase the capacity
utilization of these departments, the hospital could accept patients from outside, but even the
inflow of such patients from outside was not much. This was because MPTH did not follow
the unethical practice of remunerating the general physicians for recommending their patients
to the hospital.

The hospital had been investing extensively to keep up with the developments in medical
technology. On an average, per year, the hospital incurred capital expenditure of over rupees
one crore. This amount had to come in the form of donations. The institution had an
exemption certificate, making donations 100 per cent free from Income Tax.
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Exhibit 3 gives the activity report. Monthly purchases for the hospital varied between rupees
six to seven lakhs as can be seen in Exhibit 4. The hospital expenses towards inputs like
personnel, consumables, and power kept increasing year after year, but charges for patient
care remained the same.. Exhibit 5 provides the financial details at a glance, while Exhibit 6
and Exhibit 7 give the income and expense statements respectively.
The hospital management was faced with the challenge of improving the hospital’s business
performance.
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EXHIBIT 1
MPTH Organizational Chart

MP Trust

HOD. HOD.
Nephrology Urology

Physicians Chief Pathologist Gen. Manager Chief Radiologist Surgeons

Bio-Chemist Administration Anaesthetist

Personnel Accounts Maintenance MSW. Matron Pharmacist Internal Purchase

Officer Officer Officer Auditor Officer

House Keeping Stores Statistician Dietician

Supervisor In-Charge
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EXHIBIT 2
MPTH Medical Service Activities
Year OPD Patients Inpatients No of No of No of No of No of
Dialysis Surgery Lab tests X rays Sonography
patients
Nephro Uro Nephro Uro
1990 7,976 7,901 718 1,184 331 2,433 1,52,220 9,986 6,303
1991 7,867 8,136 802 1,207 427 2,562 1,57,175 10,896 6,956
1992 8,009 8,640 846 1,167 440 2,596 1,63,470 12,013 7,348
1993 8,395 9,038 861 1,285 533 2,636 1,71,721 11,316 7,056
1994 8,832 9,434 1,010 1,340 524 2,748 2,01,774 13,771 7,386
1995 8,696 11,284 1,650 2,448 1,317 3,006 2,15,569 16,007 8,247
1996 8,977 11,171 1,701 2,403 1,882 3,447 2,22,984 22,784 7,716
:

EXHIBIT 3
MPTH Activity Report: 1997-98
` in lacs
Sr. Name of Activity Avg/Mth Avg/Mth Avg/Mth Avg/Mth Total %
No. 1994-95 1995-96 1996-97 1997-98 97-98 Varia-
(Apr-Nov) (Apr- tion
Nov)
1 OPD Nephro (New Cases) 158 161 166 163 1,300 -3.92
2 OPD Nephro (Follow up) 576 585 620 662 5,299 8.63
3 OPD Uro (New Cases) 262 318 288 294 2,349 -7.07
4 OPD Uro (Follow up) 522 650 688 609 4,871 -11.81
5 OPD Anr (New Cases) - - 17 16 127 -23.72
6 OPD Anr (Follow up) - - 30 35 277 -2.04
7 Adm. Nephro (New Cases) 84 80 83 73 581 -12.03
8 Adm Nephro (Follow up) 52 58 60 54 432 -11.65
9 Adm Uro (New Cases) 112 137 128 110 876 -12.83
10 Adm Uro (Follow up) 62 77 76 73 582 -4.59
11 Adm Anr (New Cases) - - 0 2 18 -
12 Adm Anr (Follow up) - - 0 1 6 -
13 X-rays 1,123 1,875 1,943 1,811 14,486 -6.63
14 Laboratory Tests 16,814 18,196 19,740 18,633 1,49,065 -3.08
15 Ultrasonography 618 667 571 611 4,891 3.91
.
.
.
22. Occupancy:
(a)General Ward (N+U)76 102 106 104 58 461 -44.46
i.General Ward (N)- 28 - - - 67 67 -
ii.General Ward (U)- 48 - - - 41 41 -
(b)Semi-special Rooms14 51 65 47 14 108 -71.17
(c)Sp. & Delux Rooms11 49 52 49 49 391 -0.42
i.Special rooms- 06 - - - 60 478 -
ii.Delux Rooms 3,4&5- 03 - - - 21 169 -
iii.Super Dx rooms 1&2 - 02 - - - 58 467 -
(d)Transplant Ward12 - - - 33 33 -
(e)New I.C.U.06 - - - 95 95 -
(f)Post-op. Ward08 - - - 54 54 -
Overall Occupancy127 - - - 36 36 -
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EXHIBIT 4
MPTH Stores and Purchase Departments
` in lacs
Category 1990- 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97
91
A. Medical Items
Opening Balance 0.91 2.36 1.31 1.88 0.48 3.80 0.70
Purchase 4.32 4.44 6.71 6.42 5.57 7.09 7.78
Consumption 2.87 5.42 6.14 7.82 2.25 10.19 7.60
B. Surgical Items
Opening Balance 5.16 6.12 12.82 10.23 11.82 8.46 13.78
Purchase 14.06 20.34 22.35 27.94 29.82 44.93 38.49
Consumption 13.09 13.65 24.95 26.35 33.18 39.61 33.30
C. General Items
Opening Balance 0.08 0.03 0.13 0.61 0.05 0.15 0.12
Purchase 0.52 0.51 0.57 0.19 0.99 1.82 1.81
Consumption 0.57 0.41 0.48 0.75 0.90 1.84 1.80
D. Other Items
Dialysis 6.11 8.00 6.32 6.54 9.56 7.67 13.16
Anaesthetic 1.04 1.93 1.10 0.71 1.01 0.70 0.45
Laboratory 3.70 5.03 10.80 9.72 10.74 12.71 24.74
X-Ray 3.49 3.79 6.30 6.44 4.73 5.99 3.63
Blood Transfusion 0.61 0.89 0.74 0.05 0.01 0.01 0.04
A/C: Elect. 7.30 9.68 10.10 11.94 13.48 13.56 14.76
A/C: Plant Maint. 1.18 1.14 1.61 2.18 1.21 2.00 3.16
Oxygen 0.71 0.71 1.46 1.60 2.02 2.34 3.13
E. (A + B + C + D) 40.68 50.75 70.02 74.11 79.10 96.62 105.76

EXHIBIT 5
MPTH Financial Details
` in lacs
Sl. Particulars 90-91 91-92 92-93 93-94 94-95 95-96 96-97
No
1 Opening Balance 49.90 36.89 50.99 27.29 69.16 137.65 106.68
2 Revenue Income 189.35 282.94 305.06 335.84 366.07 457.47 473.32
3 Donations 91.91 75.41 3.69 93.36 60.48 38.03 75.53
4 Income from other sources 0.48 1.70 0.42 2.36 3.14 4.01 1.90
5 Interest Received - Bank 0.01 0.40 0.36 0.35 0.90 1.25 0.49
Interest Received - Corpus - - - 2.81 18.28 24.22 36.71
6 Loans Availed from Financial - 6.75 20.98 26.57 23.56 24.33 25.00
Institutions
Total 331.65 404.09 381.50 488.58 541.59 686.96 719.63
7 Revenue Expenses 175.05 264.58 295.60 316.50 327.92 411.92 446.16
(Inclusive of Interest)
8 Capital Expenses 31.17 24.52 29.16 75.32 43.71 123.37 62.69
9 Loans repaid to Financial 88.54 64.00 29.45 27.60 32.31 44.99 29.00
Institutions
Total (2) 294.76 353.10 354.21 419.42 403.94 580.28 537.85
10 Closing Balance (1) - (2) 36.89 50.99 27.29 69.16 137.65 106.68 181.78

EXHIBIT 6
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MPTH Income Statement: 1997-98
` in lacs
Sl. No. Fees Avg./ Avg./ Avg./ Avg./Mth Total 1997- %
Mth Mth Mth 1997-98 98 (Apr- Variation
94-95 95-96 96-97 (Apr-Nov) Nov)
1.
Consulting 0.49 0.52 0.54 0.73 5.87 35.67
2.
X-ray 1.47 1.81 2.33 2.92 23.33 24.98
3.
Laboratory 5.28 5.67 7.06 7.74 61.88 9.54
4.
Stay 2.29 2.62 3.02 3.57 28.52 17.88
5.
Operation 7.55 8.92 9.48 8.79 70.31 -7.32
6.
Kidney Transplant 3.77 2.39 2.65 2.79 22.30 5.35
7.
Theatre (Other Charges) 3.06 3.41 4.94 4.61 36.86 -6.67
8.
Anaesthetic 0.44 0.48 0.57 0.76 6.09 33.16
9.
Dialysis 2.11 2.80 3.99 4.36 34.87 9.11
10.
E.C.G. 0.13 0.13 0.16 0.16 1.30 -0.51
11.
Urodynamic 0.34 0.45 0.70 0.71 5.65 1.50
12.
Misc. 1.02 1.07 0.99 0.89 7.13 -9.59
13.
Sp. Consultation 0.09 0.11 0.14 0.13 1.06 -5.92
14.
Stone Clinic 2.47 3.56 2.85 2.34 18.71 -17.76
15.
Kidney Care Clinic - - 0.00 0.00 0.00 -100.00
16.
Andrology Fees - - 0.02 0.01 0.09 -28.95
17.
Surcharge 0.00 4.19 0.00 0.00 0.00 -
Total Income 30.50 38.12 39.45 40.50 323.97 2.67
Freeship 1.08 1.56 2.20 1.83 14.65 -16.70
Net Income 29.42 36.56 37.25 38.67 309.32 3.81
Total Expense 26.24 32.84 34.98 38.11 304.91 8.95
Surplus/Deficit 3.18 3.72 2.26 0.55 4.41 -75.65
Other Income:
1. Rent 0.01 0.01 0.01 0.00 0.03 -43.75
2. Interest (Bank) 0.08 0.03 0.04 0.03 0.21 -35.71
3. Interest (Corpus) 1.52 2.21 3.06 3.08 24.65 0.72
4. Insurance Claims 0.15 0.29 0.48 0.00 0.00 -100.00
5. Patient Bill Recov. 0.02 0.02 0.01 0.02 0.18 68.75
6. Disposal of Scraps 0.07 0.03 0.07 0.05 0.36 -39.33
Total Other Income 1.86 2.59 3.68 3.18 25.43 -13.50
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EXHIBIT 7
MPTH Expense Statement: 1997-98
` in lacs
Sr. Particulars Avg/Mth Avg/Mth Avg/Mth Avg/Mth Total %
No. 94-95 95-96 96-97 97-98 97-98 Variation
(Apr-Nov) (Apr-
Nov)
1 Salary & Wages 8.78 10.32 11.98 14.50 115.98 21.01
2 Laboratory 1.72 2.06 2.67 2.83 22.61 5.92
3 Surgical 2.74 4.00 3.37 2.77 22.18 -17.77
4 X-Ray 0.59 0.63 0.54 0.51 4.07 -6.51
5 Dialysis 1.11 1.12 1.48 1.30 10.39 -12.25
6 Medicines 0.46 0.59 0.62 0.86 6.91 39.69
7 Electric 1.67 1.80 2.13 2.73 21.84 28.27
8 Maintenance 1.38 3.28 1.98 2.68 21.40 34.99
9 Medical Professional 1.26 1.73 1.80 1.58 12.60 -12.46
10 Con. Conv. Expenses 0.34 0.38 0.50 0.48 3.85 -3.59
11 Honorarium 0.51 0.64 1.00 0.93 7.40 -7.27
12 Interest 1.41 1.29 1.07 0.99 7.91 -7.59
13 Stationery 0.40 0.62 0.53 0.46 3.67 -13.71
14 Post & Telephones 0.45 0.63 0.62 0.76 6.09 23.28
15 Staff Welfare & Guest 0.05 0.12 0.12 0.11 0.85 -13.27
16 Travelling 0.21 0.33 0.35 0.49 3.93 42.05
17 Computer - 0.46 0.47 0.65 5.21 39.06
18 Clothes & Dress - 0.29 0.37 0.39 3.14 5.84
19 Cleaning & Washing - 0.15 0.18 0.17 1.34 -5.19
20 Veema Premium - 0.52 0.26 0.30 2.37 12.86
21 Slide & Conference - 0.51 0.61 0.11 0.85 -82.63
22 Indoor Patient Food - - - 0.86 6.88
23 ESWL Equip. Repairs 0.35 0.00 0.32 0.10 0.81 -67.90
24 ESWL Service Charge 0.35 0.00 0.39 0.30 2.40 -22.35
25 Other 2.48 1.36 1.69 1.20 10.23 -24.45

Total Expense 23.7 32.84 34.98 88.11 304.91 8.95

Capital Expense 3.64 10.28 5.22 13.00 104.00 148.84