GSBA529: Strategic Formulation for Competitive Advantage

Narayana Hrudayalaya Heart Hospital: Cardiac Care for

the Poor
Today’s Agenda

Housekeeping
Dr. Shetty
Yeshaswini Insurance Scheme
Health City
Revisiting Global Expansion
 Dr. Shetty and Narayana Health
How would you rate Dr. Shetty?

Is he a businessman with a philanthropic lean or a

philanthropist trying to make a business out of heart
surgery?
DW focus on Dr. Shetty
WSJ: Indian Surgeon’s Affordable Health-Care
Revolution
 Virtuous Cycle Standardized
Routine
Procedures
• Salaried Doctors
• In-house Development of Learning Curve-
Specialization: Efficiencies
Nurses Heart Surgery
High Utilization

• Use of Technology
• Committed and dedicated staff
• Social Mission
Scale,
High
Volume of
Quality
Surgery
These elements work together to yield low
cost and high quality at the same time
 The NH Virtuous Cycle: Questions

• Are there any clear issues with this cycle?

• Why isn’t there someone focused on the paying customers in order to protect the
cross-subsidization?

• Is there an opportunity for the government to step in here for the poor or are
multinational hospital groups best suited to address the issue?

• Does it make sense to invest in the highest quality equipment instead of used
equipment that is cheaper, but still functional when the savings could help to
serve more of the poor?
Is this business model sustainable?
• NH made a small profit in 2004 – 6% net
income, but still has debt (Ex. 11) Ave. Indian pkg. - $5,500

• Should they focus on raising prices on

those paying the regular price?
NH full price
• Surgeries are under priced compared to $2,400
competitors in India
Cost
$2,000
• Only one third pay subsidized price, so it NH lower
won’t take away from mission $1,400
income price

• The other two thirds can be tapped for 3:2 Ratio

more For every 100 patients
60 Middle Income
40 Lower Income
Dr. Shetty and Narayana Health Revisited
How would you rate Dr. Shetty?

Is he a businessman with a philanthropic lean or a

philanthropist trying to make a business out of heart
surgery?
 Yeshaswini Insurance Scheme
Case Financials
• Provides healthcare to 1.7 million
farmers and their families
• Cost Rs. 5 per month (60/yr)
• Cardholders received free
treatment at 105 hospitals for any
procedure up to Rs. 100,000
• Launched as a state program, with
the government contributing Rs.
2.5 for every Rs. 5 paid (30/yr)
• Most used for low-cost treatment
(Rs. 2,000)
• First year – 9,000 surgeries;
35,000 outpatient treatment
 Revisiting the Health City Idea

Does it make sense as a business venture?

What about raising outside capital? Good or bad idea?

Why didn’t Dr. Shetty open in the US?

• Private sector salaries would lure doctors away
• Legal restrictions would impact operations