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The challenges thatawait Indianhealthcare industry

Narayana Health'sDevi Prasad Shetty

Whatstartedasa280bedhospitalhas,inthelast13years,growntobecomea26hospitalnetworkwith6,900beds

DrVivekDharwar(left)performingasurgeryatNarayanaHealth'shospitalinBangalorePhoto:NilotpalBaruah

Handsthatservearemoresacredthanlipsthatpray."ThewordsofMotherTeresahadaprofoundeffectonDrDeviShetty,whowasthelateNobellaureate'spersonalcardiacsurgeonintheearly1990s.DrShettythenworkedattheBirlaHeartFoundationinKolkata(Calcuttathen).Atthetime,hewouldseeover100heartpatientsdaily.Mostneededsurgerybutnevercamebackforit.Thisintriguedhim.Hesoonfoundoutthatthehighcostofcardiacsurgery(Rs1.50lakhthen)wasthereason.Herealisedthatalmost80percentofhealthcareexpensesinthecountrywereborneoutofpocket.Evenworse,47percentofruraland37percentoftheurbanpopulationeitherborrowedmoneyorsoldassetstopayformedicalexpenses.IndiansaregeneticallythreetimesmorevulnerabletoheartattackscomparedtoCaucasians.Yetonly120,000heartsurgerieswereperformedannuallywhentheneedwasfortwomillion."Itwasclearcostshadtocomedown,"saysDrShetty.

Qualityhealthcareandaffordabilitydidnotgohandinhand.Thoseseekingaffordabilityhadtobecontentwithgovernmenthospitals,whilequalityseekershadtospendtheirwayintoprivatehospitals.DrShettybegansearchingforamodelthatwouldmarryaffordabilityandquality."Iwascertainofonethingthoughcharityisnotscalablewhileasoundbusinessmodelis,"hesays.

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Compassionate heart, business mindNarayana Health has successfully married affordability and quality health care.

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across16citiesemploying13,000peopleand1,500doctors

In2001,hefoundedNarayanaHrudayalaya(laterrenamedNarayanaHealthorNH)inBangalorewithamissiontotakeaffordablehealthcaretothepeople.Whatstartedasa280bedhospitalthenhas,inthelast13yearsgrowntobecomea26hospitalnetworkwith6,900bedsacross16citiesemploying13,000peopleand1,500doctors.Ithassofarperformedover100,000cardiacsurgeriesand250,000cathlabprocedures.Thegroupperforms150majorsurgeries(including44cardiacsurgeries)daily.NHsaysabout12percentofallcardiacsurgeriesdoneinthecountryareperformedatitshospitalsand50percentofitspatientsarefromtheeconomicallyweakersections.

FULLCOVERAGE:BiggestInnovationsThisCenturyNHhasbeenabletoachievethisbybringingthecostofsurgerydown.AccordingtoanarticlebyVijayGovindarajan,innovationguruandCoxeDistinguishedProfessoratTuckSchoolofBusinessatDartmouthCollege,US,inHarvardBusinessReview,NH'saveragecostofabypasssurgeryis$1,500(Rs90,000)comparedto$1,44,000intheUS,$27,000inMexicoand$14,800inColombia.Interestingly,NH'scostofcardiacsurgeryissignificantlylowerthanwhatitwasinIndia13yearsago.

Thelowercosthasnotcomeattheexpenseofquality.NH'smortalityrate(1.27percent)andinfectionrate(onepercent)foracoronaryarterybypassgraftprocedureisasgoodasthatofUShospitals.Incidenceofbedsoresafteracardiacsurgeryisgloballyanywherebetweeneightand40percent.AtNH,ithasbeenalmostzerointhelastfouryears,pointsoutDrShetty.

ThefocusonbothcostandqualityhasnothurtNH'sfinancialseither.WhileNH'srevenuesgrewbyover200percentinthelastfiveyearstoRs827.35crorein2012/13,itsearningsbeforeinterest,taxes,depreciation,andamortisation(EBITDA)marginisahealthy13percent.(NH'sEBITDAfor2012/13stoodatRs97.79crore.)PrivateequityfundsJPMorganandPineBridgehavepickedupa24percentstakeinNH.TheyclearlybelieveNHiscreatinglongtermvalueforinvestors.

HowdidDrShettymanagetosuccessfullytieaffordabilityandqualitytogether?"ThemostimportantreasonforNH'sexecutionsuccessisitscommitmenttopurpose.Organisationsthatpursuebolddreamscaninspiretheiremployeestoachievetheimpossible.NHattractsdoctors,nursesandotherstaffwhobuyintothisvisionthattheymustprovidehightech,highqualitycaretoall,irrespectiveofmeans,"saysGovindarajan.

Commitmenttopurposeisjustonereason.DrShettycameupwithamodelthatleveragedeconomiesofscale.Hebuiltlargehospitalsandattractedlargenumberofpatientsthroughinnovativeschemessuchasmicroinsuranceandtelemedicine.Highervolumescutperunitcostofsurgeries."HenryFordtaughtusthissimpleprincipleover100yearsago.Automobileswentfromcrafttomassproduction.Dr

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Shettyhastransformedopenheartsurgerytomassproductionusingindustrialorganisation'sexecutionplaybook,"saysGovindarajan."Bytheway,whenyouperformopenheartsurgeryonanassemblyline,notonlydoesthecostgodownbutqualitygoesup.Performingamedicalprocedurerepeatedlyimprovesadoctor'sskillandreduceserrors."

DrShettythenleveragedthehierarchyofmedicaltalentinoptimisingsurgicalprocedures.AtNH,doctorsoperateasteams.Eachteamhasaspecialist,juniordoctors,trainees,nursesandparamedicalstaff."Abypasssurgerytypicallytakesaboutfivehours.Thecriticalpart,whichistheactualgrafting,takesonlyanhour.Thespecialistdoesthatwhileharvestingoftheveins/arteries,openingandclosingofthechest,suturingandotherproceduresaredonebyjuniordoctors.Thepreparationofthepatientishandledbynursesandparamedicalstaff,"saysDrLloydNazareth,PresidentandGroupChiefOperatingOfficeratNH.Thisprocessleavesthespecialistfreetoperformmoresurgeries.AtNH'sBangalorefacility,asurgeon,onaverage,performsfoursurgeriesaday,sixdaysaweek,takinghisweeklytallyto24.NHsaysthisisfarhigherthanthenumberperformedinanyhospitalglobally,anddramaticallyreducescost.

Also,frugalityisthewatchwordatNH.Itdoesnotbuyallitsequipment.Itleasessomeonapayperusebasis.Thiskeepscapitalcostslow.Greatemphasisisgiventomaintainingequipmentandextendingitslife.Thebuildingsaredesignedtokeepcostslow,too.NH'sMysoreHospitalwasdesignedandbuiltatacostofRs18lakhperbed,whenthethumbrulecostofasimilarhospitalisRs50lakhtoRs1croreabed.

Attimes,nodoubt,thefrugalapproachdidnotwork.Theconceptofzeroinventory,forinstance,wasonesuch.NHdidnotstoreconsumablesandgotsupplierstodeliverthemjustintime.Therewereproblemsandthemeasurewasreversed,andaninhousestoresetup."Animportantelementofinnovationistoacceptfailuresandtakecorrectivemeasures,"saysDrA.Raghuvanshi,ViceChairmanandGroupCEO,NH.Thehospitalhassetupacentralbuyingunit(CBU)andstandardisedpurchaseofconsumablesanddevices.Closeto80percentofallpurchasesarethroughtheCBU.Thishascutinventorycostsby15to40percentandensuredquality.

NHalsoadoptedtechnologytoaidinformationflow.Heretoothefrugalmindsetcameintoplay.Itdeployeditsenterpriseresourceplanning(ERP)onthecloudratherthansettingupdatacentres.Thisnotonlycutinitialcostsbutwaseasilyscalable.TheITsystemhelpsNHinmanyways.Ansmsissentatnoondailytoseniordoctorsandadministratorsinformingthemofthepreviousday'srevenue,expensesandEBITDAdetails.Thisenablesthemanagementtodecidequicklywhenrequestsforfreeorsubsidisedsurgerycome."Thisisourwaytonotturnawaysuchrequestsandatthesametimekeepournosesabovewater,"saysDrShetty."Also,lookingattheP&L(profitandloss)accountattheendofthemonthislikereadingapostmortemreport."



NHalsominesdatatoraisequalitylevels.Itsbusinessintelligencemodelthrowsuprealtimedataon30differentparametersthatthemanagementmaywanttotrackforimprovingefficiency.ThoserelatedtoclinicaloutcomesarethendiscussedattheweeklyMortalityMorbidityMeetingheldeveryThursdaywhereallmajorclinicalproceduresarediscussedamongdoctorsandbestpracticesshared."Throughbusinessintelligence,wearetryingtomaptheperformanceofeachdoctorintermsofclinicaloutcomeandfinancialdatasuchasconsumableusedduringsurgery,timepatienthasspentinICUanddurationofstayinthehospital,"saysDrRaghuvanshi.

NHhasalsobeenopentoexperimenting.Whenitsetupa104bedhospitalatCaymanIslandsintheCaribbean,itchosetousethecoldwateravailablefromtheseatoreplacetheenergyintensiverefrigerationsystem.Energysavings,asaresult,wereashighas90percent.ThisissignificantconsideringthatpowercostintheislandswasthreetimesthatoftheUS.NH'sdecisiontosetupoxygenplantthereratherthansourcethemwillsoonbeimplementedinitsotherhospitalsastheplantpaysbackinjustsixmonths.

Therearechallenges,ofcourse.Cashflowisalwaysaproblemasover50percentoftheoutstandingisfromthegovernment."Weneverhavemoney,"saysVirenShetty,sonofDrShettyandVicePresident(StrategyandPlanning)atNH.Thishasforcedthehospitaltoshifttoanassetlightmodelforexpansion."Weprefernottoinvestinlandorbuildingbutjustinequipment,"headds.

NH,meanwhile,continuestogrowandDrShetty'stargetistoreach30,000beds.HeisconfidentthatIndiawillsoonbecomethefirstcountryintheworldtodisassociatehealthcarefromaffluence."Thewealthofanationhaslittletodowithqualityofhealthcareitscitizenscanenjoy,"hesays.Notmanywilldisagree.

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Dr Dinesh Raju (right) of Narayana Health preparing a patient for surgery in Bangalore

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