Ravi, in Conversation

Aravind Eye Hospitals (AEH) and Narayana Hrudayalaya (NH) are two pioneering India-based social enterprises providing healthcare to the rural poor. Let us attempt to study their individual models and compare and contrast them emphasizing their long-term sustainability and scope for expansion.

Aravind Eye Hospitals and Dr. V

Social Issue. 45 million people around the world lack eyesight while another 180 million have impaired vision. The annual global economic burden of blindness is around 25 billion USD. Almost 90 percent of the blind live in developing countries, and India, with around 15 million blind people and 52 million visually impaired[1] people, has the largest burden. 75 percent of the blindness in Asia and in India is due to cataract and is mostly curable. More than 80 percent of cataract is age-related[2]. 70 percent of India's one billion people reside in rural areas and over 70 percent of the people live below the $100 (Rs. 2,500) per capita per annum poverty line. However, 80 percent percent of the ten thousand ophthalmic surgeons live in the cities[3]. This presents a clear gap of supply and demand in terms of the quantity as well as the price.

Organization. In 1976, upon retirement from his medical career, Dr. Govindappa Venkataswamy (favouritely called Dr. V) started the Govel Trust under which he founded the Aravind Eye Hospital with a modest 20-bed facility in Madurai, Tamil Nadu³. Today, with a 3500-plus-bed multi-hospital system, it is one of the largest and most productive eye care facilities in the world[4]. It treats over 1.4 million patients each year, two-thirds of them for free and performs over two hundred thousand sight-restoring surgeries each year. With less than 1 percent of the country's ophthalmic manpower, Aravind performs about 5 percent of all cataract surgeries in India.

Aravind takes its services to the rural poor with its unique outreach services conducted with community participation. Aravind’s facility includes an international resource and training centre and has developed a cost-effective method to develop mid-level ophthalmic personnel. The hospital has also contributed to transforming hundreds of eye care programs in developing countries by partnering with over a thousand community organizations and international NGOs. The hospital also has several specialty clinics and comprehensive support facilities, and also a lab producing low-cost ($7) intraocular lenses and other ophthalmic supplies to make eye care affordable.

The model. Aravind has pioneered a model that follows the principle that large volume, high quality services result in sustainability and lower costs. The revenue generated from the "paying" patients fully offsets the cost of caring for the poorer two-thirds of the total number of patients with the same quality of care received by both segments. Aravind effectively markets itself by organizing camps to attract patients in rural India. The hospital even takes up the responsibility to pick up diagnosed patients from rural areas and to send the patients back to their homes when the surgery is completed. HBR mentions that an average ophthalmologist in India performs about 200 cataract surgeries a year, while "an Aravind doctor performs about 1,500 - an efficiency multiple of 7.5." The technology used at Aravind is cutting-edge. The effective management makes sure that the operations are streamlined and effective.

Narayana Hrudayalaya and Dr. Devi Shetty

Social Issue. Cardiovascular disease is the world's leading killer, accounting for 16.7 million or 29.2 per cent of total global deaths in 2003[5]. In India alone, around 2.4 million people need heart surgery annually, but due to the high cost of treatment, only 60,000 surgeries are performed. The average age for heart attacks in the West is 65 years, whereas in India, it is 45, making a significant impact on the workforce[6]. World Health Organization (WHO) estimates that by 2010, 60 percent of the world’s cardiac patients will be in India and by 2015, half of all deaths in India will probably be due to coronary artery disease[7]. Around 224,000 newborns in India are affected by congenital heart disease annually. Given that less than 14 percent of the population is supported by health insurance and that the ratio of physicians per 1,000 people is just 0.5 in India compared to 2.7 in the USA, the treatment options are limited.

Organization. In the year 2001, Dr Shetty started a heart specialty hospital called Narayana Hrudayalaya (NH: meaning ‘God’s Compassionate Home’) in Bangalore, Karnataka[8]. The hospital now has more than 500 beds, 10 operating theatres and two cardiac catheterization units. NH performs around 24 open heart surgeries and 25 catheterization procedures a day which is eight times the average at other Indian hospitals. Under normal circumstances a person recommended for surgery needs less than 10 days of wait time for the surgery. Almost half of the patients are children and babies and NH provides 60 percent of the treatments below cost or free of charge. With the help of Indian Space Research Organization (ISRO), NH has developed a telemedicine program to provide cardiac care for the rural poor through nine cardiac care units (CCUs) across India, linked to NH. This also lets the general practitioners access the expertise available at NH. The state of Karnataka has planned to sponsor 29 additional CCUs in the next few years. In addition to training doctors, the staff of NH has trained over 700 nurses. The hospital offers India’s only formal training program for pediatric cardiac surgery, reflecting the expertise of NH in pediatric care.

Since 2002, NH also operates an insurance scheme called “Yeshasvini” for the 2 million farmers in the state of Karnataka. Subscribing farmers will pay Rs. 5 (12 cents) a month and will have access to free treatment at 150 hospitals in 29 districts in the state for medical procedures costing up to Rs. 100,000 ($ 2500). Less than ten percent of the cardholders would require medical procedures; therefore, the total funds collected will cover the cost of the treatment for those in need. The premium amount is collected annually to reduce administrative costs.

The model. NH operates based on the belief that hospitals can make profit by offering inexpensive quality treatment if “physicians are devoted, new technologies are used, and insurance packages are designed to serve the poor[9].” Dr Shetty calls his strategy “Walmartization of healthcare.” NH provides low cost high quality treatment implementing several cost saving methods, increasing the volume of patients served, using assembly-line processing of surgeries and accepting donations. The exceptional reputation of the staff at NH brings in a large number of wealthy patients as well, who make up for the cost of treating the poor. In 2004, the proportion of patients who paid NH’s full price to those that could not afford to pay was about 60:40[10]. NH also organizes outreach camps for cardiac diagnosis and care.

Comparison and Contrast

Both Aravind and NH tried to make a difference in a situation where there was a social need but neither the government nor the market forces were able to step in. Both organizations have applied the best of management tools and economic models to aid the efficient delivery of service. In essence, these organizations represent living examples of what C K Prahalad talks about in the book “Fortune at the Bottom of the Pyramid.” Both the organizations started from the passion of highly skilled individuals with revolutionary ideas and social service intent. Though both NH and Aravind accept donations, both of them are self-sustaining and work independent of donor motivations. Both the organizations have overcome the inefficiencies that afflict non-profits by not limiting themselves to the rural poor. NH and Aravind possess the latest technological advancements in their respective fields.

Aravind has different hospitals for the free and the paying patients. Anybody can choose to go to the free hospital, which will provide the same quality of medical support as the paid hospital but not necessarily the same facilities. In contrast, NH has the same facility for all patients though it does provide luxury facilities for the wealthy. NH, working in a more complicated domain like heart-care that needs costlier amenities than eye-care, was not only able to replicate the model but also become profitable within a shorter period of time. Moreover, by combining insurance into his ambit and directly reaching the rural population through the telemedicine facility, Dr. Shetty is taking NH one step ahead.

Sustainability and scope for expansion

The organizations possess proven strategies and are mature enough to pursue expansion. The organizations are no longer dependent on their visionary founders and will be able to sustain themselves in the long term. But we notice that these organizations have not spread their operations across the country. Acquiring talent willing to sacrifice a part of their earnings for a social cause is obviously a hurdle. They have to spend a part of what they earn from the paying customers to serve the poor and that imposes capital constraints. Finding money for expansion is not an easy task. Aravind was pursuing options for expansion akin to what the McDonalds and the Pepsis do in private enterprise domain by franchising their brand. Though highly debatable and risky there, could be options which can make this idea work.

The mix of paying and nonpaying patients is critical to sustain the objective of reaching the poorest of the poor. This mission requires careful planning, internal financial controls and operational efficiency. In order to make sure that the wealthy people continue to prefer to obtain treatment from these social enterprises rather than choosing other competing private enterprises, NH and Aravind have to ensure that their reputation and goodwill does not get tarnished in any manner. High emphasis on quality and technological innovation are some of the few means to maintain the reputation. Capacity utilization and productivity are important to drive the costs down in order to be affordable to the poor. Reaching the masses and convincing them of the safety and efficacy of treatment is a gargantuan task. It needs the involvement of community service professionals and the media. Both these organizations get sufficient media coverage by performing complicated surgeries and developing innovative programs for social outreach.

Blindness and heart-ailments, though entirely different in their effects, have one factor in common – the poorer sections of people choose to live with these diseases even after being diagnosed for surgery, instead of getting them treated. This is usually due to the potential economic burden the treatment costs would put on them and their families, and also partially due to the fear of the consequences of undergoing a surgery. Their heightened suffering and the incapability to work for a living nudges these families into even greater distress and poverty. Social enterprises like NH and Aravind help such people by spreading awareness and treating them for free. In effect they help to eradicate poverty by removing the uncertainties and unemployment caused due to such debilitating diseases.

Aravind and NH have a lot in common and are organizations that should essentially work together. There are many more areas of healthcare and many more regions of the world where the same model can be replicated with little adjustments. By joining forces, for instance, Aravind could gain from the telemedicine facilities set-up by NH. This provides NH an opportunity to expand their services to markets in regions where Aravind operates and vice versa, allowing patients to get better facilities without having to travel in search of medical aid. Also, the two organizations could strive for an insurance scheme that covers the rural poor for expenses around $5000 for the same premium of 12 cents utilizing the larger population base.

References and Further Reading