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Creating value with a heart

by Nur Hamurcu and Sahil Sharma, &samhoud consultancy

A picture of Mother Teresa adorning a wall of Narayana Hrudayalaya Hospital (NH) reads: “Hands that serve are more sacred than lips that pray”. NH may well be the one of the few hospitals in the world which has taken this quote by Mother Teresa to heart. ‘Caring with compassion’ are not just three words for the people that work here, but something that adds meaning to their lives and the lives of the numerous people that visit this hospital for treatment from all over India and abroad. Many have come to refer to it as a ‘hospital with a heart’. Rightly so. In the history of NH, it has never turned away patients due to lack of funds.

NH, located in the city of Bangalore, India, is one of the world’s largest cardiac and pediatric hospitals in the world. The NH group is led by Dr. Devi Prasad Shetty, a cardiac surgeon, who served as the personal physician to Mother Teresa herself. Today, NH is an inspiring example of how a vision has changed the very landscape of the healthcare sector which is marred by increasing costs and depreciating quality of compassion and care. A hospital that is creating life value for the people who could not afford it to begin with, and in the process is creating value for its employees by giving them a raison d’être and for itself by achieving profitable growth. How did this phenomenon called NH start? Dr. Shetty found his sense of excitement in the experiences he shared with Mother Teresa as her personal physician. One can only imagine the deep philosophical conversations between the two in finding the true meaning of a compassionate life. The doctor, in every true sense, had found his ‘calling’ to serve. This was followed by an increased sense of urgency based on some alarming figures. Dr. Shetty recalled the dismal numbers included in an interview with The Wharton School, “The first heart surgery was done over a hundred years ago, but even today only 8% of the world’spopulation can afford heart operations. In India, around 2.5 millionpeople require heart surgeries every year, but all of the country’s doctors put together perform only 80,000 to 90,000 surgeries a year”.

This sense of excitement coupled with the sense of urgency equipped Dr. Shetty to go out and build a team of doctors who share the same feeling of compassion and were willing to commit to it. By effectively creating ownership in his team he had instantly made multiple owners and gave them a platform to address it in the form of Narayana Hrudayalaya Hospital located in the bustling IT hub of the east, Bangalore.
NH creating value with a heart 2

NH´s unique business model is driven by an equally unique shared vision: ‘To make quality healthcare accessible and affordable for all’. A quick analysis reveals that Dr. Shetty made a clear strategy map for NH for the next ten years. In fact, what Dr. Shetty had effectively done, is what we at &samhoud call, setting the direction of the organisation around three major components: Vision, Strategy and Brand. The success attained by NH today reflects the power of a vision shared by its people. This vision is deeply rooted in the strategy of NH. NH’s strategy is based on the premise of economies of scale. By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, NH has managed to drive down the cost of health care in India. Its value proposition is in fact its vision to make quality healthcareaccessible for all at affordable costs!

The target mark of NH includes both the rich looking for high quality healthcare services and the poor looking for cheap (in some cases free) healthcare. Aligned with itsvision, all doctors and senior nonmedical staff can use their discretion to provide discounted (in some cases fully sponsored) treatment based on patient needs and insufficient funds.

How did NH make it happen? A recent WSJ report stated that the 42 cardiac surgeons at NH performed 3,174 cardiac bypass surgeries in 2008, more than double the 1,367 the Cleveland Clinic, a U.S. leader, did in the same year. The surgeons at NH operated on 2,777 pediatric patients, more than double the 1,026 surgeries performed at Children’s Hospital Boston.

Given the vast network NH developed over the years in rural and urban areas and the continuous feed from general physicians across borders, NH is able to operate at a capacity which is virtually unheard of in other parts of the globe. The sheer number of patients allows surgeons to acquire world-class expertise in particular surgeries, and its generous backup facilities allow them to concentrate on their specialism rather than waste their time on administration. Dr Shetty has performed more than 15,000 heart operations and other members of his team more than 10,000.
NH creating value with a heart 1

The high patient volumes and procedures effectively gave NH the much needed bargaining power with its vendors. NH got rid of long-term procurement contracts in a successful attempt to reduce its inventory costs. The hospital did not purchase much medical equipment but instead opted to lease. The cost of the leased equipment was covered by increasing the turnover of each piece of equipment, given the high through flow of patients.

In 2003, NH partnered with the government to introduce a health insurance scheme aimed at the rural co-operative sectors. According to Dr. Devi Shetty, as of January 2011, the scheme covers more than 4 million villagers for a premium of only $0.22 a month each.

In 2010, NH Group reported a 7.7% profit after taxes, compared to an average of 6.9% in American private hospitals.

NH continues to inspire other organisations and people with the strong sense of affinity that its employees feel with its vision. NH has established video and internet links with hospitals in India and abroad in African countries and in Malaysia so surgeons can give expert advice to less experienced colleagues. As part of NH’s brand strategy, NH is setting up ‘health cities’ in India and abroad. These health cities are dedicated excellence centers aimed at high-quality healthcare at affordable costs. A one-stop shop for just about all tertiary care treatments, which further drives up volumes and reduces costs.

In an interview with BBC radio, Dr. Shetty revealed that 94.8% of the jobs in NH are filled by a female workforce. He believes that empowered women, in a developing country like India, can be of more value to her family. She can provide better education to her children and educated children are the foundation of a healthy nation.

Over the next five years NH plans to increase its number of beds to 30,000, making it one of the largest private hospital groups in the world. NH is also focused on the internationalization of its brand in order to reach an even greater number of people. It recently acquired a hospital in Kuala Lumpur for $42 million. NH also recently announced its plan to set up a 2,000 bed health facility in the Cayman Islands, an hour’s plane journey from Miami. According to a recent Deloitte report, outbound medical tourism from the US could reach a staggering 1.6 million patients by 2012, with sustainable annual growth of 35%. Through its medical facility in the Caymans, NH will service its international customers at a fraction of the cost in the US. Both elective and necessary procedures are expected to be priced at 50% below US rates.

Given the dismal statistics in healthcare and the soaring medical costs around the world, NH’s vision-based strategic model can provide insights for countries that are struggling to put a cap on the ballooning costs of healthcare. In fact, making healthcare affordable for all, irrespective of their financial status.

The Value Profit Chain philosophy greatly resonates with NH. Loyal and compassionate employees led by a shared vision and continuously delivering NH’s brand promise: Caring with compassion, resulting in greater health and happiness of patients, thus leading to a healthier bottomline. Dr. Shetty prophesies with surging confidence that India will become the first country to dissociate healthcare from bank balance. In order to achieve and sustain this, NH, in spite of all its successes so far, will have to embark on a journey of continuous improvement. Value creation is indeed never ending.

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