Question

Create a business operations plan that reflects the operations management of a healthcare business unit that you are familiar with and focus on its (process engineering, the optimization of deliverables, and the logistics and supply chain management for the business unit). Consider what your recommendations would be to improve the unit’s performance.The paper should be (1500-2000) words.

Answer 1

Abstract

In a context of high health care expenses and low accessibility to fine health care, Narayana Hrudayalaya (NH) was founded as a private company to initiate a medical revolution. Based on the assumption that any existing solution to treat cardiac disease was not affordable and thus could not be defined as a solution, Dr. Devi Shetty established Narayana Hrudayalaya (NH) in 2001 to give quality cardiac healthcare to the masses. The term “Narayana Hrudayalaya” means “God’s Compassionate Home” in Sanskrit. NH’s way towards providing affordable, quality healthcare for the poor is a mixture of compassion, high-quality medical knowledge and skills, and a keen sense of making the business work for the poor.

The Healthcare Situation in India

Ajay Dhankar, Principal of McKinsey Asia-Pacific, noted, “No matter how you look at it, healthcare situation in India is hopeless.”_{(Taking India’s Pulse: The State of Healthcare.”30 March 2005)} Dhankar recognized two key challenges: one, the bulk, 80 percent, of those that spent for their health care were poor souls; and two, the government funding was mainly concentrated on secondary and tertiary_{(Primary care is at the lowest level where people make contact with the nearest physician or their family practitioner when they fall sick; secondary care includes diagnostics and treatment, and tertiary is specialized care-giving and was also typically found in teaching or research hospitals)} healthcare and not on basic primary care where patients made the first contact with the system. The following stats point to an underserved healthcare market. India has less than an individual doctor per 1,000 people than to 2.56 doctors per 1,000 people in the US and 1.05 in China;_{( Konan, Prabhudev, “Opinion: The Healthcare tourism conundrum.” The Hindu. November 24, 06 )} regarding healthcare, India is far back to the rest of the world. The situation was serious in rural areas where, in some cases, one physician fed to almost 200,000 people.

Background of Narayana Hrudayalaya

Dr. Shetty, like many surgeons of his era, went to England after graduating in 1982 from Kasturba Medical College in the seaside town of Mangalore in Karnataka, India. He served at a hospital in Midlands, England and succeeding at the Guys Hospital in London. But after a decade of practice abroad, he returned to India and founded the Asian Heart Foundation (AHF) in Calcutta in 1989 as a non-profit foundation centered on cardiac care. AHF originally helped set up a hospital for other companies. The first one was begun in 1989 by the B.M. Birla Heart Research Institute. In 1997, Dr. Shetty served in setting up the Manipal Heart Foundation’s hospital in Bangalore. Dr. Shetty’s AHF, in partnership with the West Bengal (an eastern Indian state) administration, built a 150-bed cardiac department in Calcutta that quickly became the most significant cardiac hospital in the east of India. In 1999, AHF also built its cardiac hospital called the Rabindranath Tagore International Institute of Cardiac Sciences (RTIICS) in Kolkata. Dr. Shetty never had difficulties raising funds to build the hospital. A stockbroker victim donated £72,000 (US$142,732) as working funds, while a private company, Tata Finance, granted soft loans for buying equipment. Another patient’s son, who had a building company, offered to create a cardiac diagnostic laboratory, and the Armenian Church, influenced by Shetty’s venture, came forward with a pledge of US$1 mn. “Believe it or not, it’s not hard to arrange for funds when your cause is noble,” opined Shetty in an account to the New Scientist magazine. Need for cardiac surgeries in India was underserved. In 2003, it was calculated that there were only 55,000 open-heart operations that were performed in India per million people whereas the interest was upwards of 125,000. The cost also prevailed high and varied from hospital to hospital, depending on the type of equipment. Some of the public hospitals, such as the All India Institute of Medical Sciences (AIIMS), charged much less (US$1,200) but did not have enough capacity to treat a large number of patients. In 2001, his father-in-law Narayan Shetty, who owned a production firm Shankaranarayana Constructions (SNC) that was honoring its 50th anniversary, encouraged him to start a state-of-the-art cardiac hospital in Bangalore. SNC gave 25 acres of land on 30 years of the lease.

The Business Model for Narayana Hrudayalaya

ORGANIZATIONAL STRUCTURE

Dr. Devi Shetty’s family owned NH of which Dr. Shetty was the Chairman. He was supported by a board of directors, and the business had a functional structure with the pharmaceutical and finance departments each managed by a Director. One of the operating theories of NH was that surgeons should focus only on doing surgeries and nothing else. NH also reduced administration roles for all operational staff, including nurses. NH granted patient arrival a key area, and personnel with special training handled new victims and appropriately directed them as they arrived for surgery.

WELCOME CAPACITIES AND MARKETING STRATEGY

Patients served by NH had shown a steady rise. This amounted to 480 surgeries and 732 cath lab procedures. In November 2006, the hospital marked the completion of 30,000 procedures since its beginning and completed 27 heart surgeries in a day, which was globally the second highest number of operations performed in a sole facility in one day. The doctors were all committed to the mission of the hospital and were not responsible for generating in patients. NH had built a robust rural network in both the southern, eastern and north-eastern parts of India by its outreach and telemedicine facility that regularly fed NH with patients. Dr. Shetty had developed tremendous respect for himself and NH that also translated into patient arrivals from several nations. Doctors’ compensation was competitive, and they had the discretion to provide a discounted prescription for the poor. Each doctor could also prescribe a certain amount of discount based on their evaluation of each patient’s needs and availability of funds for that day. For this purpose, each surgeon had up-to-date knowledge of the operational equivalent for any given time. This privilege was also given to senior non-medical staff. The doctor’s commitment to the mission was evident by the long hours and shift work they put in to improve productivity. The doctors pulled in ten to twelve-hour shifts, while the staff rotated in three shifts to cover victims twenty-four hours per day, every day. The operation theaters opened at 6 a.m. and operations were performed even as late as 8 p.m.

FINANCIAL STRUCTURE

A key ingredient of NH’s business design was keeping costs low for the poor. They did this by working several schemes including low-cost insurance plans. The NH business model also included benevolence.Its provision of high-quality cardiac concern and social missions to give affordable treatment for the poor would move others to underwrite the price of surgeries by bestowing to the foundation. Over 50 percent of NH income came from heart surgeries while nine percent attained from Coronary Care Unit charges, and eight percent of income came from outpatient fees.

PROCUREMENT AND SOURCING

High volumes of subjects and procedures approved NH to have stronger buying power for their medical supplies. An interesting aspect of its procuring practice was to eliminate long-term contracts and to negotiate with suppliers every week. This also cut their inventory carrying costs and lessened scope for opportunistic performance by suppliers. NH had brought down its prices by about 35 percent since it began procurement. It did not purchase much medicinal equipment, opting rather lease; NH paid only for the reagents required for the equipment. The high volumes provided the suppliers to make enough of a gain to enter into such partnerships.

PARTNERSHIPS

Partnerships involved the one with Texas Instruments for technology that will bring down the value of patient monitoring (under development), as well as a business with the government for health insurance schemes. In partnership with Biocon Foundation and a private organization called ICICI Lombard Ltd, NH launched an allowance scheme in 2004 to cater to low-income patients. The system was known as “Arogya Raksha,” and it asked individuals to pay Rs 15 (approximately US$3) per month, and the person was insured for 1,650 types of surgeries. Their caregivers were the rural hospitals run by both the public and other charitable organizations where they got three days of inpatient concern for free and paid half the price for outpatient assistance. Biocon Foundation set up a generic medicine shop where it traded drugs 20 to 30 percent cheaper to their members.

VOLUME

A high volume of procedures is the basis of NH’s cost reductions, mostly achieved with a high level of capacity utilization and staff productivity. More copious amounts of open-heart surgeries and catheterization procedures every day allowed the medical team to decrease the cost of each operation. Facility use was increased through a shift system wherein the operation theatres worked longer hours. This provided the hospital to provide more care to more subjects. This was not the case in hospitals in countries such as the UK where voluntary surgeries were performed only during the day shift with the operating theater efficiently utilized for only about six hours.