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Forbes India: Dr Shetty and his business with a heart

Article Link : http://ibnlive.in.com/news/forbes-india-dr-shetty-and-his-business-with-a-heart/96567-7-single.html

Neelima Mahajan-Bansal / Forbes India

Published on Tue, Jul 07, 2009 at 14:25, Updated on Tue, Jul 07, 2009 at 14:54 in Business section

Twenty-day-old Samuel Idoko’s parents were worried sick. The boy’s heart condition needed urgent surgery but back home in Nigeria, there were no hospitals dealing with such cases. They didn’t even have the time to celebrate his birth as they rushed him to Bangalore. Their destination: Narayana Hrudyalaya Institute of Cardiac Sciences.

Established in 2001, this 1,000-bed hospital and its sister concern, Rabindranath Tagore Institute of Cardiac Sciences in Kolkata, together do 15 percent of all heart surgeries in India. At the rate of 30 cardiac surgeries a day, the Bangalore facility handles the highest number of heart surgeries in the world.

It’s not for nothing that patients come here in droves. It has an impossible-sounding success rate of 95 percent and charges a fraction of what other heart hospitals do. The charismatic Dr Devi Shetty, the hospital’s founder, has been relentlessly pursuing a mission: To make world-class healthcare affordable to the masses. “Hundred years after the first heart surgery was done, only 8 percent of the world’s population can afford it,” he says, quickly pointing out that this is a five-year-old statistic and today we might be worse off. “What happens to the rest?” asks Shetty.

Filling the Gap

Shetty’s hospital has managed to dissociate healthcare from affluence. The patient is told beforehand what he will pay. This is fixed irrespective of any future complications or the duration of stay.

A heart surgery here costs Rs. 110,000, much less than what it costs elsewhere. Even so, you pay the full price only if you can afford it. Many don’t pay at all. In 2008, out of 6,088 heart surgeries at the Bangalore centre, only 1,232 were fully paid for. Yet, the hospital makes a tidy profit. The Narayana Hrudyalaya group had a turnover of close to Rs. 300 crore in 2008-09, up from Rs. 150 crore in the previous year.

Narayana Hrudayalaya is now moving to have the largest number of beds in the country, beating Apollo Hospitals which has 6,000. It is creating multi-specialty “Health Cities”. The Bangalore facility will be ramped up to 5,000 beds. In addition to the 1,000-bed heart hospital, it has new cancer, orthopedic and eye hospitals. In the next two years, it will add two more, one for women and children and another for tropical diseases. The Kolkata facility will also be expanded to 5,000 beds. The idea is to have a health city in every state of India and have a presence in every emerging economy of the world. Already work is on to set up facilities in Malaysia and Mexico. “Next year our turnover should be Rs. 600 crore and after Phase 1 of the Health Cities plan is complete in 2010, we should be closer to Rs. 1,000 crore,” says Sreenath Reddy, chief financial officer.

All this will be done without increasing the costs of the business. Before Devi Shetty, it was considered impossible to drive down costs to such levels; even now, no one has been able to replicate this. Top-flight management researchers want to understand how Shetty does it. “The mortality rate in Narayana Hrudyalaya is much lower than in New York State for similar kinds of heart disease,” says University of Michigan’s C.K. Prahalad. The hospital has been discussed extensively in his 2004 bestseller, The Fortune at the Bottom of the Pyramid. It has also become a case study at Harvard Business School. Adds Kokila P. Doshi, professor of Economics at University of San Diego’s business school, “Till now the trend was that government serves the poor. Shetty has shown that private enterprise can serve the poor profitably.”

Leveraging Scale

But how does Shetty do it? The answer lies in what he likes to call his “Wal-Mart approach to healthcare”. Wal-Mart proved that with size, the cost of inputs could be challenged. “They had the size which let them dictate terms to anyone starting from a giant like Procter & Gamble to potato growers,” he says.

Shetty relentlessly pursues Wal-Mart’s dictum of “everyday low prices”. Only that potato growers have been replaced by pharmaceutical companies and medical equipment manufacturers, who account for almost 40 percent of a hospital’s revenue outflow.

Here’s how it works: Most catheters sold in India by multinationals, for instance, are not manufactured by them. But the original equipment makers don’t sell directly to hospitals unless they get sufficient volumes. Narayana Hrudyalaya has the volumes: It handles 30 heart surgeries and at least 1,000 walk-in patients a day. It was able to convince them to supply at a low cost.

Scale helped Shetty shave off costs of medical tests too. Take blood gas analysis. At Rs. 350-400 per test, it forms the bulk of the cost for an ICU patient in India. At Narayana Hrudyalaya it costs merely Rs. 8.50 per test!

How? “Most hospitals do just 20, 30 tests in a day. We do about 2,000,” says Shetty. He used that to persuade manufacturers to merely “park” their machines in the hospital and instead make money from selling chemical reagents for the tests. It’s a win-win: Narayana Hrudyalaya saves on the cost of these machines (Rs. 12-15 lakh each) and the manufacturer does Rs 50,000 worth of business selling reagents every month.

Unlike other hospitals that make most of their money through in-patient care (procedures and operations), Narayana Hrudyalaya makes the bulk of its profits in the out-patient department (OPD) — just through registrations and investigations such as ultrasounds and X-rays.

The logic is simple. “At the OPD level, every person can afford to pay Rs 200-300. When he needs treatment that will cost Rs. 2-3 lakh, that is when he expects help,” says Reddy. “Today the revenue point for every hospital is in-patient services, which give a margin of hardly 8-10 percent while our margin in the out-patient is 80 percent,” adds Shetty. “So you try to get huge numbers of out-patients.”

But to get so many people to the OPD, you need a sound value proposition. “Patients will come to you provided your in-patient cost is affordable — if you are doing a heart operation for Rs. 60,000-70,000, or a brain operation for, say, Rs. 10,000. So you reduce your in-patient cost,” says Shetty.

Each evening, Shetty and his team of senior doctors examine a profit and loss account for the day. If they go below their average realisation benchmark of Rs, 95,000 the next day they prefer patients who can pay more. Also, Shetty searches for ways to save — he got his microbiology department to make hand-wash and disinfectants in-house, bringing down the monthly cost from Rs. 4 lakh to Rs. 50,000.

Practicing Quality

‘Specialisation’ is his mantra to ensure quality even as costs are driven down. “We train technically skilled people for a particular job,” says Shetty. So each surgeon specialises in doing only bypass surgeries or valve replacements or paediatric surgeries. That gives them phenomenal experience.

Shetty does something else to cut costs. Every ICU patient has dedicated nurses watching over him, 24 hours a day. They work eight-hour shifts, standing in front of the patient. Shetty doesn’t provide chairs: “The moment you provide a chair, the efficiency of the nurse goes down by at least 30 percent.” He encourages attrition among them: “As they grow older, they don’t contribute as much to patient care, but their salary keeps going up.”

To keep salary costs low, he hires people with basic college education and trains them for jobs like reading radiology charts.

Going forward, the biggest challenge for Shetty is how to make sure all this doesn’t remain a one man show, and get the same quality. “That means enormous commitment to training and recruitment,” says Prahalad.

Shetty is clear that the new facilities will be run by people who have perfected their skills at Narayana Hrudyalaya so that there’s no cultural mismatch. It is already running 49 training programmes and the plan is to turn it into an academic institution. “When you have an academic institution as a hospital, the succession plan is already in place,” he says.

The Wal-Mart Effect

Dr Devi Shetty’s Narayana Hrudyalaya in Bangalore uses economies of scale to keep the cost of treatment low

Rs 8.50 for a blood gas analysis

This normally costs Rs. 350-400 per test and forms the bulk of the cost for an ICU patient. Where others do 30 tests a day, Narayana Hrudyalaya does 2,000. It used these numbers to persuade manufacturers to install machines — which cost Rs. 12-15 lakh each — for free and make money instead by charging only for chemical reagents for the test.

Rs 110,000 cost of a heart surgery; 6,088 heart surgeries (in 2008), 1,232 fully paid for; Rs. 300 crore turnover (2008-09)

Unlike other hospitals, the bulk of its profits come from the out- patients ward, where the cost to the patient is low but the margins are as high as 80 percent. The number of walk-in patients remains high because they know the cost of surgery will be subsidised should they need it.

30 heart surgeries, 1,000 walk-in patients a day

Medicines and equipment account for 40 percent of revenue outflows, but original equipment makers for instance, don’t usually supply directly to hospitals. Narayana Hrudyalaya used these numbers to convince them to supply directly, at a low cost.

College for poor churns out IITians

TOI, 5 June 2009, Jinka Nagaraju,TNN
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HYDERABAD: The real performers, they say, never advertise themselves. While corporate colleges have been shouting from roof-tops about the toppers in IITs and other professional colleges hey have been churning out year after year, it is actually a small five-room building tucked away in the remote New Nagole in Greater Hyderabad that has been making history, silently.
The Andhra Pradesh Social Welfare Residential Junior College trains students, mostly children of the poorest of the poor and destitutes for engineering courses. Of the 35 students this year, 19 secured top ranks in the IIT-JEE including seven students making it to one of the IITs in the country. Twelve of them are set to get admitted to either the Indian Institutes of Science Education and Research located in Bhopal, Kolkata, Mohali, Pune and Thiruvananthapuram, or the Indian Institute of Space Science and Technology at Thiruvananthapuram, whose chancellor is the missile man of India and former President A P J Abdul Kalam.
All the remaining students of the 35-member batch of this year are also in line to secure admission in B.Tech courses of various universities in the state. Of the 19 students who got the ranks, 15 are SCs, one is ST, two are OBCs and one is from the general category.
These are the real success stories in the truest sense of the word, as each student carries a pathetic story of poverty behind him. The majority of the students are children of cattle-grazers of landlords or farm labourers. All the students spent their early childhood in the farms rearing cattle or doing odd-jobs. Take B Chinna Raidu, who secured the 464th rank in IIT this year. He is the son of poor and illiterate daily wagers in Nellore district. Y Krishna Veni, who also made it to IIT this year, belongs to Eukala (gypsy) community from Kurnool district. B Eswar Rao, also an IITian this year, is the son of a construction worker from Prakasam district. K Kiran Kumar, who also made it to B Arch in Delhi School of Planning apart from IIT, is the son of a farm worker from Khammam district. Ramdas, son of a cattle-grazer for a landlord in a Telangana district, made it to Kalam’s institute last year.
A beaming principal E Lakshmaiah modestly attributes the success more to the hard work and determination of the students than the alma mater. “The facilities are bare minimum here. But despite that, our students succeeded in the highly competitive nations-wide tests,” he said. “Our success rate is 100 per cent. If more than 60 per cent secured admission into nationally reputed institutes like IIT and NIT, the remaining got selected to other best colleges in the state,” said the principal. The college is run by the social welfare department of the state government while the funding comes from the department of rural development. The students are selected from the various colleges run by the social welfare department through a written test. Once picked, they are given long-term coaching along with intermediate education. “These students hail from poorest of the poor families. It is no mean achievement to secure admission into IITs and other institutes,” said V Nagi Reddy, principal secretary, social welfare.
Buoyed by the 100 per cent success story, the social welfare department now wants to expand the programme to coaching for the medical and law streams from next year. This is education in the real sense from which many a corporate college can take a leaf out of.

Keeping Kolkata Klean

Kolkata for a Green Cause, NDTV Video

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IIT dreams come true for Patna students

Viny Mishra, Tuesday May 26, 2009, Patna

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The IIT entrance exam results were declared on Monday and there were many happy children from Patna, who managed to clear the test. The sweet taste of success was felt at "Super 30" coaching institute in Patna. Mathmetician Anand Kumar started this institute in 2003 and every year 30 children from economically weak backgrounds are coached here for one of the toughest examination in the world. And all free of charge.

Says Vishwaraj Kumar, who cleared the exam: "I worked very hard for this.... I want to work for ISRO in the future."

Founder of Super 30 Anand Kumar says: "From this year, I want to pick up 90 students and work with them, I want to help more and more students."

Until last year Anand Kumar used to run super 30 with Abhayanand, who is the Additional Director General of Police in the state.

This year, they parted ways and the police officer set up another coaching institute. But the good news is, all his students too got through to the IIT.

Vikas Kumar, who too cleared the exam, says: "My father is a clerk at the Patna High Court. He has great expectations from me. I am happy I have managed to do well."

It is a giant leap forward for these students. And perhaps the future of many more such aspirants from the poorer sections of society is in safe hands.

Love for green: Healing the hills with trees

EcoWatch
Madhu Bharathi
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Sachidanand Bharti is known as the treeman in Uttarakhand, where he has been dedicatedly planting trees since the last 25 years. He has succeeded in greening about 30000.
Few hills in Uttarakhand were once barren, but now they are lush green, all due to his efforts. Bharti is a school teacher by profession but his real calling is as a climate crusader.

"The holy Ganga emerges from Uttarakhand and nowhere else. So if we do not work dedicatedly and with a pure heart for Uttarakhand, then we will not be able to save it," said Bharti.
Seeing the hills of his childhood turning barren prompted Bharti to use his Sundays for planting trees and soon his mission inspired 15 villages.

"All these hills were barren before without any plants or trees. We started with planting one tree, then two, then three and slowly all the villagers got together and turned this area into a jungle," said Kishan Pandey, a local resident.

Today, more than 25 lakh trees planted by him have created a jungle that supports rivulets.
Sachidanand is now a satisfied man as the hills are green again. However, now his only worry is protecting the forests he created from the timber mafia.

Slum Millionaire

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"Slumdog Millionaire" is the favorite at Sunday's Academy Awards and was largely inspired by a real location, the Dharavi Slum. Seth Doane reports.

A population that thrives in the shadows is now thrust into the international spotlight.
"Yeah! Everyone is speaking about Slumdog Millionaire, Slumdog Millionaire," says Jaison Thangaraj.
The Dharavi slum - the setting for the movie "Slumdog Millionaire" - defies definition.
Even the film's 8-year-old star was shocked by the poverty.
"There are many people who had stayed in road, near gutters - ate near gutters all mosquitoes on their bodies," says actor Ayush Mahesh Khedekar.
It's known as one of Asia's largest slums - about a million people live here, packed into an area that is less than one square mile. Somewhere around 50 percent of Mumbai's population lives in a slum like this one - and while there are the stories of struggling you might expect - there are also ones that might surprise you.

Twenty-one-year-old Jaison Thangaraj grew up here and shares a tiny home with his parents and sister. He's working hard to get out - by studying for an engineering degree.
"It's a mindset for people - Dharavi is just a slum, slum, slum," Jaison says. "Have they ever come and saw this?"
Maybe not before - but the movie generated business for slum tours - "Reality Tours" lets outsiders explore Dharavi.
"It's really shocking how organized it all is - that there are commercial districts and residential and that there is water and electricity - and services...and schools," says Dages Keates of Brooklyn, N.Y.

But, tours are not the only business.
A maze of makeshift homes and 10,000 small businesses generate an annual GDP of more than $600 million - all in an area smaller than New York City's Central Park.
There's gem-stone embroidery, stones chipped to grind grain and a leather industry which employs 40,000 people.
Believe it or not, Dharavi slum means opportunity for some, Doane reports. Some boys make just about $50 a month here making small leather wallets - but there were no jobs at all where they came from.
Two-thirds of India's population lives on less than $2 a day.

In one small shop, kids say that while education would be a way out, their families depend on their earnings.
But earning a million dollars here - even on the Indian TV show "Who Wants To Be A Millionaire" - seems out of reach.
"The movie is false," says Arvind, who has lived in Dharavi for 40 years. "A guy from Dharavi would never be considered for the show."
When the movie opened here, it sparked scattered protests among those offended by the word "dog" in the title.

"Indians have always been sensitive to the way that Indian poverty and the lack of development among vast sections of the Indian population have been portrayed in cinema," says film critic Nandini Ramnath.
Still, "Slumdog Millionaire" was the 4th-biggest weekend box office opening ever for any Hollywood film released in India. It's the kind of success that Jaison hopes believes could generate hope and investment in a place that could use both.
"Yeah, I'm definitely proud of living here," Jaison says. "I want to change the whole face of Dharavi, you know?"
And that would be a real Hollywood ending.