The single gravest problem facing India’s health care system today is the sheer volume of patients requiring immediate treatment. Since most Indian public hospitals are small and poorly equipped, they simply don’t have enough beds to meet the demand. Right now, an estimated two million beds are needed in hospitals throughout the country. That means that the burden of providing quality health care is passed on to the private sector, which often charges excessive fees that the majority cannot afford. In a country with widespread poverty, analysts expect Indian health care industry revenues to reach $155 billion by 2017. It currently has the 14th largest in terms of value, and 3rd in terms of volume.

The challenge, then, is making private health care more affordable. One field in particular that needs attention is heart care. Heart operations by their very nature are one of the most expensive operations in medicine, requiring highly trained medical specialists. But though private hospitals charge over $4,000 for heart operations, most have significant backlogs of patients awaiting spots. There is clearly a gap between supply and demand.

However, it also means there is tremendous opportunity.

This is the challenge that Dr. Devi Shetty, a cardiac surgeon working with Narayana Hrudayalaya, a nongovernmental organization, took on a decade ago when he opened the first heart-care hospital in Bangalore. Dr. Shetty is as close as India gets to a celebrity doctor, having pioneered the use of microchip cameras during open-heart surgery. He also had the distinction of operating on Mother Teresa in her final years.

The results at these new hospitals have been promising. Narayana currently performs more heart surgeries than most other hospitals throughout the world, and the most across India by a huge margin. More than 12 percent of the entire country’s heart surgeries are carried out at Shetty’s hospitals in Bangalore and Calcutta. And the mortality rate is lower than that of the best hospitals in New York.

Most significant of all, the costs of surgery are nearly 40 percent lower than those of other private hospitals in India—a figure that has drawn the attention of health care professionals in the West as they seek to cut their own costs. Narayana hospitals charge an average of $2,000 for open-heart surgery, compared with $20,000 to $100,000 in the United States. Furthermore, their sliding scales for medical fees mean that wealthier patients subsidize poorer ones, providing about 80 percent with some form of discount or other.


Financial Times/CC-BY-SA-3.0
Dr. Devi Shetty, who has dramatically increased the accessibility of heart surgery in India, receives an award for corporate social responsibility.

Here’s how Narayana has driven down costs:

  • Extremely high volume: Surgeons don’t do any administrative work and concentrate solely on surgeries. Because of an increased number of shifts and a higher number of specialized doctors, the operation theater is used for longer hours, contributing to high volumes. Narayana hospitals perform 25 to 35 major heart surgeries a day. (These are heart operations, not simply angiograms.) In the U.S., a typical hospital will do about one or two heart surgeries a day.) The potential work overload on Narayana’s surgeons has attracted criticism, as doctors work up to 15 hours each day. But Shetty insists that the volume brings expertise and efficiency. He says that it’s also important to note that doctors are paid generous fixed salaries, rather than by the operation. Senior doctors make anywhere between $100,000 and $250,000 annually, he says, up to 12 times as much as an average heart surgeon in India.
  • A sliding scale of fees for surgeries, so wealthier customers subsidize poorer ones. There are optional private rooms and other revenue-generating perks for wealthier patients, including foreigners, for whom India has become a popular medical tourism destination. Hospitals receive daily profit and loss statements for their surgeons, which help to balance the ratio of full-pay and subsidized patients.
  • Mobile clinics sent to nearby rural hospitals to test for heart disease and refer potential customers. These also offer micro-insurance programs backed by the government, providing coverage to three million poor customers for extremely low monthly premiums.
  • Flexible contracting whereby hospitals negotiate supply contracts on a weekly basis, rather than for long-term fixed rates. The hospitals have also forged “do-gooder” partnerships with Western health tech firms like Texas Instruments, who offer to “do good” by offering equipment at below market rates.

Due to this factory-style approach, Shetty has been duly hailed as the Henry Ford of heart care. However, a Toyota analogy may be more apt, since what also sets Narayana apart is its leanness—that is, its strict emphasis on standardization of processes, reliance on core competencies, and economies of scale.

One of Narayana’s biggest challenges now is its huge expansion plans. The company is planning to increase its number of beds from 5,000 to 30,000 by 2017, which would make it one of the largest health care players in India. It is also planning to expand aggressively beyond the country’s borders—possibly even to the United States. These expansion plans have exposed the need for more doctors and nurses in India to staff these new hospitals. The country’s Ministry of Health is planning to build a $300 million medical college, which would help, but the building is unlikely to be ready anytime soon. Nonetheless, as long Narayana Hrudayalaya has the staff available, it plans to keep expanding, building on its mission to provide affordable health to the masses.


Rishabh Kaul

Rishabh Kaul is an associate at Aavishkaar, an early to early growth venture capital firm that invests in rural and under-served semiurban markets in India. He is also vice president at BITS Spark Angels,...

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