The healthcare sector in any developing country is a fitting case for demonstration of the opportunities for SI2. Though many countries have made rapid progress, unhealthy statistics suggest the volume of work still left to be done even as it indicates the opportunities.
For instance, India alone has more than six million blind people and more than 50 million malnourished children. India has one of the world’s highest rates of maternal death in childbirth. Around the world, some 400,000 women and girls die each year from pregnancy and childbirth, and India accounts for almost a quarter of these maternal deaths, the vast majority preventable. According to a UN report, of the 358,000 maternal deaths in 2008, majority were from 11 developing countries.
The healthcare sector is marred with its problems. Doctors and nursers are in short supply, healthcare centres are under- equipped and under-staffed, at times making them useless facilities, healthcare finance is inaccessible, drugs and treatment are expensive, and the physical distance between a patient and the hospital is huge.
Yet, amid all these constraints, a few healthcare providers in India are establishing new global standards for cost, quality and delivery. They do it by sidestepping conventional approaches to medical practice.
Through its process-driven model, LifeSpring Hospital has developed an easily replicable model ensuring scalability and supporting rapid expansion. LifeSpring Hospitals is a network of maternity and child healthcare hospitals that provides high-quality, low-cost maternal services to low-income women with clear and transparent pricing. It is a joint venture between the public-sector company, Hindustan Latex Ltd, and the US-based philanthropic funding agency, Acumen Fund. LifeSpring aims to serve as a model for providing high-quality maternal and child health services to the poor in India and worldwide.
Through its model of small hospitals (20- 25 beds) and prices significantly below market rates, LifeSpring has achieved financial sustainability and social impact. The first LifeSpring Hospital opened in 2005 on the outskirts of Hyderabad in Moula Ali; it broke even and became profitable in less than two years of operation.4 The hospital network has already served more than 25,000 low- income patients, mostly from families working in the informal sector.
LifeSpring cut costs by standardising its procedures, trimming expenses, increasing volume, reducing staff attrition rates and using a cross-subsidy model for three types of wards (general, semi- private, and private). Additionally, it substantially increased the typical hospital use rates of key assets, ranging from diagnostic machines to the obstetricians themselves.
Most LifeSpring hospitals are taken on long leases (15-20 years) from players who could not run them.The lease model saves hugely on land costs.
LifeSpring’s focus on a particular niche – maternal and child care – cuts down on the need for many specialist doctors and also on the range of equipment needed. It refers the more difficult cases to other hospitals, even if it means turning away customers. The equipment as well as the service is on a no-frills basis.
Standardisation in clinical procedures and kits brings down costs too. It allows the network’s facilities to average eight times more procedures than other private clinics. Thus, its operating theatres accommodate 22-27 procedures each week compared to between four and six in a private clinic.
Specialising in in-patient gynaecology and obstetrics leads to easy standardisation. It has over 90 standard procedures, including standardised surgery kits and clinical protocols. LifeSpring uses a narrow range of drugs and equipment for large numbers of repeat procedures and thus purchases standard equipment and generic medicines in bulk.
LifeSpring is aggressive in marketing, has low OPD fees and is located very close to urban slums. All these generate high footfalls. This increase in traffic allows LifeSpring to use doctors more efficiently; consultancy firm Monitor estimates that its doctors, on an average, perform 17-26 surgeries per month, which is four times as many operations as their peers outside. So the network’s medical cost per patient is just a quarter of what a private hospital spends.
LifeSpring doctors earn fixed salaries rather than the variable consulting fees of their private clinic peers. Doctors nevertheless have strong non-monetary incentives to stay, for example, less administrative duties, more clinical practice.
LifeSpring hires less qualified auxiliary nurse midwives (ANMs) rather than graduate nurse midwives (GNMs). The former are trained as birth attendants. But because the ANMs are less qualified, they are less costly to employ than GNMs, whose degrees are more advanced and expensive to attain. Moreover, their attrition rate too is low.
Further, a tiered pricing model helps its commercial viability. Women, for instance, can choose to give birth in a general ward, semi-private room or private room. Rates, accordingly, will rise. LifeSpring’s general ward, which makes up 70 per cent of each hospital, is 30-50 per cent cheaper than comparable market rates; its private room is at par with the rest of the market. Normal deliveries cost only around Rs 2,000 ($40). That includes the cost of a two-day stay in the hospital and the medicines. Caesarean operations cost Rs 7,000 ($140) at LifeSpring – just a fifth of what is charged outside. While that is more than the official rate at public hospitals, which are supposed to be free though they often require undisclosed payments, these are still only about a sixth of the price at a private clinic.
LifeSpring plans to launch 22 more such hospitals in the next 20 months at a cost of $4 million. It is also evaluating a franchise model in hopes of scaling up rapidly to 150 hospitals over the next two years.
LifeSpring’s marketing approach is multi- faceted, consisting of its outreach teams, voucher programmes, health camps and word of mouth. To generate high patient volume, it targets key decision-makers in maternity matters – husbands and mother-in-laws – and has a dedicated community outreach team that customises its message, depending on whether the woman has had an institutional delivery before, and if so, where. It also focuses heavily on customer retention and referrals – even operating a ‘pull’ programme that gives every inpatient a voucher, good for one out- patient visit, to distribute to friends and family. The low-cost outpatient department plays a vital role in attracting mothers by providing a showcase for services, including women’s health and paediatrics. A visit costs Rs 50 ($1) in contrast to a private clinic’s Rs 100-300. Moreover, it posts a price list outside the hospital, creating consumer awareness and confidence of transactional transparency.
LifeSpring’s innovation was figuring out how to deliver world-class care – it is ISO 9001 certified – at a price that many of the poor could afford and that also made economic sense. Its high throughput/high asset use business model is vastly more productive than that of its counterparts.
The LifeSpring model is scalable for obvious reasons: it targets densely- populated urban and peri-urban areas, offers a value proposition superior to competitors and, although more expensive than government hospitals, provides superior service, has a demonstrably no frills cost and profit structure, and is verifiably replicable.
Source: CII REPORT ON SUSTAINABLE & INCLUSIVE INNOVATION