January 22, 2014 | Dr. Devi Shetty, Chairman of Narayana Health, headquartered in Bangalore, India, is on a mission to expand the reach of world-class healthcare facilities to the poorest in India. And he’s convinced that his model can be replicated the world over.
An interview by Swati Prasad
Dr. Devi Shetty – Chairman and Founder of Narayana Health (NH) – is known the world over as the ‘Henry Ford of heart surgery’ for applying mass production techniques to healthcare, thereby exploiting economies of scale. His healthcare model has worked, and with tremendous success. From a 300-bed hospital in 2001 at Bommasandra, in Bangalore, NH today is a 6,000-bed healthcare conglomerate, with 17 hospitals in 13 locations across India.
Over the next six years, Shetty plans a five-fold increase – to become a 30,000-bed healthcare provider with a global presence. He plans to achieve this by building low-cost, 300-bed, multispecialty hospitals that take just six months to construct.
Shetty’s hospital chain never turns away a patient due to a lack of funds. Despite this policy, NH claims to make higher profits than several American healthcare chains.
Working on the Healthcare Challenges in India
According to Shetty, countries can reduce the cost of healthcare by increasing the number of healthcare professionals, such as doctors, nurses, technicians, and administrators. And he is optimistic that the scenario will change very soon in India. He is one clinician who has been working on the most common challenges gripping the Indian healthcare industry – the prohibitive cost of healthcare services, lack of specialists, low penetration of medical insurance, and the high cost of medical education – through various initiatives. In his opinion, India has all it takes to emerge as a major healthcare provider to the world.
In an interview with Medical Solutions, Shetty talks about his vision for India and the global healthcare industry.
Click on the boxes below to read Dr. Shetty’s answers.
Medical Solutions: Globally, what are some of the trends in healthcare?
Shetty: There is a crisis across the world in delivering healthcare. Governments believe that taxpayers’ money can pay for healthcare. Taxpayers’ money could pay for healthcare 50 years ago when people retired at the age of 60 and died at 65. Today, people retire at the age of 60 and they live to celebrate their 95th birthday.
When adult diapers are forecast to out-sell baby diapers, you know there is a crisis in healthcare. As life expectancy increases, the old will need huge attention.
Ten years ago, we realized that taxpayers’ money cannot pay for healthcare. We evolved a mechanism whereby each individual pays a tiny bit of money every month. We launched a program called Yeshasvini and convinced 1.7 million farmers to contribute 5 INR (0.08 USD) per month towards medical insurance. The government agreed to be the reinsurer. Now, the premium has risen to 18 INR (0.27 USD) per month. In the last 10 years, more than 450,000 farmers had a variety of surgeries under this program.
In India, we have 850,000 mobile phone subscribers who spend at least 150 INR (2.3 USD) per month just to speak on the phone. If there is a policy that provides them with health insurance for an additional 20 INR (0.31 USD), I do not think anyone will mind paying that extra amount. We need to create such a vehicle.
State governments are quite open to this model. The scenario could change in the near future. The government will become a health insurance provider. Not only a healthcare provider.
What opportunities does India have?
There are many positives in India’s favor. Indians are born healers. The younger generation is very studious. We have 381 medical colleges. We produce the largest number of doctors, nurses, and medical technicians. We have a very mature pharmaceutical industry. India has all it takes to emerge as a major healthcare provider to the world.
We have to look at the global scenario. The economy of the 20th century was driven by machines. The global healthcare and wellness industry is going to drive the world economy of the 21st century.
Globally, healthcare is a 4.5 trillion USD industry. It is the second largest industry after food and agro-processing. Despite its size, it is only addressing about 30 percent of the world population. Nearly 70 percent of the world population is nowhere close to receiving decent healthcare services. We need a revolution in order to service the entire market.
Unlike manufacturing, healthcare is not dependent on any finite component. It is dependent on human skill. And human skill is replenishable. Therefore, we can technically reduce the price of any service to any level we want. It’s all about creating more supply of clinicians, nurses, technicians, and the like in order to meet the demand for quality healthcare.
India will become the first country in the world to dissociate healthcare from affluence. India will prove that you do not have to be a rich country to offer quality healthcare to your citizens.
However, we need the right policies. India’s policymakers need to realize that it is not just about healthcare. It is about creating equitable growth across society.
How can healthcare create equitable growth?
Take the case of England: The National Health Service (NHS), a publicly funded system, offers healthcare in the United Kingdom. Everyone says it is inefficient. What will happen if it is closed down? It’s not that people will start dying. Healthcare is only a 50-year-old phenomenon. People have lived for centuries without healthcare.
However, if the NHS shuts down, the economy of the United Kingdom will collapse. The NHS distributes GBP 5.58 billion in salaries every month to 1.4 million employees. It is a main driver of the UK economy.
How can you have equitable growth if you do not create employment? Healthcare is a unique industry that creates millions of jobs. It creates highly skilled jobs for a few people. But a large number of jobs are for semi-skilled and unskilled people.
Are there any healthcare models India can emulate?
We have a lot to learn from the US and Europe. In the US, a large number of procedures are done by physician assistants. They significantly reduce the volume of work to be done by the surgeons.
The process of healthcare is much more streamlined in these countries. For instance, in oncology there is an oncology nurse, who knows all about the drugs and who can talk to the patient very confidently. We have not reached that here, yet.
What is the first step hospitals need to take in order to bring down costs?
In global forums, everyone talks about reducing the cost of healthcare. But no one knows how much they are spending today.
We have invested in technology. Every day at noon, I get an SMS on my cell phone with yesterday’s revenue, expenses, and EBIDTA (earnings before interest, depreciate, taxation, and amortization) margin. For us, looking at a profit and loss account at the end of the month is like reading a post-mortem report. You cannot do anything about it. Whereas if you monitor it on a daily basis, it works as a diagnostic tool. You can take remedial measures.
While charity is not scalable, good business principles can be scaled up, and can be taken to any level.
Swati Prasad is a freelance business journalist based in Delhi. She reports from India for several publications overseas and has worked as a correspondent and editor for The Economic Times, Business Standard, The Indian Express, and Business Today.