Global

Details

  • Service: Advisory, Management Consulting, Business Performance Services, IT Advisory Services
  • Industry: Healthcare, Government & Public Sector
  • Type: Business and industry issue, Case study
  • Date: 1/22/2014

Care Hospitals 

CARE Hospitals was founded in 1997 by a group of physicians and chaired by Dr. Soma Raju, who worked at Nizam’s Institute of Medical Sciences (NIMS), a public medical school in Hyderabad (India).

CARE focuses mostly on middle income patients while employing a pricing structure which suits lower income customers as well. Low, middle and upper income groups comprise 25, 50 and 25 percent of the total patients, respectively.

Starting from a 100-bed single specialty heart institute facility focusing on cardiac care in Nampally (Hyderabad), CARE has now become a multi-specialty hospital chain comprising 1,600 beds across 12 hospitals, providing other specialty services, including neurology, neurosurgery, urology, orthopedics, plastic surgery, vascular surgery, medical and surgical gastroenterology.


The primary objective of CARE hospitals has been to maximize accessibility and provide high-quality care while ensuring affordability. CARE focuses mostly on middle income patients while employing a pricing structure which suits lower income customers as well. Low, middle and upper income groups comprise 25, 50 and 25 percent of the total patients, respectively.


To ensure affordability of services, the hospital chain has adopted several practices in management and operations, some of them being:


 

Strategic Cost Control


The operational model of CARE Hospitals largely revolves around strategic cost control. Through market research, the affordable price point for Coronary Artery Bypass Graft (CABG) and related care has been determined as approximately $US 2,000–2,500. All processes of CARE Hospitals have been devised to fall under this range, without compromising on quality by constant redesigning/restructuring of the service delivery model.


Evidence-based management system


The hospitals follow an evidence-based medical practice with emphasis on accurate diagnoses to minimize costs. It has developed its clinical processes to mitigate unnecessary expensive invasive procedures. While this is a cost containment measure, it also ensures that patients are not subjected to unnecessary discomfort. This is also evident by the conversion rate of outpatient consults to invasive diagnostic procedures and invasive diagnostic procedures to invasive treatment procedures which remains controlled and monitored.


Cost containment by driving efficiency


CARE Hospitals attempts to reduce the per-unit cost by increasing the efficiency of the overall system. For instance, radiology equipment at CARE Hospitals is used continuously to avoid periods of downtime for capital equipment. For this purpose, the outpatient studies are conducted by appointment during the day and inpatient radiology studies are conducted during the night.


Emphasis on efficiency is also applied to supply chain management. The materials management practices constantly undergo intense scrutiny, with the objective of reducing the costs of supplies without compromising on the quality. For instance, CARE Hospitals actively evaluates non-critical equipment (including monitors) from lower price sources (including China) by carrying out head-to-head, month-long comparisons with more costly global brands; and actively deploys these lower-cost technologies across all its facilities if they meet internal quality standards. Relisys, a part of the CARE Group (which includes CARE Hospitals and CARE Foundation), is focused on the commercialization of indigenous technology and equipment.


It also adopts “rational drug choice” policy to procure low-cost pharmaceutical products and reduce material expenses in order to manage pharmaceutical costs. With internally developed IT systems, it is able to monitor costs almost in real-time and monthly reviews are performed al all facilities.


Staffing


CARE deploys task shifting among its staff. Under a process, which CARE labels as ‘de-skilling,’ many functions of higher-level personnel are repackaged and assigned to less-trained individuals deemed to be appropriate for the job. With this task shifting, more highly-trained staff is allowed to focus on higher-skill functions, while more routine or less demanding tasks are carried out by individuals with less education or training. For instance, physician assistants substitute the work of residents and nurse physicians substitute the work of residents in CARE Hospitals leading to cost containment and maximum utilization of resources.


Multi-tariff system


CARE deploys a tiered pricing model which serves as one of the cornerstones of their operating model. CARE uses a multi-tariff system for the provision of standard services, charging higher fees for higher-income segments. This allows the organization to provide the services either with minimal margins or below the full cost (but above variable cost) to approximately 75 percent of its patients. There is focus on limiting fixed costs while maintaining quality, so price discrimination occurs primarily on capital costs and secondarily on technology and services. This model is also observed in other hospitals.


Capital efficiency finance model


CARE’s capital efficiency model is based on the use of leased space (instead of property acquisition), modular expansion of facilities, and reduction of space allocated per bed under allowable limits. CARE primarily undertakes existing underused facilities (e.g. lease underused existing hotels or hospitals) and makes incremental investments into them.


While most new hospitals in India take three to five years to reach break-even and profitability, CARE Hospitals’ capital efficiency model has consistently helped it reach profitable levels within a year.


Evolving business model: Integrated Care delivery


In order to become an integrated healthcare delivery provider, CARE has started primary health centers and urban clinics. The key components of the rural primary care model of CARE include a focus on empowering non-physician providers by training community workers to become Village Health Champions (VHCs), serving as the interface between the villagers and healthcare delivery networks. These VHCs are expected to refer the patient to CARE Arogya Kendra, the first referral point.


Robust technology platforms are used to provide VHCs with access to health information, guidance on medical evaluation by pre-developed algorithms, and direct access to healthcare personnel, to offer further consultative services in real time.


CARE’s urban clinics are called “CARE Clinics”. Currently there are two CARE clinics operating in Hyderabad. CARE urban clinics are equipped with a wellness centre, diagnostic unit, OPD unit and a pharmacy to provide health-care across the value chain to all customers.


Over the years, CARE Hospitals have developed an entrepreneurial approach to serve India’s healthcare needs and plans to expand in the tertiary care area while increasing its geographic presence. The combination of services offered by CARE hospitals, urban clinics, primary health centers and Relisys aim to address the healthcare needs of every strata of society while focusing on quality and affordability. With the correct customized pricing strategy and service mix, CARE has been able to establish a model which is economically viable, yet scalable and manages to cater to the needs of the economically backward.


Key facts:

Number of hospitals: 1,600 beds across 12 hospitals


Turnover: INR5,000 million (2012)


Staff employed: Full-time professionals (100); nursing staff (1,000); additional support staff (1,850); the number of full-time employees has increased from 200 in the beginning to 2,500 at present


Customer base: Low-end patients (25 percent), middle (50 percent), high end (25 percent)


Key services: Primary and secondary care (expansion plans to include tertiary care)

 

Share this

Share this

Necessity: the mother of innovation

Necessity: the mother of innovation
This report explores the challenges emerging health economies face in delivering high-quality, cost-effective care.
  • Subscribe to related feeds