Team Chanakyas

MuthuNaveen S

Sathya G

NITIE , Mumbai

Xploryze – IIM Raipur

Scope Industry Overview

SWOT

The Competition

Business Ethics

Business Model

Basic Strategic Plan

Role of Service Operations

Competitive Strategies

Organizational Structure

Insurance & Med Equip

15%

Diagnostics10%

Pharma25%

HealthCare Delivery

50%Healthcare

deliveryUSD 50 bn

CAGR

15%

Health Care Industry – Opportunities galore

Indian Scenario : Only 0.8 beds / 1000 people

No of beds in Delhi (2011) :Demand 28,007 Supply 19,836

src: ENAM India Research

Huge Demand

Supply Gap

Increasing spend on health care

2006 2011 2016 (F)

0

1000

2000

3000

4000

617 903 13296371268

2312

Out Patients In Patients

Increase in lifestyle diseases => increase in in-patients

In Bn Rs

Medical Tourism in India: USD 2.5bn industry CAGR 30%

Strength

Weakness

Opportunities Threats

*World class Facilities and

Treatments

* Increase in health insurance

companies

*Increased Depreciation rate for

equipments

* Connectivity with Skilled professionals

all

around the globe

*Lower operational efficiencies

*Rough behavior of lower category

staff

*Undue delay in rendering service

*Poor Information and guidance

system

*High attrition rate

*Growing Urban conglomerate of NCR

*Increase in life style diseases

*Growing Demand for World-class

treatments

*Growing medical tourism

*Change in spending attitude on health

care

*High Competitive rivalry –

pressure on

price & service

*Obsolescence of medical equipment

*Capital intensive

*Ayurveda , Unani, homeopathy

substitutes

Tertiary Health Care Industry

Group Hospitals Beds Revenue

Fortis Healthcare 66 10,270 1482

Apollo Hospitals 54 8,800 2350

Manipal Health Enterprises 15 4,400 600

Narayana Hrudayalaya 14 5,700 476

CARE Hospitals 12 1,600 NA

Paras Hospitals 2 250 NA

Max Healthcare 8 800 NA

Competing with Neuro division of established Multi-Speciality players

The Competition

Src: Business World, 5 Mar 2012, Fortis Annual Report 2010-2011, Apollo Annual Report 2010-2011

Src:Corporate Governance Model,Peter Begley

Kohlberg’s stages of moral development

Pre Conventional

• Stage 1:Punishment-Obedience Orientation (Compliance with regulations)

• Stage 2: Instrumental Relativist orientation ( Profit Centered)

Conventional

• Stage 3: Interpersonal Concordance orientation ( Living up to Customer expectations)

• Stage 4: Authority and social order maintaining orientation (Abiding social conventions)

Post Conventional

• Stage 5: Social-Contract Legalistic orientation (Working towards greater good for the society)

• Stage 6: Universal ethical principle orientation (Weighing social welfare over profitability )

Corporate

Governance

CSR

Business Ethics

Ethical Profits

Dr.Ashwini

Dr. Ram Mathur

& Dr.Sharma

Dr. Ram Mathur

& Dr.Sharma

Where Our Heroes Stand…

Ethical Dilemma

VisionTo bring world class medical facilities to New Delhi and revolutionize the

whole healthcare industry.Mission

Using his knowledge and expertise of 12 years in Medical field , serving the people of Delhi, while turning in to a profitable venture.

What it brings?

World class medical service to all those who can afford it and for some who can’t.

Why Should we appreciate?

Initiative to contribute to the society against brain-drain scenario.

Why Justified?

Dr.Ashwini’s aspirations in the beginning – Hurdle to sustainability

and growth

Enterprise – at an infancy stage :: profit –centric

Later stage:: Interwoven Social Responsibility

Aspirations Justified

Charity Run

Hospitals

Corporate Hospitals

World Class facilities & Treatment

Profit Driven & Aggressive Growth

Quality health care but expensive

High operational efficiency

High operational costs & Inability to

scale up

Ineffective Management

/Services

Mass market

Lack of “world class” facilities

A Hybrid Model

Stage 1• Target segment =>

The affluent• 5 % of patients

served for free : To obtain government subsidy for land

• Primarily Neuro specialty

Stage 2 • 5 % of patients

served for free• Differential rates

based on the choice of pre/post treatment stay

• Maintaining the same level of treatment – Same doctors/ OT , etc.

• Diversify into other verticals

• CSR Arm

A Hybrid ModelA world class hospital for all those who can afford it and also for some who can’t

Business Model

Single Super Specialty hospital for Neuro care

Demand Supply Gap:

Number of reported Neurocases in India : 300 per 1,00,000Number of Neurologists practising in India : 1100=> ~ 32,000 patients per doctor per yearHuge market waiting to be served!!!

In patients are major revenue contributors

Size of the Hospital Tax deduction to private

investors on the cost of building infrastructure for minimum 100 bed hospitals anywhere in India

Go ahead with Dr Ashwini’s plan of 150 bed

hospitalSrc: ENAM Research; Neurology: The Scenario in IndiaSV Khadilkar

Basic Strategic Plan: Size |Investment | Profitability

Space Required

507 SqFt per bed for 125 – 175 bed

hospital

Þ ~ 76000 Sq Ft

Total investment required

Investment cost/bed – Rs.75

lakh/bed

Expected investment on the Hospital =

Rs.112 Crores (approx)

Location:Out skirts of the city to reduce the cost of land

5 % of patients to be treated for free to avail governments subsidy for land . Advantage from social and

economic point of view

Land12%

Building26%

Equiment50%

Others12%

Set Up Cost

Basic Strategic Plan: Size |Investment | Profitability

(Src: Economic times dt:1-8-2011, Healthcare bio tech-fortis-to-start-6-new-hospitals-rs-1050-cr-

investment-likely)

ENAM India Research

A proposed standard method of Measuring Hospital Capacity , Pg 677)

(In Lakhs) Yr 1 Yr 2 Yr 3

Initial Investment 11200Operational ExpensesPer Yr / Bed 150 165 181.5Total 2250 2475 2722.5

Non Operational ExpenseIndustry Avg - 50% of operational Exp 1125 1237.5 1361.25

RevenueIncome per procedure 0.98 1.078 1.1858Average length of stay 3.9 Days 3.9 3.9

Total income per bed per yr 91.7179 100.8897 110.9787Assumed operational Effeciency 40% 55% 65%Total Income per 150 beds 5503.08 8323.404 10820.43

Contribution 2128.08 4610.904 6736.675

Net Profit -9071.9 -4461.02 2275.656 Year 1 Year 2 Year 3

22.5 24.8 27.211.3 12.4 13.6

55.083.2

108.2

-90.7-44.6

22.8

Operating ExpNon Operational ExpRevenueNet profit

Becoming Cash Positive in third year of operations

Basic Strategic Plan: Size |Investment | Profitability

Rs in Cr

Src: Appolo hospitals; ENAM Research

Real Estate

•Go Outskirts• Avail subsidies

Equipment

•Best Prices•The best not the latest•Training costs•Pay-per-use model

Manpower Outlay

•Expertise as needed•Attrition•Collaborationwith institutes• Outsourcing

Operations

•Purchase from source•Usage metrics•Cross subsidize•Day care to reduce ALOSMedical Tourism:

Neurosurgery Cost comparison: Almost 4 times cheaper than in USInternational Accreditation provides more confidence for medical tourists.

Src: ENAM India Research

Key Focus Areas

Focus on increasing operational efficiency to increase competitiveness & reduce cost

Operational Expenses account for around 2/3 of the total expensesProjected expenses of 22.5Cr a year!!

Layout Design

• Department locations

• Emergency Entry & Exits

• Man & Material Movement

Capacity Planning

• Estimating the resources-5M

• Hospital Occupancy Rate

Patient Flow Management

• Wait Time analysis of Patients

• Idle time of consultants

• Scheduling

Inventory Management

• Aggregate Planning

• FIFO• Reverse

Logistics

Procurement• Vendor

selection• Vendor

Managements

• Contracts

• Service Agreements

Equipment management

• TPM• Utilizatio

n Mapping

• On the Job Training

Advantage:

• Tangible: Bottom Line improvement through efficiency improvement• Intangible: Goodwill and Trust from customers

Better Patient Care with Improved Returns!!!

Operations Management – A key differentiator

Capacity Planning

Man

Machine

MaterialMethods

Money

Forecast and Demand projections

based on medical and

demographic

Target bottlenecks through

Queuing theory

Think “LEAN” – Eliminate wastes

Increase occupancy level

Cases/year X Length of

Stay

No of Beds X 365

Occupancy Rate =

Capacity |Layout | Patient flow | Inventory | Procurement | Equipment

Evaluating utilization before capacity expansion

Corelap Matrix Consider Qualitative Factors in layout design

Craft Refining the initial layout based on frequency of movement and cost associated with it

Optimized layout feasibility* Discrete even simulation to model patient flow and futuristic development* Decoupling /Service blue Print* Present fit and flexibility for future expansion

Corelap Considerations

o Flow of Materialo Personnel Contacto Use Same Facilitieso Use Common

Recordso Share Same

Personnelo Supervision or

Controlo Noise, Dust, Fumeso Interruptionso Special Mgmt. Needs

Hospital Layout changes are expensive, Hence future expansion plans should be taken into consideration

Capacity |Layout | Patient flow | Inventory | Procurement | Equipment

Ref: A Methodology for total hospital design by Gerald L Delon

PATIENT FLOW ANALYSIS

Value stream mapping of the best practices / current practice to

identify wastes and propose new systems

Real Time Monitoring

Wait-time analysis of Patients

Idle Time analysis of Consultants

Identify inefficiencies

Criticality of freshness /

shelf life of products

Lead times & criticality

associated with particular

products

Seasonal Effects & Costs

VED analysis and online

monitoring of inventory

Better stocking & Inventory

Control ; FIFO; 5S

EOQ ordering with safety stock

– A trade off between costs,

risks of stock out and expiry

Capacity |Layout | Patient flow | Inventory | Procurement | Equipment

INVENTORY MANAGEMENT

Procurement

MRP – when, what, how much to buy

Vendor selection – Cost, Quality, Service levels, Reliability, Lead time

Vendor Management – Information sharing, leverage their strength,

long term relationships

Win – Win Agreements

Contracts – Payment, Shipping, Service, Urgent deliveries, Penalty

clauses

Service Agreements – Maintenance Repair and Service of equipment

Reverse Logistics – Return of expired inventory, Disposal of medical

wastes

Equipment Management

• Training of staff for best usage and

autonomous maintenance

• Visual instructions for usage

• Poka-yoke to prevent unintended mishaps

• Preventive & Proactive maintenance

• Equipment tracking for better utilization

Capacity |Layout | Patient flow | Inventory | Procurement | Equipment

Competitive Edge

Dr. Sharma’s good contacts of creamy layer in Delhi region

Reliable and high quality sourcing of equipment by Dr. Sharma’s Father-in-law

Dr. Ram gained expertise with best of medical equipment in USA

Dr. Ram’s contacts in USA - Referrals – Medical Tourism

Specialized services – Better focus and operational efficiency

“100 bed super-specialized hospitals generate equal revenues as that of

500 bed multi specialty hospitals” (Source : Economic Times, Apollo)

Leveraging Unique Strengths:

Service Specialization

IT Integration

Implementation of Hospital Information Management System

Maintaining Electronic Health records – Error free and timely reports

Name Labels and Uniform for all functionaries

Marketing through booklet – create awareness on neuro diseases

Transparency with patients – trust – word of mouth referrals

Visiting doctors to promote the hospital

Better facilities and motivation for employees to reduce attrition

SMED – Improve Productivity of surgeons

Establish Protocols/Systems for all functions

Maintenance of in-house labs with short TAT

Churn Rate, ALOS, SERVQUAL for continuous improvement

Risk Management and Green Initiatives

Resource based quality Improvement

Public relations management

Competitive Edge

Organizational Structure

Dr.Ashwini (COO)

Dept wise RequirementMatrix

HR & Personnel Head

Full Time consultants

Visiting consultants

Nursing Staff

Lab Technicians

IT support

Payroll

Supervisors & Helpers

PRO Marketing

Future Scope

Hospital Admin &

Maintenance

Reception & Enquiry

Equipment

Facility

Legal Advisor

Land and Construction License

Electricity Clearance

Water Board Clearance

Sewage and Sanitation Clearance

Biomedical waste disposal Clearance

Fire Department Approval

Health Certification

Financial Advisor

Fund Raising

Budgeting

Accounting

Procurement Manager

Medical Equipment Purchase

Vendor Selection

Signing Annual Maintenance Contract

Hospital Design Consultants

Building

Contractors

Real Estate Consultants

Thank You

References

1)Service operation management return to roots, Robert Johnston – IJOPM 19,2

2) KPMG Report: Emerging trends in Healthcare

3) A Methodology for total hospital design by Gerald L Delon

4) Evaluating hospital design from an operations management perspective

Leti Vos & Siebren Groothuis &Godefridus G. van Merode