Rethinking Business Models In Healthcare

By Dr. Lisha Ruparel


How can we bring about evolution of healthcare, writes Dr. Lisha Ruparel.


Healthcare is a unique profession with the ethos of healing, serving and caring. At the same time the people engaged in the profession of delivering healthcare have to earn a living. Hospitals have to function as a business enterprise providing a service. An enterprise has the aim of maximizing profit for the stakeholders. This is an antithesis to the values of the noble profession. In a country like India a huge portion of the population has difficulty in accessing quality and affordable healthcare. This further affects the overall well-being of a country and hampers our progress. We need to find a balance between delivering the best care at affordable rates for the benefit of society and the profit earned by a healthcare organization. 

Healthcare is expensive in India as promoters have to incur very high capex expenditure for setting up a hospital. India is very dependent on imported technology for medical equipment and devices leading to very high capex expenditure on technology. Also, the resistance to the use of generic drugs further adds to the cost of healthcare. Based on annual reports of hospitals in Delhi and Mumbai, cost of consumables and maintenance in tertiary care government hospitals is Rs.9000 to Rs.17,000 per bed per day while private hospitals spend around Rs.15,000 to Rs.25,000 per bed per  day – The study findings have been submitted by AHPI to the Arvind Kejriwal led government in Delhi. The estimated percentage wise break up of expenditure in private hospitals is 45% on manpower, 20% on  consumables and followed by other expenses like marketing, repairs and maintenance, equipment replacement cost, power and utilities and other regulatory requirement.

Running a hospital is a balancing act. On one side are demands like demographics, disease patterns, public health requirements which have to be supplemented by a knowledgeable workforce and supporting technology and infrastructure. To truly combat health care’s cost challenge, the focus must shift to disruptive business models – innovative ways of delivering existing treatments at a much lower cost. We are yet to see healthcare’s Amazon and Flipkart moment. We need to leverage technology to achieve affordable healthcare. We need to bring about drastic changes in the current scenario. That is easier said than done as human intervention and the expertise of doctors’ and the support of the nurses, technicians and the other hospital staff is essential and impossible to replace.

What factors can help us bring about a change?

Innovation - Hospitals will have to find innovative solutions to decrease costs.Smart Investment - Strategic investments must be made in automation and technological advancements.

Furthermore, seamless integration of the innovation and investment in the current functions of the healthcare facility. 

Dr.Abhishek Pawar, Principal Consultant- Hosmac India Pvt. Ltd. says that that hospitals should focus on overall operations in a hospital to decrease the costs in healthcare. He further adds it is very important to analyze the existing processes to weed out inefficiencies. He further says some factors that can help in reducing costs and that can be adopted are: 

Functional hospital- Decrease the capex spent on building hospitals. Explore the possibility of setting up hospitals in tier II / tier III hospitals where land is available cheaper. Set up “no frills” hospital.

Patient centric processes - Processes of the hospital should be analyzed and to be modified to streamline the processes to achieve efficiencies that will not only save manpower costs but also improve overall asset utilisation. Thereby making hospitals more efficient and generating additional revenue with the existing resources. Implementation of quality standards has been known to enhance patient outcomes. Quality standards further help in gaining the trust of patients.

Right Doctor engagement policy - Develop a team of competent doctors rather than depending on a single doctor. Invest more in building the ‘Institutional Brand’ of the hospital.

Ruthless cost reduction- Be cost efficient. Invest in medical technology rather than aesthetics and ambience. For example, use of pneumatic shoots help in saving manpower cost. Set up an in-house team for costing of key procedures and other services offered.

Use of technology- Develop and implement a robust information technology system which helps in tracking all the processes in the hospital which can be analysed and improved. Use of smart phones for processes like hospital registration, payments for the hospital services through mobile wallets that can be done from home will help in reducing manpower costs.

Control over wastage and pilferage- it is prudent to have a stringent inventory control policy in place with monitoring over the usage of the drugs and consumables to avoid wastage.

Smart Marketing - Effective use of digital marketing and public relations in place of huge marketing expenditure.

Use of indigenous medical equipment, devices and consumable.

Promote the use of generic drugs which are substantial cheaper than the branded drugs. 

Since the last few decades we have seen evolution in all fields of life and almost all industries. We have seen technological advancement in the field of diagnostics but the method of delivering healthcare services has remained the unchanged. To combat the problem of unaffordable healthcare expenditure at the same time providing healthcare for the massive population healthcare will need to evolve. Technology and innovative disruption have deeply impacted our daily lives positively and if we can replicate the same success in healthcare, we can move rapidly towards our goal of achieving healthcare for all.