Your task is to present organizations assigned to your group, discuss them from the perspective of topics addressed in the Frugal Innovation report, and to discuss what, if anything, can be transferred and used in the developed countries. Alternatively, you may brainstorm about the possibilities how some business from the developed countries could work with and help these organizations.
About 40 million people in the world are blind and India is home to 1/3 of the world’s blind population. Yet, for many of these cases, it is preventable and treatable. In developing countries, the leading cause of blindness is attributed to cataracts, in which the natural lens of the eye clouds over time. This requires surgical removal and replacement with an artificial one. In 2006 alone, India had nearly 7 million cataract-blind individuals, with roughly 3.8 million new cases occuring every year. However, with 25% of Indians considered below the poverty line and with much larger numbers at income levels that would place such treatments for blindness out of their reach.
Many of these afflicted live in the rural areas and are mostly farmers… to rob one of sight usually meant robbing them of their livelihood and their ability to provide.
Yet, in the past decades, the country’s capacity to perform such eye surgeries have grown four-fold from 1.2 million in 1991 to 5 million a year in 2006. Much of this is credited to the efforts of a Doctor Govindappa Ventakaswamy (Or Dr. V) and the hospital he founded, Aravind Eye Hospital.
The surgeons at Aravind are world class, among the most productive in the world, doing as much as 13 times the amount of eye surgeries than their counterparts in the United States and yet having fewer complication rates than health systems in developed countries. But what is truly astonishing about Aravind is that nearly half of the procedures it conducts every year are practically free. For many years, India’s Aravind Eye Care System has restored the sight of millions, even those who cannot afford it. The question is how they manage such a seemingly impossible feat.
About Aravind Eye Care
1976 Madurai, when Dr V. who had turned 58, had to retire from public service, he still wanted to carry on his mission of eradicating “preventable” blindness in India. Mortgaging his house and selling his family’s possessions, he started a humble 11-bed eye clinic in the living room of his house and recruited his extended family in joining his mission. Today, with over 3,500 beds in 5 hospitals across Tamilnadu, it is one of the largest eye care systems in the world. The Aravind eye hospital has since expanded to become Aravind Eye Care System, which includes treatment facilities, training schools, research centers and even production facilities. All of which have been self-sustaining with 75% profit margins. All the while treating both paying and non-paying patients alike with such high service levels.
The question was how was it even possible to do such surgeries for free and yet still make a profit. Innovative Approaches
High Quality, Low Cost (Economies of Scale)
The innovation challenge here is significant – how would one carry out a high quality process of eye surgery at low cost?
Dr V. searched for inspiration in other fields where the same challenge of carrying out activities systematically, reproducibly and to a high quality standard – but at low cost –and found inspiration from the global fast food chain of McDonalds. What fascinated him was how McDonald’s could train people all over the world to produce a product that was delivered the same way and have the meals offered at a low cost. He wanted to deliver a mechanism of delivery of eyecare with the efficiency of McDonalds. And so this assembly line production system formed the basis for his quest to eradicate blindness.
Finding a Niche Market
Cataracts were the leading cause of preventable blindness in India, with numbers up to 70% of the total population suffering from cataract blindness. While the hospital did treat other optical problems, there was a predominant focus on cataract treatment, as Dr. V saw it as the fastest means to making an impact on the blindness problem that plagued India. As such, it was the cataract procedure that became the poster child for efficiency.
Smarter Use of People
Eye surgeons who worked at Aravind had productivity rates that were many times their counterparts in the developed nations. Each surgeon would have an average of 2000 eye surgeries a year as compared to 150 such eye surgeries done by an eye surgeon in the United States. Much of it could be attributed to the “assembly” line system for surgery. Patients were processed and readied in batches, with qualified nurses doing all the preparatory work, so that the surgeons could focus on what they did best, surgery. Each operating theatre, at any time, had 2 surgeons working on two tables each, with each having four qualified nurses assisting them at any time..
These tables were placed on either side of the equipment, such that once the surgeon was done with the procedure on one, he and the equipment would swivel to the other table. Leaving the qualified opthalmic assistants to escort the treatment patient to the recovery room and prepare the next patient on the free table. This assembly line structure ensured that the waiting times between surgeries were basically zero. Beyond this, these surgeons develop their own learning economies of scales in terms of skills, taking an average of 10 mins for a cataract surgery as compared to 30 mins in the other hospitals in India.
This detail and focus on efficiency isn’t just limited to the operating theatre. Trained support staff, who are categorised by colours according to their job scopes, carry out all the routine diagnostic procedures. This leaves the opthalmologists to perform tasks that required their judgement and medical background. Another example of their operational efficiency would be in how data from patient visits are compiled on a daily basis to forecast the number of patients per day and anticipate the load required on the staff.
Vertical Integration (Scaling Up)
In India, the two most important cost elements were personnel and critical components in the surgery (See Figure 1). For the cataract surgeries, often it was the highly efficient and well trained ophthamlmic nurses and the Inter-Ocular Lenses (IOL) that were to replace the fogged natural lenses. As such, as the hospital began to expand it’s operations, there were problems sourcing these two. As the hospital grew, the required base of skilled nurses were often not readily available in rural Southern India. As such, Aravind recruited candidates from the rural villages to undergo two years of training at Aravind before being hired full-time. Many of these candidates had barely passed high school and the alternative was often early marriage, thus ending any opportunity of further studies or meaningful employment. Stigma and fear for young unaccompanied girls to travel to the city often meant looking for employment was also not culturally accepted in these villages.
By recruiting from these villages, training is freely given, along with housing and a monthly stipend. This training empowers these young women with further knowledge, confidence, skills and money. Of which the money is placed in a bank account for them for future uses (i.e. marriage). The other issue was in the sourcing of the IOLs. IOLs were sold for nearly US$150 in the U.S. and in Europe, making it prohibitively expensive for use in rural India. In the 1980s, strong profits allowed these manufacturers to donate some lenses to Aravind. However, as Aravind’s volumes grew, the donations just weren’t enough to match the increase in demand. For many, these IOLs were a means to regain their vision fully and a return to their livelihoods. IOL was cutting edge at that time, requiring precision machining, quality control and a strict sterile environment.
With help from external supporters, Aravind acquired the technology required and set up Aurolab, a production facility under the direction of an independent trust. With the huge volumes of IOLs needed in India, the facility today produces excess quality lenses at the affordable and profitable costs of US$6 (at the exchange rates at the time), making it an alternate source of revenue to further support the core mission of eradicating blindness. This high quality and very affordable product made a global impact on the prices of IOLs. Aurolab later expanded into making other essential surgical components as well, such as sutures, eye drops.
Hybrid Business Model (Tiered Pricing)
Aravind serves any patient, regardless of whether the patient has the means to pay. Up to 70% of the total patients were treated for free. Majority of which were the vast numbers of poor who mainly lived in the rural areas, the very segments that the hospital was set up to address. Eye screening camps were used to reach out to the poor to convince them it really was free for them. Those who are screened are then transported to the hospital for their free surgeries in the “free section” of the base hospitals. Yet the focus on efficiency and cost-cutting, the main question was still on how the hospital generates revenue when up to 70% of the patients are treated for free. Paying patients that make up the other 30% are how Aravind generates it’s revenues and sustains its hospitals.
This segment of patients are essential to Aravind in two ways. Put simply, the income generated, which is still below the market price for high quality eye care, from these paying patients subsidises the surgeries for the free paying ones. Furthermore, paying customers set high demands on quality care and help ensure that the standards for nonpaying customers are equally high. How Aravind justifies the difference in pricing is in differentiating the service offered to paying customers. The surgeons, operations, equipment are the same, but the the difference is in the level of service and comfort given in pre-operation and post-operation services. Paying customers rest in beds instead of floor mats, have optional air conditioning and even semi-private bathrooms. Due to this two tiered pricing strategy adopted by Aravind, it has helped Aravind avoid the issue of funding for sustainability that often plagues NGOs.
Affordability vs Quality
With such cheap costs of manufacturing and a two tiered service system, the common conception would be that quality is somehow compromised as well. That was one of the main misconceptions that they had to debunk as well. In Aravind, eye hospitals, the surgeons are rotated between the free and paying patients on a set schedule, so that every doctor treats both free and paying patients, at the eye camps or in surgery at the base hospitals. This ensures quality assurance in the form of market feedback from the paying patients. The other concern for doctors would be the efficiency and service level from having performed such high volumes of surgeries non-stop each day. One key metric for surgeries is that of infection rates or complications.
Yet despite the high volumes, complication rates were 4 in a 10,000, compared to that in the United Kingdom (6 in 10000). Aravind management keeps a very close track on these metrics, both as a whole and for individual surgeons as well. Each case of complication is traced to the team that performed and accounted for. Every camp patient is followed up on and around 90% of the patients interviewed provide valuable feedback on post-surgery outcomes and statistical data. For their production arm, Aurolab was certified according to quality standards (such as ISO9002). A testament to the quality and affordability would be how they went on to capture 10% of the global market share for lens production. Making high quality products at an affordable price, Aurolab’s products are now exported to more than 130 countries worldwide, many of which are developing countries.
Lessons for developed countries
The case of Aravind was an example of what was thought impossible. The main lesson for developed countries would be to rethink how a healthcare model can operate effectively and efficiently. The experience curve and High-Volume/Low-Cost model is readily applied to other industries in developed nations, yet why should healthcare be any different? Affordable healthcare is achievable and while I personally do agree that the local economy can explain some of the differences in costs. The willingness to challenge assumptions, physicians who are willing to find cost-effective solutions are some ways Aravind has made such a great feat possible.
Beyond that, for the medical doctors from developed countries, the specialisation and high volumes of surgery provide an invaluable learning opportunity. Many of the cases that these doctors would only hear about in their home country, were real here. That is why Aravind has become the frontier for eye care, with doctors and students applying for a fellowship in its hospitals.
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