It describe operation excellence model of Narayana Health.
Published on: Mar 3, 2016
Transcripts - Narayana Health
“Hands that serve are more sacred than lips that prey”
By Mother Teresa to Dr. Devi Shetty when Dr Shetty was working in Birla Heart Foundation in
Dr.Devi Shetty, Founder & Chairman of Narayan Health (NH), who has committed to provide
affordable and compassionate health care service on large scale, has been serving nation
since 2000 when he opened his first hospital in Bangaluru. Now he is considered as an icon of
modern entrepreneurship in health care. He pioneered and championed an absolute unheard
model for treating India’s poorest people. NH provides medical services for those who cannot
have good medical services due to money constraint. An open heart surgery cost 2.5 lacs INR
and Rs 2500 per month in post-operative care and medicines. Other hospitals, especially
private hospitals, provide health services in corporate style where common man cannot think
to go due to money constraints. While Narayan Health (Hrudalaya) welcomes them and is still
running as a sustainable and effective business model.
While Dr. Shetty was working in Calcutta in 1990s, he found out that 80% of health care
expenses were borne out of pocket. And cost of heart surgeries was more than 1.5 lacs INR.
He also found out that 47% of rural and 37% of urban population either borrowed money of
sold out asset to pay for medical expenses. On the other hand side Indians genetically are 3
times more vulnerable to heart attacks than Caucasians. Only 120,000 heart surgeries used
to perform in 1990s when there was need to perform 2,00,000 surgeries. He was sure that
cost of surgeries has to come down. However main challenge was to keep quality of health
care good with low cost (which generally unexpected, when one seeks to have affordable
health care from Government hospitals then quality is a big issue, and private hospitals who
has good quality has high cost of health care). As Dr. Devi Shetty says “I was certain of one
thing though- charity is not scalable while a sound business model is”. However he believes,
If a solution is not affordable then it is not a solution. It is pertinent to note that 100 years
after the first heart surgery, less than 8% of the world’s population can afford it.
But now NH is one of the largest private hospitals in India and performs more heart surgeries
per year than the leading hospitals in the US with matching quality and effectiveness. . He has
developed a scalable, low cost model. In NH, those who can pay, can have medical service by
paying far less than other private hospitals, and those who cannot pay, can also get treated.
Currently NH has 29 hospitals in 17 cities, 7500 beds, 15000 associates and 1500 full time
Core values of NH are iCARE, which are:
I: Innovation & efficiency
C: Compassionate care
R: Respect for all
E: Excellence as a culture
While dream of Dr. Shetty is to have compassion, quality and affordability in the services at
1.Identify & State the Operational (functional) methodology at NH
Answer 1) NH provides health services on low cost which Dr. Devi Shetty has been able to
provide because of its operational efficiency. Below are some points which highlights
operational excellence model at NH:
1. NH has best collaborators, such as Indian Space Research Organization (ISRO)
provided satellite services to link small local hospitals in the country with NH so that
immediate advice, in the case of cardiac arrest, may be sought by local hospitals from
NH. Biocon has supported NH in offering new drugs which are considerably cheaper
than conventional ones. They buy generic drug which 80% cheaper.
2. Low attrition rate (almost zero) of doctors.
3. Fixed salary of doctors, rather than variable pay (for each surgery). That is why they
spend only 22% of revenue on salaries.
4. Business model is similar to Walmart. It takes advantage of volume in its favour. The
large number of pathological tests per day per machine brings down per unit cost due
to economy of scale.
5. More process innovation and less product innovation.
6. Twenty four operation theatres and other infrastructure support 50 major heart
surgeries daily. This is eight times more than other Indian hospitals.
7. Some of the expensive machines are on rent from the suppliers so as to save
immediate capital expenditure.
8. Lean staff helps in bringing down the costs and reducing corruption.
9. Micro medicine and telepathy reduces cost as doctor canadminister patient remotely.
10. Using shared resources like laboratory, radiology, infection and quality control Teams,
11. NH has implemented Cloud-based ERP System. This has provided:
a. Single Patient Record for all life
b. Integrated across all units
c. Real time access of data
d. Lower maintenance efforts
12. NH has implanted Automated Redress System. With this service, patients & staff send
complaints instantly via mobile phone. And they are able to solve 99.6 issues. They
provide department targets to improve efficiency. It is called as PEARLS (Patient &
Employee Ailment Resolution & Learning System).
13. NH has adopted a “Doctor Engagement Model”. Now doctors has dedicated teams.
Due to this, doctors are able to handle higher volumes through assembly line
approach. Doctors have standard processes and procedure.
14. Many hospitals are on lease, for eg: NH Hydrabad.
15. Some of the hospitals are based on cost effective hub and spoke method. For e.g.
Heart centre at Ramaih medical college hospital Bangalore and SDM medical college
16. They have singleequipment maintenance partner for NH group, maintaining 400 crore
worth equipment. They have partnered with Trimedx, which is equipment
maintenance and provider company. This has made them to have equipment available
all time and quick service in case of emergency.
17. NH manages fund on daily basis. Daily P&L provide them to have better financial
18. NH bargain contract with supplier on weekly basis. That is why they try to source
material from supplier cheaper.
19. NH has continuous training program. It has nursing college as well.
20. It has strategic alliance with many companies to provide better equipment and
service. One such example is NH-HP partnership, which provides eHealth center. This
provides quality health care services through telemedicine and teleradiology.
21. High utilization of machines and digitalization of reports reduces cost further. CT
Scanners, MRI scanners are used for around 14 hours a day whereas the Indian
average is around 8 hours a day. X-Rays are digital – savings on recurring cost of the
22. There are some other methods that NH has adopted to reduce cost, such as
a. Use pre-fab building materials
b. Build for natural ventilation, no air-conditioning
c. Centralise purchase of drugs and consumables
d. Leverage IT, share data on Cloud
e. Create replicable systems and procedures
23. NH has adopted Asset Light Model, where they have adopted various strategies from
greenfield projects to management contracts. That is why their individual bed cost has
reduced from 48 lacs, which is industry average, to 27 lacs INR.
2.What are the unique features at NH, that enables it to classified under one of the best
However most of unique features at NH are mentioned above, but below are some points
that describes the same:
1) High quality yet low cost: NH provides high quality service (globally benchmarked) yet
in low cost.
2) Number of operation (Scale): They perform operations in a huge number. As per one
case study, Massachusetts General Hospital performs 536 operation per day,
Cleveland Clinic performs 1367, while Narayana Health performs 3174 operations per
3) Service Excellence
5) Ethics: They provide same health care to those who cannot pay for treatment as they
provide others who can pay.
6) Financial Stability: As Dr. Devi Shetty says “I was certain of one thing though- charity
is not scalable while a sound business model is”. That is why NH has EBIDTA margin at
13% (in 2012-13).
7) Reach: NH is operating in 17 cities and have 29 hospital. Recently they have opened
one hospital abroad (in Cayman Island).
8) Other than all these their expansion strategy, operational efficiency, academic
excellence and CSR is also best.
3.Explain the success approach of NH in covering major hospitals as their Partners - rather
Answer: NH’s main objective is to provide affordable health care service to all. To achieve the
same, NH has collaborated with many organization. Some collaborations are with hospitals
where they provide servicein other hospital’s campus. For eg:Heart centre atRamaih medical
college hospital Bangalore and SDM medical college Hospital Dharwad.
NH has created a chain of 16 primary health centers across Amethi and Raebareli to offer free
services including consultations & medication to more than 30,000 patients in a month. There
NH used other hospital’s infrastructure. NH adopted PPP model in Karnataka, where NH
provide medical services in govt. hospitals.
Even in Yeshaswini Micro Health Insurance Scheme, insurer can visit many hospitals other
than NH to getmedical services.In 2012, NH entered into partnership with Westbank Hospital
to set up a ‘comprehensive cardiac care unit' at Westbank’s Howrah Hospital. In the same
year, Narayana Hrudayalaya Group and SRCC partnered for Children's Hospital in Mumbai.
Similarly. NH partnered with Shri Mata Vaishno Devi Institute of Medical Excellence
(SMVDIME) in 2014 to serve patients in Jammu.
4.What is the vision statement of NH, explain the unfulfilled dream project of Dr.Devi Shett
Answer: Vision statement is “High Quality Healthcare with care and compassion at an
affordable cost on a large scale”.
As Dr. Devi Shetty says “The first heart surgery was done over a hundred years ago but even
today only 8% of the world’s population can afford heart operations,” and “In India, around
2.5 million people require heart surgeries every year but all of [the country’s doctors] put
together perform only 80,000 to 90,000 surgeries a year…. We clearly need to relook and
change the way things are being done.”
Above statement clearly shows that Dr Devi Shetty’s dream is yet not fulfilled. He requires
more process innovation as he says “[industry] does not need a magic pill or the fastest
scanner or a new procedure,” but instead requires improvements that lower the cost of
medical attention and make it more widely available. To further lower cost, he has planned
to make health cities having 5000 bed capacity. As currently there is 0.7 bed per 1000
population in India, so he will make pan India chain of such health cities. This will further
reduces cost of treatment to $800. He also wants to make expensive treatment available to
poor as well. That is why he has started micro finance scheme “Yeshasvini”. Not only this, but
Dr Devi Shetty wants medical education available to poor student, that is why he has started
Udayer Pathe, which provides soft loans to poor children and mentor these student right from