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Having built NH into a reputable and profitable hospital, Dr. Shetty was keen to extend the concept of affordable health care to other specialties, with NH serving as the “backbone” hospital. Dr. Shetty offered this rationale: “We have reached a plateau in cost reduction by increasing our volume of surgeries . . . the yearly increase in procedures is now small, but our resources are still underutilized—our machines, sterilization department, blood bank, etc. can be used by other hospitals within Health City, and this will drive unit costs even lower.”
To this end, NH started noncardiac units, with the plan to house each specialty in new buildings being constructed in the 35 acres around the hospital. The neurosurgery unit was started in May 2004 with three surgeons and within 10 months had completed 320 operations. A 500-bed orthopedic and trauma hospital was expected to be ready by the end of 2005, while another building was being constructed to house the existing neurosurgery unit and a planned pediatric unit.
In addition, the Emami National Institute for Bone Marrow Transplant (named after the Emami Group of Companies of Calcutta, which fully funded the equipment) was started in 2004 as the state’s largest bone marrow transplant unit. The unit was headed by Dr. Sharat Damodar, a hematologist trained in bone marrow transplant who was already working with the cardiac team at NH. Once again, Dr. Shetty managed to reduce the cost of bone marrow transplants from the national average of Rs. 1.2 million (US$27,000) to Rs. 400,000 (US$8,900), this time by leveraging the hospital’s existing infrastructure. The blood bank, for instance, had previously discarded unused blood after 10 days (as it was unsuitable for cardiac surgery) but could now utilize blood for up to 26 days after collection in transplant procedures. In addition, the investigations performed for the bone marrow transplant utilized the existing equipment at NH, thus adding few fixed costs.
The plan, according to Dr. Shetty, was to build a total of 10 hospitals in a common area, with each hospital housing one or two specialties. The hospitals would be self-sufficient within each specialty (thus each building would have its own OTs, intensive care units, etc.) but would draw on common facilities such as blood banks and laboratories already established at NH. By employing specialists in each field who would be able to perform high volumes of surgeries and by leveraging the underutilized common facilities, Dr. Shetty expected to offer tertiary health care at below-average costs. For instance, the cost of brain surgery at NH was expected to be Rs. 45,000 (US$1,000), while major spine surgery would cost Rs. 25,000 (US$550) at NH, approximately half the cost at other Indian hospitals.
Dr. Shetty explained:
If one were to evaluate our business as a strategy exercise, it is not unreasonable to view our three lines of business as somewhat different forays in health care. The first is our heart hospital and all the associated activities. Next is the Yeshasvini insurance scheme. Frankly, that does not consume much administrative or medical time—we simply came up with an idea and a means to organize its administration. We get some surgical referrals from the scheme, but that’s not the mainstay. Then, of course, is our vision for the Health City with many specialties all within a geographical proximity, so we can utilize the common infrastructure, labs, supplies, transport, etc., to further bring down costs while improving quality for the masses of people who even lack basic care.
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