9-505-078

REV: AUGUST 26, 2011

Narayana Hrudayalaya (NH) means God’s Compassionate Home in Sanskrit. Situated in the south Indian city of Bangalore, best known as India’s Silicon Valley, almost everything about this heart hospital was unique, from its buildings and equipment to the doctors, nurses, and their treatment and care of patients. At the entrance to the main foyer of the hospital was a circular chapel equally divided into four independent quadrants, each a place of prayer and meditation for the four main religious faiths of its patient population—Hindus, Muslims, Christians, and Sikhs (see Exhibit 1 ). Depicting the unity of human faith, the four streams naturally converged at the center of the chapel.

Founded in 2001 by Dr. Devi Prasad Shetty, NH had grown rapidly in four years to house 500 beds, 10 fully commissioned operating theatres (OTs), two cardiac catheterization laboratories, and its own blood and valve banks. [1] The pediatric intensive therapy unit (see Exhibit 2 ), which consisted of 50 beds, was one of the largest in the world with 40% of all procedures performed at NH being pediatric treatments. Since its opening, the hospital had completed over 11,228 open-heart surgeries (OHSes), half of which were pediatric. In 2004 alone, it performed 4,276 surgeries, of which 1,467 were on children. To complement the surgeries, NH also performed 5,430 catheterization procedures that year.

To provide affordable cardiac care to the masses, NH followed a hybrid strategy of attracting paying patients by virtue of its reputation for high quality combined with a relentless focus on lowering its costs of operation wherever possible so that a larger number of people could afford to seek treatment. The surplus gained from paying patients was used to subsidize procedures performed at, or below, cost for patients who could not afford the full fee. In 2004, the proportion of patients who paid NH’s full price to those that could not afford to pay was about 60:40. (See Exhibit 3 for a picture of the entrance foyer at NH on a typical day.)

The break-even price for a typical OHS at NH was approximately 90,000 rupees (Rs.) (US$2,000) for adults and Rs. 130,000 (US$2,900) for children. At a price of Rs. 110,000 (US$2,400) for a regular package involving OHS (inclusive of surgery and hospitalization charges), NH’s charges were the lowest in the country, where the average cost of OHS in a private hospital was Rs. 250,000 (US$5,500). At the upper end, patients who opted for executive wards paid Rs. 140,000–Rs. 195,000 (US$3,100–$4,300); this package provided private rooms instead of general wards, although treatment and care across all packages was identical. (See Exhibit 4 for the prices of various procedures at NH and comparative prices at other Indian hospitals.)

Professors Tarun Khanna and V. Kasturi Rangan and Doctoral Student Merlina Manocaran prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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