Saturday, June 09, 2012

How sustainable is the Narayana Hrudayalaya model for healthcare ?

Narayana Hrudayalaya is often touted today as an Indian healthcare success story. It is supposed to be a great model of how to provide high tech medical care for the poor at a low cost. It has received many awards – and has been featured in the Economist and as a Harvard Business School study as well. In fact, the Aamir Khan show  , Satyamev Jayate, projected Dr Devi Shetty as an ideal role model for all Indian doctors to copy.

What amazes me is that no one factors in the hidden subsidies which have been provided to Narayana Hrudayalaya, which allow it to function the way it does! There are 3 major components to the costs of providing medical care:

1.    Salaries of health care professionals
2.    Cost of medical equipment
3.    Real estate

In Indian cities, by far the biggest chunk of the cost is that of the land – and private hospitals have to take loans (on which they have to pay interest at market rates ) in order to buy land to construct their hospital building. This is a huge part of the “cost of doing business” for the healthcare industry.

What bothers me is that no one talks about the fact that the land on which Narayana Hrudayalaya constructs its hospitals is given to it for a song. Incidentally, this is true for most large “charitable” hospitals in India. They claim to be charitable by promising to provide free care to a certain number of patients, in order to qualify for the grant of free land by the government. Once the hospital has been constructed, they happily break all the rules – after all, who is going to check ?

Everyone feels good about all these fancy new hospitals which are supposed to symbolize how India is shining ! India is becoming a medical superpower and a magnet for medical tourism, which is being projected as a multi-billion dollar industry. However, the reality is that this gifted land is a hidden subsidy – it’s the exploitation of a public asset for private gain. Of course, there’s nothing new about this. Industrialists and politicians do this all the time – and Narayana Hrudayalaya’s neighbor,  , Infosys is an excellent example of a highly profitable company which is happy to exploit land gifted from the government, because they are “ creating jobs “and “ earning valuable foreign exchange”.

Gifting prime real estate land in this fashion just ends up distorting reality, because this gift of hundreds of crores  does not show up anywhere on the balance sheet ! Of course, it’s not fair to single out Narayana Hrudayalaya  – they are just following in the footsteps of “ charitable hospitals “, which do this all the time. Using political clout, they grab the land , and promise free care at the time of signing up . They end up creating 5 star corporate hospitals which charge an arm and a leg – and forget all their promises when their operations start. The Seven Hills Hospital in Andheri, Mumbai is a great example of this; as is the Kokilaben Ambani Hospital. If doctors in private practice had access to free land to build their private hospitals , they would be able to provide care at much less than these hospitals charge !

Of course, this misuse is not limited to h als only . Another great example of how this largesse is exploited by people in power is the large number of private educational  institutes which have come up in India in recent times. These have huge sprawling campuses and practically all of them are owned by politicians , who have built these institutes to convert public land to private property !

I don’t expect human nature change and I am mature enough to accept that it’s perfectly reasonable for people to exploit whatever sweetheart deals they get – after all, we are all human ! What bothers me is the hypocrisy - Narayana Hrudayalaya and the other hospitals should not pretend to be holier than
thou ! It’s OK to be greedy and money is good , but it’s not right that these hospitals pretend to be low cost and charitable , when they are not.

This is not something which is limited to India either ! An article published in June 1997 highlighted how many of the world’s most highly respected “charities” in the USA also take advantage of the same loopholes ! As the article Charities on the Dole, states “ .. But the provision of charity--like profit making itself--isn't always what it seems. The bane of free economies has long been the businessman who eschews market competition to seek favors from the state. He slants the process in his favor, using an unfair advantage or imposing disadvantages on his potential competitors. The U.S. government has pioneered the practice of doing the same for charitable organizations. Government at all levels funds the nonprofit sector to the hilt, corrupting the idea of compassion. “

What about the low cost insurance program which Narayana Hrudayalaya has pioneered ? Isn’t this praiseworthy ? The idea of doing bypass surgery for one tenth of what a US hospital charges for poor  Indians is very commendable,  but this hides a subtle danger, which no one seems to have bothered to point out – the bane of unnecessary surgery, done simply to earn healthcare insurance revenue , which is provided “free” by the government. Bypass surgery ( which is what Narayana Hrudayalaya originally specialized in) is very dramatic surgery , but it’s also the most overused operation , and the one which has been documented to performed most unnecessarily as well ! There’s the temptation to do bypass surgery for everyone which cardiac complaints , whether they need it or not. Who’s doing the independent medical audit to check if the long lines of patients waiting for surgery really need this at all in the first place ?

Given the way India operates, Narayana Hrudayalaya is healthcare’s blue-eyed boy which is unlikely to ever be critically analysed by the powers that be . However, the good news is that thanks to the internet, the most important people in the healthcare system – the patients – are finally getting a chance to provide their personal feedback. It’s worth reading what  Narayana Hrudayalaya’s patients feel about the services they provide.

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  1. I have been arguing that unless incentives of healthcare are not changed they will work unethically. The whole business of healthcare survives on sickness.

    This model needs to be changed. I have discussed at

  2. Pls try to keep posting.
    Let me show other source that may be good for community.

  3. Anonymous1:56 PM

    Is the consolidated site for feedback on hospitals?


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