“If Coca-Cola can sell billions of sodas and McDonald’s can sell billions of burger, why can’t Aravind sell millions of sight-restoring operations, and, eventually, the belief in human perfection?” – quipped Dr. Venkatawamy (endearingly known as Dr. V) in an interview to Fast Company. Dr. V had a vision – to restore the gift of sight to millions of poor blind people through the Aravind Eye-Care system (“Aravind”). Aravind’s business model is based on his vision to solve the blindness problem regardless of the patient’s ability to pay. Aravind has been able to successfully execute this business model over the last forty years to become the largest provider of eye-care services in the world.
India is home to one-third of the world’s blind population with close to 200 million Indians needing eye-care. In 80% of the cases, blindness is caused by factors which can be corrected. Dr. V set out to address this problem of curable blindness and created an institution which performs 400,000 eye surgeries a year.
Aravind has been able to develop a self-funding healthcare delivery model where it creates value for its entire customer base but captures the value only from a part of it. Aravind is able to provide free-of-cost or at cost, high-quality service for 50-60% of its patients who are poor or ‘non-paying’ by using the profits generated from the 40-50% of the paying patients. The hospital provides the same quality of service across both paying and non-paying patients and has consistently provided high-quality care for the last 39 years. The organization has been able to achieve this by focusing on the following strategic imperatives –
- Singular Vision – Dr. V chose a specific vision for the company to focus on – eliminating blindness through cataract surgery
- Hybrid Business Model – The hybrid model helps Aravind use the cash-flows from paying patients to cross-subsidize services for the needy. This model helped Aravind develop specialty services along with basic cataract surgery and care. The ability to develop high-end ophthalmic care also helped Aravind attract and retain qualified doctors.
- High volume, high quality and low cost business model – To provide perspective, the cost of cataract surgery at Aravind could be as low as US$50 while in the US, it is in the range of US$3,000.
- Reaching out to the under-served – Given the highly fragmented nature of its customer base and due to the need for scale, Aravind has to generate demand through customer outreach programs.
The successful execution of the above business model is predicated on reducing fixed costs through scale and efficiency. For context, Aravind performs 60% of volume of surgeries done by the UK health system but at one-hundredth the cost. Aravind has been able to accomplish this by focusing on the following operational innovations.
Productivity with quality – Aravind has developed standardized processes for key operations, so as to ensure consistent and efficient delivery.
- OPD: Aravind serves 6,000 outpatients in the hospital and 1,500 patients in outreach camps every day. The process flow involves registration, vision test, preliminary exam, refraction, final exam, counseling and recommendation for surgery.
- Surgeries: As seen in the Exhibit 1 below, the Aravind doctor performs >2,000 surgeries in a year compared to the Indian average of 400 and 150-200 for most Asian economies. This significantly higher productivity is obtained by adopting an assembly line approach to surgery. Each operating room has one surgeon in each room, but a minimum of two operating tables, multiple sets of equipment and multiple nursing teams to carry out key non-surgical tasks, such as preparing the patient and administering the anesthetic. This unique layout enables the surgeon to complete a surgery, turn around and start the surgery on the next patient who has been pre-prepared. This procedure enables the doctor to perform six to eight procedures per hour as opposed to usual norm of one surgery per hour. More pertinently, the high productivity does not come at the cost of quality and in fact the clinical outcomes are superior to the average in UK hospitals (See Exhibit 2 below).
Cross-training the work-force – To allow the doctors to focus on the most critical tasks of diagnosis and surgery, Aravind has a large staff of nurses and technicians. To further reduce costs, Aravind recruits and trains women from local communities and certifies them as technicians (these women make up 60% of Aravind’s workforce). The nurses and technicians are cross-trained so that they can perform multiple routine tasks.
In-house manufacturing – The intra-ocular lens used in the surgery used to make up a significant part of the fixed cost of the surgery at c.US$100. Aravind set up a manufacturing facility which makes intraocular lens called Aurolab in 1992. The price of the lens has been driven down to less than US$10 (90% reduction!).
Technology to aid outreach – To facilitate its community outreach programs, Aravind uses both eye camps and telemedicine driven vision centers to source patients for surgery in the main hospital. The vision centers are mobile diagnosis centers which employ tele-medicine so that doctors from the main hospital can evaluate and diagnose millions of patients at scale.
The Aravind model has been partially replicated in more than 300 hospitals globally. However, Aravind believes that it has only covered the tip of the iceberg and that the impact that it can potentially have is much larger. Aravind plans to expand its reach to other parts of India and globally to other developing markets which have large impoverished population. The key source of differentiation for Aravind as compared to other low-cost healthcare players is that it has a strong Research division and it is constantly innovating – on product, process and eye-care delivery
- Driving down the cost of high-quality care: Lessons from the Aravind Eye Care System, Health International, Mckinsey Health Systems and Services Practice
- Making Sight Affordable – V. Kasturi Rangan and R.D. Thulasiraj
- Aravind Eye Health Care Operations – Angel Diaz Matalobos, Juan Pons, Stephen Pahls
- Financial Sustainability for high quality, large volume cataract surgery programs – Aravind Eye Hospitals & Postgraduate Institute of Ophthalmology
- 2008 Gates Award Video – Aravind Eye Care System