Business Process award winner 2011
In 2001, with $20 million in seed money from his father-in-law and the backing of Shankar Narayana Construction Company, he founded Narayana Hrudayalaya (God’s Compassionate Home) Hospital outside Bangalore. He was guided by the philosophy of Henry Ford: using mass production techniques and specialization to cut costs by achieving economies of scale. His flagship hospital has 1,000 beds compared to an average of 160 in American heart hospitals. He personally has performed more than 15,000 heart operations. The other 42 members of his team performed 6,272 cardiac surgeries last year, compared to 4,128 at the Cleveland Clinic, a US leader.
The sheer volume enables physicians to acquire world-class expertise. Dr Shetty has them concentrate on one specialty rather than serve as generalists in cardiac surgery. He says performing the same surgery repeatedly enables them to come close to perfection. Plus, he relieves the doctors of administrative duties so they can concentrate solely on medicine.
He increases productivity by using his cardiac operating rooms to the maximum, rather than the standard six or seven hours a day customary in Western hospitals. Dr Shetty, still Chairman and Managing Director of the hospital company, believes that higher volumes lead to better quality and lower cost.
Next door to Narayana, Dr Shetty built a 1,400-bed cancer hospital and a 300-bed eye hospital, which share the same laboratories and blood bank as the heart institute, further cutting overhead. Narayana Hrudayalaya in association with India’s Space Research Organization also runs one of the world’s largest tele-cardiology programs, having used its satellite technology to treat close to 70,000 remote patients to date.
Over the next five years, his company plans to increase its total hospital beds to 30,000 from about 5,000 today. He says at that volume he would be able to cut costs significantly more by buying directly from suppliers and bypassing medical equipment sellers.
With the government of the state of Karnataka, Dr Shetty also created a health insurance plan for the poor farmers of the area. It covers nearly three million people at a premium of about 10 Rupees (22 US cents) a month. About 60 percent of the cardiac operations were performed on patients too poor to afford the full cost.
Despite serving primarily a low-income population, Dr Shetti says his privately-owned hospital group earns an after-tax profit of 8 percent, slightly above the 6.9% average for a US hospital, according to American Hospital Association data.