India’s high rates of maternal death, malnourished children, and major problems in the healthcare sector, have attracted healthcare providers that are re-thinking and implementing new models of healthcare delivery for the poor. LifeSpring Hospitals is one example of a high-quality, low-cost healthcare network in India, which provides maternal and child healthcare services to low-income women. As a joint-venture between Hindustan Latex Ltd. and social philanthropic fund, Acumen Fund, LifeSpring Hospitals targets women and children in the bottom-of-the-pyramid. Since its establishment in 2005 when it opened a 25 bed hospital, the company has provided healthcare services to 25,000 low-income patients. Its business model depends on a process and standards-driven, minimum capital and expenses, high-volume and high asset use approach, which enables it to be easily scalable. In addition, the hospital offers tiered pricing, allowing patients to choose from a general ward, semi-private room, or a private room. The company operates in peri-urban areas and plans to open 22 more hospitals within less than two years. The healthcare sector is marred with its own problems. Doctors and nurses are in short supply, healthcare centres are under-equipped and under-staffed, healthcare finance is inaccessible, drugs and treatment are expensive, and at times the physical distance between a patient and the hospital is huge. Furthermore, enormous potential for growth has been identified in healthcare. A McKinsey study projected the growth of healthcare in India over the first quarter of the century at 10 per cent, making it one of the rapidly growing sections of the Indian economy. The study further indicated that a vast improvement in awareness and a new infrastructure for healthcare in rural India would increase the use of these services there.
A few healthcare providers in India are establishing new global standards for cost, quality and delivery. They do it by sidestepping conventional approaches to medical practice and innovating new business models by incorporating business practices. LifeSpring Hospitals has developed a business model of running a network of hospitals that provide worldclass healthcare at extremely low prices mainly on the principle of high-asset use.
LifeSpring Hospitals is a network of maternity and child-care hospitals that provides high-quality, low cost maternal services to low-income women with clear and transparent pricing. It is a joint venture between the public-sector company, Hindustan Latex Ltd, and the US-based philanthropic funding agency, Acumen Fund.
LifeSpring founder Anant Kumar set out with the goal of supplying a vital healthcare service to the ‘B70’, or the lowest 70 per cent of the wage earners, opening the first 20-bed LifeSpring Hospital in Moula Ali, a town in the outskirts of Hyderabad. LifeSpring responded to this potential at the bottom of the pyramid as well as the gap left by often corrupt and poorly-staffed government hospitals, the high price and exclusivity of private hospitals, and the lack of quality control in many small private hospitals.
The first LifeSpring Hospital opened in 2005. With a chain of small hospitals (20-25 beds), priced at one-fifth of the market rates, LifeSpring has achieved financial sustainability and has had a tremendous social impact. LifeSpring broke even and became profitable in less than two years of operation. The hospital network has already served more than 25,000 low income patients, mostly from families working in the informal sector.
Through a process-driven approach, LifeSpring Hospital has developed an easily replicable model ensuring scalability and supporting rapid expansion. LifeSpring cut costs by standardising its procedures, trimming expenses, increasing volume, reducing staff attrition rates and using a cross-subsidy model for three types of wards: general, semi-private, and private. Additionally, it substantially increased the typical hospital use rates of key assets, ranging from diagnostic machines to the obstetricians themselves.
LifeSpring maintains minimum capital and expenses, delivering its services at a low unit cost. Most LifeSpring hospitals are taken on long leases (15-20 years) from players who could not run them. The lease model saves hugely on land costs. LifeSpring’s focus on a particular niche — maternal and child care — cuts down on the need for many specialist doctors and also on the range of equipment needed. It refers the more difficult cases for which it may be ill-equipped to other hospitals, even if it means turning away customers. Standardisation in clinical procedures and kits brings down costs too. It allows the network’s facilities to average eight times more procedures than other private clinics. Thus, its operating theatres accommodate 22-27 procedures each week compared to between four and six in a private clinic.
Specialising in in-patient gynaecology and obstetrics leads to easy standardisation. It has over 90 standard procedures, including standardised surgery kits and clinical protocols. LifeSpring uses a narrow range of drugs and equipment for large numbers of repeat procedures and thus purchases standard equipment and generic medicines in bulk. LifeSpring’s highly standardised processes allow for quality control and easy routines and replication by lesser-skilled hospital employees.
LifeSpring doctors earn fixed salaries rather than the variable consulting fees of their private clinic peers. Doctors nevertheless have strong non-monetary incentives to stay, like less administrative duties and more clinical practice. LifeSpring hires less qualified auxiliary nurse midwives (ANMs) rather than graduate nurse midwives (GNMs). The former are trained as birth attendants. But because the ANMs are less qualified, they are less costly to employ than GNMs, whose degrees are more advanced and expensive to attain. Moreover, the attrition rate of ANMs is low as well.
Further, a tiered pricing model helps its commercial viability. Women, for instance, can choose to give birth in a general ward, semi-private room or private room. Rates will rise accordingly. LifeSpring’s general ward, which makes up 70 per cent of each hospital, is 30-50 per cent cheaper than comparable market rates; its private room is at par with the rest of the market. Normal deliveries cost only around Rs 2,000 ($40). That includes the cost of a two-day stay in the hospital and medicines. Caesarean operations cost Rs 7,000 ($140) at LifeSpring, just a fifth of what is charged by private hospitals. While that is more than the official rate at public hospitals, which are supposed to be free though they often require undisclosed payments, these are still only about a sixth of the price at a private clinic.
LifeSpring established a protocol for employee-customer relations: The CARES (courteous, attentive, respectful, enthusiastic and safe) staff protocol played an important role in overcoming local families’ distrust of institutional health providers and building trust. LifeSpring employed a five-pillar metric to gauge its performance and sustainability in terms of growth, finance, customer satisfaction, clinical quality and talent.
LifeSpring is aggressive in marketing, ensuring a high volume of customers and, consequently, optimal asset use. It has low OPD fees and is located very close to urban slums. All these generate high footfalls. This increase in traffic allows LifeSpring to use doctors more efficiently; consultancy firm Monitor estimates that its doctors, on an average, perform 17-26 surgeries per month, which is four times as many operations as their peers. So the network’s medical cost per patient is just a quarter of what a private hospital spends.
LifeSpring’s marketing strategy is multifaceted, consisting of its outreach teams, voucher programmes, health camps and word of mouth. To generate high patient volume, it targets key decision-makers in maternity matters — husbands and mother-in-laws — and has a dedicated community outreach team that customises its message. Word of mouth and referrals have proved to be LifeSpring’s most powerful mode of outreach. LifeSpring also runs a ‘pull’ programme that gives every inpatient a voucher, good for one outpatient visit, to distribute to friends and family.
The low-cost outpatient department plays a vital role in attracting mothers by providing a showcase for services, including women’s health and paediatrics. A visit costs Rs 50 ($1) in contrast to a private clinic’s Rs 100-300. Moreover, it posts a price list outside the hospital, creating consumer awareness and confidence of transactional transparency.
LifeSpring plans to launch 22 more such hospitals in the next 20 months at a cost of $4 million. It is also evaluating a franchise model in the hope of scaling up rapidly to150 hospitals over the next two years.
LifeSpring’s innovation lay in figuring out how to deliver world-class care at a price that many of the poor could afford and that also made economic sense. Maintaining hygiene, privacy, transparent and economic pricing, and retaining skilled medical personnel allowed LifeSpring to position themselves as a trusted provider of consistently high-quality package of maternity services to low-end markets. LifeSpring’s high throughput/high asset use model is vastly more productive than that of its counterparts, allowing it to become profitable quickly and sustain itself.
LifeSpring presents a scaleable model for healthcare because it services densely-populated peri-urban areas, filling gaps left by the alternately dismal and highly exclusive maternity care services preceding it and awakening latent demand for trustworthy, credible healthcare services. Its no-frills approach allows for minimum costs and optimum asset utilisation, as well as highly standardised and replicable processes. Its strongly customer-centric positioning and strategic retention of skilled staff are also the key to the sustainability of this model.
The author is director, CII-ITC Centre of Excellence for Sustainable Development. In the second part of the series to be published next week we will bring you the story of Arogya Ghar, which seeks to make medical knowledge accessible to rural populations. These case studies have been adapted from a report titled Sustainable and Inclusive Innovation: Strategies for Tomorrow’s World, published by the CII-ITC Centre of Excellence for Sustainable Development