Xploryze Case Solution by NITIE
- 1. Xploryze – IIM Raipur Team Chanakyas MuthuNaveen S Sathya G NITIE , Mumbai
- 2. Scope Industry Overview SWOT The Competition Business Ethics Business Model Basic Strategic Plan Role of Service Operations Competitive Strategies Organizational Structure
- 3. Health Care Industry – Opportunities galore Insurance & CAGR Med Equip 15% 15% Indian Scenario : Diagnostics Only 0.8 beds / 1000 people 10% HealthCare Delivery Healthcare delivery 50% USD 50 bn Pharma 25% Increase in lifestyle diseases => increase in in-patients Increasing spend on 4000 health care In Bn Rs 3000 2312 No of beds in Delhi Medical Tourism in India: 2000 (2011) : USD 2.5bn industry 1268 Demand 28,007 CAGR 30% 1000 637 Supply 19,836 903 1329 0 617 2006 2011 2016 (F) Huge Demand Out Patients In Patients Supply Gap src: ENAM India Research
- 4. Tertiary Health Care Industry Strength Weakness *World class Facilities and Treatments *Lower operational efficiencies * Increase in health insurance companies *Rough behavior of lower category staff *Increased Depreciation rate for equipments *Undue delay in rendering service * Connectivity with Skilled professionals all *Poor Information and guidance system around the globe *High attrition rate Opportunities Threats *Growing Urban conglomerate of NCR *High Competitive rivalry – pressure on *Increase in life style diseases price & service *Growing Demand for World-class treatments *Obsolescence of medical equipment *Growing medical tourism *Capital intensive *Change in spending attitude on health care *Ayurveda , Unani, homeopathy substitutes
- 5. The Competition Group Hospitals Beds Revenue Fortis Healthcare 66 10,270 1482 Apollo Hospitals 54 8,800 2350 Manipal Health Enterprises 15 4,400 600 Narayana Hrudayalaya 14 5,700 476 CARE Hospitals 12 1,600 NA Paras Hospitals 2 250 NA Max Healthcare 8 800 NA Competing with Neuro division of established Multi-Speciality players Src: Business World, 5 Mar 2012, Fortis Annual Report 2010-2011, Apollo Annual Report 2010-2011
- 6. Ethical Dilemma Corporate Governance Kohlberg’s stages of moral development Dr. Ram •Stage 1:Punishment-Obedience Orientation Mathur (Compliance with regulations) & Pre •Stage 2: Instrumental Relativist orientation Dr.Sharma Conventional ( Profit Centered) CSR •Stage 3: Interpersonal Concordance orientation ( Living up to Customer expectations) •Stage 4: Authority and social order maintaining orientation Conventional (Abiding social conventions) Business •Stage 5: Social-Contract Legalistic orientation Ethics (Working towards greater good for the society) Post •Stage 6: Universal ethical principle orientation Conventional (Weighing social welfare over profitability ) Dr.Ashwini Ethical Profits Where Our Heroes Stand… Src:Corporate Governance Model, Peter Begley
- 7. Aspirations Justified Vision To bring world class medical facilities to New Delhi and revolutionize the whole healthcare industry. Mission Using his knowledge and expertise of 12 years in Medical field , serving the people of Delhi, while turning in to a profitable venture. What it brings? World class medical service to all those who can afford it and for some who can’t. Why Should we appreciate? Initiative to contribute to the society against brain-drain scenario. Why Justified? Dr.Ashwini’s aspirations in the beginning – Hurdle to sustainability and growth Enterprise – at an infancy stage :: profit –centric Later stage:: Interwoven Social Responsibility
- 8. Business Model A Hybrid Model Charity Run Corporate A world class hospital for Hospitals Hospitals all those who can afford it and also for some who can’t Lack of “world class” High operational facilities efficiency Mass market Quality health care Stage 2 but expensive •5 % of patients served Ineffective Profit Driven & for free Management /Services Aggressive Growth •Differential rates based on the choice of High operational costs World Class facilities Stage 1 pre/post treatment stay & Inability to scale up & Treatment •Target segment => The •Maintaining the same A Hybrid Model affluent level of treatment – •5 % of patients served Same doctors/ OT , etc. for free : To obtain •Diversify into other government subsidy verticals for land •CSR Arm •Primarily Neuro specialty
- 9. Basic Strategic Plan: Size |Investment | Profitability Single Super Specialty hospital for Neuro care Demand Supply Gap: Number of reported Neurocases in India : 300 per 1,00,000 Number of Neurologists practising in India : 1100 => ~ 32,000 patients per doctor per year Huge market waiting to be served!!! Size of the Hospital Tax deduction to private investors on the cost of building infrastructure for minimum 100 bed hospitals anywhere in India In patients are major revenue contributors Go ahead with Dr Ashwini’s plan of 150 bed hospital Src: ENAM Research; Neurology: The Scenario in IndiaSV Khadilkar
- 10. Basic Strategic Plan: Size |Investment | Profitability 5 % of patients to be treated for free to avail governments subsidy Location: for land . Out skirts of the city to reduce the cost of land Advantage from social and economic point of view Space Required 507 SqFt per bed for 125 – 175 bed hospital Others Set Up Cost Land 12% 12% ~ 76000 Sq Ft Building Total investment required 26% Investment cost/bed – Rs.75 lakh/bed Equiment 50% Expected investment on the Hospital = Rs.112 Crores (approx) (Src: Economic times dt:1-8-2011, Healthcare bio tech-fortis-to-start-6-new-hospitals-rs-1050-cr-investment-likely) ENAM India Research A proposed standard method of Measuring Hospital Capacity , Pg 677)
- 11. Basic Strategic Plan: Size |Investment | Profitability (In Lakhs) Yr 1 Yr 2 Yr 3 Operating Exp Initial Investment 11200 Non Operational Exp Operational Expenses Revenue Per Yr / Bed 150 165 181.5 22.8 Net profit Total 2250 2475 2722.5 Non Operational Expense 108.2 Industry Avg - 50% of operational Exp 1125 1237.5 1361.25 83.2 55.0 Revenue 11.3 12.4 13.6 Income per procedure 0.98 1.078 1.1858 22.5 24.8 27.2 Average length of stay 3.9 Days 3.9 3.9 -44.6 Total income per bed per yr 91.7179 100.8897 110.9787 -90.7 Assumed operational Effeciency 40% 55% 65% Total Income per 150 beds 5503.08 8323.404 10820.43 Rs in Cr Contribution 2128.08 4610.904 6736.675 Net Profit -9071.9 -4461.02 2275.656 Year 1 Year 2 Year 3 Src: Appolo hospitals; ENAM Becoming Cash Positive in third year of operations Research
- 12. Key Focus Areas Manpower Real Estate Equipment Operations Outlay •Go Outskirts •Best Prices •Expertise as •Purchase • Avail •The best not needed from source subsidies the latest •Attrition •Usage •Training •Collaboration metrics costs with •Cross •Pay-per-use institutes subsidize model • Outsourcing •Day care to reduce ALOS Medical Tourism: Neurosurgery Cost comparison: Almost 4 times cheaper than in US International Accreditation provides more confidence for medical tourists. Focus on increasing operational efficiency to increase competitiveness & reduce cost Src: ENAM India Research
- 13. Operations Management – A key differentiator Operational Expenses account for around 2/3 of the total expenses Projected expenses of 22.5Cr a year!! Layout Design Capacity Patient Flow Inventory Procurement Equipment Planning Management Management management •Department •Vendor selection locations •Estimating the •Wait Time analysis •Aggregate •TPM •Vendor •Emergency Entry resources-5M of Patients Planning •Utilization Managements & Exits •Hospital •Idle time of •FIFO Mapping •Contracts •Man & Material Occupancy Rate consultants •Reverse Logistics •On the Job Movement •Service •Scheduling Agreements Training Advantage: • Tangible: Bottom Line improvement through efficiency improvement • Intangible: Goodwill and Trust from customers Better Patient Care with Improved Returns!!!
- 14. Capacity |Layout | Patient flow | Inventory | Procurement | Equipment Capacity Planning Man Forecast and Demand projections based on medical and demographic Money Machine Target bottlenecks through Queuing theory Think “LEAN” – Eliminate wastes Increase occupancy level Methods Material Cases/year X Length of Stay Occupancy Rate = No of Beds X 365 Evaluating utilization before capacity expansion
- 15. Capacity |Layout | Patient flow | Inventory | Procurement | Equipment Corelap Matrix Consider Qualitative Factors in layout design Corelap Considerations o Flow of Material o Personnel Contact Craft o Use Same Facilities Refining the initial layout o Use Common Records based on frequency of o Share Same Personnel movement and cost associated o Supervision or Control with it o Noise, Dust, Fumes o Interruptions o Special Mgmt. Needs Optimized layout feasibility * Discrete even simulation to Hospital Layout changes are model patient flow and expensive, futuristic development Hence future expansion plans * Decoupling /Service blue Print should be taken into consideration * Present fit and flexibility for future expansion Ref: A Methodology for total hospital design by Gerald L Delon
- 16. Capacity |Layout | Patient flow | Inventory | Procurement | Equipment PATIENT FLOW ANALYSIS Value stream mapping of the best practices / current practice to identify wastes and propose new systems Real Time Monitoring Wait-time analysis of Patients Identify inefficiencies Idle Time analysis of Consultants INVENTORY MANAGEMENT VED analysis and online monitoring Criticality of freshness / shelf of inventory life of products Better stocking & Inventory Control ; Lead times & criticality FIFO; 5S associated with particular EOQ ordering with safety stock – A products trade off between costs, risks of stock Seasonal Effects & Costs out and expiry
- 17. Capacity |Layout | Patient flow | Inventory | Procurement | Equipment Procurement MRP – when, what, how much to buy Vendor selection – Cost, Quality, Service levels, Reliability, Lead time Vendor Management – Information sharing, leverage their strength, long term relationships Win – Win Agreements Contracts – Payment, Shipping, Service, Urgent deliveries, Penalty clauses Service Agreements – Maintenance Repair and Service of equipment Reverse Logistics – Return of expired inventory, Disposal of medical wastes Equipment Management • Training of staff for best usage and autonomous maintenance • Visual instructions for usage • Poka-yoke to prevent unintended mishaps • Preventive & Proactive maintenance • Equipment tracking for better utilization
- 18. Competitive Edge Leveraging Unique Strengths: Dr. Sharma’s good contacts of creamy layer in Delhi region Reliable and high quality sourcing of equipment by Dr. Sharma’s Father-in-law Dr. Ram gained expertise with best of medical equipment in USA Dr. Ram’s contacts in USA - Referrals – Medical Tourism Service Specialization Specialized services – Better focus and operational efficiency “100 bed super-specialized hospitals generate equal revenues as that of 500 bed multi specialty hospitals” (Source : Economic Times, Apollo) IT Integration Implementation of Hospital Information Management System Maintaining Electronic Health records – Error free and timely reports
- 19. Competitive Edge Resource based quality Improvement Better facilities and motivation for employees to reduce attrition SMED – Improve Productivity of surgeons Establish Protocols/Systems for all functions Maintenance of in-house labs with short TAT Churn Rate, ALOS, SERVQUAL for continuous improvement Risk Management and Green Initiatives Public relations management Name Labels and Uniform for all functionaries Marketing through booklet – create awareness on neuro diseases Transparency with patients – trust – word of mouth referrals Visiting doctors to promote the hospital
- 20. Organizational Structure Dr.Ashwini (COO) Building Financial Advisor HR & Personnel Head Procurement Manager Hospital Admin & Maintenance Real Estate Fund Raising Vendor Selection Consultants Dept wise Requirement Payroll Accounting Matrix Medical Equipment Reception Hospital Design Purchase & Enquiry Consultants Budgeting Full Time consultants Signing Equipment Contractors Visiting consultants Annual Maintenance Contract Facility Nursing Staff Legal Advisor Lab Technicians Land and Construction License IT support Electricity Clearance Supervisors & Helpers Water Board Clearance Sewage and Sanitation Clearance Future Scope Biomedical waste disposal Clearance Fire Department Approval PRO Marketing Health Certification
- 21. References 1)Service operation management return to roots, Robert Johnston – IJOPM 19,2 2) KPMG Report: Emerging trends in Healthcare 3) A Methodology for total hospital design by Gerald L Delon 4) Evaluating hospital design from an operations management perspective Leti Vos & Siebren Groothuis &Godefridus G. van Merode Thank You