In a brightly-lit operating theatre on a sunny Thursday afternoon, Devi Prasad Shetty replaces an aortic valve on a 65-year-old woman as “Guzaarish”, a song from Aamir Khan’s movie Ghajini, plays through discreetly placed Bose speakers. The scene is nothing like the ones we’ve seen in the popular TV series Grey’s Anatomy — no alarms and beepers going off almost every minute, no frenetic running around. It is so calm and serene that you could forget there is a woman lying on the table with a sawed-open chest and a stopped heart. Shetty believes such a relaxed environment is essential for doctors to perform at their best in a profession that leaves no room for error; at the same time, he says surgery is more like art and surgeons more like artists. Indeed, he sews the valve in place with dark blue sutures much like a painter working on a canvas.
“It comes with years of practice, but I always recommend my first- and second-year students join an art class before they start to operate. It improves their dexterity,” says the 60-year-old surgeon who still performs one or two surgeries a day. At the hospital chain he started over a decade ago, operation theatres have morphed from dimly-lit rooms packed with monitors and machines to airy and naturally lit rooms with huge windows. And yes, there is always music playing. But really, that’s just a small way Shetty has turned the conventional healthcare model on its head. More importantly, at a time when costs are moving only up, he has brought the cost of open heart surgery down by half while maintaining world-class quality standards.
As he meets the family post the operation, the woman’s son-in-law reminds Shetty that he had operated on his aunt years ago in Calcutta. “Since then we’ve had blind faith in you, so I brought her straight here,” he says as the doctor assures him the procedure went off well. For millions of people who can’t afford specialised healthcare, Shetty has been an answer to their prayers. Through Narayana Hrudayalaya (now rebranded Narayana Healthcare or NH, because many people found it difficult to spell and pronounce Hrudayalaya), he has managed to build a sustainable, affordable healthcare business model that can be replicated, is scalable and profitable.
Shetty firmly believes that India will significantly alter the healthcare delivery space in the years to come. And with a vision to provide healthcare to everyone in the country, he is showing us the way.
Devi Shetty always knew he wanted to be a doctor. The eighth of a Mangalore-based businessman’s nine children, Shetty’s father encouraged him in his goal, just as he egged on all his children to become professionals. When he was in class V, Shetty’s teacher told him about Christiaan Barnard, the South African who performed the first successful heart transplant. That was it; Shetty had found his calling — he would be a cardiac surgeon.
In 1982, Shetty completed his MBBS from the Kasturba Medical College at Manipal and after basic cardiac training, worked for six years at Guy’s Hospital in London, always knowing that he would return to India before too long. It was in London, under his boss Alan Yates, that Shetty understood the importance of money, working under the stringent budgets of the British National Health Services. “He was the one who taught me that if a solution is not affordable, it is no solution at all,” says Shetty. It is a learning that has not only stayed with him over the years but has also been the base on which Shetty has built his healthcare model.
In 1989, Shetty returned to India and started work at BM Birla Hospital, a superspeciality institute in Calcutta dedicated to the treatment of cardiovascular diseases. “It was a big change from Heathrow to Howrah. The concept of disposable gloves didn’t even exist back then. I was in charge of paediatric cardiac surgery and the first question other doctors would ask was, ‘So, children also get heart disease, is it?’,” he recalls. From paediatric surgery, Shetty soon began performing neonatal surgeries as well, on newborn babies — again, something that hadn’t been done in India before. “In those days I had to convince a patient to undergo surgery; I would spend an hour telling them how safe it is and how good they would feel afterward. Today, I have to spend an hour convincing patients that they don’t need heart surgery,” he says ruefully.
It was during his stint in Calcutta that Shetty met Mother Teresa and went on to become her personal physician. He calls her one of the greatest mentors he ever had. “What I loved about her was her simplicity. She would always say the hands that serve are more sacred than the lips that pray and that has remained with me,” Shetty recalls. Working with poor patients in Calcutta, it increasingly became clear to him that healthcare costs need to be brought down significantly. “It was no rocket science. I would see 100 patients a day but nobody would come back for the surgery because they couldn’t afford to pay for it.”
It was another decade before Shetty was able to act on his conviction. In 2001, he started Narayana Hrudayalaya in Bangalore after his brother-in-law convinced his father (Devi Shetty’s father-in-law) to give him capital for a hospital in order to leave a legacy behind. Around the same time, Shetty met Biocon founder Kiran Mazumdar Shaw, who had just set up her facility on the same Hosur Road. “We were first-time entrepreneurs pursuing our dream and soon we discovered we shared the same thoughts on how healthcare should be democratised. I was inspired by what he was doing,” says Shaw. “I admire his sense of dedication, purpose and compassion, which has brought together like-minded people. He doesn’t differentiate between people when it comes to healthcare. In sickness, there is no rich and poor.” Later, in 2009, when Shaw wanted to start a cancer hospital, she asked Shetty to run it. “We wanted to replicate what he has done in cardiac care and make cancer care more affordable,” she says. Together, Shaw and Shetty currently run a 1,400-bed cancer hospital, the largest in the country, housed at the Bengaluru campus.
In 2008, private equity investors JP Morgan and Pine Bridge Investments together put up ₹400 crore for a 25% stake in the NH hospital group; Shaw, who also sits on the board, owns about 2.5% while the Shetty family holds the balance. The group now has 19 hospitals across 13 locations and is looking to add another four. Currently, there are 7,000 beds under group and the four upcoming projects will add another 800 beds. Altogether, the group conducts 10% of the cardiac surgeries done in India.
Attention to detail
“The most satisfying part of my journey so far is that we have brought down the cost of a heart operation by almost 50%,” says Shetty. About 22 years ago, a heart operation cost ₹1.5 lakh; today, Shetty says, NH can break even at ₹80,000-90,000. Not surprisingly, the business model caught the attention of the West, where heart surgery typically carries heart attack-inducing bills of $20,000-50,000, depending on the complexity of the surgery. The hospital was featured in Wall Street Journal and written as a case study in Harvard Business Review, but not all the attention was positive. There were also snide remarks that open-heart surgery just wasn’t possible at $1,500 and so the team must be adopting some iffy practices. “So we spent hell of a lot of money in 2011 and got our hospitals accredited by Joint Commission International [JCI],” says Shetty. JCI is a non-profit organisation in the US that accredits healthcare programmes and institutions; it is recognition of the highest medical standards being followed. “We wanted to prove that we don’t have to cut corners and make it unsafe for the patient. It is possible to maintain very high standards and reduce costs.”
And $1,500 is just the beginning. The aim is to bring the cost of surgery down further, to $800 (₹ 45,000) by 2020. Shetty is working with management consultancy McKinsey to achieve this goal. It won’t be easy. He point out that there are a thousand different things a hospital has to do to keep costs under control, right from how the buildings are made to sourcing equipment and consumables.
Driven by purpose
NH is working on lowering the cost of cardiac
surgery to $800 from the present $1,500
Connections in the construction business has certainly helped — Shetty’s wife comes from a family that is in the construction business in Karnataka; funds aside, his father-in-law also leased him 25 acres to build the first NH centre in Bangalore. “We design and build our own hospitals. We don’t build them fancy; rather, they are extremely functional and maximise space utilisation, which brings down the cost per bed,” says Viren Shetty, Devi Shetty’s eldest son who is a director in the company and has been working with him since 2004. The only engineer in the family (Shetty’s two other sons are doctors), Viren is in charge of hospital projects.
With about 80% of the beds in general wards, the cost per bed at NH works out to ₹15-17 lakh on average, compared with ₹1 crore at hospitals such as Fortis Healthcare, where 80% of the beds are private wards. At Shetty’s hospital, the junior surgeons, nurses and technicians handle the routine of prepping the patient for surgery and closing up after the surgery is complete. Senior cardiac surgeons enter the theatre to perform complex procedures only after the chest has been opened and the heart is ready to be operated on. This way the hospital ensures its cardiac surgeons are able to perform two-three procedures a day compared with the average of one a day at other hospitals. The hospital in Bengaluru, for instance, does up to 32-35 surgeries a day and has the infrastructure to support almost 60 operations a day. “We have established the fact that healthcare is a volume game — the more procedures you do, the better your results and the lower your costs,” says Shetty. Today, the group does the largest number of cardiac surgeries across India — in 2012, it performed 11,404 surgeries.
The Madurai-based Aravind Eye Care has revolutionised eye care the same way NH has for cardiac surgeries and does about 350,000 eye operations a year. It follows a similar strategy. Its ophthalmologists perform 1,500-2,000 cataract operations a year against a national average of 300-400 operations, because each doctor is assisted by six eye technicians — women trained at the hospital — who take care of the pre-op and post-op procedures. Operating rooms at Aravind centres are often equipped with two beds so that doctors can move from one patient to the next in minutes.
At NH, cost cutting is a continuous, ongoing process. “Focusing on costs is what we do 80% of our time,” confirms Viren. “We are a big purchaser, so we have some unfair bargaining power. At the same time, we have been able to demonstrate significant growth, so vendors are confident in offering prices or terms they normally will not give others as they know we will come back to them very soon.” For instance, the hospital convinced a vendor that rather than buy a machine for blood tests, it would only pay for reagents. Given the sheer volume in the system (the Bengaluru hospital alone gets some 3,000 walk-ins, or patients without appointments, every day), the vendor was still making a profit just by selling reagents, while the hospital saved on the cost of the machine.
NH was also one of the first few hospitals to switch over to digital x-rays to save on the cost of film. And it is still the only hospital in the country to use disposable gowns and drapes. Here, too, NH employed ingenious ways of bringing down costs. Sterilising and maintaining linen was adding ₹ 2,000 to the cost of every operation and the price quoted by MNCs manufacturing disposable scrubs was not attractive enough. NH, therefore, procured raw material directly from Alstom and had the scrubs made up by a group of entrepreneurs in the garments business. The cost of these made-up disposable scrubs came to just ₹800 per operation, not only making it safer for the patients but also lowering the cost of the operation.
It’s not only administrators who keep an eagle eye on costs at NH. At noon everyday, the senior management and doctors get a report on the previous day’s revenue, expense and operations. “When you run a business with a wafer-thin margin, you need financial information to keep your nose above water. For us, reading the P&L report at the end of the month will be like reading a post-mortem report. On a daily basis, it serves more as a diagnostic tool,” says Shetty.
A weak pulse
All the hospitals in the country, put together, cater to only a little more than 5% of the cardiac surgeries required yearly
NH also makes effective use of technology to improve processes and implement protocols. “We believe that one day, all paper will disappear from hospitals and we will be forced to offer protocol-based healthcare. Technology will bring a massive shift in how patients will be treated and healthcare will become safer for these patients with the help of software,” says Shetty. Not only does the hospital have iPad apps for the intensive care and outpatients units, it has also worked with Cognizant to develop a software called icare, which will help streamline post-op cardiac ICU care. Using the software, medical staff in India will be able to monitor ICU patients at NH’s new facility in Cayman Islands when it is commissioned in February 2014, taking advantage of the time difference. The 200-bed hospital, being built at a cost of ₹ 250 crore, will be completed by December 2013 and will be eventually expanded in four phases to 2,000 beds.
“All this has been possible because I have an incredible team backing me up,” says Shetty. In response, Biocon’s Shaw says that’s because Shetty is an inspirational leader who has been able to attract very good people. “He has a very loyal team that is driven not by the mercenary side but by the missionary side of medicine,” she adds. And it is easy to see why. “He is driven a lot by purpose. For him it is not about a single surgery or a hospital being built. His goal is to provide healthcare to everyone and everything he does moves towards that,” says his son Viren. According to Aravind Eye Care director S Aravind, Shetty’s biggest strength is his execution. “He has been able to translate his vision into reality. A lot of people have vision, but to walk the talk is difficult. Being a doctor, one is always constrained for time. But Dr Shetty has not only managed the best in class in his profession, he has found time to build an institution based on vision,” he says.
Shetty’s success has paved the way for many entrepreneurs to enter the affordable healthcare space. Take the case of Vaatsalya Healthcare, which has built low-cost hospitals in 15 tier-2 and tier-3 towns. “NH has successfully demonstrated that the affordable healthcare model is scalable and can be profitable as well. This has resulted in the entire ecosystem becoming mature, with more investors showing interest in this space and doctors being more open to the idea of working out of smaller towns and rural areas,” says Ashwin Naik, Vaatsalya’s CEO, who first met Shetty when he started out in 2006. Not only was he enthusiastic about starting hospitals in small locations, Naik recalls, Shetty even shared the results of a pilot project he ran in Uttar Pradesh that tested how the low-cost model would work and advised Naik and Vaatsalya co-founder Veerendra Hiremath on the challenges that could arise in terms of recruiting talent and replicating the model in several places.
Now, the focus at NH, too, is to build low-cost hospitals in tier-2 and tier-3 towns. Earlier, the group was looking to build 1,000-bed hospitals but discovered that in order to increase the overall efficiency, it was better to have smaller, 200- to 300-bed hospitals. “In smaller hospitals, the demand for beds will push up efficiency levels. It will also be more useful for patients since we can be present in many more locations,” says Shetty. The first such hospital has already been built in Mysore in 2012, where, in association with L&T, the group has built a 300-bed hospital. Built in eight months on a ₹40-crore budget, it is the cheapest superspecialty hospital ever built in India, with the cost-per-bed coming to about ₹13-14 lakh. Made of pre-fabricated materials, the building is on a single level, doing away with the need for lifts; there is also no air-conditioning, except in the operation theatres. “When you are unwell, you are not bothered whether the hospital you go to is a five-star facility; you just want good medical care. So, Shetty has focused on medical excellence,” says Shaw. Going forward, the plan is to expand the number of beds under the group to 30,000 by 2020. “We need 2 millions beds in this country. We have to look at dramatically different models of delivering healthcare. We have 100 towns in India with populations of 0.5-1 million where there are no superspecialty heart hospitals and we want to be there,” declares Shetty.
Future of healthcare
If there is a country that can significantly alter the healthcare delivery landscape, it is India, says Shetty convincingly. “I believe India will become the first country in the world to dissociate healthcare from affluence. Ten years from now, we may still have millions of people living in slums with no amenities but when they are unwell, they will have access to high-tech healthcare with dignity,” he says. “It will be exactly like the mobile revolution. You don’t need to be rich to have a mobile phone. We have 850 million mobile subscribers who are willing to pay ₹ 150 per month to talk.” According to him, these consumers will be more than willing to pay a fraction of that as health insurance premium every month.
It was along those lines that in 2002 in association with the Karnataka government, he launched Yeshasvini, where farmers got insurance cover for just ₹ 5 per month. While the premium has since increased to ₹ 10 per month, about 4 million farmers are now covered under the scheme. Almost 200,000 farmers have undergone multiple surgeries, including cardiac operations, for which the government reimburses the concerned hospital (NH, for instance, receives about ₹ 65,000-70,000 per open-heart surgery, less than its breakeven). About 40% of all patients at NH are covered under various government programmes.
Shetty firmly believes that money has no relation to healthcare. Spending money will not always solve the problem. He cites the case of maternal and infant mortality in India, which continues to be one of the highest in the world despite increasing healthcare spends. “Our policymakers kept telling us that healthcare is expensive but that some day, India will become rich and then everyone will be able to afford it,” he says. “But the richest countries are struggling to provide healthcare and if India becomes rich, it will face the same problems that the developed countries are now facing and the government will finally have to step in.”
And unlike now, hospitals will soon not be able to charge at will. “Today, hospitals negotiate with the patient. Soon, there will be an intermediary like an insurance company or government and we won’t have as much bargaining power. This honeymoon will not last forever and if we [healthcare providers] don’t get our act together, if we don’t proactively work for the underprivileged, the system will hit back.” Indeed, if healthcare continues to remain unaffordable to the majority of the people, Shetty thinks it all too likely that the government may eventually regulate prices as it does in the pharma sector. “If we don’t act responsibly, the government will start fixing the price for bypass heart surgeries. Then it would be pointless to complain. So I tell my colleagues this is our window of opportunity and we have to be aggressive in reducing costs.”
The problem is, there are not enough doctors. “We are short by about 1 million doctors,” he says. But it is a problem that can be solved with just a few policy changes. While there are several primary health centres with no doctors to man them, there are also several ayurvedic doctors who just need a six-month course to bridge the understanding gap and start prescribing allopathic drugs. These doctors want to serve in primary health centres but aren’t allowed to because the medical lobby in the country is yet to decide on letting them practise medicine. “The policies of the country have made MBBS doctors the custodians of healthcare. The world over, primary healthcare is not given by doctors with MBBS. We have people desperately seeking work but we don’t empower them,” says Shetty. Similarly, he suggests, nurses and technicians should be allowed to upgrade their skills so they can perform non-complex procedures, freeing up surgeons to perform more complex procedures and be more productive.
After transforming India’s healthcare landscape, Shetty wants to turn his attention to Africa. “It is where India was 10-15 years ago. They need someone like me to start institutions there, be it medical or nursing colleges, before others follow,” he declares. The lack of a powerful medical lobby across the continent means it will be receptive to policy changes, he believes.
There are many parts to Dr Devi Prasad Shetty. Several titles, from successful entrepreneur to inspirational leader and visionary, suit him. But in the end, he wants to be known as someone who loves being a surgeon. “At airports, I have had huge, strapping six-footers falling at my feet to take my blessings. They say, ‘You don’t remember me, but you operated on me when I was a two-month-old baby. Thank you for saving my life.’ Truly, there is nothing more gratifying than saving a life and I want to be remembered as a heart surgeon who loved his work. Nothing else.”