Reducing Healthcare Costs in India: Distruptive Technology and Business Model Innovation

Clayton M. Christensen, Jerome H. Grossman & Jason Hwang in their book “The Innovator’s Prescription – A Disruptive Solution for Healthcare” have, among many factors, identified disruption of inefficiency through technology and business model innovation as enablers to reduce healthcare costs.

Aavind Eye Care Hospitals in Southern India  have used both process innovation and technology to drive down eye care costs. It is a self-sustaining system primarily targeted to rural poor .  According to the MacNeil/Lehrer Newshour on PBS, the Aaavind hospital in Madurai is considered one of the best in the world.  

Over 2.5 million out patients have been treated and over 300,000 surgeries  been performed. The Aravind Eye Care System comprises five hospitals, three managed eye hospitals, a manufacturing center for ophthalmic products, and international research foundation and a resource and training center that is pioneering innovative eye care programs across the developing world.

Aravind uses the low cost Aravind telemedicine network to support video conferencing for 3000 rural patients per month, and is targeting 500,000 patient examinations per year.  In 1996 only 7% of the region’s eye care cases were being treated.  For rural patients, such as the million in Tamil Nadu, the Rs. 20 cost of an eye exam and ophthalmologist consultation was trivial compared to the Rs. 200 bus ticket and day of travel round trip.  Now the hospital’s broadband network and 23 vision centres have changed the economics of eye-care in rural Tamil Nadu without changing the economics for the provider.  Today it is estimated that there is 70% coverage of patients to the Rs. 20 service and typically only two hours of patient time with little or no transportation cost.  Cisco Corp. (Nasdaq: CSCO) estimates that there is a 40% ROI (return on investment) for the telecommunication network.  The costs are returned in 2 1/2 years.  After that the system simply produces net savings in the care provided.

This is one of the many examples of how innovative business models and technology are being used for Indian rural markets to bring affordable products for “bottom of pyramid consumers” a term coined by C.K.Prahlad in his book “The Fortune at the Bottom of the Pyramid“.  There are a variety of rural economic development projects in India.  Some of them are described by an article in The Economic Times, a publication of The Times of India

Lured by the country’s economic boom, a number of expatriate entrepreneurs are flocking to India to set up new businesses ranging from rural broadband, solar lighting and drip irrigation systems to incubators that nurture very small enterprises and consulting firms.

Details of some of rural wireless broadband development efforts in  India are found in a paper by Sonesh Surana, Rabin Patra, Sergiu Nedevschi, Manuel Ramos, Lakshminarayanan Subramanian, Yahel Ben-David and Eric Brewer.  There seems to be much more openness to entrepreneurial efforts in India than in the other BRIC countries, especially Brazil and China, where government regulation is more endemic.  A negative of the lower regulation is that theft of services is much higher.  Sonesh et al state that for electric power, India loses 42% to theft and transmission losses compared to 5-10% in the U.S.

While many concentrate on the relative competitiveness of the four BRIC countries for future growth looking at centralized corporate structures, India may have an advantage in one area:  the effective development of rural population assets.