Aravind has provided eye treatment to millions of poor indians for free, yet still manages to make a profit of millions of dollars a year by using management principles learned from McDonald’s. By David W. Smith
Aravind’s business model sounds like a recipe for financial ruin. The network of eye hospitals in the southern Indian state of Tamil Nadu lets patients pay what they can afford for glaucoma tests and cataract surgery. Most are too poor to pay anything and so richer patients subsidise the treatment. But Aravind Eye Care System has grown into the largest eye-care provider in the world and makes millions of dollars in profit each year. It has performed around 4.5 million operations and treated around 35 million patients over 39 years.
Aravind was the brainchild of Dr Govindappa Venkataswamy, better known as ‘Dr V’. He was 58 when he founded the company in 1976 after retiring from general practice. Dr V invested all his money in Aravind and even persuaded his brothers and sisters to sell their houses and pawn their jewellery. It was a gamble, but Aravind grew rapidly from its humble beginning as an 11-bed hospital with six beds reserved for patients who could not afford to pay.
Dr V, who died in 2006, cited two unlikely bedfellows as his greatest influences. The first was the Indian mystic Sri Aurobindo – Aravind is a southern Indian version of his name – and the second was the fast-food chain McDonald’s. “Dr V read Aurobindo’s poetry everyday. There was a lot of teaching about reaching higher states of consciousness through doing good acts,” says Aravind’s chairman Dr Ravindran. “Dr V believed we all know what is the right thing to do, but in business our principles may be corrupted by money.”
To fulfil his compassionate vision of providing free eye care to millions of blind Indians, Dr V needed a business plan. This was a subject he knew nothing about so he turned to McDonald’s for operational lessons. “He was impressed by their standardised training procedures and the consistency of every McDonald’s restaurant and he went to the US to study their methods,” says Dr Ravindran.
Dr V was determined to use the lessons in efficiency from McDonald’s to challenge the presumption that small numbers of operations result in high quality whereas high volumes leads to poor quality. “He also saw an analogy with mass-produced cars. The manufacturers making the most cars provide the best quality. That’s why people buy them. Dr V believed surgeons increased their fees to minimise the number of patients they see,” says Dr Ravindran.
McDonald’s’ influence is felt on Aravind’s surgical procedures, which are organised like assembly lines. Each operating room has two tables. The doctor performs a surgery which takes around five minutes on one table. By the time he has finished, a new patient is ready on the next table.
The streamlined process allows Aravind doctors to perform more than 2,000 surgeries a year compared to an average of 300 at other Indian hospitals. “Doctors don’t wait for anything, whether it’s a human resource, such as an assisting nurse, or an instrument, or the patient. In the UK, they spend more time between cases than doing surgery,” says Dr Ravindran.
“To save time we segregate roles carefully. Doctors only do what they need to do. Nurses take care of anything that can be measured, such as taking temperatures and blood pressure, or measuring visual acuity. Another way we speed up processes is to constantly challenge doctors to perform better whilst maintaining the highest quality.”
Aravind trains its doctors using its ‘step surgery’ method, which gradually introduces them to new skills. They spend their first month in a wet lab operating on animal life and simulators to develop hand-eye coordination. After that, they spend a day performing step one of an eight-step operating procedure on three or four patients. Senior surgeons take care of the rest.
On the second day they perform the first two steps on three or four more patients. And so it goes, until after 10 to 14 days they are trusted to perform all eight steps alone. For the rest of the month, the doctors operate on one person a day under full supervision, then move to doing two a day twice a week. “Giving them intense surgical training in the first year minimises complication rates. Good surgical habits are best learned early in a career. After five years they are set in their ways and it’s too late. By the second year they are doing 100 to 150 surgeries and by the third year they can manage 30 to 40 a day,” Dr Ravindran says.
The Aravind model has been widely influential in the developing world. The company is helping to train surgeons at 300 hospitals, mainly in India, South America and Africa. But its influence is much less pervasive in rich Western countries. “In the West, the major obstacle is regulations,” says Dr Ravindran. “There is 10 times as much need for eye care as cardiac surgery and you don’t really have to clean the operating theatre and change everything after every eye operation, but the clinical protocols are the same as for cardiac surgery. These protocols can drive inefficiencies in the system. At Aravind, we save time but we do nothing to compromise patient safety.”
Aravind has also had a problem selling its Aurolab eye care products, which include lenses, sutures and medicines, to the Western world. Aurolab supplies them to 120 countries, but not the US, the UK, or other Western European countries. “The perception in the West is that the products are low cost and must therefore be low quality. But that’s not the case. Artificial corneas are made by two companies – one in the US and Aravind. The US manufacturer charges about 25 times more than we do, but ours give equally good results. Similarly, we produce a high-quality drainage implant at one fiftieth the US cost.”
Western nations are struggling to find the funds to maintain their healthcare systems and Dr Ravindran says they could learn a lot from Aravind. “The productivity and efficiency parts can be replicated. They can even use products made in the developing world after evaluating their quality to save a lot of money.”
EYES ON THE PRIZE
In Mexico, the eye care company salaUno has been inspired by the best practices of Aravind Eye Care. As a result it charges 60 per cent less than the average cost and its surgeons perform five times as many procedures as the average Mexican ophthalmologist.
The company was founded by Javier Okhuysen and Carlos Orellana, engineers turned private equity professionals, after they met in Madrid in 2005. Although the pair had no background in eye care they were inspired by Aravind and travelled to India to learn how to run an eye hospital.
They opened their first clinic in Mexico City in 2011 and expanded fast. salaUno aims to be Mexico’s leading provider of eye care by 2020 with hospitals in five cities.
FROM THE HEART
The Indian philanthropist and a cardiac surgeon Devi Shetty founded the Narayana Health hospital chain which has won awards for its low-cost, but high-quality medical model. Shetty has expanded the operation from one hospital in 2001 to 31 in 19 locations today.
Like Aravind, Narayana Health hospitals make their services available to all who need them regardless of income. A further parallel is that costs are kept low because of the speed of the surgical procedures. By using economies of scale, Narayana’s heart surgery costs a tenth as much as in the US.
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Photo credit: PACAF on Flickr.