Entrepreneurial Hospital Pioneers New Model

A "Robin Hood" cardiac hospital in India—which charges wealthy patients, yet equally welcomes the destitute—is an exciting example of entrepreneurship in the subcontinent, says HBS professor Tarun Khanna.
by Martha Lagace

In Bangalore, a state-of-the-art hospital staffed by Western-trained physicians treats anyone suffering from a heart ailment. It accepts patients regardless of caste, class, religion, and perhaps most surprisingly, their ability to pay for treatment. Yet it is solvent, and its founder would like to roll out a similar model beyond India—maybe even into Europe and the U.S. What's the secret?

According to HBS professor Tarun Khanna, the success of the hospital, called Narayana Hrudayalaya, is due to the vision and tireless work of a compassionate surgeon, Dr. Devi Shetty, whose specialty is heart care for children. It's also a story made of equal parts Robin Hood humanitarianism, entrepreneurship, and the Indian government's newfound ability to allow entrepreneurs a free hand in trying to solve some of society's most desperate problems, said Khanna.

Khanna, who is writing a case on Shetty that will be taught to HBS MBA's in the fall, said in an recent presentation on campus, "Dr. Shetty and I are working together to try to figure out ways to institutionalize his hospital model and spread it. He would like to create similar hospitals specializing in, for example, urology, ophthalmology, gynecology, and so on. His ambition is breathtaking."

"He has also started training doctors in Tanzania and Malaysia. His ambition is to cure the poor of the world for one dollar a day. He also thinks there is no reason this couldn't work in the United States for the inner city poor."

His ambition is to cure the poor of the world for one dollar a day.

Shetty's model is based on staffing doctors who are extremely well-trained and dedicated, yet are willing to take a 50 percent pay cut compared to what they would earn in the West.

The intellectual issues for MBA students, said Khanna, are these: How does someone become an entrepreneur in a developing country? How do they overcome all the barriers? How do they provide market-based services to the poor? Khanna is also working with Shetty on questions surrounding how to change the institutional structure in India for healthcare, to make it more feasible for other entrepreneurs to do similar work. "The odds against succeeding in a developing country are severe," he said.

Robin Hood Via London

Born and raised in India, Shetty went to medical school in Mangalore and trained in cardiac surgery at Guy's Hospital, London. He returned to India in 1989 to co-found a state-of-the-art center in Calcutta, the B.M. Biria Heart Research Center, which soon added pediatric cardiac surgical facilities. It was India's first hospital specializing in the treatment of heart disease. Mother Teresa later chose him as her own physician. Reflecting on his background, Shetty wrote on his Web site that he became a doctor because of the recurrent illnesses of his parents. As a child he lived in fear that he would lose his mother; his father, a diabetic, suffered several diabetic comas.

As an adult back in India, Shetty was greatly inspired by his contact with Mother Teresa. He wrote, "One day, Mother Teresa, who at that point of time was convalescing in the intensive care unit of the hospital, saw me examining a 'blue baby.' After a few minutes of thought, she turned towards me and said, 'Now I know why you are here. To relieve the agony of children with heart disease. God sent you to this world to fix it.' To my mind, this is the best definition ever given of a pediatric cardiac surgeon and perhaps the best compliment that I have ever received."

Said Khanna, "When Mother Teresa died, he decided to start Narayana Hrudayalaya. It's kind of a Robin Hood hospital. When you walk in with a heart ailment, if you can pay, you pay; if you can't pay, you get treated for free. It doesn't matter what your heart ailment is. Its operating metrics are better than all the heart hospitals in the U.S. But what's more interesting—and this is a function of operating in an environment such as India where heart disease is endemic—it's a genetic trait among Indians, and also there are so many people, so there are more heart ailments—is that Dr. Shetty has one of the biggest, if not the biggest, pediatric heart hospital facilities in the world."

Shetty also directs telemedicine units that connect to remote areas in northeastern India, allowing physicians and technicians to communicate on acute care. Telemedicine is one way to spread expertise geographically, said Khanna. Shetty has also established an insurance plan that insures many rural poor in two large, populous states in India for the equivalent of ten cents a day: "The numbers of people are so large, that for ten cents a day the people who become ill are insured for just about any ailment," said Khanna.

The impact of the hospital's work reaches beyond individual patients and into informal but important diplomacy, Khanna speculated.

If you can pay, you pay; if you can't pay, you get treated for free. It doesn't matter what your heart ailment is.

"One of the good things he has done has been to treat a lot of children from Pakistan. It's probably one of the nicest things anyone could have done to repair Indo-Pak relations and reduce the possibility of nuclear war. He has done it beautifully. He has a colleague stationed at the border, and the hospital in Bangalore has a visa desk right in front, which you never see in any other hospital. As soon as a heart patient arrives at the border, the colleague alerts Shetty, Shetty alerts the Indian government, the Indian government kicks into high gear, the patient is air-lifted to the hospital, treated, and returned to Pakistan."

"Leaving aside the humanitarian goodness of this, the public relations benefits are wonderful. The world should applaud this, because it's a tangible action that might be reducing tension on the border," suggested Khanna.

India Likes Entrepreneurs

The Shetty case highlights for Khanna many of changes he has been observing in his own research in India. India is fertile ground for domestic, indigenous entrepreneurs, he said, especially compared to China, because the Indian government is learning to loosen some controls. There are many examples of entrepreneurs who start an enterprise, and who go later to the government to say, in effect, "We did this, it works, it is competitive," and the government then offers them the opportunity to institutionalize whatever the lessons were, said Khanna.

"Many of the spaces have done just fine—which as circumstances would have it are the hot spaces for tomorrow: the knowledge-based spaces such as advertising, media, software, biotech, research, and genomics. The government doesn't really know how to grab onto some physical asset, because there are no interventionist rules and regulations written to it."

However, Khanna is concerned about how India will cope with an anticipated population boom. The downside of a knowledge-based industry boom is that it does not employ enough people relative to a population, he said. "The only hope for India is that the lessons of the knowledge-space industries disseminate and begin to affect other sectors," he said.

Cases such as Shetty's inspire him in that regard, and in the coming year he would like to collaborate on research in the healthcare sector in India with doctoral students and also with David Bloom, a professor of economics and demography at the Harvard School of Public Health.

"In the healthcare space, a lot of the interesting work is among the private entrepreneurs. Health problems in India are severe; they are mind-blowing," said Khanna. In addition to heart disease and other ailments shared around the world, there is malnutrition and infanticide, especially female infanticide. He believes the most likely solutions to these problems will come from caring entrepreneurs who are allowed to do what they do best—individuals like Dr. Shetty.

About the Author

Martha Lagace is senior editor of Working Knowledge.