Vaatsalya: Going Against the Grain

C.K. Prahalad, management guru and professor at the University of Michigan School of Business at Ann Arbor, has been telling anyone who cares to listen about the "fortune at the bottom of the pyramid". While his ideas have gained wide publicity, there's little evidence that business folk have embraced his ideas and re-crafted strategy at their companies. Indeed, Big Business has been somewhat skeptical and have pursued business as usual.

That, of course, doesn't negate the perspective. There's the example of Grameen Phone in Bangladesh and the several ventures spawned as a result that utilizes a form of group insurance based on "self help groups". This business model is slowly spreading around the world, including in the United States. In India, the Aravind Eye Hospital in Madurai in the far south, has pioneered a concept of business based on the mass market comprising the poor that has been written about as a Harvard Business School case by Prof. Kasturi Rangan. Aravind grew from a 20-bed eyecare center to an organization with five hospitals and 2,000 beds where 70% of patients are treated free. Yet, the hospital is debt free and very profitable.

Is there a story here? In India, healthcare providers have largely been government hospitals characterized by poor service, inadequate infrastructure, and appalling conditions. In recent years, the private sector has moved in aggressively and invested in large, "super specialty", hospitals in urban areas. These often entail large investments and overtly target the upper middle class and the very affluent. That leaves the middle and lower middle class with nowhere else to go; and the poor in the rural areas are left high and dry. A potential market, one might conclude, for any enterprising entrepreneur.

Vaatsalya is a new venture that has stepped into the breach. It is an angel-funded, four-hospital chain with about 20 beds each on the western seaboard of Karnataka state. It has a unique business model. Taking a leaf from the hospitality sector where the big brands such as Sheraton, Hyatt, and Hilton often only manage properties across the world in return for royalty and a share of revenues, Vaatsalya focuses on primary care in rural areas, partnering with small, dedicated physician groups who provide quality services while the company takes care of hospital administration and partnerships with insurance companies and tertiary hospitals.

Ashwin Naik, co-founder and CEO, is a physician who returned from the US with a question in his mind: was it possible to go against the grain and concentrate on primary care - when all private sector hospital groups with deep pockets were shunning this for tertiary care facilities - and yet make a profit? It's too soon to tell, but he has his priorities set out. First, he wants to articulate his vision and sign up a network of physicians who are committed to providing quality care; second, he would like Vaatsalya to be a branded hospital of choice for rural people in the areas served by it; third, to implement a robust infrastructure suited to the geography, including information technology that may not be cutting-edge for now, but does the job; four, to create overlapping sets of alliances with insurance companies utilizing the concept of group insurance, referral centers, and tertiary hospitals for advanced care; and, finally, to engage with providers of services and products and explore co-branding with a view to lower costs and give them a platform to extend their market.

Vaatsalya hopes to grow to about 15 hospitals by the end of next year, concentrating on rural and semi-rural areas and keeping its small-size format for better administration. This is one idea that's worth watching out for as its success has the scope to revolutionize rural health delivery.