Efficiency: For Profit, For the People

As a sharp contrast to visiting AIIMS (All India Institute of Medical Sciences) in New Delhi our group spent the following day at Max Healthcare. Max Healthcare is a for profit system of high end hospitals. Walking through the main door it is almost necessary to turn around, look back outside and remind oneself that yes it is still India. There are dropped ceilings to cover wiring, occupancy can be measured by people per room instead of by people per square centimeter and it is easy to identify staff from patient. Oh and this strange intangible quality, what is it… Ah that’s it. Organization.

Beyond all the glitz and glamor (wait, I believe I just described a hospital the way someone from the jersey shore would describe a club) is a well-run system. The physical location of the hospital, the technology employed, a coordinated staff, intelligent use of consumable resources, doctor performance and especially the processes implemented all contribute toward the efficiency of this hospital chain. CEO Dr. Ajay Bakshi stressed the importance of this efficient system from a profitability standpoint (which he absolutely should) but the success that Max has implemented has effects that reach further than the bottom line.

First a quick look at realities. Capital expenditure is huge, especially for a new hospital. For a hospital to be profitable, or even economically sustainable, bed occupancy rates must be very high. Dr. Bakshi likened the model to the airline industry where every empty seat is lost revenue. At 85% occupancy the hospital is unprofitable and at 92-95% occupancy the hospital can be incredibly profitable. (Forgive the fuzzy statistics) Because of this some of hospital management’s greatest goals are to increase efficiency of the assets available by improving the points I mentioned before. Succeed in this and the hospital will succeed as an economic entity.

Theory time: Let us assume that at any given time there is a finite amount of resources (doctors, nurses, syringes, medical equipment, drugs…) available for the a product that I will generically call health care. With these resources X amount of product is available for consumption by the general population. This X amount of product can be divided up by either capitalist or socialist ideals but it is still a finite amount. However, through increased efficiency the system may be able to produce 1.2X or some such multiple and under any distribution system there is a greater good for society. In an open market scenario prices become cheaper and people at the bottom of the pyramid are able to afford more care and under social entitlement system more care is available for distribution to everyone. Purely Fantastic

Next question: Is a private model the best environment for fostering and providing incentives for efficiency?

As a side note: I have been in downward facing dog the entire time I have been writing this post.