ZARRAR SHAHEED TRUST HOSPITAL (ZST) Report: Interim Report Submitted By: Group Sub-missal.

Zarrar Shaheed Trust Hospital FYP Interim Report.doc

A brief Introduction and Scope: The efforts during the last 4 weeks on the Zarrar Shaheed Trust Hospital (ZST) entail devising a cost model and a business model for Zarrar Shaheed Trust. Using these models the trust will be able to provide quality medical service to the lower privileged population of Lahore specifically to its neighboring villages and its surrounding townships areas by offering them a low cost medi-care service. It is safe to state that our scope of work in the weeks to follow will be to come up with: 1- Cost model 2- Business model for Zarrar Shaheed Trust. Cost Models: Accurately measuring health care cost has become challenging itself. Due to the medical condition of the patient and given each one has the same disease; each has to go through different set of consultation, processes, and treatments to get complete care. Moreover each process involves various resources such as staff, the equipment and supplies. Although the financials clearly tell the total cost that is incurred by Zarrar Shaheed Trust (ZST) hospital, it does not specify the cost per resource ZST incurs to deal with one patient per visit based on a specific disease. To calculate such cost Time Driven Activity Based Costing will be used. This methodology requires that we estimate only two parameters at each process step: the cost of each of the resources used in the process and time the patient spends with each resource. In order to calculate such cost certain information must be known. Below is the table which summarizes the information that is required. Table 1: Type of information required Salary, Working Hours, number of workers, time spent on patient Equipment Cost of machine, life of machine, duration of equipment used per patient. Medicine Cost of acquiring medicine Staff (not directly involved in patient treatment) Salary, Number of patients per month. Electricity, Gas and Ambulance Total cost, Number of patients per month. The information above is used to calculate the cost of each resource per patient. (Exhibit 1) Information related to Employees (Doctors and Nurses)

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At the moment ZST is running a small operation, it is basically providing services related to Gynecology and General Diseases (such as cold, fever, diarrhea etc). No proper process has been defined on how to handle a patient, a lot is based on the instincts of the doctor, and hence acquiring cost to hospital based on a specific type of disease at the moment seems to be an asking task. To start of the cost of catering to patient per department (such as gynecology or General Disease) was calculated. Currently calculating just medicine cost, only the cost of acquiring the medicine is realized either because the patient himself buys the medicine from the pharmacy or the medicine is sold to the patient by ZST at cost price. The table below provides a summary of the cost per patient to the department. Table 2:

Business Models: To cover the scope of the Business Model our focus has been to perform research and study on Emerging Markets and the Emerging health Models which are being practiced in such markets. We've read through seven business models, tailored to the circumstances of low-income groups, that we believe have the best chances of success. Out of this we have identified two models that fulfill the requirements in the health sector. These models are successfully run by different health organizations in the developing world.

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A pared-down, No Frills Service model (Exhibit 2) is our first one that meets the basic needs of the poor at lower prices and still generates positive cash flow and profits through high volume, high asset utilization, and service specialization. Para-skilling model(Exhibit 3) which combines No Frills services with a reengineering of complex services and processes into a set of simple standardized tasks. Once simplified and standardized these tasks and processes can be undertaken by workers without specialized qualification. Weve agreed to work on a model which will be a combination of No Frills Service model and Para-skilling model. The generic work could be dedicated to lower staff (nurses) while specialized service can be provided by doctors (MBBS and specialized). The group aims to work in a direction keeping standardization and specialization as our prime focus. The whole idea of reengineering of complex services and processes into a set of simplified steps from the Para-skilling model will be used to help introduce standardization. These models selected and used are Profitable or at least self-sustaining without requiring continuous subsidy (otherwise, theyre merely alternative forms of aid and dependent on the continuing of donors); and Scalable and thus able to reach and improve the lives of significant numbers of poor people. The route to scale will depend on two factors: business model maturity, and the size of the entity implementing the business model. Meaningful scale is achieved in different ways but invariably takes, especially if large corporations are not involved. Most small enterprises require at least a decade to reach significant scale. Market- based solutions, therefore, are not a quick fix to the causes and consequences of poverty, though they promise large, enduring benefits. These Business models integrate four elements: the customer value proposition (CVP), the profit formula, key processes, and key resources (Exhibit 4). Developing new business models always begins with devising a new CVP. The CVP we plan to focus on is Low-cost provider. The group intends to follow the clockwise route i.e. Model designed to compete on price proceeds in the opposite way, establishing first the offerings price, then the cost structure, and finally the processes and resources required.

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External Analysis: For finding out more about our customers and what value proposition we need to pitch in, we have conducted surveys and focus groups. The target population was the patients who were coming to ZST and people who live in the catchment area of ZST (Boan Walla Mohalla, Phullar Wan etc). The catchment areas of ZST include a population of 40,000 people out of 100,000 total populations. 60,000 of population prefer Burki Hospital as it is the nearest hospital (Exhibit 5). Walking distance patients visit ZST because they perceive ZST as the best quality hospital which is located nearest to them. Most of the people know about ZST but they perceive that its under construction and not yet fully operational. Another option to visit is the Cantonment hospital that is also nearby. Further analysis helped determine Maternity cases, hepatitis A/B/C, eye problems, diarrhea, Diabetes, flu and fever as the commonly occurring medical problems. In case, the disease is minor, frequent or expensive to cure usually home treatment is preferred and medicine is usually bought from local pharmacy without visiting the doctor. The survey also helped establish that mostly, husbands and mother in law are making the decision regarding which maternity hospital to choose for labor and delivery of the newborn. Parents are very critical about the health of their children and parents are mostly willing to go to specialist for best treatment in case they are not satisfied with the services of the local pharmacist/quack (a person running a pharmacy who is not a qualified doctor). Another reason for not getting satisfied with the local quack is that these quacks dont offer any antibiotics but just cure patients by an injection and generic drugs. Quacks usually cure all patients by same stick and reason being that they buy in bulk and caters volumes. People who cant buy antibiotics, Diabetes and TB medicine usually come to ZST to get free medicine. They avoid visit to Government general hospitals because it take an hour to reach govt. hospital and it takes whole day time to get medicine for a week or two and additionally they had to spent transport cost of Rs. 200 to Rs. 300 to reach the hospital. This situation becomes drastic when they have to travel with another relative to accompany them during this long visit to govt. hospital. In short, patients are buying fast cure instead of slow cures and moreover it is preferred that it is available nearest to home and available at lowest possible price. The perception of quality is also linked with the advertisement channel; most of the people perceive medical camps as the most viable way to promote health service. TV
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advertisement on the Indian soup channels and local news channels through collaboration with local cable network providers is thought of second best way to advertise. It was also observed that one of the local maternity hospitals was using media channels along with a non-conventional way of attracting patients i.e. prize scheme and reducing costs on every next delivery to attract customers. Specialist doctors in the field of pediatrics and Hepatitis are lacking in local vicinity. ZST also has an ambulance which is rarely used to transport patients to government hospitals because people perceive that ambulance service in general is unreliable and costly; and its more convenient to transport the patient by using neighbors mode of conveyance or public transport in case family dont own a conveyance suitable for transportation of the patient. Local gynecology quack specialist charges half the price that of the local delivery and labor hospital. Its actually the family culture and history; and lack of awareness that makes quack compete in the market. Moreover, in emergency situation quack is the one who is available on time. Additionally, they provide an additional service of keeping a check on patient health. In case of cesareans operation, they usually refer the patient to the nearby hospital.

But, modern instruments like ultrasound attract the parents to go to the hospitals. It is usually the first contact of the patient with the doctor and at which point local staff of trained nurses motivate the patient to visit more regularly and at the same time estimate the income level of the patient. This information is used to charge the patient later on. This social bound also help patient to become more confident in using the labor and delivery service later on. Moreover, perceived switching costs for the patients are also increased by explaining them the cons of going to competitor for the medical service. In case, the disease is minor, frequent or expensive to cure usually home treatment is preferred and medicine is usually bought from local pharmacy without
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visiting the doctor. Unclean water is the major cause of diseases like hepatitis and diseases related to ENT; and lack of daily activities is the major cause of blood pressure, bone weakness and diabetes.

The pegging order for treatment is pregnant women; children and then old people i.e. pregnant women get the best treatment, then the children and then old people. Gynecology and pediatrics remains the highly demanded specialized areas. With Diabetes, Blood pressure and Hepatitis come second. For diseases related to children, parents usually visit child specialist and for gynecology they visit local delivery and labor hospitals because of the emergency nature of service and unsatisfactory with the service provided at government hospitals. For Blood pressure, diabetes and Hepatitis poor patients usually go to public hospitals because of the availability of free availability of branded medicine. Patients prefer to visit local doctor first in case of minor disease; and when in case the patient is not satisfied with the treatment, then patient would go to local big hospital. Whereas, in case of chronicle diseases, patients prefer to visit public hospital in case a good alternate is not available near their home. A good substitute is one which saves them time and money and provides them good quality treatment. Time and cost of new entry varies. The cost will depend upon targeted medical services. If revenue generating medical services are children particularly their normal everyday diseases of ENT category or similar then time and cost of new entry is Low. Because there can be a new medical store or a small medical clinic in vicinity of local people providing basic health services with a minimum setup cost. However, if we are targeting specialized gynae services (handling delivery cases both normal and other) the time and cost of entry is rather at high end. The setup

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requires higher cost and time for any new competitor to establish itself in this domain is also higher. Specialist knowledge is moderate. Experience is generally preferred. Rather we should say doctors with good history are preferred. But in our survey we found that credited doctors (who have clinics near Jora Pul) demanded higher fees. For children parents are willing to go to good doctors. The experience or specialist might be different in local people minds. They usually think of a doctor or person who is not even a qualified doctor better just because his treatment is more effective (in short term: as some clinics give injections which are effective in short term but have high long term patient health consequences). ZST has moderate Cost advantages. ZST have a reasonably large setup. ZST medical facility is almost up to mark for starting medical services for children and gynecology (however specialist and doctors still are to be hired). As ZST is already up and running our incremental cost will be moderate as compared to any new incumbent. There are moderate Barriers to entry. Any facility can open from small to large. Even competitors with no sufficient expertise can open new medical facility as Government law enforcement is almost not observed. Number of competitors in the vicinity are Large for both children and gynecology. For children ZST face competition from medical stores (prescribing medicine to patients), small clinics, local government funded dispensary, government funded hospitals like Children Hospital and specialized or credited doctors at Jora Pul. For gynecology, people use traditional daees and those who prefer medical facility. ZST is rivaled with local Geo hospital, and other government funded hospitals like Services, Gangaram, Jinnah hospitals.

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Quality difference between substitutes and competitors differs a lot from each other. People want higher services but at lower cost. Accessibility Advantage is high. People prefer to use local nearby facilities to save transportation cost and inconvenience. Furthermore people are afraid to travel after dark as they feel their area is insecure. We have very high end medical facility right at the corner. We are right in the heart of Bao Wall Mohalla and easily assessable to nearby slums. Switching Cost is Low. A patient can just switch if he or she finds ZST inappropriate (not satisfied by our treatment). It will be very much advisable to provide adequate services to new comers so that they are retained. Customer Loyalty is high. Patients prefer to go to doctor or quack from which they are getting healthy for last several visits. But, Patients switch as they feel that the treatment was not effective. Service Cost is high as compared to the quacks but operations are still not efficient as compared to the other established hospitals. Some Buyers are Price Sensitive and others are not based on the specialization or general treatment demanded. Two segments of people encountered are: very price sensitive and moderately price sensitive. Many people went to local government funded dispensary for medicines as the cost was only Rs. 2 per patient (plus very little transportation + inconvenience cost). Families preferred to take their children and wife to better facilities in case the local treatment was not effective. This was also dependent upon the income level of the patient. Service Differentiation is moderate. For gynecology local people prefer to stick with doctors for their case and follow their recommendation for delivery facility. Some interviews also revealed that people preferred better facilities with delivery specific equipment and staff. Overall buyer power is high because People have number of medical facilities available both private and public. They have lot of choices but they also consider accessibility and medical service price.

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Summarizing the survey effort; we conducted interviews with mostly family heads and extracted various insights regarding disease, money expenditure on health, services at ZST and other medical institutes, willingness to pay, preferred medical services availed by them, and who usually requires medical services in a particular household.

Exhibit 1: ZST Costing and Survey Analysis

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Diseases Health Provider Relationship

Exhibit 2: NO FRILLS SERVICE

No Frills models serve low-income markets by economizing at every stage of offering: Setup and service, in which the provider reduces or minimizes non-core capital and expenses to provide bare bones service and lower the unit cost of delivery. Quality is kept sufficiently high to provide customer benefits superior to other options. High throughput/high asset utilization in which high customer volume drives capacity utilization, pushes down unit costs of key human or physical assets, and provides economies of scale for purchasing, marketing, and other functions. Service specialization, which enables the provider to focus on a limited array of services, standardize processes and reduce the need for additional procedures or multi-functional (and thus more expensive) personnel and training. Services/protocols, which are highly standardized, documented, routinized, and easy to deliver for lower-skilled staff.
Health: Vaatsalya Hospitals, Dial 1298, Narayana Hrudayalaya Hospitals,
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Exhibit 3: Para-skilling
Para-skilling entails all of the elements of No Frills model (discussed above) plus: Key processes reengineered into smaller, often disaggregated, discrete parts that can be performed by lower-skilled workers. Simplified and codified processes that lower-skilled workers can perform on a high-volume basis many times per shift or per day. Cultivation of a paraprofessional cadre that has less education or skills than the professionals who customarily perform services. Para-skilling requires finding suitable staff members who see the business proposition as attractive and making substantial continuous investment in staff training, and heavy investment in segmenting the labor market. Retention through promotion or expansion is generally a key to success.
Health: Aravind Eye Care, Ambuja Cement Foundation;

Exhibit 4: Building a New model

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Exhibit 5: ZST map till border

Exhibit 7: Value Health Quality Variables

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Exhibit 7: Virtuous cycle of value health

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Exhibit 8: Cost measurement System

Cost measurement Disease Patient No. medical condition complicatio n/co morbidities patient care cycle Activity Map (Encircle principal activity and corresponding stage) Diagno Preparin sing/ g for principal preve screeni intervent Interve Recov Mana activity ntion ng ion ning ering ging What do patient inform need to be ing educated about? What measures measu need to be ring collected? Where do patient acces care activities sing take place? care What activities delive are performed at ry each stage? Process Map Process Name P1 time in: time out: Person al Facilities Equip ment Supplies (Medic, syrng, bandage etc)

Legend

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