Question

How the Aravind hospital in India works? What is it's business model? Why it could be considered as an innovation?

Answer 1

Arvind Eye Hospital is a hospital chain in India that was first started by Dr. Govindappa Venkataswamy at Madurai, Tamilnadu in 1976. It was founded with the aim to alleviate the suffering of needless blindness and it is one of the purpose-led Eye chain hospitals in the world. Arvind Hospital delivers high quality and low-cost medical care to poor people and focuses on the basic value proposition. Arvind Hospital provides medical services to poor people. by arranging funds through cross-financing provided by the high net worth individuals.

Arvind Eye hospital has developed a replicable model that provides high-quality eye care to the poor people in India. It works on the business model that is known a McDonaldization of Eye Care. Arvind Eye Hospital provides free eye care treatment to the people who are not able to afford the cost for the eye care treatment and the treatment is either free or highly subsidized for the poor that is arranged by the cross-subsidized by the paying customers. Arvind Eye Hospital has already treated more than 62 million patients and has done 7 million eye surgeries.

the business model of the Arvind Eye Hospital is so innovative and is one of a different kind of business model in the healthcare industry. In the cross-subsidy business model that Arvind Hospital is using, affluent patients who can afford the eye treatment or surgery will pay full amount at the market rate for the treatment. The hospital arranges for free treatment or surgery for poor people from the amount collected from the high paying patients. Arvind surgeons and other staffs are so productive as compared to other hospitals that they can perform 13000 patients examinations and 1500 eye surgeries in a year. Arvind works at the level of the quality, productivity, and profitability that provides a business model or process of treating patients to the world.

For the purpose to treat different kinds of patients that are poor (free treatment) and paying customers, Aravind has two different kinds of hospitals, the Main Hospital and Free hospital. The main hospital operates in the same way the other hospitals are running with full facilities and premium treatment. The Free hospital offers basic but quality service to poor people at free of cost or subsidized amount. Aravind Hospitals are operated like an assembly line with the lowest turnaround time. This enables surgeons to carry out a large number of surgeries. Aravind reaches to mass patients who are suffering from eye problems and blindness through their eye camps in rural and semi-urban areas and patients are screened and provided treatment at the free or main hospitals. It is able to reduce its cost by using its own factory producing lenses.

Aravind Eye Hospital is a hybrid and innovative business model. It uses the cash flow from the paying patients and uses the cash for its operational uses and treatment for the non-paying poor patients. Aravind has its own factory that is called Aurolab, to manufacture the lenses for the patients. They have purchased the manufacturing technology from the US and set up the unit to produce the intraocular lenses. They also use vision centers for video confressing between centers to provide treatments and counclling to the patients through video conferencing.