The major eye care providers in India include the government health care system, private hospitals and non-government health providers such as not-for-profit eye hospitals. Many of these not-for-profit hospitals serve poor communities by providing affordable eye care (free or at a comparatively low rate). They then rely on charity donations or try to balance the income from paid patients that subsidizes the health costs for the poor. Most not-for-profit eye hospitals strive to generate enough revenue to run their regular operations along with the fixed running cost of the hospital. However, for new clinical equipment, additional infrastructure, training, and capacity building, the majority of them are dependent on external support and donations.
To remain competitive, hospitals have to reinvent themselves with rapidly changing technology, increasingly competitive market forces, and a better standard of patient care. As a result, financial sustainability has emerged as one of the most important focus areas for any not-for-profit institution working to serve the poor and people at the bottom of the pyramid including the eye hospitals across India.
In the various annual joint learning meetings that Seva Foundation partners organized under Global Site Initiative (GSI) in India as a part of SIB’s funded SCALE project, financial sustainability has been a main focus of discussion and learning. The financial sustainability of an eye hospital is based on two main factors:
- Revenue maximization
- Cost containment
For many not-for-profit eye hospitals, the major revenue streams that directly contribute to revenue maximization are;
a) Income through services (paying patient including charges for surgeries, consultation, investigations and support services)
b) Revenue generated through the sale of the optical spectacles and hospital’s pharmacy
c) Any other source including external support (donations and grant), national subsidy, insurance scheme, etc
The revenue generated through services such as cataract surgeries along with other inpatient and outpatient clinical services is the largest part of income, contributing anywhere from fifty percent to hundred percent of total income in different hospitals. This is also the most visible part of income for eye hospitals, so efforts to try and maximize the benefits from this stream is always a high priority. Improving the clinical services and higher standard of patient care leads to organic demand generation and ultimately adds to the larger number of paid patients coming to the hospital.
“For achieving financial sustainability we believed to focus largely on two key areas – that is cost optimization and balanced growth indirect revenue generation. Cost optimization in operations is self-explanatory whereas balanced growth in direct revenue generation literary means, strengthening of the system of operations and quality assurance to ensure all segment from the society access the care. We strongly believe, apart from the charity we all do, there should be a fair proportion of people who can afford care and also access our care. It is obviously crucial for our financial sustainability but also helpful to assess our own standard of care and improve on a continual basis” ~ Subeesh Kuyyadiyil, Sadguru Netra Chikitsalaya (SNC), Chitrakoot, India
One key component of revenue maximization is through an optical shop and pharmacy. Traditionally not-for-profit eye hospitals haven’t explored this revenue stream much due to reasons such as patient behaviour towards optical usage, logistic and supply chain challenges. To set up an optical shop or a pharmacy requires a huge amount of effort and investment along with dedicated human resources, especially for small hospitals. However, recent experiences show that optical sales can attract a hugely untapped revenue stream, which is mostly exploited by the market forces.
The non-profit eye hospitals can bring another element of affordability and access due to their values and existing practices. Further, for-profit ventures mostly focus on urban populations, overlooking a large unmet and unrealized demand in rural areas and smaller towns, where more than 70 percent of the population resides.
In countries such as India, close to half a billion people need vision correction, yet only one fourth of them wear spectacles. This offers a huge opportunity and untapped market. Ventures like lenskart.com have already taken the giant leap and innovated a successful business model build around process innovation, online sales, technological improvement in specs along with supply chain management.
“To my mind, sustainability, in the long run, is a function of quality overall. And that transitions into patient care; patient satisfaction and overall process efficiency. It is a satisfied patient who passes the word around and impacts perceptions” ~ Shantanu Das Gupta, Dr. Shroff Charity Eye Hospital, Delhi, India
Another important factor for financial sustainability within an eye hospital is the aspect of cost containment. The cost of consumables within the hospital (intraocular lens, sutures, eye drops, spectacles), the efficiency of an ophthalmologist, and other fixed costs including salaries, maintenance and utilities widely vary in different hospitals. Further, the availability of trained human resources, regulations in terms of trade and licensing requirements of running a hospital add to the overall cost of the operation. Internal checks and balances on efficient practices, regular monitoring, and management practices have a huge role containment of this cost, which directly lead to self-reliance of the eye hospital. This has been another critical component of SCALE: reviewing with hospitals their patient flow for efficiency, ensuring protocols for high standards are in place, and reviewing human resource management to cut unnecessary costs.
There are quite a number of factors that are important for financial sustainability. Most important is developing skilled Human resource and their efficient utilisation.~ Dr Asim Sil, Netra Niramay Niketan Vivekananda Mission Ashram West Bengal, India
The scale and efficiency of the eye the hospital plays an important role in financial sustainability as the higher number of paid patients at the hospital not only ensure the optimum utilization of available resources (human, physical and clinical infrastructure) but also reducing the per-unit cost of service due economy of the scale. According to a recent review of hospitals participating in the SCALE project, almost 90% of hospitals responding noted that support from SIB through the SCALE project improved their financial sustainability by focusing on the revenue maximization and cost containment.
Author: Kuldeep Singh
Position: Program Manager, India and Bangladesh for Seva Foundation