who's Hospital? 2

CASE 7.1 ARAVIND EYE HOSPITAL

All organizations should match their design to their missions. In the nonprofit sector, however, scale is often a problem, because many nonprofits tackle huge problems (hunger, poverty, disease) with meager resources. Fortunately, some rethink their missions, deliberately scaling back and focusing more narrowly on missions where they can expect to achieve success. Take India’s Aravind Hospital, the world’s largest provider of cataract surgery. Founded in India in 1976 by a retired eye surgeon, Dr. Goriudappa Venkataswamy, Aravind has achieved much by drawing the lines of organization in a way that supports its strategy.Dr. V. (as he’s known to the poor in India) started with a small, 20-bed private nonprofit hospital that performed all types of eye surgery at reasonable cost. In 1978, a 70-bed free hospital was opened to provide the poor with free eye care. Today the hospital has more than 2,500 beds in a four-hospital network performing 250,000 surgeries and treating 1.5 million patients each year. Fully 70 percent of the hospitals’ patients are treated without charge. Dr. V. says his core mis-sion is to wipe out needless blindness.All this was the result not of luck but of designing an organization to support a strategy. Four actions, in particular, are worth noting: (1) configure patient surgery like an assembly line, (2) produce lenses in-house rather than purchasing them, (3) hold “eye camps” in rural areas to find patients, and (4) generate income to subsidize the core mission.1. Dr. V.’s vision and methods owe a lot to Adam Smith, although he himself credits McDonald’s as his inspiration. Harold L. Sirkin and his part-ners at Boston Consulting Group explain how Dr. V. has transformed the cataract surgery model to suit conditions in a rapidly develop-ing economy: Expensive medical equipment is scheduled for round-the-clock use to drive down the cost per surgical procedure. Doctors and staff are extraordinarily efficient and produc-tive, carrying out more than 4000 cataract surgeries per doctor per year, in compari-son with an average of 400 performed by other surgeons in India. Like the cost-effective use of equipment, this task special-ization is an innovation in the industry. In a traditional hospital, a surgeon admits the patient, orders tests, synthesizes the resulting information, plans the surgery, coordinates the team, and monitors postoperative care. The surgeon acts like an orchestra conductor, overseeing the entire operation and taking individual responsibility for its success. At Aravind, a surgeon moves from one oper-ating table to the next, performing only the cataract procedure itself, while teams of nurses remain at each table and over-see the patient’s care before and after the surgeon does his or her work.2. Cataract surgery is a procedure to remove a cloudy lens from the eye and can be performed in two ways: intracapsular and extracapsular. Intracapsular surgery is the removal of both the lenses and the thin capsule that surrounds them. Removal of the capsule requires a large incision and doesn’t allow implantation of a new lens. Thus, people who undergo intra-capsular surgery have long recovery periods and have to wear glasses that look like the bottom of two Coke bottles. Extracapsular surgery is the removal of the lenses where the capsule is left in place and a silicone or plastic lens is implanted where the original lens was. To keep costs low, Aravind initially offered its free-care patients intracapsular sur-gery. But the hospital’s mission was to provide the highest-quality care to poor patients, so in 1992, it decided to establish its own facility to produce lenses—Aurolab. Now, rather than spend $30 for each lens, it could provide its No distribution allowed without express authorization, poor patients with its own lenses, which cost just seven dollars each. Today Aurolab consists of five divisions: intraocular lens, suture, instru-ments, blades, and pharmaceutical.3. Aravind offers a service so good that it cre-ates its own demand. “Market driving” is a marketing term that refers to the creation of a need that didn’t exist before (think of FedEx and Starbucks). As a market-driving organization, Aravind has to educate its free patients. Harriet Rubin explains: One of the ways that the hospitals accom-plish this is through community work, which their doctors and technicians almost rou-tinely undertake. First, a representative from Aravind visits a village and meets with its leaders. Together they do the planning necessary to organize a weekend camp. Then Aravind doctors and technicians set out for the village, sometimes driving for days. Once there, they work around the clock, examining people and working to identify those who will need to be taken to Madurai for surgery.4. About 30 percent of the hospital’s patients pay—and that is important for several reasons. Joan Magretta writes: The paying patients are critical to Aravind’s success, making the organization self-sustaining. Those patients are drawn to Aravind by its repetition for world-class eye care. Here too, organization supports strategy. Aravind has forged research and training collaborations with premier teaching hospitals in the United States. Aravind may be low cost overall, but it stays at the lead-ing edge of its field, and that is its appeal to paying customers. It is also part of Ara-vind’s appeal to its doctors. They work longer hours, for less money, in exchange for the psychic rewards that come in part from professional pride, in part from the organization’s social mission. Thus, Aravind has drawn the lines of incentives in ways that reinforce its strategy.

Case Questions

1. Aravind is successful because each organiza-tional component directly addresses the organi-zation’s mission. Discuss

2. How would you characterize the division of labor at Aurolab?

3. How well do you think the matrix approach would work at Aravind?

4. What are the advantages for a nonprofit to be self-sustaining?