LifeSpring provides prenatal care throughout a woman’s pregnancy. Its core customer base is those who have a household income of USD 2-5 USD/day. A for-profit organisation – although not profit-maximising – its hospitals offer an alternative to resource-constrained public hospitals and higher-priced private hospitals. financial self-sustainability is key to its model (centred on high quality, low cost, and customer focus).
India, with a population of more than 1.2 billion, which is constantly growing, estimated its maternal mortality ratio (MMR) at 254 (per 100,000 births) in 2011, down from 400 in 1990. This is almost 15 times higher than the MMR in developed countries, although India’s target is to reduce its MMR to 109 by 2015, in line with the United Nations’ millennium development goal of improving maternal health. A recent report by the National Institute of Medical Statistics points out that India has failed to reach its goal of reducing the infant mortality rate to 28 per 1,000 live births by 2012. The report adds that the country is unlikely to achieve this target until the end of 2016. Currently, 25% of global maternal deaths are contributed by India. Only 19% of mothers of lowest wealk quintile get skilled birth assistance in India, compared with 53% of all mothers (for more detail on India’s health system, see the box, below).
Healthcare in post-independance India
Since India’s independence, public financing and the provision of healthcare services have been the main foundation of its healthcare policy. However, the public sector has well recognised problems, such as inadequate access by the most vulnerable groups, poor quality and coverage of primary and secondary facilities, and – until recently – excessive focus on sterilisation and inadequate focus on maternal and child health. The private sector has filled the gaps. At independence, it accounted for just 8% of healthcare facilities. According to the National Family Health Survey-3, the private medical sector is now the primary source of healthcare for the majority of households in both the urban (70%) and rural areas (63%) of India. Evidence is mounting that the private sector provides an increasing share of primary health care and that large segments of the poor use the private sector. The majority of private sector institutions are single-doctor institutions, with very little infrastructure or paramedical support. Many of these private practitioners do not have access to updated standard protocols for the management of common ailments; hence, the quality of treatment they provide is often suboptimal. Some private hospitals have also been found to be using inappropriate, unnecessary diagnostic tests and therapeutic procedures, as well as inappropriate and unethical treatment practices. Other problems reported in private sector include the use of unqualified service providers and the overuse of diagnostics and therapeutic measures, leading to exorbitant costs.
With rapid urbanisation, India has seen a concomitant rapid growth of the urban poor, with more than 20% of the entire urban population estimated to be poor. In terms of access to maternal and child healthcare services, the urban poor do not have much choice among the existing options. These are (1) government hospitals, which suffer from limited resources; (2) large private hospitals, whose high prices keep their services beyond the reach of many low-income women; (3) small private maternity homes, which lack transparency in pricing and quality (hospital facilities with fewer than 30 beds account for nearly 84% of the private for-profit sector, which is also the most unorganised, with most of the facilities managed by individual doctors); and (4) home births.
Through its market-based approach, LifeSpring fills the gap in quality maternal health care at affordable rates for India’s low-income population. It offers an alternative to resource-constrained government hospitals and higher-priced private hospitals. With 80% of health care expenditure in India being out-of-pocket, LifeSpring will significantly lessen the burden of rising health costs on the nation’s low-income communities. LifeSpring’s core customer base is the bottom 60% of the Indian population income segment (B60), who have a household income of Rs 3,000 to Rs 7,000 per month (approximately USD 2-5 USD/day). Many are employed in the informal sector (e.g. micro-entrepreneurs) or are day labourers. Eighty percent of LifeSpring’s customers have an educational level of 10th grade or below. LifeSpring offers prenatal care, postnatal care, normal and caesarean deliveries, family planning services, immunisations, paediatric consultations, diagnostic services, pharmaceutics, and health care education to surrounding communities. Its hospitals have not utilised donations or grants for core operations, strongly believing that financial self-sustainability is key to its model and potential for scale.
An innovative private model
LifeSpring’s three pillars are high quality, low cost, and customer focus. Its first hospital began as a proof-of-concept in 2005, and became operationally profitable in less than two years. On a unit level, each LifeSpring hospital is set up to be operationally profitable within 18-24 months of operation. LifeSpring is a for-profit organisation, although not profit-maximising. It prices its services at 30-50% of prevailing market rates: the price of a normal delivery is Rs 5,000 (USD 90), while a caesarean section is Rs 12,000 (USD 218) for a two- and five-day hospital stay (all-inclusive), respectively, although a mid-sized hospital typically charges around USD 200 for a normal delivery and USD 280 to USD 500 for a C-section. Additionally, LifeSpring provides prenatal care throughout the duration of a woman’s pregnancy; the price of an antenatal checkup with a gynaecologist is Rs 100 (USD 1.50) for each visit. These lower tariffs do not prevent LifeSpring from being profitable, as has been proven across its 12 hospitals in Hyderabad.
At the core of LifeSpring’s business model is its focus on maintaining low costs. Through regular activity-based costing analyses, it has been able to keep a close eye on costs per service, and to implement any necessary changes. There are four primary means through which LifeSpring is able to maintain its low costs, and each is dealt with below.
The first is service specialisation and high asset utilisation. Unlike a multi-specialty hospital, LifeSpring’s focus on maternal health obviates the need to purchase a broad range of expensive medical equipment. This narrow focus also allows for improved efficiencies and high asset utilisation. It has refrained from making investments in building specialised infrastructure as births requiring intensive care account for just about 2% to 3% of all of its deliveries. Therefore, instead of creating the in-house infrastructure to address this need, LifeSpring has worked with paediatric hospitals to provide this care. This has helped not only in keeping the initial capital costs low, but also in reducing operating expenses related to hiring full-time paediatricians and paediatric nurses.
The second way of maintaining low costs is its low-capital expenditure model, which for new hospitals, entails entering into long-term leases with site owners. In the future, LifeSpring is also considering public-private partnerships with the government for sites. Adopting a cluster approach of having multiple hospitals in the city has also enabled expensive resources, such as ambulances and back-end operations, to be shared easily between the different facilities. Moreover, without compromising clinical quality, it offers no-frills hospitals, for instance, utilising fans instead of air conditioners in the general ward.
The third means of keeping costs low is the innovative structuring of partnerships. For instance, LifeSpring outsources its hospital laboratories, and has structured a revenue-sharing model with its partners. Additionally, it outsources its pharmacies, and buys in-patient medicines at cost, which avoids managing stocks, procurement and old medicines. To improve clinical quality within its hospitals, LifeSpring had partnered with the Institute for Healthcare Improvement (IHI) for two years.
LifeSpring’s fourth way of maintaining low costs is through effective marketing. The BOP is the primary customer base in its model. The majority of women come to LifeSpring through word-of-mouth. Moreover, prior to adopting a hospital integrated management system across its hospitals, LifeSpring’s marketing team utilised SalesForce to help track pregnant women in communities and to support the efforts of community outreach workers. Through SalesForce analyses its marketing team was better able to identify key decision makers in each household, and the specific aspects they care about. A big insight gained was that the real decision makers (and thus, ‘customers’) are often the pregnant woman’s mother, mother-in-law, or husband. This led to the development of new campaigns to reach these decision makers, LifeSpring has also developed a unique protocol for customer care1.
Impacts and learning
By October 2012, LifeSpring had delivered over 20,000 healthy babies across its 12 hospitals and had provided over 250,000 antenatal and postnatal checkups. It plans to scale across India, targeting urban slums. The main impact LifeSpring has recorded so far is that most of the private players have reduced prices in its vicinity, serving as a catalyst to improve the quality of healthcare offered by other providers.
Several key success factors have been identified. First, LifeSpring has a very narrow focus on maternal health, which has allowed it to achieve the level of operational efficiency it has. From the outset, LifeSpring has been focused on sustainability and scale. This led to the development of over 150 processes across clinical, operational, and marketing functions, allowing for the opening of new hospitals in an efficient and standardised manner. Early on, LifeSpring invested in a hospital integrated management system (HIMS) to improve efficiency at the hospitals and allow digital customer records to follow a woman, regardless of whether she goes for antenatal visits in one LifeSpring Hospital and delivers in another.
It has also managed to ensure alignment between social and financial metrics. In its initial proof-of-concept hospital, LifeSpring followed a cross-subsidy model, whereby customers in the semi-private and private wards would subsidise customers in the general ward. As the general ward comprised
70% of hospital beds and was the social focus of the hospital, there was, however, a disconnect when LifeSpring needed to ensure that its semi-private and private wards were filled. In a sense, there became two segments of customers: one to meet LifeSpring’s financial goals, and one to meet LifeSpring’s social goals. In order to more closely align its social and financial goals, LifeSpring discontinued its cross-subsidy model in 2009 and revised its business model such that each unit would be profitable solely through its general ward. This alignment brought unity to its financial goals and social mission. It has also developed strong marketing and community outreach efforts in order to reach its customer base.
Finally, LifeSpring has managed to face the human resource challenges, now centring less on hiring doctors than on finding and hiring hospital administrators to run the hospitals as ‘unit-level CEOs’.
But can it be repeated ?
The aspect of LifeSpring’s business model dealing with entering new geographical areas strongly depends on government intervention to ensure that regulatory frameworks support a level playing field. But expansion to new countries also poses business viability challenges. The provision of innovative financing and smarter capital flows to take viable business models to scale and build markets is essential. By their nature, foundations have the funds and are in a position to take higher risks in their investments e.g. in R&D, innovation, pilots, etc. that LifeSpring would not be willing to embrace in newer markets. Also, foundations can play the key role of a broker between government-civil societies and the private sector in countries where that relationship is currently weak.
The LifeSpring model can be successfully scaled up via an integrated, genuine partnership model including all actors in society. While scale is important, it is necessary to focus on achieving operational excellence and profitability within existing hospitals before scaling up. Although LifeSpring was initially geared to open 30 hospitals by 2010, it re-evaluated its expansion goals, wanting to ensure that the model was set and finalised. This re-evaluation led to the development of a ‘cluster strategy’ approach, whereby it would have 10-20 hospitals in a given urban area. LifeSpring opened six more hospitals in Hyderabad in the summer of 2011, and now operates 12 hospitals in this cluster.
¹ LifeSpring CARES’s protocol (courteous, attentive, respectful, enthusiastic, and safe), which all hospital employees are required to observe.
References / International Institute for Population Sciences (IIPS) and Macro International, 2007. National Family Health Survey (NFHS-3), 2005-06, India: Key Findings. Mumbai, India.