Corporate Governance on Healthcare’s Platter

The vibrant and sparkling new face of trust hospitals is a reflection of the changing dynamics of their management, which concentrates on a corporate mode of governance. Nancy Singh and Jayata Sharma explore the metamorphosis

The era of globalisation and corporatisation has swept trust hospitals in its wake. The end result: dingy rooms replaced by swanky interiors, unfriendly staff giving way to smiling employees and hospitals being equipped with the latest technology.

Whether it is Manipal Hospital, Bangalore, Aravind Eye Care Systems (AECS), LV Prasad Eye Institute (LVPEI), Hinduja Hospital, CMC, Vellore or Sankara Nethralaya, all have undergone this metamorphosis. The difference between these and other trust/not-for-profit hospitals is that the former have been open to change and adopted the corporate way to strategise their growth and have kept a strict watch on the finances.

So, what exactly is corporate governance in a trust hospital? It means emphasising on accountability, transparency, strict costing measures and quality healthcare, patient care, bringing in latest technology to benefit patients and being self-sufficient. This is in addition to keeping their cost as per the trust guidelines, i.e. at the lowest. Besides, trust hospitals are also under scrutiny from regulatory bodies, the judiciary, consumers and NGOs. From patient safety to services to charity, there is tremendous pressure on their social responsibility. Well, this sure seems to be a tough challenge!

"The board of trustees now expects discreet spending and good organisation stewardship from the leadership team," says Dr George Chandy, Former Director, CMC, Vellore.

Then, what is the difference between a corporate hospital and a trust hospital? The main difference between totally corporate functioning and corporate functioning in trusts is that the former strives for profit, the latter for surplus. Trust hospitals plough back the entire surplus money, while corporates keep a certain amount of profits for their shareholders.

Once restricted to the affluent, today personalised care has extended its wings to encompass all

Many hospitals are adopting IT to stay ahead of competition

The Changing Face

The multiple facets of corporate governance in trust hospitals are:

Costing: This is one area which benefited the most by the change in governance. LVPEI, Hyderabad saves its purchase cost by making bulk purchases, and hence gets the power of negotiation in the cost. "Also, we ensure that our staff does not get a commission, as it results in increased total cost of products we buy," informs Dr GN Rao, Founder and Chairman, LVPEI.

Meenakshi Mission Hospital and Research Centre (MMHRC), Madurai, has restricted the vendors for their medical products to just two. "This restricts the doctors from getting commission from various vendors and the price quoted to us also remains low, as we are regular customers for the vendors. By this simple strategy, we have saved 20-30 per cent cost on every purchase and Rs 7 lakh in the last few months!" explains Dr N Sethuraman, Founder Chairman, MMHRC.

Also, hospitals are used to outsourcing medicines, when actually an in-house pharmacy is a profit-making section. This is the reason why after corporate governance, many trust hospitals have opened up their own pharmacies within the hospital premises. In yet another cost-saving measure, LVPEI has tightened employee scrutiny and does daily, weekly, and monthly checks on cost saving. "During these checks, we ask the management what steps they took to save/reduce the cost incurred by the hospital, in that time frame. This compels the employees to continuously work on cost-saving measures," informs Dr Rao.

Trust hospitals have another breather in the form of the funds they get from various organisations, which takes care of a certain percentage of their spendings. For example, the Melinda Gates Foundation sponsors the cancer ward at MMHRC. Such financial aid from external factors is a boon for trust/not-for-profit hospitals. A focused way of governance also involves devising organised ways and means to raise funds for trust hospitals. "That's why our hospital still remains with its original owner. All the others were either taken over or sold," says Dr Sethuraman with pride.

However, there are hospitals that are run in a way that does not require additional funds, considering the large amount of patient turnover. CMC requires no funding because of large patient turnover. "For us, it is a daily reminder of dedicating our services for the betterment of poor, so that we do not forget our mission," says Dr Chandy.

Saifee Hospital in Mumbai is another example of tight costing procedures. They have a centralised internal audit system and with the help of sophisticated IT systems, they maintain a strict medical audit. The Hospital managed to attain break-even in one year and now, they have decided to avail of KPMG for providing audit, tax, and advisory services operating.

Saving overheads: This aspect was comfortably ignored before corporate governance stepped in. Training the staff helps in saving overheads like electricity and small costs like that of injections, syringes, and other hospital equipment. Nurses and paramedics must be trained to handle syringes and oxygen cylinders appropriately, which makes them utilise the resources optimally and prevents the wastage of these materials.

An instance is of LVPEI, where usage of electricity is eyed strictly. "We do not let our staff use the lifts unless they have some physical disability. Also, our corridors and offices do not have air conditioners. We monitor our OTs closely, as it is one area where more electricity is spent," says Dr Rao.

MMHRC has gone a step further in saving electricity and have appointed 'energy consultants' to work out electricity saving at the Hospital. They changed the heavy wattage lights to lower wattage lights in the areas which do not need much lighting. Also, they use low-energy-bulbs, which consume less electricity. "We switch off the ACs at night as the climate is cool enough. All this has helped us in saving about Rs 5-6 lakh soon after we started implementing these exercises," says Dr Sethuraman. The feather in their cap is the installation of 'bio-gasifier', which is soon to happen. This machine will run the generator at their hospital and is competent to reduce the price of per unit of electricity to just Rs 3.50.

Another example is of Ruby Hall Clinic, Pune, which worked extensively to save power. Earlier, they had geysers to boil water that were changed to boilers, which consumed less power. However, they soon realised that boilers consumed 18 tankers of furnace oil, and hence they retuned them and brought down the usage to five-six tankers. Also, instead of the previous eight tubes in a single patient room, now they have four energy saving tubes. Formerly, the AC was on 24x7. Consequently, energy savers were installed on the ACs, which were tuned to reduce the air conditioning between two and four o'clock in the morning.

"Many trust hospitals are run by the fourth or fifth generation, most of whom take this responsibility as a burden" - Brig Joe Curian Group President Global Hospitals

"We have exploited IT in the best possible way to make treatment affordable and to improve our quality of service" - Dr P Namperaumalsamy Chairman AECS

Cross-subsidisation: With corporatisation, a new model of doing charity has evolved, from 100 per cent charity, which is not a self-sustaining model, to cross-subsidisation. Although not many trust hospitals are following this principle, they soon might have to, given the benefits that they accrue, feel experts. Cross-subsidisation helps in improving the quality of service delivery. When a patient is paying more, he/she expects better quality, which the hospital strives to give. In this process, even the non-paying patients benefit and get the best care possible, which is ultimately the aim of a trust hospital.

Experts unanimously opine that the 'Robin Hood' style of functioning, which essentially means cross-subsidisation, is indeed the future where all classes are taken care of and the hospital can also be self-sustainable. AECS is an excellent example where 'charity' as a concept and quality service synergise beautifully. "The Robin Hood principle is the only way forward that can lead to the mutual existence of quality, service and philanthropy," says Shaikh Yusuf Qasimji, CEO, Saifee Hospital, Mumbai.

LVPEI, Chennai's Sankara Nethralaya and Narayana Hrudayalaya in Bangalore are some hospitals which have actively absorbed this kind of functioning style. St Stephen's Hospital, Delhi also follows the above principle and has 25 per cent private beds, while the remaining 75 per cent are general and for the underprivileged.

A positive story is that of AECS, which has survived and is doing well because its mission and goal are crystal clear. They operate on an economic model that depends on patient liberty, which means patients pay as per their capacity. This model is a successful one indeed, when you consider the fact that today it is the largest eye care system in the world! The Hospital has three classes of buildings (A, B, C) with all kinds of services from five-star to free care.

Change in mindsets: An important step while going the corporate way is changing the mindset of people. In a complete trust/not-for-profit set-up, generally employees are not used to being answerable or accountable. A sense of responsibility is created when corporate structure is established. "The best part is we are not hounded by profits all the time. Of course, we are supposed to be financially disciplined, but there are no shareholders at our throats. Our only shareholders are our patients, who benefit if we have surpluses. Our return on investment is patient satisfaction," beams Dr Rao.

Leadership is very important here as it is necessary that the managers realise the significance of their mission and are focused towards the goal. Especially, since trust hospitals are started with a mission, the management needs to be very stern and clear its objectives, opines Dr P Namperaumalsamy, Chairman, AECS. True to his leadership vision, AECS is considered as one of the best operating management models.

An ugly face of such a transition also implies firing people, when they refuse to adapt to newer standards of corporate governance. Manipal Hospital, Bangalore and Jaslok Hospital, Mumbai are examples of how the top management had to cleanse the systems of people who were either not suited to their job profile or averse to change.

Infrastructure: Gone are the days where the management shied away from investing in latest technology. "Do you think the best consultants would have joined us if I hadn't invested in improving my infrastructure?" asks Col Manesh Masand, CEO, Jaslok Hospital. Jaslok is upgraded with the latest technologies like PET-CT and hi-tech systems, as today even this Hospital has its eyes on foreign shores for medical tourists.

Today, many trust hospitals have received accreditation from bodies like NABH, which is a good barometer of these hospitals being fully equipped with state-of-the-art infrastructure. The fact that many trust hospitals are in the waiting list for accreditation indicates that they are raising their quality standards and upgrading themselves with the best of infrastructure.

While they may not focus on aesthetics, when it comes to technology or quality there seems to be no compromise. "The kind of patients most trust hospitals get may not want to see the latest LCD/plasma screen TV in their room, but still they do expect a certain standard of quality and service which can be only possible if the trust hospitals have good infrastructure," opines Dr Paramjit Bawa, CEO, Channandevi Superspeciality Hospital, Delhi and also a medico-legal expert.

"We do not let our staff use the lifts unless they have some physical disability. Also, our corridors and offices do not have ACs" - Dr GN Rao Founder and Chairman LVPEI

"By this simple strategy, we have saved 20-30 per cent cost on every purchase and Rs 7 lakh in the last few months" - Dr N Sethuraman Founder Chairman MMHRC

Tech-savvy/IT: Though implementation of IT is still considered to be nascent in healthcare, as compared to other industries, hospitals are exploring IT to their maximum advantage. The ones that top the list are institutions like the chain of Sri Sathya Sai Trust Hospitals and Kochi's Amrita Institute of Medical Sciences. Given their high patient turnover, they looked at IT to improve their efficiency. In fact, Sathya Sai received the best IT implementation award from CII in 2003. It has integrated HIS/HS systems, PACS, RFID models and now has many telemedicine units too. The completely computerised and paperless hospital's sophisticated IT systems help generate weekly statistical reports of each department. "We have also pioneered the use of bar coded patient labels and were one of the first in India to acquire the neuro navigation system to track down deep-seated tumours in the brain, whose functioning is based on Global Positioning Systems (GPS)," informs an official from the IT department of the Hospital.

AECS is another prime example of how IT has become its best weapon to reduce cost and reach the bottom of the pyramid. It was one of the first institutions to use GPS to reach the rural masses way back in the 1980s. "We have exploited IT in the best possible way to make treatment affordable and to improve our quality of service," says Dr Namperaumalsamy. It has one of the largest patient turnovers today with almost 2,76,000 eye surgeries performed every year. Every day, an average of 100 surgeries are performed and 1,200 outpatients are treated. The free hospital, adjacent to the main hospital, has four OTs with a capacity for 320 inpatients. Every day, on an average, it handles about 800 outpatients and 200 surgeries are performed. The camp hospital, situated close to the main hospital, with two OTs with a capacity for 600 inpatients, handles about 100 camp surgeries.

Better Salaries: Change in management style has resulted in revision of salaries of employees. While a trust hospital is usually known to pay less than the corporate sector, strict watch on overheads results in saving money. Money saved is money earned. Hence, the cash thus saved is utilised to increase salaries of employees. "Good salary is an important aspect. If you give peanuts, you will get monkeys," quips Dr Sethuraman. MMHRC improved the salaries of its employees when they adopted the corporate way of governance and now gives salaries on par with corporate hospitals. Another instance can be of Manipal Hospital, Bangalore which was known in the industry for their dismal pay packages some years back. However, when they were shifting to a corporate way of functioning, this facet was addressed and now the employees are paid according to industry standards.

'Hospital'ity: Today, the warmth is not just reserved for the VIPs. "Now, patients and their relatives are not pushed around, neglected or ignored. Patients are provided with choice of convenient timings, treatments and costs," says Dr Chandy. Once considered the domain of only the affluent, today personalised care has extended its wings to encompass all. The reasons for this are many. "Firstly, patients are more aware of their rights and communication plays a crucial role. Competition is high, especially during the current times of consumerism. Hence, management has started realising the value of hospitality," opines Dr Bawa.

Though hospitality may not have reached the level of industries like travel, the concept has managed to make a significant entry, as 'care' forms the core of hospitality. The concept is more prevalent especially in spiritual or religious organisations. Hence, hospitals like AIMS, and Sathya Sai are known for their compassionate care. In fact, Sathya Sai goes a step further and prefers to call the hospital a 'temple of healing' with the doctors considering themselves as servants of God. The relatives who accompany the patients are also taken care of and given free accommodation and food.

Paying salary according to the market standards is the best way to retain employees

Trust hospitals have woken up to the importance of having swanky infrastructure

Training: While adopting the corporate way of functioning, HR is in the forefront. This is where employees are scanned and are segregated as efficient and non-efficient. Here, hospitals are also required to find out multi-tasking employees, who can be trained further to shoulder more responsibilities and become leaders. Inefficient people can be retrained and the hospital needs to make them aware of the organisation's focus and motive. With high attrition rate in trust hospitals, training the workforce is most important, so as not to waste the available manpower.

Diversify: Corporate governance helps some hospitals to diversify. New Delhi's Rockland Hospital expanded from a single speciality of cancer to multi-speciality. Rockland actually started off as a research institute for cancer. However, research cannot sustain in isolation and hence they felt the need to diversify. "As we had professional managers with us right from the start, it became relatively easy to expand. They took care of the process while our doctors concentrated on research and their practice," says Dr PK Dave, Chairman, Rockland Hospital.

Similarly GNRC, Guwahati started as a neurology and neuro-surgery centre, but later included cardiology, orthopaedics, general surgery and trauma facilities. SL Raheja Hospital, Mumbai, which was started as a hospital for diabetes, soon realised that transforming to multi-speciality will boost its business. They calculated the risks and went for it.

Another instance can be of St Stephen's Hospital, Delhi, which first started off as a hospital for women and children. However, as the hospital is situated in Old Delhi and the surrounding areas are congested and over crowded, there were numerous medical issues and a deficit of general medical facilities. As the Hospital grew and progressed, it also kept adding various departments to its kitty, like neurology, orthopaedics, cosmetic surgery, urology, gastroenterology, dentistry and ophthalmology. In fact, now they even conduct free eye screening camps in and around Delhi. In spite of being a trust hospital, appropriate governance has helped St Stephen's to grow and diversify to suit the needs of the economically weaker groups. Currently, the Hospital meets the needs of around 50,00,000 patients in the capital.

The Road Ahead

Corporate way of functioning was adopted by other sectors way back, and even healthcare NGOs are operating in a professional manner for quite some time now. Although trust/not-for-profit healthcare institutions were slightly behind schedule in doing so, they have now geared up and it won't be long before this trend is successful here too.

As for the future, the prospects seem bright. In a country with 30 per cent of population below the poverty line, and majority being middle class, trust hospitals have a significant role to play.

However, there is no denying that rising costs and cutthroat competition would challenge their future survival and smooth functioning. Dr Sanjeev Singh, Senior Administrator, AIMS has a strategic suggestion, "I believe these organisations should focus more on primary and secondary subsidised care, rather than tertiary as it involves huge investments."

While the big bulldozer of privatisation looms, and healthcare activists are fighting tooth and nail for equality, it seems that Robin Hood has a rather difficult task ahead. We are yet to see if un-equals can ever be equals.

nancy.singh@expressindia.com