MBPC Case- Aravind Eye Hospital

Group 1
Anmol Mahajan (1801011)
Aditi Shah (1801066)
Sriram Ulaganathan (1801186)
Tanvi Vedak (1801188)
Question 1: Explain the challenges that Aravind Eye Hospital overcame and key factors, Operations
as well as Marketing related, that have led to Aravind Eye Hospital’s success.

Ans: The bigger than life goal of Dr. V- founder of Aravind Eye Hospital- had numerous challenges both
in terms of patients knowing about the initiative and him knowing about the patients. Thus, one major
challenge had been to reach out to patients and make them aware about the initiative Dr. V had
started. Another challenge was the cost associated with the treatment of cataract and its lack of
affordability by the target patient group- the poor or not wealthy proportion of Indian population.

To address these two key challenges, Aravind Eye Hospitals started off with eye check up camps where
patients from nearby towns and villages used to come and get necessary diagnosis and treatment
advice. The marketing of these camps was done with local sponsors, which partnered with Aravind
Eye Hospitals to arrange for these camps. Initially, the turnout for surgery from these camps was quite
low as the patients had to come to Aravind at their own expense thought the surgery was free of cost.
Looking at this hurdle, Aravind Eye Hospitals requested local sponsors to take care of patients’ travel
and food needs also if they are going for surgery and coming to camps. This improved the turnout
leading to scaling of operations.

For the second key challenge, DR. V understood that to support the capex and operating expenses
required for the free treatment of cataract there had to be some source of revenue also to be self-
sustainable. He then focused on offering their core services of cataract surgery to both poor and
wealthy basis who can pay what. While people paying for the surgery were kept in main hospitals in
private rooms, people getting free surgery were kept in free hospital. However, the quality of
treatment was same for both the groups as the staff and doctors kept rotating between both the
hospitals.

By bringing in this Business Model Innovation, Dr. V was able to ensure a mass scale high quality
cataract operation for the amount payable by the patients and that marked the success of Aravind Eye
Hospitals.

Question 2: Do you see any "re-imagining" of certain conventional business concepts by Aravind Eye
Hospital that contributed to its success?

Ans: To bring the economies of scale on the supply side of cataract surgery value chain, Aravind
Hospitals adopted “assembly line” approach a highly specialised process of cataract surgery. By doing
so, they could use their core competence at serving higher number of patients in lower time, thereby
improving their resource utilization. This entire process of standardization reduced the fixed cost of
performing a surgery and a highly efficient use of the core skills of the Aravind Hospitals i.e. cataract
surgery. To add to it, Aravind Hospitals ensured that in doing so, they do not compromise on the
quality of the treatment being imparted to the free patients. So, they rotated doctors through main
and free hospitals and ensured that the entire staff gets required training and knowledge upgradation
as and when required to stay updated with the recent advancements in the field concerned. The sheer
scale of operation of hospital made it profitable despite its all these expenses on upgradation and free
service.

Other than this, instead of following the traditional approach of promoting the initiative and then
relying upon patients reaching out to Aravind, they started with local camps to reach out to patients
directly. The social benefits that association with Aravind brought to sponsors ensured that there are
enough sponsors willing to make every camp a step forward to achieving Dr. V’s goal of removing the
curable blindness.
Question 3: Analyse the performance of Aravind’s satellite hospitals at Tirunelveli and Theni and
propose an action plan for these hospitals based on your analysis.

Ans: While the ambitious plan of scaling up operations of Aravind Hospitals continued, a 400-bed
hospital in Tirunelveli and 200 bed hospital in Theni also came up. However, looking at the various
utilization and efficiency matrix (refer table 1), both these satellite hospitals have not been able to do
justice to the investments made into them. While the capacity utilization at Madurai is 85%, it is in
mid 20s for these hospitals. If Madurai were not to support these two hospitals with the Capex
required, they would not be able to generate a positive NPV, leading to a loss making project and
bringing a dark spot to Aravind’s so far success.

Aravind’s management has been prudent enough to fund satellite hospitals through funds from
Madurai and let them be positive cash flow units to run the operations smoothly. However, this
strategy may not be a sustainable one in long run. These two hospitals can focus on improving their
utilization by streamlining their patient inflows and reducing patient flow time (wait time). Further,
they need more patients to visit them to attain the required economies of scale as the current
conversions from camps stand much lower than Madurai branch. More focus on promotions and
higher association with Aravind’s name at all touch points will help bring more of free and paid
patients to the hospitals.

Exhibit 7 & 8
Madurai Tirunelveli Theni

Bed Capacity 324 200 40

Beds Occupied per
day 265 51 10
Total Camps 331 293 83
Screening Visits 117175 57924 15901
Surgery 14951 4922 945
Bed Utilization 82% 26% 25%
Camp Conversion
(visits per camp) 354.003 197.69283 191.5783
Surgery per camp 45.16918 16.798635 11.38554

Table 1.