Entrepreneurship How Does a Low Price Provider  Essay

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How does a "low price provider, a low cost operator," that is committed to keeping quality and safety at the forefront of operations, "…achieve financial sustainability?" (Anant, et al., 2012, p. 1). This paper critically evaluates the article and offers an analysis of the business model employed with Lifespring Hospitals.

The Lifespring Hospital Case

The hospital got off the ground thanks to American money in the form of a venture capital fund (Acumen Fund) and money from Hindustan Lifecare; it was 50-50 as to investment at the start. The partnership was a success from the start; in the first year of operation the three hospitals under the LifeSpring Hospital (LSH) umbrella reported that 2,000 babies had been delivered and there were 23,000 outpatient visits. This would appear to be a remarkable achievement for a start-up healthcare facility; but upon taking a deeper look at healthcare in India it should not be too surprising given that India had very poor public facilities.

Indeed, given that India is the world's most heavily populated democracy (the World Bank reports that 1,241,960 people live in India), it is truly a sad reality that leaves a social scar on the face of India that an "…acute shortage of doctors, nurses, technicians and healthcare administrators" exists in India (Anant, 2). Moreover, when a big country like India cannot serve the healthcare needs of its more than a billion citizens through public services, it is logical and pragmatic that the private industry come in and offer the pivotal services needed.

As additional evidence that India is backward -- and grossly negligent -- in its approach to healthcare, Anant notes that at the time this article was written an estimated 700 million citizens "…had no access to specialist care" and that 80% of medical specialists "…lived in urban areas" (2). When 80% of healthcare specialists (including doctors that deliver babies and give prenatal care) are located in urban areas, but according to India's Census "…nearly 70% of the country's population lives in rural areas" (Business Standard, 2001), therein lies a serious healthcare problem. Moreover, Anant writes that about one million Indians die each year due to "…inadequate healthcare facilities," and this is evidence piled on top of verifiable evidence that private healthcare facilities are pivotal to the well-being of the nation.

Added to the sorry state of medical facilities is the legacy of poverty in India, Anant explains on page 3. Women living in the slums (think of the squalor in the film "Slumdog Millionaire") had it worse than women living in rural poverty, Anant continues, because urban facilities were "overburdened" and "under-resourced" (3). Also city women living in poverty struggled with "less stable sexual relations, shorter breastfeeding duration, environmental risks" and the work around the house that is needed in order to buy the food and water and fuel needed for the family (Anant, 3).

The previous narrative provides ample evidence of the desperate need for additional healthcare services. Beginning on page 4 the authors present their business model. Credit must be given to the vision of Anant Kumar, who as a post graduate student initiated the idea of providing contraceptives and then advocated for a clinic, which got the ball rolling for a business plan that would: a) provide children's health services and maternity services; b) establish a model for franchising these commercially provided services; and c) place clinics in "semi-urban" and rural areas (Anant, 4). Kumar's advocacy and knowledge was the inspiration to get this program off the ground, and clearly a reader can see that his intention was from a profit motive but also he saw the great need and it seemed a perfect fit to link needs with capitalism.

By hiring midwives (that are not as expensive as RNs) and two full-time doctors (who were asked to provide medical services but not the time-consuming administration-related tasks) the LifeSpring model was designed to be profitable albeit affordable and up to standards (Anant, 6). Also, LifeSpring did not invest in expensive new facilities but rather rented "…existing hospitals" and outsourced many services (it was cheaper than hiring permanent employees to handle bio-waste, pharmacy, ambulance and housekeeping services). Clearly LifeSpring was serving the poor in India; the average household income of patients was between $3 and $9 a day, and few if any had health insurance. But pricing at LifeSpring facilities took the poverty-stricken Indians into account, charging just a third to a half of the "…prevailing market rates at private hospitals" (Anant, 7).

The cost-cutting for LifeSpring was meticulously imbedded in the chain's business plan. Software was for the most part "open source," there was no HR department, and in effect the plan was to maximize the number of patients seen and serviced and minimize the dollars spent tending to those patients. Most poor patients were satisfied with being in the "general ward" with many other patients but patients with more disposable incomes wanted private rooms; hence, LifeSpring opened another clinic for those more well-to-do patients and raised their prices to cover the additional expenses.

All seems to be clicking well. To this point the article appears to be pointing out how a desperate need for healthcare can be met through a blending of altruism and business savvy. A caring, alert young graduate student emerges as the catalyst for better healthcare services for the poor. The health camps set up by LSH were innovate ways to market the hospitals; the customer orientation programs and customer "appreciation events" were strokes of near-genius by the marketing arm of LSH. Moreover, getting feedback from "customers" (notice it isn't patients, it is customers, which in true capitalistic scenarios is the reality because LSH wasn't giving anything away) was very smart as it kept people in touch with the hospitals and made customers feel that their opinions were important (Anant, 10). Using "customer" as an identifying term was a way of "…empowering the women rather than treating them as beneficiaries"; Anant quotes Kuman saying, "We are not doing them a favour. In fact they are doing us a favour by coming to us and using our services" (Anant, 12).

One could look at some of the marketing strategies as almost pushy and yet very commercially viable. The tactic was to "identify a prospect" and to "get that prospect to come to LSH for the first time" and ultimately have her deliver her baby at LSH (Anant, 10). Once she is happy with the service she received, not only will she come back but also through word of mouth she will share her positive experience and hence, the marketing plan will work well and keep the money flowing.

The word "pushy' was used in this paragraph because it would seem to be rare in the world to identify a hospital that gives a questionnaire to brand-new mothers, a questionnaire that asks questions like: "Did the doctor treat you with dignity and respect," and "When you were in the labour room did the nurse shout at you or did she take care of you?" (Anant, 10).

And notwithstanding the LSH attention to detail -- LSH has more than 90 protocols to keep cleanliness at the forefront of operations and monitored quality standards constantly -- deliveries were done around the clock using an assembly line-like process (Anant, 11). LifeSpring pats itself on the back for the dignity and leadership with which it approaches all its customers. The article points out that one customer, Rohina (23 years old) had her second baby at a LSH facility and said "…the nurses are never irritable here, even if you summon them at 2 a.m." (Anant, 12). It cost Rohina $180 while three years earlier her first baby cost $600 at another facility (Anant, 12).

This business model would appear to be an ideal format for…

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