The statistics tell a stark tale: India’s population is 1.2 billion and growing. The country has a GDP of US$1.85 trillion but health care spending is only about 5% of that. India’s ratio of nine hospital beds per 10,000 people is far from adequate. Although much attention is focused on infectious diseases like malaria or HIV, incidences of chronic or “lifestyle” ailments such as diabetes and heart disease are growing and, in fact, account for the bulk of the deaths. While India can competitively deliver world-class health care — witness the success of medical tourism — the country is seriously underperforming when it comes to taking care of its own. At the recent Wharton India Economic Forum held in Philadelphia, a panel of experts, moderated by life sciences venture capitalist and Wharton alumnus Jasmin Patel, discussed various models for the country to capitalize on its own innovation and expertise to deliver affordable care to those most in need.

The panelists’ approaches to the issue varied widely, given their diverse backgrounds. Mohan Chellappa, a surgeon and president of Global Ventures at Johns Hopkins Medicine International, noted that his role at the institute was to provide technical collaboration and knowledge transfer to governments, entrepreneurs and corporations to improve health care systems or delivery models in various countries.

“In India, we’ve started [to establish] a network of family practice clinics,” said Chellappa. “The goal is not in dollars but in societal impact. When you build a network of clinics or specialty centers, while you have systems that can be replicated in different places quite easily, how you control quality in each center becomes very important. Obviously you need to ensure effective management practices so that service delivery quality and consistency remain.”

Naresh Malhotra, founder and CEO of the primary-care focused Modern Family Doctor, likewise looks at management rather than medicine. He noted that health care is not where he began his career — he is a serial entrepreneur with an accounting background who loves to start companies. As former CEO of Amalgamated Bean Coffee Trading Company, Malhotra was responsible for rapidly expanding Cafe Coffee Day outlets in India from 18 to more than 1,000.

A Socially-Relevant Venture

Currently, Modern Family Doctor operates clinics in Bangalore and Pune. “We did a survey and realized there was an opportunity to do something socially relevant,” said Malhotra. “We struck on the idea of creating clinics for the poor and the middle class.” His prior experience in retail has come in handy, he noted. “We’ve opened only 20 clinics over the past 18 months. We decided that we are going to make each of them profitable and a sound business before opening the next one. Our objective is to open 500 in the next two to four years.”

N. Krishna Reddy, a practicing cardiologist and entrepreneur, cofounded CARE Hospitals in 1997. It has grown into a multi-specialty network of 12 hospitals in six states in India. The objective, he said, has always been to offer “a delivery model that is safe and effective but also affordable.”

“Beyond the hospital, 80% of health-care needs are really at the community level,” Reddy pointed out. So he set out to connect patients through technology to primary or specialist physicians. The important thing was to ensure that, even without face-to-face interaction with patients, health care professionals were still able to deliver “the standard of care as defined through evidence-based medicine.”

Hoping to address the rise of chronic, non-infectious conditions in India, Shriram Vijayakumar, a medical doctor, started Nephrolife in 2009 after observing the lack of affordable treatment options for kidney patients. Nephrolife, a standalone kidney-care center, closed a second round of funding in 2011 with venture firm New Enterprise Associates and DaVita, a U.S.-based kidney-care provider. Today, DaVita Nephrolife has a presence in eight Indian cities.

“Kidney care is not talked about often, but every year in India about 300,000 new patients need kidney replacement therapy,” said Vijayakumar. “Less than 10% have access to care.” Many patients have to sell their homes or cars or give up on retirement to afford the treatment they need to stay alive, he noted, often getting substandard care.

“Our vision is not only to treat those who require dialysis, but also to work on prevention, screening and community health measures because as a country we will never be able to afford dialysis for everybody who needs it,” noted Vijayakumar. “Once your kidney fails, you need that treatment until the end of your life. So, unlike traditional hospital chains, our patients are with us for many years. In each clinic, we cater only to a few hundred patients at capacity, so we end up knowing them very well.”

The Urban-Rural Issue

Moderator Patel, who has been an active investor and entrepreneur in the life sciences sector, brought up the issue of differential access to care, especially in urban vs. rural India, and asked panelists how their models might address this. “The distance you have to travel to get to a hospital [in rural India] can be quite horrendous. Certain parts of the country are more covered by the large hospital networks, but there’s a vast middle that is largely untapped,” he said.

Reddy pointed out that the urban vs. rural distinction was a bit misleading. “I tend to think of it as hospital vs. community care,” he said. “The majority of the people who live in urban slums have no access. The real issue is how to [scale up] the delivery network.”

Technology is one answer that can help people think differently about health care delivery, he noted. “It enables us to make the infrastructure more efficient. If the physician can’t move to the village, how can we deliver the same quality of care? We have to think about physician assistants, and to connect them through technology.”

Vijayakumar offered another approach, noting that as the ability to pay is lower in rural markets, significant scale was important so as to be able to offer discounts. “We also use our technology effectively to serve rural areas near cities, say 50 kilometers to 150 kilometers from a city,” he said. “We can then leverage the medical talent in the city. They may not be available every day, but maybe twice a week. The rest of the days we use remote diagnosis. So we’re taking baby steps. We’re still not going 400 kilometers into the hinterland because availability of talent becomes an issue.

“To be able to serve the same high quality at lower costs for rural areas you need to think about air conditioning, power, infrastructure and building design,” added Vijayakumar. “Maybe you can skimp on something, but you can’t cut clinical quality. Every cost line item has to be looked at. Some of our centers may look a little different in rural areas; maybe we don’t use the best quality wood [for construction].”

Government spending on rural health care is largely wasted, said Malhotra. “We visited six or seven primary health centers at various times of day — 10 o’clock, 11 o’clock and 3 o’clock. The whole time, I never once saw a doctor. Either they are around but doing their own private practice or the whole thing is corrupt. We spoke to governments in Gujarat and Karnataka and told them we could run [these centers]. They said, ‘We can’t get a doctor for Rs. 80,000 (about US$1,500); how will you manage it?’ We said, ‘Come with us and see; would you work in this pigsty?’ The government builds great places, but then no one maintains them.”

Vijayakumar also pointed out the obstacles associated with infrastructure. “If we are competing for space with those in, say, high-end retail, health care can never be delivered in the cost-effective manner that the country needs. We need access to clean water and 24-hour power. We also don’t have a health care system in India that supports specialty care. For example, we don’t have the equivalent of ‘911’ [the central number to call in the event of an emergency used in the U.S.]. So we often have to provide our own support because the state or other agencies don’t provide it.”

A key area of concern, noted the panelists, is the availability of skilled personnel and the training they receive. What’s taught to doctors in India, said Chellappa, has barely changed since he himself went to school. “Medical education has not been addressed in the past 45 years. The curriculum needs to be updated. The world has changed; doctors have done great things with new technology.”

Vijayakumar echoed this, citing a huge disparity in numbers. “We have about 800 Indian nephrologists in America, but only about 800 nephrologists in India, for a country that has four times the population.”

Shortage at All Levels

The gap has extended, he said, into other health care professional roles as well. “It’s not only a challenge at the doctor level. Elsewhere, the educational network of nurse practitioners and others is strong, so you can scale your health care business more quickly. In India, we use doctors even for jobs that nurses can do. We need to educate more nurses and nurse practitioners. Those of us who are in this business are forced to invest more in training. We have actually started a dialysis academy, because we’ve found there just isn’t enough talent in the market.”

Sometimes, what looks like a potential talent issue can be addressed by creative thinking, Malhotra noted. “[People said they couldn’t get] women doctors to work full days, but 95% of our staff are women,” he said. “We cracked the model. They work four-hour shifts — from 8 a.m. to 12 p.m. and then again from 4 p.m. to 8 p.m. They send the kids to school, [go back to] make lunch for their family, and then come back to work and are then back home for dinner.”

How much will people pay for health care? Malhotra related an anecdote to illustrate the issue. “When we started [the clinics], we said we would charge Rs. 50 (about US$1) for a consultation. No one came. We wondered why. Some people came by and said it looked too fancy and expensive. Others thought if it’s only Rs. 50, will I be seen by a doctor or a cobbler? How good could it be? So we changed the fee to Rs. 150. Overnight, our patient numbers jumped four or five times.”

The mission was to make good primary health care affordable, but the lesson they learned was that when it comes to medical care, “people will find the money,” he said. “Five percent of the population is below the poverty line due to crushing health care costs, so we decided to stick to Rs. 150. We never take money from people before they get treatment. Often in Indian hospitals you have to go to the cashier’s kiosk and pay money first. We don’t do that. We treat first and then talk payment. If they can’t pay, we say it’s not free, but pay whatever you can.”

Payment models haven’t evolved, noted Vijayakumar. “Many times in specialty care or out-of-hospital care, there’s not enough understanding of what constitutes care,” he stated. “So insurance will pay for hospitalization, but not for outpatient treatment. This can affect cancer [patients], it can affect follow-up care. The models haven’t evolved to support specialty care, and even many government policies don’t support it. Macroeconomic change is needed in the way the country addresses the provision of specialty care.”

Even when the payer system is addressed, the cost of diagnosis or treatment is often arbitrarily high. An example is the medical device segment, said Reddy. “India still buys or imports most [medical] devices, and we still pay in dollars. We pay US$3,000 for a stent, whereas for drugs we pay much less. Could we develop a self-reliant medical device platform that can give us devices in rupee terms rather than dollar terms? Can we do it for Rs. 3,000? I think so. We are still evolving this model, creating a platform and a replicable delivery model.”

Chellappa, too, noted the importance of containing costs in health care. “Health care prolongs life expectancy. It’s simple economics. If the costs aren’t contained or managed, there’s no way the country can sustain it.”

Costs are indeed an important consideration, Vijayakumar agreed, but said the focus should really be on quality. “Higher quality care reduces readmissions,” he pointed out, thus saving money over the long term.