Indian School of Business: January 31, 2019

Indian School of Business
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January 31, 2019
Sarang Deo | Nithin Nemani | Sourav Singh | Nupur Jain
REVENUE MANAGEMENT AT SPARSH NEPHROCARE

On a Sunday morning in July 2015, Gaurav Porwal and Saurav Panda walked into their offices hoping
to catch some quiet time to reflect on the recently concluded spate of meetings with leading venture
capital firms. They were seeking to raise Series B funding for their venture, Sparsh Nephrocare, a
growing chain of dialysis centers that they had co-founded five years earlier in 2010. What they heard
on the fund-raising circuit left them with mixed feelings.
On the one hand, there was recognition that Sparsh’s cost structure was probably the best in the
industry. Porwal, who headed Sparsh’s operations commented:
“This vindicates our approach. We have always prided ourselves on making no-frills
dialysis service accessible to patients at a low cost. Our constant focus on costs has
also helped us to be profitable from Day 1.”
On the other hand, there were concerns about Sparsh’s ability to maintain this cost leadership in light
of its recent rapid expansion. Panda, the head of business development, elaborated:
“Most of our growth has come from opening new dialysis centers, increasingly in Tier-
2 and Tier-3 cities.1 Just within the past year, we have almost doubled our footprint.
It is natural to wonder whether sustaining this growth and simultaneously maintaining
low cost is feasible. Perhaps it is time we explored avenues for revenue growth at our
existing locations.”
1Tier-2 and Tier-3 cities are commonly used terms for X and Y class under HRA classification of Indian cities used by
the Government of India to allocate House Rent Allowance (HRA) to public servants employed in different cities in India.
HRA is also used by the Indian Revenue Service (IRS) to provide income tax exemptions. Source: Ministry of Finance
Department of Expenditure, Government of India. (2008. August 29). Recommendations of the Sixth Central Pay
Commission - Decision of Government relating to grant of Dearness Allowance to Central Government servants" (PDF).
Ministry of Finance Department of Expenditure. Retrieved from http://dispur.nic.in/sixthpay/sixth-pay-allowances.pdf on
Oct, 17, 2017.
Professor Sarang Deo along with Nithin Nemani, Sourav Singh and Nupur Jain of ISB’s PGP class of 2015 prepared this case
solely as a basis for class discussion. This case is not intended to serve as an endorsement, a source of primary data, or an
illustration of effective or ineffective management. This case was developed under the aegis of the Centre for Learning and
Management Practice, ISB.
Copyright @ 2019 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced,
posted or transmitted, without the permission of the Indian School of Business.
This document is authorized for use only in Prof. Prantosh J. Banerjee's MBA-06 T-5 Business to Business marketing (04-09-2021) at Indian Institute of Management - Amritsar from Sep
2021 to Mar 2022.
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More broadly, the market for dialysis services was becoming increasingly crowded and commoditized.
Sparsh’s current reliance on business-to-business (B2B) marketing to hospitals and nephrologists
meant that brand recognition among patients was low and efforts to enhance it would require
additional marketing expenditure. Having brainstormed on these issues through the morning, Porwal
and Panda concluded that they needed to take a relook at some of their strategic choices to prepare
the blueprint for the second phase of their venture.
THE MARKET FOR DIALYSIS IN INDIA
Nearly 125 million people in India (10% of the population) suffered from chronic kidney disease (CKD),
a condition in which the regular functioning of the kidneys was impaired (see Exhibit 1). About half of
these cases were attributable to diabetes and hypertension.2 Of these, roughly 800,000 patients were
estimated to be suffering from end stage renal disease (ESRD), a condition in which dialysis was
absolutely necessary.3 However, only a small fraction of these patients were on regular dialysis. There
were multiple barriers to expanding access to dialysis services. First, the cost to the patient of a single
dialysis session ranged from INR 1,000-2000, which was mostly borne as an out-of-pocket expense,
like most healthcare expenditure in India. Second, there were just under 1,000 nephrologists in the
entire country, which created bottlenecks in initiating patients on dialysis and monitoring them on a
regular basis.4
The size of the dialysis services market in India was estimated to be about USD 150 million, growing
at an annual rate of about 30%, compared to 6-8% in the United States and other developed
economies.5 Unlike other countries where home dialysis dominated, most patients in India accessed
dialysis treatment at outpatient centers, which were either stand-alone centers or part of secondary
and tertiary care hospitals. In 2009, there were a little over 800 dialysis centers with 4,000 dialysis
machines conducting 250,000 treatments per month in the country. Roughly 40% of this capacity was
installed and used in the four metro cities of Mumbai, Delhi, Chennai and Kolkata.6 However, since
then, there had been significant capacity expansion in Tier II and Tier III cities, primarily driven by
private chains of stand-alone dialysis centers such as DaVita NephroLife and NephroPlus, in addition
to Sparsh Nephrocare.7
Nephroplus, founded in 2009 in Hyderabad, operated more than 40 centers across 15 states with a
mix of stand-alone and hospital-based locations. It had received investments of USD 14 million from
IFC and Bessemer Venture Partners in Series A and B funding. 8 Nephroplus centers positioned
themselves on the quality of their entire service offering (which included individual TVs, headphones,
2 India’s dialysis market. (2013. July 10). Pacific Bridge Medical. Retrieved from
http://www.pacificbridgemedical.com/publication/high-rates-of-chronic-kidney-disease-lead-to-medtech-opportunities-in-
india/ on July, 19, 2016.
3 Fortis launches dialysis centre chain under a new brand. (2011, December 8). The Hindu Business Line. Retrieved from
http://www.thehindubusinessline.com/companies/fortis-launches-dialysis-centre-chain-under-a-new-
brand/article2697982.ece.
4 Khanna, U. (2009). The economics of dialysis in India. Indian Journal of Nephrology, 19(1), 1–4.
5 India’s dialysis market. (2013, July 10). Op. Cit.
6 Khanna, U. (2009). Op. Cit.
7 In 2011, Fortis Healthcare, one of the leading corporate hospital chains in India, announced that it planned to open 50
stand-alone dialysis centers under a separate brand, Renkare. Source: Fortis launches dialysis centre chain under a new
brand. (2011, December 8). Op. Cit.
8 Jagwani, L. (2014, March 5). IFC leading $10M series B investment in NephroPlus. VCCircle.com. Retrieved from
http://www.vccircle.com/news/healthcare-services/2014/03/05/ifc-leading-10m-series-b-investment-nephroplus, on July
20, 2016.
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medical experts and trained staff).9 Nephroplus’s unique value proposition was its holiday dialysis
package, which provided dialysis services at selected tourist destinations. As a part of this package,
patients only had to inform Nephroplus about their holiday plans and Nephroplus would organize the
entire itinerary including travel, accommodation and dialysis treatment.
NephroLife started with a single stand-alone dialysis center in Bengaluru in 2009. This center had 21
beds for dialysis, a day care surgical suite for vascular access, outpatient rooms and diagnostics. In
2011, NephroLife received USD 11 million in investment from New Enterprise Associates, one of the
largest VC firms in the world, and DaVita HealthCare Partners Inc., 10 a Fortune 500 company that
provided a variety of healthcare services in the US and globally. It operated three types of centers: (i)
centers located at partnering tertiary care hospitals that fulfilled other medical needs of the patients
such as transplant services and inpatient surgical procedures, (ii) 25-bed flagship stand-alone centers
and centers within secondary care hospitals providing renal care clinics and dialysis day care, and (iii)
10-15 bed stand-alone satellite dialysis centers. 11 In January 2015, DaVita was reported to have
acquired NephroLife with an investment of INR 2 billion. 12 In addition to dialysis, NephroLife also
provided a wide spectrum of support services to its patients, including urology, diabetology, nutrition
and psychological counseling.
GENESIS AND EARLY YEARS
Porwal and Panda were both products of the prestigious Indian Institute of Technology (IIT), Mumbai.
They subsequently joined the Indian School of Business (ISB) in Hyderabad, graduating in 2010. The
pair co-founded Sparsh Nephrocare the very same year, with a mission to make high-quality dialysis
treatment widely accessible to patients. While at ISB, they were naturally drawn towards the
healthcare sector, because it offered both tremendous growth opportunities and the possibility of
making a visible and positive impact on people’s lives. After exploring various ideas, they zeroed in on
dialysis because of the huge demand-supply gap in that space as well as the ease of operations. A
dialysis center did not require full-time clinical staff; paramedical or technical staff could execute all
the necessary steps by following well-defined standard operating procedures.
While scouting for suppliers of dialysis equipment, they had a chance encounter with Rajiv Sindhi,
owner of Sandor Medicals, a medical equipment distributor. Sindhi had intimate knowledge of the
market and was keen to integrate downstream into dialysis centers but did not have the managerial
capacity to do so. This led to a mutually beneficial partnership. Sindhi provided the initial capital
investment and Sandor’s marketing team provided leads for business development. Porwal and Panda
worked on closing these deals and handled delivery and execution after the deals were struck. This
helped them keep their investment costs low.
9 Mehta, J. (2012, May 28). Hyderabad based Nephroplus; A chain of kidney care clinics. YourStory.com. Retrieved from
http://yourstory.com/2012/05/hyderabad-based-nephroplus-a-chain-of-kidney-care-clinics/.
10 DaVita has provided administrative services at 2,239 outpatient dialysis centers worldwide serving approximately 176,500
patients. Source: Abrar, P. (2015, January 23). Warren Buffett-backed DaVita HealthCare Partners completes NephroLife Care
buy for Rs 200 crore. The Economic Times. Retrieved from http://articles.economictimes.indiatimes.com/2015-01-
23/news/58382426_1_nephro-life-nephrolife-care-dev-kumar-roy on July 20, 2016.
11 Dutta, R. (2013, August). Reaching out. Healthcare Radius.
12 Abrar, P. (2015, January 23). Warren Buffett-backed DaVita HealthCare Partners completes NephroLife Care buy for Rs
200 crore. The Economic Times. Retrieved from http://articles.economictimes.indiatimes.com/2015-01-

23/news/58382426_1_nephro-life-nephrolife-care-dev-kumar-roy on July 20, 2016.
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In the first three to four years, Sparsh took a slow and cautious approach to expansion. Porwal and
Panda wanted to stabilize their business model before allowing major equity stakes from investors.
Consequently, Sindhi funded Sparsh’s initial phase of expansion, but it was agreed that his equity
would be capped and Sparsh would seek debt investment beyond that. This strategy, in turn, further
limited its scale-up speed. Porwal and Panda set up the first three centers in Hyderabad since they
wanted to keep a close eye on operations and fine-tune the model before venturing out into other
markets. After about nine months of operations, they opened their first remote center in Lucknow,
the capital of the state of Uttar Pradesh, in August 2011. This was followed a couple of months later
with another center in Benares, also in Uttar Pradesh.
During the second half of 2013, with 10-15 centers operational, Porwal and Panda were keen to invest
in technology, but Sindhi, whose background was in the trading business, was reluctant. Porwal and
Panda agreed that it was perhaps the right time to look for external investment along with some fresh
ideas. They recounted their early interactions with VCs:
“We started talking to VCs in May-June 2013. We met people in Delhi, Mumbai,
Bangalore, etc. By then, DaVita had already invested in Nephrolife (2011) and
Bessemer had invested in Nephroplus (December 2011). The market news was that
dialysis was not a good business to be in. Investors thought that this was a capital
business and there were no differentiating factors. One of the toughest questions was
‘Why are you doing this?’ We did not have an emotional connect. At times, we
perhaps sounded too rational and made the whole venture sound too easy for our
own good. Another VC asked, ‘Who is the CEO of the company? What if there is a
conflict? Leadership by committee does not work.’ After a lot of failed meetings, we
realized that we needed to pull the investors towards us rather than pushing the idea
to them. So we asked the investors if they would come and meet us in Hyderabad.
That would give them an opportunity to see our operations before any discussions.
This worked well as we saw a significant increase in interest after that.”
Sparsh raised its first round of major funding to the tune of INR 200 – 250 million from Tata Capital
Healthcare Fund in March 2014, which led to exponential growth in the next year. As of June 2015,
Sparsh Nephrocare was one of the largest providers of dialysis services in India. It operated a network
of 49 dialysis centers spread across 43 different cities in India with an installed capacity of 268 dialysis
machines. Sparsh had administered over 150,000 dialysis procedures and served over 6,000 patients.
(See Exhibit 2, 3 & 4 for details).
BUSINESS MODEL
Sparsh was one of the first chains of dialysis centers in India to adopt an “in-hospital” model. Prior to
Sparsh, existing players such as NephroPlus and NephroLife offered their services at stand-alone
centers as was the practice in western countries. Sparsh realized that Indian patients preferred having
dialysis administered in hospitals where medical assistance could be promptly provided in case of an
emergency. This was necessitated by the fact that the average Indian patient was initiated on dialysis
in more advanced stages of disease progression than their western counterparts, and hence, clinical
complications were quite likely.
The initial partnerships were all fee-based models, wherein Sparsh was paid a fixed fee of INR 1,000
per patient. Porwal elaborated:
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“This was important because we were really small to be able to bear the risk as
hospitals can give discounts to patients if they expect to get more revenue from them
in the future. For instance, dialysis could be a potential loss leader if the main income
is going to come from a transplant.”
Over time, Sparsh entered into revenue sharing and profit sharing contracts with some hospitals. As
of March 2015, around 75% of the contracts were fee based, 20% were revenue sharing and 5% were
profit sharing. In the revenue sharing model, Sparsh contributed dialysis equipment, skilled manpower
and capital to run end-to-end operations. It bore the entire up-front investment cost and had a
revenue sharing agreement with the hospital. The hospital typically provided the fixed assets such as
land.
The in-hospital dialysis centers were beneficial for both Sparsh and its partner hospitals. Hospitals
traditionally had not been big players in dialysis because it was not their core business. On the other
hand, Sparsh was able to achieve economies of scale by procuring equipment and consumables in bulk
at 20-30% less than the market rate. This approach also minimized the investment requirement as
hospitals typically had the required space and supporting infrastructure in place. The hospital also
benefited from the opportunity to provide specialized tertiary care to patients who developed
complications from kidney disease. Additionally, the hospitals valued the ability of Sparsh to adopt a
revenue sharing model, reduce costs through negotiations and training, and increase revenue through
marketing. These initiatives led to an increase in profits.
BUSINESS DEVELOPMENT
Geographic Location
In the early years, Sparsh’s choice of geographic locations was opportunistic and leveraged Sandor’s
regional sales teams and trade partnerships across the country. For instance, it decided to set up the
first two centers outside of Hyderabad more than 1,500 km away in Lucknow and Benares in the
northern state of Uttar Pradesh, based on the leads provided by Sandor’s sub-distributor. Similar leads
were obtained in Gujarat, Rajasthan, Punjab, West Bengal and Tamil Nadu. However, after obtaining
VC funding, Porwal and Panda decided to consolidate operations in the two states of Uttar Pradesh
and Andhra Pradesh, in which Sparsh already had a substantial presence. For growth, they chose to
focus on the eastern region, particularly on the states of Chhattisgarh and Jharkhand, because they
had very few dialysis facilities.
However, the most conscious and deliberate change in their approach was their focus on Tier II and
Tier III cities. Explaining the motivation behind this move, Panda said:
“The primary barrier for patients in India is not the cost of treatment but accessibility.
Most of the nephrologists and dialysis facilities are located in metro or Tier I cities. A
patient in a Tier II or Tier III city has to bear significant costs with respect to travel
and/or relocation to the centers.”13
Among these cities, the choice was based on a multitude of factors such as total population, incidence
of chronic kidney disease, presence of competition, and the availability of nephrologists and trained
technicians.
13 Mehta, J. (2012, May 28). Op. Cit.

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As a rule of thumb, Sparsh set up centers only in towns with a minimum population of 500,000 and an
additional population of 500,000-1 million within a 50-kilometer radius. While a larger population in
the catchment area obviously meant more people with CKD on average, there were likely to be
regional differences based on differences in the prevalence of underlying clinical risk factors, such as
diabetes and hypertension, and environmental risk factors, such as mineral content in drinking water.
On the supply side, connectivity to the nearest Tier I town or metro city had to be good to ensure that
nephrologists could visit regularly to monitor patients. Such connectivity was also essential for
managing supplies of consumables and reagents and minimizing disruptions to operations. The town
also had to have a reasonable supply of trained or training worthy technicians because technicians
from bigger cities were reluctant to relocate to smaller towns, even if it was their hometown. Finally,
Internet connectivity was necessary to guarantee real-time transfer of operational data from the
centers to the cloud.
Private Hospitals
Once a town was shortlisted based on demography, epidemiology and infrastructure, the feasibility
of actually opening a dialysis center hinged on the availability of a candidate partner hospital. Sandor’s
regional team members, who had good market intelligence due to their presence in this sector for
over 15 years, carried out an informal market survey. They prepared a list of four to five targets based
on size (30-100 beds), availability of an intensive care unit (ICU), reputation and patient load. Beyond
these structural elements, it was important that the hospital view nephrology as a strategic focus area.
Porwal elaborated:
“We are looking for a true partnership, and in many mid-sized hospitals we will not
proceed unless we are given access to the head of the hospital (either administrative
or clinical). We do not want to be treated like vendors and we do not want to talk to
people in the purchase department. This is possible only if renal diseases contribute
5-10% of their revenues. If the hospital is very small and wants to set up a center with
one or two machines, we tell them that they don’t need us. They can set up the
machine themselves and run it with minimal support.”
However, active negotiations with hospitals that satisfied the above criteria did not begin until Sparsh
secured the buy-in of a nephrologist who either resided in the same town or the nearest big city. It
was especially important to gauge the nephrologist’s comfort level and past experience with the target
hospitals and their administration. The second issue was the frequency of visits that the nephrologists
could afford to make. Porwal and Panda preferred this approach over the earlier one of first getting
the hospital’s buy-in and then leveraging that to negotiate with nephrologists.
Once the due diligence was concluded and the partnership established, these business development
efforts had to be followed by marketing efforts. Again, the partner nephrologists and hospitals played
an integral role in attracting patients to the dialysis centers since the success of the centers would be
to their own personal benefit. However, the acute shortage of nephrologists in Tier-2 and Tier-3 cities
meant that many patients were referred for dialysis directly by general practitioners (GPs). Hence,
Sparsh put considerable marketing effort into getting them on board as well. These B2B marketing
efforts were complemented by a minimal investment in business-to-consumer (B2C) marketing in the
form of billboards and advertisements targeted directly at the consumer.
Over time, these efforts started to bear fruit. Instead of having to scout for hospital partners, Sparsh
started to receive two or three calls every week from hospitals seeking partnership opportunities.
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Motivated by their good working relationship with Sparsh, some nephrologists even provided business
development leads occasionally. Panda recounted a conversation with a nephrologist from Agra, who
told him, “A lot of patients are coming to me from Aligarh. I know that the dialysis center there is not
that great. It is very close to Agra. I can go there once or twice a month as there are no nephrologists
there. Why don’t we work together to set something up there?” Sparsh’s dynamics with its partner
hospitals also evolved over time.
Government Partnerships
In addition to the private segment, and in a marked departure from other players in the industry,
Sparsh actively pursued opportunities in the government segment. Porwal explained this
unconventional approach:
“First, whether we like it nor, we are already partnering with the government as about 30-40% of
patients in private hospitals are government insured. This share is likely to increase in the near future
with more states planning and implementing their own insurance schemes. But beyond that, we have
also set up five of our 50+ centers in government facilities, two of which are in reputed medical
colleges and research institutions.14 Such partnerships obviously give us immense credibility in the
marketplace. It is true that there is a lot of up-front due diligence when it comes to government
machinery, but once the sales cycle is closed, payment is not an issue. In fact, it is private hospitals
that don’t pay easily and on time. As against that, government payments are actually quite punctual.”
Encouraged by this early positive experience, Sparsh was planning to submit larger bids to operate
dialysis centers under public-private partnership (PPP) schemes in states such as Rajasthan.
DIALYSIS CENTER OPERATIONS
Physical Layout and Resources
A typical Sparsh dialysis center operated as a stand-alone, self-sufficient unit within a secondary or
tertiary care hospital. It comprised five to six beds, each allocated about 100 sq. ft. of space and paired
with a dialysis machine fitted with a dialyzer (See Exhibit 5 & 6). Some bigger centers also had
additional “positive” machines, which were only used to treat patients with Hepatitis B or HIV
infection. In addition, at each center, Sparsh set up a customized water treatment facility to provide
purified water required for dialysis, a sterilization unit, and a room for storing inventory of
consumables and some frequently used spares.
The investment cost for a typical six-bed center with six dialysis machines was around INR 5 million.
The capital required for starting a center primarily went towards dialysis machines, a reverse osmosis
plant and a reprocessing machine. Sparsh typically started a center with three machines and added
more machines as the utilization levels went up. The life of a dialysis machine was about 25,000 hours,
which typically translated to about seven years in a clinical setting.
Staffing
Center operations were managed by a lead technician to whom one or more technicians reported.
They worked together to administer dialysis, maintain data records and monitor cleaning staff. Each
14 These included King George Medical College (Lucknow) and SS Hospital (Benares Hindu University).
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technician was capable of administering about three procedures in parallel; a second technician was
required if a center had more than three beds (with adequate utilization). Technicians were trained
and certified in the dialysis procedure by a recognized institute although it was not mandatory for
them to possess a degree in medicine. High school graduates were also hired and trained for non-
medical roles, which included some basic patient counseling beyond the dialysis procedure itself.
Training of technicians took place both centrally and at the local center level.
In addition to technical expertise, technicians were expected to have good communication skills and
were trained in the basics of patient counseling. Ravinder, a patient who had been on dialysis for the
past two months, commented:
“Everyone who comes for dialysis is undergoing some type of depression. It is very
important for the technician to be friendly since the patient spends about four hours
a day at the center. Here, the technician is very friendly and talks politely on the phone
with a personal touch. It can be very uncomfortable to be assisted by junior
technicians. If the care was not so personalized here, I would have easily shifted to
another dialysis center.”
Appointment Scheduling and Patient Visits
The typical operating hours of the dialysis center were 9 am to 9 pm. During this period, each dialysis
machine-bed pair could accommodate up to three appointment slots of four hours including the time
required for preparation and cleaning. Patients were encouraged to adhere to the time slots as it
helped the staff members administer procedures in batches and avoid overtime. If a patient had not
arrived half an hour after the scheduled appointment, a technician would call to find out the reason.
If the patient was unable to make the appointment or would be further delayed, the appointment
would be re-scheduled. On occasions where late arriving patients were accommodated, the center
would likely run into overtime. Patients who missed their appointments impacted manpower and
machine utilization, leading to loss of revenue. Patients requiring dialysis twice a week typically
scheduled one appointment on Monday or Tuesday and the second on Friday or Saturday. This
arrangement was especially convenient for patients who traveled from another town as they stayed
with relatives or friends over the weekend between the two appointments. Those who required
dialysis three times a week would typically schedule a third slot on Wednesday or Thursday (see
Exhibit 7 (a)).
During each visit, the technician first tested the patient for Hepatitis and HIV. Upon ruling out any
infection, the technician prepared the patient for dialysis. The technician simultaneously prepared the
equipment for the dialysis procedure. This was followed by the administration of the treatment,
during which the patient’s blood pressure was monitored every 30 minutes. After the procedure, the
technician recorded the patient’s vitals, e.g. weight, blood pressure and blood sugar levels. Between
two procedures, the technician removed the dialyzer, cleaned and sterilized the dialysis machine, and
reinstalled the dialyzer, all of which took about 20-30 minutes (see Exhibit 7(a)).
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Quality Management
At Sparsh, quality of service comprised two major dimensions. On the clinical front, the efficacy of
each dialysis procedure was measured using the Kt/V ratio.15 It was one of several clinical parameters
that were diligently recorded on paper for every treatment and then attached to the patient’s file and
stored at the dialysis center (see Exhibit 8). In addition, patients were given a diary, which contained
important clinical parameters such as blood pressure, temperature and weight, as well as the date of
the patient’s next dialysis procedure (see Exhibit 9). The technicians also maintained a logbook for
each dialyzer, which recorded the number of dialysis procedures done and the bundle volume 16
remaining after each procedure (see Exhibit 10). At the center level, Sparsh tracked patient safety by
the number of cross-infections, i.e., infections transmitted from one patient to the other through the
use of the same dialysis machine. An internal audit team ensured that quality levels and procedures
were maintained by checking the performance of every center on a 100-parameter scale.
Nephrologists were satisfied with Sparsh’s efforts to maintain the overall quality of service. Dr. Mayoor
Prabhu, a reputed nephrologist affiliated with Sparsh, commented, “I appreciate that they do not
skimp on consumables and equipment maintenance as even small slips are likely to lead to a breakout
of infections.” Sparsh had a home-grown enterprise resource planning (ERP) solution to capture
patient medical data and information on the internal operations of the dialysis center.
PATIENT EXPERIENCE
Patient profile
Patients visiting Sparsh for dialysis services belonged to two clinical categories: (i) those suffering from
end stage kidney failure, the last stage of chronic kidney disease (90%), (ii) those suffering from acute
kidney failure, which required emergency dialysis (10%). Patients undergoing emergency dialysis were
usually admitted to the hospital (inpatients) unlike regular dialysis patients, who were outpatients.
Mirroring a wider trend in healthcare expenditure in India, most patients paid out-of-pocket for their
treatment, while a small but growing portion (mostly outpatients) were covered by government
medical insurance, such as the Aarogyasri scheme17 in Andhra Pradesh. The government had set limits
on the amount that hospitals could recover on dialysis procedures on behalf of their Aarogyasri
patients. Sparsh recovered INR 1,200 per dialysis procedure for every Aarogyasri patient7 while it
charged INR 1,500 per procedure for self-paying patients.
Diagnosis and Initiation on Dialysis
A patient showing symptoms of CKD and suffering from one or more underlying chronic conditions
such as diabetes and hypertension was typically referred by her GP to a nephrologist, who made the
final diagnosis and advised the patient to initiate dialysis. Compared to developed countries, most
patients in India were diagnosed much later in their disease lifecycle owing to a lack of awareness
about CKD and access to appropriate healthcare facilities. As an example, one patient at a Sparsh
15 K was the dialyzer clearance of urea and t was the time for which the dialysis was conducted. Kt, therefore, quantified
the volume of blood that had been cleared of urea while V was the total volume of water in the patient’s body. A value of 1
indicated that the blood had been completely purified of urea.
16 Bundle volume measured the volume of the fiber used in the dialyzer for filtration. The dialyzer was typically replaced
when the bundle volume reached 70% of the original capacity.

17 Aarogyasri (or Rajiv Aarogyasri Community Health Insurance Scheme) was a program launched by the Andhra Pradesh
government in 2007 to provide quality healthcare to below poverty line citizens. It was an insurance cover providing
assistance for treatment involving hospitalization and surgery for serious ailments such as cancer, kidney failure, heart
disease, neurological diseases, etc.
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Nephrocare center said, “I knew that my kidneys were not functioning well for months before I
underwent my first dialysis. I gained a lot of weight [through fluid accumulation] but [I thought] my
condition wasn’t that serious.”
The most common mode of dialysis recommended by nephrologists and approved by state insurance
programs in India was in-center hemodialysis. 18 Self-paying patients typically chose their dialysis
center primarily on the basis of their nephrologist’s recommendation, which they considered to be
safe and reliable. Since patients underwent multiple dialysis sessions every week, the proximity of the
center to the patient’s residence was also an important consideration in the choice. As dialysis was a
long-term therapeutic process for CKD patients, the cost of treatment also played an important role
in the choice. At times, word-of-mouth from family and friends influenced the patient’s decision.
However, patients were more likely to recall the name of the hospital where the center was located
rather than the name of the dialysis chain itself. Very few patients made their choices based on
advertisements in the press or on billboards. Patients covered under a state insurance scheme were
required to access centers affiliated with and empaneled under that scheme.
On a patient’s first visit to the dialysis center, the lead technician verified the patient’s medical reports
and prepared a dialysis plan in accordance with the recommendations of the nephrologist. While
studies had shown that three dialysis sessions per week of four hours or more each yielded the best
outcomes, there was little consensus among nephrologists on this issue. Dr. Prabhu commented,
“Ideally a patient suffering from CKD should go for dialysis thrice a week, but we have seen that even
10 sessions a month keeps the patient indicators within the prescribed limits and prevents further
renal damage.” Accordingly, technicians tentatively scheduled patients on an alternating 3-2-3-2
pattern of appointments by default. The exact day and time slot was finalized after considering the
patient’s convenience and preferences.
Continued Adherence
Despite the importance of adherence to treatment for better outcomes, many of Sparsh’s patients
chose to undergo dialysis less often than prescribed, or irregularly, for a number of reasons. Self-
paying patients often reported financial constraints as the main reason for less than perfect
adherence. Each dialysis procedure cost about INR 1,500. If a patient were to undergo dialysis 10 times
a month, it amounted to INR 15,000 excluding transport and a possible loss of wages — a significant
chunk of a typical family’s income.
The other factors leading to poor adherence were behavioral. Many patients were already coping with
other chronic conditions such as diabetes, hypertension and cardiovascular disease. Additional
lifestyle changes required by dialysis such as strict monitoring of diet and fluid intake pushed them
over the edge and into depression, sapping them of the willpower to adhere to the long dialysis
regimen. A 71-year-old patient submitted, “There are many complications from diabetes. My eyesight
has become very weak and I recently underwent surgery. I also have hypertension. It’s a very
complicated condition and I sometimes lose the will to live.”
18Hemodialysis was a continuous process, wherein the dialysis machine removed the blood from the body of the patient,
cleansed it through an artificial kidney (or dialyzer) and returned the cleansed blood to the body. In the dialyzer, the blood
was made to interact with a fluid called dialysate into which impurities percolated. An alternative method called peritoneal
dialysis involved the introduction of a special fluid into the peritoneal cavity in the abdomen, which absorbed excess waste
from the blood vessels. The fluid was then flushed out at the end of the process.
2021 to Mar 2022.
ISB131
General lack of awareness and medical knowledge further contributed to the problem. Some patients
mistook nausea and weakness, which were caused by a delay in consecutive dialysis sessions, for the
side effects of dialysis itself. As a result, they sought out alternative therapies, thus leading to further
delays and interruptions in their treatment. Finally, many patients claimed that coming twice a week
or eight times a month was sufficient for them. (See Exhibit 7(b) for a sample arrival schedule for
patients). In the words of Sanjeev, a patient, “I feel quite fit and healthy after coming eight times a
month. The doctor may even suggest 12 times, but what is the need? My monthly blood reports show
everything to be normal time after time!”
Sparsh also had a centrally located specialized patient counselor who periodically went through
patient lists and schedules and called those with poor adherence records. However, the counselor was
sometimes met with indifference from patients, who claimed that their nephrologists did not deem
such frequent dialysis necessary.
Clinical Management
The primary responsibility for making clinical decisions and managing patient outcomes rested with
the affiliated nephrologists. They periodically visited the dialysis centers to ensure that they saw most
patients roughly once a week. They reviewed certain standard clinical metrics such as Kt/V that were
recorded during each of the previous dialysis visits to assess the effectiveness of the dialysis regimen.
The record also provided them a window into the patient’s recent history of adherence and they
briefly counseled patients who had long gaps between visits and/or irregular treatment patterns. In
addition, patients were also asked to undergo monthly diagnostic tests to measure their levels of urea,
creatinine and electrolytes. Patients carried their medical records with them to the dialysis center and
shared them with the nephrologist during their visits. Occasionally, patients who suffered from side-
effects or who required additional medical advice were asked to consult with nephrologists at their
outpatient clinics, which were typically not collocated with the dialysis center.
Nephrologists’ visits to dialysis centers in Tier II and Tier III cities were not very frequent, and patients
living in those towns found it difficult to visit nephrologists’ clinics in large cities. Dr. Prabhu, who
visited Sparsh’s dialysis center in one such town, Bhatkal in Karnataka, said, “Ideally we would like to
be there for patients more often. But the number of patients is so huge and doctors are in such short
supply that it is not practically manageable to see patients more than once a month.” Due to these
time constraints, nephrologists reported an inability to monitor patients’ arrival for dialysis and their
adherence to dietary recommendations. Sparsh planned to offer a technology-enabled solution such
as telemedicine to overcome these physical barriers and was in the process of developing a
smartphone app for this purpose.
THE WAY FORWARD
Porwal and Panda realized that topline enhancement at their existing centers must be their top
priority, given the natural limits to cost containment and constraints on growth in the number of
centers. Could they really raise prices in an increasingly competitive marketplace? The other option
was to optimize the utilization of existing resources, but it was not clear if they could afford the
marketing expenditure needed to attract more patients. There was anecdotal evidence that patient
compliance was less than perfect, but they had always looked at this as a patient behavior issue with
some clinical implications. However, it seemed like an opportune time to start looking at it as a
customer retention issue with substantial business impact.
2021 to Mar 2022.
ISB131
The first obvious step was to conduct a rigorous opportunity assessment by deep-diving into patient
visit data from one of the centers (see Exhibit 7 (a)). But beyond that, they wondered if they had the
resources and the processes to actually realize this opportunity, even if it did exist. Could their staff
be sensitized and empowered to address this challenge? Did they have the necessary information
systems? They were also somewhat apprehensive about whether attempting to forge direct
connections with the patients might antagonize their main business partners — hospitals and
nephrologists — and prove detrimental to the business in the long run. Recalling their negotiations
course from their B-school days, Panda blurted out, “We must look for a win-win situation here!”
2021 to Mar 2022.
ISB131
Exhibit 1
Background on Kidney Disease and Dialysis
The kidneys help filter waste, excess fluid and toxins from the blood. They are also important for blood cell
production and bone health. Renal failure can result from many conditions including diabetes,
glomerulonephritis (a class of kidney diseases), polycystic kidney disorder and hypertension.
Dialysis is a life-support treatment that uses a special machine to filter harmful wastes, salt and excess fluid from
the blood. This restores the blood to a normal, healthy balance. Dialysis (at home or in-center) is advised in case
of stage-5 kidney disorder where the kidneys are unable to perform their normal function of purifying blood.
Such a state is also referred to as chronic kidney disease (CKD). There are two broad forms of dialysis:
hemodialysis and peritoneal dialysis. In hemodialysis, the dialysis machine removes the blood from the body of
the patient, cleanses it through an artificial kidney (or dialyzer) and returns the cleansed blood to the body. In
the dialyzer, the blood is made to interact with a fluid called dialysate into which impurities percolate. Peritoneal
dialysis involves the introduction of a special fluid into the peritoneal cavity in the abdomen, which absorbs
excess waste from the blood vessels. The fluid is then flushed out.
Failure to perform dialysis regularly can result in breathlessness, nausea and loss of appetite. Prolonged delay
causes the accumulation of fluid in the body, including the lungs (pulmonary edema), uncontrolled blood
pressure and accumulation of toxins in the joints, ultimately proving fatal for a patient. What makes managing
kidney failure challenging is that patients not only have to cope with the physiological ramifications of the
disease but also the mental or psychological effects. Many patients are reported to experience depression as a
result of prolonged stress caused by the condition.
Source: Author analysis based on the following sources: WebMD website. Chronic kidney disease — topic overview. Retrieved
from https://www.webmd.com/a-to-z-guides/tc/chronic-kidney-disease-topic-overview; National Kidney Foundation
website. About chronic kidney disease. Retrieved from https://www.kidney.org/atoz/content/about-chronic-kidney-disease;
Mayo Clinic website. Chronic kidney disease. Retrieved from https://www.mayoclinic.org/diseases-conditions/chronic-
kidney-disease/symptoms-causes/syc-20354521; Nordqvist, C. (2017, March 29). Chronic kidney disease: Causes, symptoms,
and treatments. Medical News Today. Retrieved from https://www.medicalnewstoday.com/articles/172179.php.
2021 to Mar 2022.
ISB131
Exhibit 2
Growth of Sparsh Nephrocare
Note: SNSPL — Sandor Nephro Services Pvt. Ltd; BHU— Banaras Hindu University; SMPL— Sandor Medicaid Pvt. Ltd; KGMU
— King George Medical University.
Note: 10 Lacs = 1 million
Source: Company records – part of pitch document to potential investors.
2021 to Mar 2022.
ISB131
Exhibit 3
Map of Sparsh Nephrocare Network
Source: Created by authors based on information available on company website.
2021 to Mar 2022.
ISB131
Exhibit 4
Dialysis Capacity and Utilization at Sparsh Nephrocare
Month # Machines Capacity Utilization

May-14 118 8260 5,899
Jun-14 124 8680 6,006
Jul-14 127 8890 6293
Aug-14 142 9940 6596
Sep-14 140 9800 6823
Oct-14 146 10220 5299
Nov-14 154 10780 5573
Dec-14 178 12460 6277
Jan-15 186 13020 6673
Feb-15 206 14420 6748
Mar-15 199 13930 7342
Apr-15 268 18760 7669
May-15 268 18760 8278
Jun-15 268 18760 8787
Source: Company records.
2021 to Mar 2022.
ISB131
Exhibit 5
Sparsh Dialysis Center
2021 to Mar 2022.
ISB131
Exhibit 6
Dialysis Machine
Above is an image of a dialysis machine in use – the flow of blood is visible in the dark tubes. The dialyzer, which
purifies the blood, is seen clamped to the side and the dialysate fluid is contained in the jugs at the very bottom
of the picture into which light colored tubes are seen entering. The screen contains the input criteria for the
dialysis procedure as well as the key statistics for monitoring.
Source: Case authors with permission from Sparsh Nephrocare.
2021 to Mar 2022.
ISB131
Exhibit 7 (a)
Illustrative Patient Arrival Data at a Dialysis Center: Inter-visit gap
Please refer to spreadsheet ISB133
Source: Author analysis based on company records.
2021 to Mar 2022.
ISB131
Exhibit 7 (b)
Illustrative Patient Arrival Data at a Dialysis Center
Patient No. of Patient No. of

No. Date Visits patients No. Date Visits patients
1 01-Mar-14 1 9 41 16-May-14 4 16
2 03-Mar-14 3 9 42 17-May-14 2 16
3 04-Mar-14 3 9 43 19-May-14 6 16
4 05-Mar-14 3 9 44 20-May-14 2 16
5 06-Mar-14 2 9 45 21-May-14 1 16
6 07-Mar-14 2 9 46 22-May-14 2 16
7 08-Mar-14 6 9 47 23-May-14 6 16
8 10-Mar-14 3 10 48 24-May-14 2 16
9 11-Mar-14 5 10 49 25-May-14 1 16
10 12-Mar-14 3 11 50 26-May-14 3 16
11 13-Mar-14 2 11 51 27-May-14 4 16
12 14-Mar-14 5 11 52 28-May-14 2 16
13 15-Mar-14 4 11 53 29-May-14 3 16
14 17-Mar-14 4 11 54 30-May-14 3 16
15 18-Mar-14 6 11 55 31-May-14 4 16
16 20-Mar-14 3 11 56 02-Jun-14 4 16
17 21-Mar-14 5 11 57 03-Jun-14 2 17
18 22-Mar-14 5 11 58 04-Jun-14 3 18
19 24-Mar-14 5 12 59 05-Jun-14 4 19
20 25-Mar-14 6 12 60 06-Jun-14 4 19
21 26-Mar-14 3 12 61 07-Jun-14 4 19
22 27-Mar-14 1 12 62 09-Jun-14 3 19
23 28-Mar-14 6 13 63 10-Jun-14 3 19
24 29-Mar-14 6 13 64 11-Jun-14 4 20
25 31-Mar-14 6 13 65 12-Jun-14 3 20
26 01-Apr-14 1 13 66 13-Jun-14 3 20
27 04-Apr-14 1 13 67 14-Jun-14 5 20
28 25-Apr-14 1 13 68 16-Jun-14 4 20
29 01-May-14 6 14 69 17-Jun-14 5 20
30 02-May-14 3 16 70 18-Jun-14 2 20
31 03-May-14 4 16 71 19-Jun-14 2 20
32 05-May-14 3 16 72 20-Jun-14 4 20
33 06-May-14 4 16 73 21-Jun-14 5 20
34 07-May-14 1 16 74 23-Jun-14 5 21
35 09-May-14 1 16 75 24-Jun-14 4 21
36 10-May-14 2 16 76 25-Jun-14 4 21
37 12-May-14 1 16 77 26-Jun-14 3 21
38 13-May-14 1 16 78 27-Jun-14 4 21
39 14-May-14 3 16 79 28-Jun-14 4 21
40 15-May-14 3 16 80 30-Jun-14 10 21
Source: Author analysis based on company records.
2021 to Mar 2022.
ISB131
Exhibit 8
Patient Record of a Dialysis Visit
2021 to Mar 2022.
ISB131
Exhibit 9
Patient Diary
2021 to Mar 2022.
ISB131
Exhibit 10
Dialyzer Log
2021 to Mar 2022.

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Indian School of Business

January 31, 2019

Sarang Deo | Nithin Nemani | Sourav Singh | Nupur Jain

REVENUE MANAGEMENT AT SPARSH NEPHROCARE

THE MARKET FOR DIALYSIS IN INDIA

Revenue Management at Sparsh Nephrocare | 2

GENESIS AND EARLY YEARS

200 crore. The Economic Times. Retrieved from http://articles.economictimes.indiatimes.com/2015-01-

Revenue Management at Sparsh Nephrocare | 3

Revenue Management at Sparsh Nephrocare | 4

13 Mehta, J. (2012, May 28). Op. Cit.

DIALYSIS CENTER OPERATIONS

Physical Layout and Resources

Appointment Scheduling and Patient Visits

Revenue Management at Sparsh Nephrocare | 8

Diagnosis and Initiation on Dialysis

when the bundle volume reached 70% of the original capacity.

Revenue Management at Sparsh Nephrocare | 10

THE WAY FORWARD

Revenue Management at Sparsh Nephrocare | 11

Revenue Management at Sparsh Nephrocare | 12

Revenue Management at Sparsh Nephrocare | 13

Note: 10 Lacs = 1 million

Source: Company records – part of pitch document to potential investors.

Revenue Management at Sparsh Nephrocare | 14

Source: Created by authors based on information available on company website.

Revenue Management at Sparsh Nephrocare | 15

Month # Machines Capacity Utilization

Jun-14 124 8680 6,006

Jul-14 127 8890 6293

Aug-14 142 9940 6596

Sep-14 140 9800 6823

Oct-14 146 10220 5299

Nov-14 154 10780 5573

Dec-14 178 12460 6277

Jan-15 186 13020 6673

Feb-15 206 14420 6748

Mar-15 199 13930 7342

Apr-15 268 18760 7669

May-15 268 18760 8278

Jun-15 268 18760 8787

Source: Company records.

Revenue Management at Sparsh Nephrocare | 16

Source: Company records.

Revenue Management at Sparsh Nephrocare | 17

Source: Case authors with permission from Sparsh Nephrocare.

Revenue Management at Sparsh Nephrocare | 18

Please refer to spreadsheet ISB133

Source: Author analysis based on company records.

Revenue Management at Sparsh Nephrocare | 19

Patient No. of Patient No. of

Source: Author analysis based on company records.

Revenue Management at Sparsh Nephrocare | 20

Source: Company records.

Revenue Management at Sparsh Nephrocare | 21

Source: Company records.

Revenue Management at Sparsh Nephrocare | 22

Source: Company records.

Revenue Management at Sparsh Nephrocare | 23

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