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LIFENET hospitals (India): Developing new services' case study

Article  in  International Journal of Health Care Quality Assurance · February 2008

DOI: 10.1108/09526860810868210 · Source: PubMed

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IJHCQA
21,3 LIFENET hospitals (India):
developing new services’
case study
274
Zillur Rahman
Department of Management Studies, Indian Institute of Technology,
Received 17 August 2006
Revised 9 March 2007 Roorkee, India, and
Accepted 6 April 2007 M.N. Qureshi
Department of Mechanical Engineering, M.S. University of Baroda,
Vadodara, India

Abstract
Purpose – Indian healthcare is in the process of offering a plethora of services to customers hailing
largely from India and from neighboring countries. The Indian hospital sector consists of private
“nursing homes” and government and charitable missionary hospitals. Government and missionary
hospitals determine their charges according to patients’ income levels and treat poor patients freely.
Nursing homes charged higher, market-determined rates. They offer services in just a few medical
specialties, owned and operated by physicians who worked with them. Nursing homes cannot afford
the latest medical technology, but they provide more intimate settings than government hospitals.
This case study aims to demonstrate the various strategic options available to a for-profit hospital, in
an emerging economy with a burgeoning middle-class population and how it can choose which
services that it can best offer to its target population.
Design/methodology/approach – Diagnosing and treating complex ailments in nursing homes
could be a time-consuming and expensive proposition as visits to several nursing homes with different
specialties may be necessary. This paper demonstrates how an hospital can develop new
customer-oriented services and eliminate the hassle for patients needing to run around different
healthcare outlets even for minor ailments.
Findings – The paper finds that large government hospitals generally have better facilities than
nursing homes, but they were widely believed to provide poor-quality care. They failed to keep up with
advanced equipment, train their technicians adequately and did not publicize their capabilities to
doctors who might refer patients. Many missionary and charitable hospitals were undercapitalized
and did not offer all services. These conditions left an unsatisfied demand for high-quality medical
care. In 1983, LIFENET opened in Madras, becoming the first comprehensive, for-profit hospital in
India. LIFENET, invested in a cardiology laboratory and clinics with capacity to diagnose heart and
lung ailments, which grew through referrals it received from other doctors.
Originality/value – Out of promoters’ shared vision and the persistence to overcome financial and
regulatory hurdles, LIFENET turned into a super specialty hospital. In early 2004, LIFENET
promoters considered several options for expansion. In addition to building more hospitals, they
considered licensing the brand name and establishing India’s first health maintenance organization.
Keywords Health services, Medical management, Managed care, Quality function deployment, India
Paper type Case study
International Journal of Health Care
Quality Assurance
Vol. 21 No. 3, 2008
pp. 274-288 Introduction and background
q Emerald Group Publishing Limited LIFENET was founded in 1983 as India’s first corporate hospital. It offered
0952-6862
DOI 10.1108/09526860810868210 sophisticated treatment in a comprehensive range of medical specialties.
State-of-the-art medical technology operated by skilled technicians is complemented LIFENET
by well qualified doctors, many of whom left their lucrative jobs in Europe and hospitals (India)
North America. Other entrepreneurs followed LIFENET in the market and built
several dozen corporate hospitals to compete. Since its founding, LIFENET has been
delivering quality medical care, which has improved continually for those who can
pay. Despite competition, LIFENET has remained a leader in top-quality medical
care and had made a profit for a straight 22 years after inception (Walker, 2002). 275
The organization’s promoters felt that building more hospitals would take
advantage of the company’s experience, but expand its reach only gradually.
Therefore, LIFENET created the Indian Hospitals Consortium (IHC) as a consulting
service to share the company’s expertise in hospital management and to license the
LIFENET name to doctors and entrepreneurs. This enabled quicker expansion while
relying on LIFENET’s established competencies. Finally, promoters contemplated a
proposal to establish India’s first health maintenance organization (HMO). Operating
such a healthcare hybrid services allowed them to promote high-quality healthcare
through a large network of doctors and hospitals. This improved the quality of care
available to many. As there was no indication how patients would react, this kind
of investment could be huge risk. Moreover, managing such a huge service portfolio
called for new skills and resources. Indian health professionals are exploring
whether to offer a variety of health services to its customers hailing largely from
India and from the neighboring countries like Pakistan, Nepal and Bhutan. Élite
customers are also heading to India for their growing plastic surgery needs. The
main reasons contributing to foreigner customers’ demand include:
.
Indian health services are growing in quality and size.
.
They are cheaper compared to the USA, European and other Asian countries (see
Table I).
.
Doctors, nurses and technicians are in demand globally.

Assessing customers’ need in an Indian health service context is uncertain. Service

selection is largely affected by customer income and their desire to select a
particular quality level. The low income group hardly manages to access private
nursing home services unless otherwise crucial to survival; they prefer
Government or charity-run hospitals. Upper-class people, on the other hand, can

Surgery Thailand India

Bone marrow transplant 62,500 30,000

Liver transplant 75,000 40,000
Open heart surgery (CABG) 14,250 4,400
Hip replacement 6,900 4,500
Knee surgery 7,000 4,500
Hysterectomy 2,012 511
Gall bladder removal 1,755 555 Table I.
Asian treatment cost
Source: IBEF (2005) (US$) comparison
IJHCQA access nursing home services and other cosmetic health services. Thus identifying
21,3 the level and type of services required by the customers is a prerequisite for
setting-up a new HMO.

The milieu
India, a country with a population of about a billion, represents an immense variety of
276 economic levels, social statuses and cultural groups (Rahman, 2006a). A mass of poor
people, along with a large middle-class, constitutes nearly 80 percent of the population.
It is this class that leads every product or service innovation to success or failure. In
fact, satisfying customer requirements merely through existing products is often not
good enough to capture and retain the market share (Rahman, 2004). Managers
capitalize on this kind of position in the competitive market scenario (Rahman, 2006b).
India has exported its human resources for decades, sending young people abroad after
completing their studies, thereby enriching their adoptive countries, but creating
anxiety at home over the brain drain. In 1991, Prime Minister P.V. Narsimha Rao
initiated a round of economic changes fuelling the elimination of government
monopolies, reduced tariffs and liberalized foreign investment (Rahman, 1996). The
reforms were credited with stimulating private-sector growth. This benefited the
healthcare sector, which saw local entrepreneurs and organizations entering into
strategic partnerships with foreign players to harness the potential opportunities in
India.

Healthcare history
Health status varied widely between the rich, poor and middle-class Indian population
evident from Figure 1, however average levels matched those found in developing
countries in southern Asia and Latin America (Ravallion, 2003). Medical personnel and
facilities also lagged considerably behind developed countries’ norms (Banga, 2005). A
picture of an Indian health care industry is given in Table II, which clearly shows the
gross domestic product (GDP) spending lag.
In the early 1980s the state government bore primary responsibility for providing
most Indian health care, while the national government sponsored major initiatives

Figure 1.
Cost per treatment and
hospitalization in 2004
(INR)
(Varatharajan, 1999). The hospital sector consisted of private “nursing homes”, LIFENET
government and charitable missionary hospitals. The latter determined their rates hospitals (India)
according to patients’ income and treated poor patients for free. Nursing homes –
small hospitals, most with fewer than 25 beds – charged higher, market-determined
rates. They offered fewer medical specialty services and were owned and operated by
physicians who worked in them. Nursing homes could not afford the latest medical
technology, but provided a more intimate setting than government hospitals (Eaton, 277
2000). Diagnosing and treating complex ailments through nursing homes could be
time-consuming and expensive, as visits to several homes with different specialties
were often necessary. Large government hospitals generally had better facilities than
nursing homes, but they were widely believed to provide poor-quality care (Filmer et al.
2000). They failed to maintain their advanced equipment, train their technicians and
did not publicize their capabilities to doctors who refer patients (Ensor and Witter,
2001). Many missionary and charitable hospitals were undercapitalized and did not
offer all services. These conditions led to unsatisfied demand for high quality medical
care owing to critical gaps in infra structure, workforce, equipment, essential
diagnostic reagents and drugs (Arjunan et al., 2002).
LIFENET opened in Madras in 1983, becoming the first comprehensive, for-profit
hospital in India. Most private medical care was paid for out-of-pocket by patients,
although a growing number of employers were offering healthcare benefits to their
employees. In 2005, approximately 60 percent of the middle class was considered
capable of paying for private healthcare, although that proportion was rising. A
growing number of Indians were purchasing health insurance for themselves because
the legal prohibition on private health care services providers would soon be relaxed
(see Table III).

Market overview
Healthcare has emerged as one of India’s largest service sectors. In 2004, national
healthcare spending was about 5.2 percent of nominal GDP, or US$34.9 billion.
Healthcare spending in India is expected to rise by 12 percent per annum through
2005-2009 (in Rupee terms) and scale up to about 5.5 percent of GDP or US$ 60.9 billion
by 2009. Other estimates suggest that by 2012, healthcare spending could contribute
eight percent of GDP and employ around 9 million people. From a pan-India
perspective, presently there are more than half a million doctors employed in 15,097
hospitals. Additionally there are 0.75 million nurses, who look after more than 870,000
hospital beds. During the previous decade the number of doctors increased by 37

Particulars 2004 2005 2006 2007 2008 2009

Life expectancy, average years 64 64.3 64.7 65.1 65.4 65.8

Healthcare spending (Rs billion) 1,582 1,763 1,967 2,216 2,463 2,771
Healthcare spending percent of GDP 5.2 5.3 5.3 5.4 5.4 5.5
Health care spending (US $ billion per head) 32 37 41 46 49 53
Table II.
Source: US Census Bureau; Economist Intelligence Unit Indian health care
IJHCQA
Health premium as percent
21,3 Insurer Health premium (in Rs Crore) of total non-life business

ICICI Lombard 118.78 13.4

Bajaj Allianz 70.93 8.3
Royal Sundaram 30.02 9.1
278 IFFCO- Tokio 28.37 5.6
TATA AIG 26.64 5.7
Cholamandalam 20.12 11.8
Reliance 7.98 4.9
HDFC Chubb 1.97 1.1
Private Sector 304.27 8.6
New India 504.28 11.9
National 364.29 9.5
United India 294.19 10
Oriental 265.19 8.7
Public sector 1,427.9 9.8
Table III. Total 1,732.17 9.6
Indian health care: major
contributors Source: IBEF (2005)

percent and an estimated 30 percent of medical practitioners held specialist

qualifications (Mahal, 2002).

LIFENET – the journey

LIFENET grew out of the promoters’ own practice. After building its primary
healthcare practices, they invested in a complete cardiology service with capacity to
diagnose heart and lung ailments. However, the frustration of not being able to perform
certain therapies at LIFENET led the promoters to create a private hospital. Facing
regulatory and financial obstacles, they presented their ideas to then Prime Minister,
the late Mrs Indira Gandhi. They argued that quality hospital services would reverse
the currency outflows as well as the brain drain. This led to a successful one-time grant
of exemption from financial restrictions. Later, Prime Minister Rajiv Gandhi liberalized
the sector and allowed broad access to financing and encouraging hospital
development on a large scale (Bonin and Wachtel, 2003). The promoters faced
skepticism during their campaign to convince investors and the press that a
super-specialty Indian hospital was viable. Nevertheless, they raised $4.6 million in one
1983 share issue.

Key management philosophy

LIFENET exists to give patients advanced compassionate, high quality medical care. It
hired top-quality doctors in all medical specialties. It contributed well-trained
support-staff, comprehensive facilities and the most advanced medical technology in
the world (Smith, 2000). Managers encouraged every employee to contribute materially
to patients’ LIFENET experience. They set high standards for all aspects of patient
care, including non-medical ones, and stressed hospitality toward patients. Regular
training gave employees the ability to meet these standards, and high pay, good
benefits and a strong, team-oriented culture helped motivate them. Finally, LIFENET’s
operations were geared to provide outstanding value to patient through superior LIFENET
medical results, quick treatment and a low care cost (see Table IV). hospitals (India)
The LIFENET Star
Management philosophy was based on the LIFENET Star, formed by its five arms:
core group, technology, employees, values and hospitality (Figure 2).
279
Core group
Top caliber, renowned physicians and surgeons were a key to LIFENET’s reputation
and service. A total of 250 consultant doctors, many of whom had impressive academic
and clinical credentials from the USA or UK, formed the hospital’s élite medical staff.
Consultant doctors operated on a fee-for-service basis. Most patients came to them
through referrals for medical problems. About half the doctors kept the entire fee they
received. They set their own rates within broad hospital limits. The hospitals’ main
source of revenue, therefore, was payments from patients for medical services such as
laboratory tests, equipment and hotel-type services including accommodation and
meals.

Technology
Effectively applying the latest medical technology was a critical part of LIFENET’s
service, which appeals to patients and consultant doctors. The equipment was
expensive; for instance, a magnetic resonance imaging machine (MRI) cost about INR

Surgery Thailand India

Bone marrow transplant 62,500 30,000

Liver transplant 75,000 40,000
Open heart surgery (CABG) 14,250 4,400
Hip replacement 6,900 4,500
Knee surgery 7,000 4,500
Hysterectomy 2,012 511 Table IV.
Gall bladder removal 1,755 555 Asian continent
treatment cost (US$)
Source: IBEF (2005) comparison

Figure 2.
LIFENET Star –
management philosophy
IJHCQA 49million. Careful equipment purchases and use were essential to LIFENET’s
21,3 profitability and constituted a formidable management challenge. Much of the
equipment was manufactured in the USA or Germany and priced for those markets,
but LIFENET’s charges were constrained by Indian income levels (Collins and
Williamson, 2001). High use had to be balanced against availability: LIFENET had to
have enough equipment to serve patients promptly. Delays could cause a patient’s
280 condition to deteriorate and erode revenues by tying-up scarce beds. In the first four
days, most patients received an estimated 75 percent of the services they needed; the
remainder of their stay was primarily convalescence, during which they paid mainly
room and board charges (see Table V).

Employees
Employees are the key arm of the Star. Top managers motivate staff by underlying
employees’ important roles. LIFENET considered team spirit essential to an
organization and success as a business. Employees understood LIFENET’s larger
ambitions. Many had a strong sense of community (Kinjerski and Skrypnek, 2004).
This grew out of personal relationships within the departments and an array of
hospital-wide events. Awards recognized dozens of employees many from
maintenance and housekeeping departments. Achievements included outstanding
attendance, punctuality, intramural sports achievement and honesty. Employment at
LIFENET yielded material rewards as well as a community place. LIFENET’s wages
were 10 to 20 percent higher than local private hospital salaries (Stilwell et al. 2004).
Medical care at the hospital, which few could afford, was free. In addition to regular
holidays, they were eligible for attendance bonus each month and subsidized cafeteria
meals. Government hospitals generally paid slightly more than LIFENET but their
reputation made them unattractive to staff used to a flexible atmosphere (Kinjerski and
Skrypnek, 2004). Competition for some skilled staff, like nurses, had risen, but local,
private competitors could only afford to offer higher salaries to a few LIFENET
employees (see Table VI).

Hospitality
Each employee is asked to take responsibility for meeting patient’s every need and
desire. Patients, for example, expected hospitality and personal services in return for
the premium they paid to be in a private hospital. Employee training programs,
therefore, explained what hospitality meant and how to anticipate patient’s needs.
They also covered specific job functions and other aspects of customer service.

Cost Revenue generated by each per year

Equipment Number owned (Rs million) (Rs million)

MRI machine 2 49 24
CAT scanner 3 16 10.6
Catheterization 4 50 56
Gamma camera 2 30 7.8
Table V. Linear accelerator 3 89 16.8
Medical equipment cost
and revenue generated Source: IBEF (2005)
LIFENET made sure employees knew that employers demanded excellence and LIFENET
encouraged managers to commend good work. hospitals (India)
Values
These are encompassed the ways LIFENET strove to serve patients better than its
competitors. Patients’ health was the most important measure of success, so the
hospital aimed to provide the best medical outcomes. Many patients were attracted by 281
LIFENET’s pioneering work in cardio-thoracic surgery; including angioplasty and
coronary bypass (Bonin and Wachtel, 2003).

Hospitalization’s opportunity cost

LIFENET tried to reduce care costs below nursing homes and other hospitals, while
providing superior service. Quick diagnosis and treatment was the key to value.
LIFENET had facilities and specialties immediately available in virtually all
disciplines, unlike nursing homes. Often, complex ailments could be diagnosed in a few
days, rather than a few weeks. Early diagnosis and treatment increased the chance that
therapy succeeded and reduced recovery time, follow-up treatment, hospitalization and
lost work time. This efficiency was important because LIFENET charged 20 percent to
30 percent more for procedures than local competitors, although 10 percent to 15
percent less than top hospitals in Mumbai and New Delhi (Mahal, 2002).

Quality standards
LIFENET made special efforts to ensure patients’ complete satisfaction. The Guest
Relations department’s 50 staff interviewed each patient at admission and discharge.
Additionally, they visited each ward every three days and spoke to each patient. All
complaints were noted, referred to the relevant department (such as housekeeping) for
action and comment, and then passed for information to the hospital’s chief executive.
Complaints were recorded in a database that revealed patterns by location and
complaint type. The guest Relations’ Department then gathered staff from various
departments to identify causes of each problem and address them.

Management issues
The LIFENET management team faced ongoing issues regarding critical relations
between consultant doctors and administrators and the hospital’s ability to further
both medical and business goals. Vice president B.S. Varghese explained:

Rank Average employed Starters Leavers Turnover (%)

Doctors 286 54 39 19
Executives 105 20 7 19
Staff 1,580 229 190 14
Trainees 146 155 90 106
Special assignments 46 5 4 11 Table VI.
Temporary 87 43 33 49 LIFENET employee
Casuals 504 115 105 23 turnover
IJHCQA Doctors and administrators are naturally different from each other in their professional
orientation. Doctors are not subservient to the goals of the institution. They have strong
21,3 loyalties to their patients and they have strong individual identities. However, administrators
have corporate loyalties and corporate identities. The potential for conflict is certainly there.
Equipment and facilities management laid bare an essential tension between medical
and business goals. When consultants experienced what they saw as undue or
282 unacceptable delays in equipment availability or other facilities they complained to
their managers, who had to decide whether to buy more. Hospital managers had to
address investment, future benefits and patient satisfaction. They resolved many
important issues through consultant and administrator committees. Both groups
received training in collaborative problem solving and conflict resolution. Still, medical
progress and respectable profit pulled in opposite directions.

Marketing LIFENET
LIFENET served middle to upper-income patients who could pay for medical care, and
companies that provided medical care benefits to employees. Although LIFENET
provided primary care services to some patients as part of its emphasis on preventive
health, its main emphasis was on tertiary care – advanced therapy and surgery for
patients with advanced or complicated medical problems (see Table VII). Inpatients
accounted for roughly three-quarters of its revenue.

Changing mindsets
Creating awareness of the hospital’s capabilities presented another challenge to
managers. In 1983, many people saw private health care as a luxury. LIFENET
convinced investors and the Indian government that a private hospital would be
financially viable. Once LIFENET Hospitals Madras opened, its marketing staff had
to convince potential patients and their doctors that the hospital provided superior
care that justified its prices. The tertiary care offered at LIFENET is given in
Table VII. In 1994, 42 percent of patients were from Madras and its Tamil Nadu
state. The rest came from every part of India and dozens of foreign countries.
LIFENET offered six room categories, ranging from General Ward, at Rs250 per
day, to Super Deluxe, at Rs1,800 per day, thereby catering to as wide a market as
possible.

LIFENET specialties

Dentistry Neurology and neurosurgery

Diabetology Obstetrics and gynecology
Drug addiction and rehabilitation Ophthalmology
Emergency services Orthopedics and traumatology
Endocrinology Pediatrics and neonatology
Table VII. Ear, nose and throat dieses Physical therapy
Tertiary care offered at Gastroenterology Psychiatry
LIFENET Internal medicine Radiology and imaging
Individual consumers LIFENET
LIFENET publicized itself to individuals early on. Healthcare services’ marketing was hospitals (India)
new to India. There was some public concern over its ethical propriety even though
LIFENET’s efforts were less aggressive than US hospitals’ (Javalgi et al., 2001).
Accordingly, LIFENET encouraged preventive health measures, with the goal of
developing long-term, trusting relationships with patients. It aimed most marketing
efforts at women, whom it had found to be the family health-care decision-maker. 283
Efforts to reach potential patients included programs to encourage awareness of health
issues, such as the “Healthy Hearts Club”, “Well Women’s Club” and outreach
programs for local schools. A low-priced preventative check-up package provided
comprehensive physical exams for a family of four. Additionally, LIFENET targeted
people at risk for specific illnesses, like diabetes, by advertising specially priced
diagnostic packages.

Referring doctors
Primary-care physicians represented a critical market for LIFENET because their
referrals brought in most new patients. Marketing programs aimed both to develop
relationships with potential referrers and to publicize the hospital’s capabilities. Some
competing hospitals paid doctors for referrals, but LIFENET felt that this contradicted
patients’ interests. Persuading physicians to refer patients was difficult because they
perceived LIFENET as a threat. Although LIFENET was primarily a tertiary-care
provider, it offered services that competed with referring doctors’ work. Instead of
returning to their primary-care physician, patients could choose to rely on the hospital
for care after a major procedure. To assuage potential referrers’ worries, LIFENET
established a program to help them maintain close contact with their patients at the
hospital. They were allowed to join their patients during consultations and visit
whenever they wished.

Corporations
LIFENET had contracts to provide preventative care and advanced treatment for
employees of about 150 corporations. It aggressively courted new corporate business.
Master Health Check, a popular program, catered mainly to corporate clients. It
packaged five diagnostic services into a fairly comprehensive physical examination at
a relatively low price (Rs1,250 for men and Rs1,350 for women, who received
gynecological tests). Examinations were concluded in the morning and results,
including those from lab’ tests, were available the next day. LIFENET’s marketing
tasted success. By 2005, it had an international reputation for excellent medical care
(Mahal, 2002). The hospital scored a public relations coup in 2003 when India’s vice
president chose to have his coronary bypass operation performed at the Madras
hospital rather than abroad. LIFENET was on the front pages of newspapers
throughout India every day for a week and the vice president’s surgery was successful.
His choice was especially influential among India’s three-million-strong economic élite
who could afford medical care anywhere in the world.
The hospital’s performance reflected its reputation (Mahal, 2002). It turned to profit
after two years – raising revenue per bed and increasing its fixed assets and capacity
by 300 percent between 1983 and 1993. Expansion was limited by a cramped site so
LIFENET built a 150-bed specialty cancer hospital in another Madras location and it
IJHCQA planned an off-site recovery facility to free-up beds in the main hospital for more
21,3 intensive use. LIFENET’s executives reported that the hospital’s financial performance
had not been affected by competition, despite the appearance of five Madras private
hospitals. They felt that enormous, unmet demand for high-quality health care for the
population and the hospital’s superlative reputation had insulated it so far.

284 Expansion plans – the roadmap

In early 2004 LIFENET promoters considered several expansion options. In addition to
building more hospitals, they considered licensing the brand name and establishing
India’s first HMO.

Licensing
LIFENET created Indian Hospitals Consortium (IHC) as a consulting group to help
entrepreneurs build and manage new medical facilities. The group managed the
construction and opening of a super-specialty hospital and two medical centers, but
had not yet managed a facility for a long period. The IHC assisted its clients in market
research, development planning, project management, architectural design, equipment
selection, staff recruitment and training. The LIFENET group was considering
licensing the LIFENET name to groups of doctors or entrepreneurs, as long as they
retained IHC to manage the facility according to LIFENET’s standards. In certain
ways, licensing was more attractive than building wholly-owned facilities. LIFENET
would not risk large amounts of its own capital or have to cover losses until facilities
broke even. Working with partners also made ventures easier. LIFENET anticipated
that many local partners would provide land on good sites, which was expensive in
major cities and foster good relations with local authorities. Local doctors would make
good partners because they help staff the facility and provide a ready-made customer
base. Licensing might not be the most profitable way to use managers though. Since
LIFENET (through IHC) managed licensed facilities, it would have to provide as many
managers as for wholly-owned ventures. Skilled hospital managers were rare in India.
Most management contracts compensated IHC with a percentage of profits but the
company was willing to consider investing equity to form partnerships. Licensing
without equity participation expanded LIFENET’s presence without straining its
capital resources. Under either compensation arrangements, long-term profit potential
was reduced along with financial risk.

HMO
Modeled on HMOs in the USA, the planned HMO provides all medical care as needed to
members in return for a fixed, annual premium. Because the HMO’s revenues would be
fixed, it tried to prevent illness so as to spare itself the cost of sophisticated treatments
once serious ailments developed. The HMO initially accepted only corporate clients
who bought health coverage for their employees, but after two years it started
accepting individuals. It appealed to corporations and institutions that already paid
their employees’ health expenses, either through insurance or by reimbursing them
directly. The promoters believed that LIFENET’s reputation for quality and the
promise of lower costs were powerful selling points. Several large corporations
expressed serious interest in joining the HMO, which combined two expansion
methods – building wholly-owned hospitals and licensing. It gave LIFENET influence
over quality at more facilities across India than either of these other methods alone LIFENET
(Javalgi et al., 2001). The HMO’s network included wholly-owned facilities; licensed hospitals (India)
facilities and independently managed facilities without the LIFENET name, accredited
by the HMO to serve its patients. Accredited facilities were required to meet high
standards in medical and non-medical care. The HMO patients received treatment only
at facilities in the network, providing a constant flow of patients for those facilities.
Creating the network was time-consuming and expensive. Many of LIFENET’s best 285
managers were drawn in to inspect facilities for accreditation and to develop new ones,
either wholly-owned by LIFENET or through licensing. Managing the HMO requires
careful balancing patients’ medical needs costs of care (Luck and Peabody, 2002).
Although this involved a departure from experience with building and managing
medical facilities, LIFENET had administered medical insurance policies for the
government-owned Oriental Insurance Company. Under Oriental’s standard policy,
sold through insurance brokers, patients were reimbursed for medical expenses only
up to a set limit per year. In return for paying a regular fee to LIFENET, in addition to
the standard premium, patients could be reimbursed for all medical expenses that
LIFENET approved in advance. LIFENET accepted the risk of providing adequate
medical care for its 200,000 insurance patients for a fixed fee. This resembled closely
the arrangement under which US HMOs operated.

Various healthcare options

Health care organizations are companies that develop, manufacture, market, and/or
distribute health-related products or provide health care services, such as hospitals,
nursing homes, HMOs, medical product suppliers, medical equipment and medical
device makers, and medical laboratories. Health medical devices develop, manufacture
and market medical apparatus, equipment, instruments, devices and supplies (Arnold
and Reeves, 2006). Thus, the Indian healthcare market has lately seen a vacuum filled
by various segments. Despite the presence of varied healthcare services in the market,
there seems to be a lack of integration. This can be attributed towards the scarce
resources in terms of workforce and investment.

Conclusions
Indian healthcare has seen standards rising over the past decade. However, the
industry is in its initial expansion phase. Private hospitals and continued investment in
the public health programs are driving growth. Together, this health infrastructure
serves a population of over one billion, growing at about 2 percent annually. The
combination of high quality services and low cost facilities is also attracting a stream
of international patients as cost of advanced surgery in India are ten to 15 times lower
than anywhere in the world. Strategic foreign investment and collaboration
opportunities have already arrived in the sector. Leading Indian players are
drawing out global expansion plans. The policies aims at widening the extent and
coverage of care as well as envisions a greater role for the private sector in the urban
primary care and tertiary care sectors with growth of private health insurance. With
demand outstripping supply, the outlook for private medical players is positive. There
exists a large gap to be filled by private HMOs. It is this gap that LIFENET can fill by
being the first Indian HMO. LIFENET has served the healthcare industry as a first
mover in corporate hospitals segment. It has successfully devised premium healthcare
IJHCQA services for middle class that formed nearly 60 percent of the population. The presence
21,3 of LIFENET is strong in tertiary care and its clients constitute mainly middle- to
upper-income patients who could pay for medical care along with employers who
provide a medical care benefit. LIFENET has reduced the total cost of care lower than
nursing homes or other hospitals while providing superior service. Quick diagnosis
and treatment are key to value. LIFENET had facilities and specialties immediately
286 available in virtually all disciplines, unlike nursing homes. Early diagnosis and
treatment increased the chance that therapy succeeded and reduced recovery time,
follow-up treatment, hospitalization and lost work time. LIFENET charged 20 percent
to 30 percent more for procedures than its local competitors, although 10 percent to 15
percent less than top hospitals in Mumbai and New Delhi. LIFENET existed to give
patients advanced, high-quality quality medical care. It had hired top-quality doctors
in all medical specialties and provided them with well-trained support-staff,
comprehensive facilities and some of the most advanced medical technology in the
world. The chief executive downwards emphasized that every employee contributed
materially to patients’ experience at LIFENET. They set high standards for all aspects
of patient care, including non-medical ones and stressed hospitality toward patients.
Regular training gave employees the ability to meet these standards; high pay, good
benefits and a strong, team-oriented culture helped motivate them. Finally, LIFENET’s
operations were geared to provide outstanding value to patient through superior
medical results, quick treatment and a low total cost of care relative to competitors.
The brand LIFENET has been able to underline its service dimensions: reliability,
responsiveness, accuracy, tangibles and empathy. Thus patients’ perception of
LIFENET were better than the rest if not the best.

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288
Corresponding author
Zillur Rahman can be contacted at: yusuffdm@iitr.ernet.in

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