Q1: Howis focused factory model suitable for cancer healthcare?
“Focused factory” a vertically integrated one stop shop for its patients, It covered every
specialty and sub-specialty for adult and child cancers. It provided all services, including
imaging, treatments(medical, radiation and surgicaloncology) and laboratory.
Fromstrategy perspective wecan relate to the competitive dimension.
COST/ EFFICIENCY- Owned a chain of pharmacies that created a formulary based on
patient’s need. Its ownership lowered its costs by procuring directly from manufacturers,
that enables it to offer either a distributor or a retailer price to its customers. allowing low
income patients to benefit from well tested generic drugs instead of quality imported
QUALITY/ EFFECTIVENESS-HCG’s Hub and spoke model expansion model was key to its
value proposition. It was HUB if provided all three treatment specialties (medical, radiation
and surgical oncology) with high end technology. And SPOKES were the chemotherapy
centers providing basic therapy and follow –ups located in small cities and towns.
CREATING A PRODUCT OR PROVIDING GREA
T SERVICE THA
T ADDS V
ALUE TO IT’S
■ DELIVERYSPEED-Spokes allowed patients to remain in their local community for
most of their treatment, which was rare in India reducing their burden on travelling,
accommodation etc. Also, as it focused on three processes, environmental
scanning, assessment of cancer incidence, market size etc. it was appropriate and
suitable model based initiative to depend on the prone place.
■ TECHNICALLIAISON:It also worked on its regulatory knowledge. Aspecific team
was focused on understanding regulatory requirements.
■ Hence, this approach was suitable as it provided for quality healthcare service to its
patients with Hubs and Spokes.
Operations management focus and
strategy on competitive dimensions
Thuswe can sayHCGfocused
on the given four areasto
• Reducing cost
• Updating and using
developed machines and
• Constant and efficient
supply chain management.
• Process and quality
improvement through trained
doctors, specialized doctors
Forces HCG CTCA Salick Dana-Farber
Structure • Vertical
• High technology
• Some JV’s in
• Focused care
• Focused factory
• Implant within
• JV’s with teaching
• High Quality of
• Academic &
• JV’s with Multi-
Financing • Mostly through
• For Profit
• Private Equity,
• For Profit
• Patient Revenue
• Privately Owned
• For Profit
• Revenue shares
• Outpatient Revenue
• Research grants and
• Capital cost often
shared with JV’s
Q.1 Compare and contrast the ‘FocusFactory’ of Health Care Global(HCG)
with other such factories in the US. (Use SixForces Analysis)
Forces HCG CTCA Salick Dana-Farber
• All social-
• Special Prices and
services for low
• Largely affluent • Captive from
• 30-35% from
• Awareness camps
• Starting outcomes
• Patient centric
• Patient family
Q2. Trace the status of cancer health care in India before and after
Detection & treatment were major bottlenecks
0.9 million new cases found annually
0.4 million deaths because of cancer out of 1.25 billion people.
Different kinds of cancer prevailed in different areas, high prevalence cancers
founded in the neck & head in majority
Shortage of cancer specialist hospitals and hospital's infrastructure.
With liberalisation and globalization private players entered.
HCG's hub and spokes model – expanded
Introduction of advanced technologies like linear accelerator, Cyberknife
,modulated radiotherapy etc and treatment specialities (medical, radiation &
oncology) helped in early detection.
Efficient and affordable means of treatment.
Q3. Comment on the Hub and Spoke Expansion model adopted by HCG in India.
What were the challenges/entry barriers faced by HCG during establishing its
operations in India?
Hub and Spoke ExpansionModel :
• Central Hub performed high end imaging therapy and other complicated procedures.
• Lower Cost ‘Spokes’ provided basic therapy and follow-ups in the patient’s local communities that
too in smaller towns
• The ‘Expansion Model’ was HCG’s value proposition. The ‘spokes’ helped decentralize the support
all over the country and increased the reach of the care. It provided basic therapy and follow-ups.
• HCG due to its Expansion Modelling proved to be an economical and convenient option if we see
from the view of the patients. It minimized the travelling frequencies of its patients as the therapy
was provided in their local community itself. This saved their costs of travelling as well as enabled
them to avail the services regularly as and when required.
• HCG decided on either of the two approaches: Greenfield or Brownfield approach.
Brownfield would save the cost for HCG as HCG would lease space rather than owning it.
The Brownfield approach would allow HCG upgrade its facilities as HCG would collaborate
with a local doctor who already had a practice. This would help HCG provide capital
investments like radiation equipment.
In attaining its target and implementing its plan HCG had to overcome various challenges,
a) The prevailing belief: It was believed that, Indian patients couldn’t afford specialized cancer
care services and hence, the services were mainly rendered Government or Trust funded
hospitals. However, Government hospitals were poorly run and due to the above belief it was
also difficult to attract investors for the private ones.
b) Barriers to Resources: Due to corruption, access to even basic resources like land and
electricity, were hindered.
c) Entry Barriers: The barrier to the advanced and newly launched equipment like Linear
Accelerator was ‘regulation’. HCG had to forge the process with the Atomic Energy
Regulatory Board to meet this challenge. Moreover, public hospitals resisted the entry of
private hospitals. These hurdles were entry barriers to HCG.
d) Financial Challenges: Servicing Principal repayment on short term debt was risky and
long term was not available. Credit collection efficiency or receivable turnover was low
as government payers and employees took long to pay. Owing to low profitability, the
sector couldn’t fetch equity investors.
Q4. What steps did HCGtake to ensure high qualityof its
services? Comment on HCGs CSRefforts.
Physics (planning of radiation treatment) and pathology (study and
diagnosis of a disease) were centralized function.
Centralized drug procurement.
Doctors do not provide drugs outside the formulary. Doctors prescribed
only three versions of the same drug: an inexpensive(generic), mid-
range(Indian brand), and expensive(foreign brand) based on the ability
of patient’s to pay.
Maintain outcome data. Focussed on disease-free status of different
Quality at spokes were maintained by deploying specialists from hub for
short period (1 month).
Comment on HCGs CSRefforts.
HCG did not turn away any patients even if the patient could not afford to
It also contributed 5%-8% of its top line towards these discounts and free
All employees were also contributed 0.5%-1% of their salaries to the
Foundation also raised money through theatre, art auctions, dinners, and
other fundraising events
Persuaded suppliers to give free drugs for poor patients.
Q5. What effect did the changing insurance landscape in
the countryhave on HCG’s operations?
Government insured people below poverty line.
40% of HCG patient’s were insured.
40% of HCG’s patients were insured out of which 15 % were
government and 25% were private insurance
Government is poor in reimbursement.
“Arogya Shree” paid 70 % less than private insurers.
Usually government payments were received after 6 months of claim.
Q.6 Howdid the Human ResourcesModel of HCGhelp ensure successof
■ Established relationship with nursing schools and medical colleges to recruit its
■ Recruited mangers from management schools and management colleges.
■ Took Initiative to bring many specialist and super specialized doctors back to
India from U.S. providing them with typical salary after adjustment for purchasing
■ Problem of quality was also addressed at the spokes by stationing specialists at
the hubs, deploying them regularly to the spokes to train doctors stationed there.
■ Doctors were deployed at spokes doctor who had strong family ties with the
■ Created in-home care provisions protocols in which HCG tried to shift care to
patient's home. Innovated its in house training programs for nurses by creating a
new cadre of nurses to serve patients.: “Onco-Nurses” , they were paid higher
salaries. This reduced the attrition rate of nurses and their dependence on
Q7. Comment on the financing model of HCG and its
Revenue growing at the rate of 70% CAGR (Compound Annual Growth Rate)
EBITDA at rate of 115%
EBITDA margins were inching towards 20%
Costs were cut down with centralization and scale purchasing.
Maximum use of technology. Linear accelerator were operated whole night
to ensure full usage.
Prescribed generic version of drugs. Persuaded suppliers to give free drugs
for poor patients.
They directly connected with the manufacturers to get low cost rates
New centres take $4-$10Mn to set up as per scale. Cash breakeven is
around 2 years.
Physicians partnered in creation of new spokes owned 20% equity in
company. Dr. Ajaikumar retained 26% of equity.
Q.8. What recommendations do you have for Dr. Ajaikumar for
expansion in India with an IT focus?Should he goahead with
the plan for settingup cancer centre in Africa.
Digital India initiative is improving online infrastructure across country.
Taking advantage if it, HCG can spread its spokes
Services like Telemedicine, Teleradiology and Telephysics can be
EMR (Electronic Medical Record) is on the anvil.
EHR (Electronic Health Record ) can be added to diversify treatment
Developing app for Personal Health Record (PHR) and integrating with