Strategy had traveled abroad for availing health care facilities,

Strategy
of Health City Cayman Islands

The central idea behind creating the Health City Cayman Islands was to provide
high quality and reasonably priced health care facilities. It was primarily
targeted at the 950 million people in the Americas and the Caribbean Islands.
In terms of Porter’s generic strategy, the organization depended on the cost
leadership strategy and due to the feasible location, a broad scope of
potential customers could easily access it.

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Business
model

The Who, what and how

Who: As mentioned earlier, the organization mostly targets the American
customers, and the 38 million less affluent inhabitants of the Caribbean who
required not just cheap and high-quality healthcare but also not have to travel
to distant countries like India, Thailand and Singapore every year for
healthcare. It was particularly interesting for the American employers that
could save on health care costs by considering medical tourism for their
employees.

 

What: Affordable and high-quality healthcare was the offering of HCCI.
It was observed that in 2007 about 100,000 to 150,000 had traveled abroad for
availing health care facilities, owing to the high health care costs in the US.
In terms of reliability of HCCI healthcare, the mortality rate stood at overall
1.27% compared to 1.2% in US. Infection rate was 1% for both HCCI and the US.

 

Tertiary healthcare was a challenge in the Caribbean. Before HCCI was
established, the population depended on the US whenever it was affordable and
also on the cost-effective countries like Colombia, Cuba and Mexico. At Cayman,
since the hospitals had limited capabilities to provide tertiary healthcare,
patients had to fly to Florida after waiting for at least 3 to 4 weeks for
their Visa. HCCI could reduce these costs considerably since NH at Bangalore in
India was providing CABG procedures at just $8000, that included traveling and
accommodation costs as well.

 

How:

In order to acquire customers, the Cayman Government started providing
new medical tourism visa. These visas were available to patients within 48 – 72
hours post approval by the HCCI doctors. There were also plans of developing
assisted living homes for the aging American population, who found the health
care extremely expensive in the US. The strategic location of Cayman Islands
also enabled patients to arrive at Cayman Islands in a matter of hours.

 

In order to provide these services, the organization made earnest
efforts to reduce its overall costs. They procured high quality equipment from India rather than the US. It chose to
use the cold water available from the sea to replace the energy intensive
refrigeration system. This reduced air conditioning costs by 75%. In order to cut costs of procuring liquid oxygen
cylinders, they constructed their oxygen generation plant. Indian doctors were
issued licenses to work in the Cayman Islands; these doctors were trained to
perform 10-12 cardiac surgeries a week compared with 2-4 surgeries by a US
doctor. Besides, HCCI had implemented the iKare system, a form of telemedicine
which permitted remote monitoring of HCCI patients by specialists at NH in
India. This provided the HCCI economies of scale.

 

Since healthcare is an existing and a fairly competitive industry, HCCI
was able to attract the potential customers determined by the 5 forces of
Porter’s strategy. Bargaining power of suppliers is low for now. HCCI is
outsourcing their equipment from India at comparatively low prices. In the long
run, this could change and establish oligopoly among Indian suppliers. Risk of
entry by potential competitors is low. HCCI gets advantage because of its VRI
resources. Even if competitors could provide high quality healthcare, finding
such experienced doctors for such low salaries would be difficult. Also, the US
health care systems have been slow in adopting innovations unlike HCCI which
made healthcare cheaper by implementing innovations. The rivalry among
established firms is moderate. Most potential customers may already be loyal to
certain brands and healthcare facilities in the US. To change their perception
about adopting new healthcare facilities, away from their country, USA. The bargaining
power of buyers is low. The buyers in this case would be the patients that are
flying from the US and Caribbean, the costs of surgical and tertiary healthcare
are extremely high in the US. Finally, the threat of substitute products is low.
The quality of services is high and cheap and there are no substitutes
presently in the market.

 

VRI
resources:

What gave HCCI a competitive advantage can be explained by the VRI
resources proposed by J Barney (1995).

HCCI was able to maintain a competitive advantage by providing
affordable healthcare due to the expertise of not just doctors but also its
nurses. The doctors were highly experienced, having been exposed to less common
procedures at Narayana Health in India; hence were able to utilize their
expertise even at Cayman. The nurses were trained to be multi taskers. This not
just reduced over staffing but also led to fewer staff touching patients. This
improved the health care quality. The medical expertise was rare because Indian
doctors could perform high number of surgeries per week at a comparatively
lower cost than US doctors. According to the report, the doctors at HCCI were
earning about 2x~5x the Indian salaries but lesser than US salaries (0.5x~1x). The
commitment of experienced doctors to serve the society without having high
salary expectations made it not only rare but also difficult to imitate.

 

How would other firms find it difficult to imitate?

Asset mass efficiencies and slow accumulation of resources: Narayana Health
had earned reputation for its services for having the most efficient and
experienced doctors. At Narayana Health in India, doctors spent long hours,
performing 10 ~ 12 surgeries per week. This learning gradually improved their
expertise, especially in the CABG procedure. Thus, it can be observed that
resources gathered with time. The Indian doctors would use this gathered
expertise at HCCI and help in providing affordable healthcare.