Omar Ishrak, CEO of Medtronic, and Parveez Ubed, founder of ERC Eye Care, discuss their business models for bringing low-cost health care services to the underserved.
More than a billion people worldwide, including in the U.S., lack access to basic health care, but they are very much on the radar of some public spirited organizations, both big and small. One is Medtronic, a large manufacturer of medical devices that has its worldwide operational headquarters in Minneapolis, Minn. The company, through its Applied Innovation Lab, is bringing low-cost, technology driven health care solutions in treating childhood blindness, childhood diabetes and adult blood pressure to the underserved in emerging markets.
Another is ERC Eye Care in Jorhat, located in India’s Assam state, which provides affordable eye care in the country’s northeastern region. With a novel hub-and-spoke model of a hospital connected with rural centers and mobile vans, it has over the past six years provided eye care services to more than 1.55 million people.
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“Awareness, infrastructure and training are common elements that need to be resolved in health care,” said Omar Ishrak, CEO of Medtronic, about the company’s holistic approach. Parveez Ubed, founder and CEO of ERC Eye Care, meantime, encountered unique challenges in bringing health care to low-income populations, such as individuals feeling a lack of dignity in receiving free eye care services. “When we think that the aspirations of the BOP (people at the bottom of the pyramid) are not the same as those of the middle-income or the upper-income segments, we are totally wrong,” he said.
Ishrak and Ubed shared their experiences in building their business models with Knowledge@Wharton for a new podcast series called “From Back Street to Wall Street.” The series is being produced in partnership with Impact Investment Exchange (IIX), a Singapore-based group that serves as a bridge between investors and development goals in Asia. (Listen to this episode using the player at the top of this page. Find the first episode here, the second episode here, and the third episode here.)
Ishrak said Medtronic aims to “contribute to human welfare” through medical engineering, which is the first part of its mission statement. The company, he adds, does not want to stop simply with making the devices, “hoping that people get better with it,” but wants to ensure they also “alleviate pain, restore health, and extend life” — the second part of its mission statement, he added. He explained how Medtronic takes those goals seriously. “This is not just a matter of showing up with stuff,” he said. “It’s a matter of training and educating people, and creating awareness in different types of investments.”
Granular and Specific
The challenges in meeting the health care needs of the underserved in the U.S. are typically around creating sustainable funding and local infrastructure of facilities to make them widely accessible, Ishrak noted. But the issues are different in emerging markets and cannot be solved by technology alone, he said. They need customized solutions that get “very granular and specific” about the type of problem, the disease being tackled, the population being served, and the circumstances around that population, he explained.
Medtronic’s vehicle for those objectives is its Applied Innovation Lab, “a collaboration hub for employees, customers, health care providers, and other partners,” set up in September 2015. Focused on the underserved, the lab plows back its profits to further scale the reach of its health care solutions. Its ecosystem is made up of other technology companies, physicians and government agencies.
Among the projects that have had significant impact thus far is one to treat childhood hearing loss among underserved populations mostly in India, and some in Bangladesh. Another project: to treat childhood diabetes remotely. A third project is in Kenya, where it provides treatments for adult blood pressure and hypertension measurement. The lab is working on about a dozen technology-based health care programs.
Technology and Scalability
Medtronic is using technology creatively in delivering those solutions. For example, in treating childhood hearing loss, while the conventional otoscope takes a picture of the interior of the ear, the company added a mobile phone plug in order to send that picture to a doctor. Next, it is building artificial intelligence tools to provide quicker diagnosis. In hypertension measurements, it makes available low cost iPad technology to physicians that helps them manage patient treatment processes.
“It’s dangerous in health care to think that there is a magic bullet that will solve all problems.” –Omar Ishrak
Ultimately, for these programs to work effectively, “scalability has to go with affordability, so you cannot scale without affordability,” said Ishrak. “But affordability can happen if there’s a real ecosystem that develops that can pay for it.” He added that “without infrastructure, awareness and training, nothing is going to happen.”
Ishrak shared his guiding philosophy: “The one thing that we can do is to move away from this being a charitable enterprise to one that’s an impact enterprise, where we measure our success in terms of the amount of impact that we make, as opposed to the money that we give,” he said.
For Ubed, after he graduated in 2007 as an eye doctor from the Guwahati Medical College in Assam, he was struck by the size of the unmet health care needs of people in his state and elsewhere in the Northeast region. The region is not well connected with the rest of India, and with agriculture as the main occupation, most people live on marginal incomes. The region is also prone to heavy floods and has inadequate public infrastructure.
When Ubed began practicing, he found that the “pain points for patients” were chiefly accessibility to care, affordability and inclusiveness, but he discovered something else as well. “The most important issue was the lack of dignity [among low income people] in accessing services which were not paid for,” he said. Data that Ubed found told him that 43% of the people in his region with low vision needed at least a simple pair of glasses. That encouraged Ubed to set up ERC Eye Care in Jorhat in 2011 with a modest capital of $6,000, and he converted his mother’s kitchen into a clinic.
Ubed wanted to grow his enterprise, but found it hard to raise funding, and he realized he also lacked the requisite business expertise. “We were not businessmen [with an understanding of] how to monetize treatments in a profitable manner, and to run things in a sustainable way,” he said. He read a lot of management books including those by Philip Kotler, and learned how to write a business model, draw up Excel sheets, etc.
“The most important issue was the lack of dignity [among low income people] in accessing services which were not paid for.” –Parveez Ubed
In 2014, ERC won a $150,000 grant from the World Bank, and set up a large eye hospital in Jorhat that provides secondary eye care such as cataract surgery and other services like refractive error correction. Subsequently, it also secured investments from Ennovent Impact Investment Holding, Ankur Capital, Beyond Capital Fund and angel investors.
A Hub-and-spoke Model
ERC uses a “hub-and-spoke” business model, where it runs “vision centers” in rural areas and deploys mobile units to reach further into interior areas. They are the spokes that are connected to its hub, which is the main hospital.
Ubed said he is now “very confident about our business model.” ERC is currently in a fund raising round aimed at prepping its internal operations to go “large scale” in two years. Future plans includes more hospitals, and expansion into new geographies across Southeast Asia.
Ubed now has advice for other aspiring social entrepreneurs. “They should look and get help from organizations like IIX, which have programs for entrepreneurs like me to introduce them to the ecosystem” he said. “[They must also] make their business models investable, because it’s not always that the investor and the entrepreneur look in the same direction.”
Article by Knowledge@Wharton