Five lessons for building scalable business models for maternal health
August 17, 2011
By Nick Pearson, Executive Director
Jacaranda Health entered the field of maternal healthcare in east Africa with a challenge: How do we provide high-quality care to low-income women while building a business that’s financially sustainable? It was essential that we provide services of a quality that our international advisors in obstetrics and midwifery could point to with pride, but we needed to be efficient enough as an organization that we could scale up if our first clinics were a success. Which strategies would help us meet both goals?
My background is in business: Before Jacaranda Health, I worked with an organization called the Acumen Fund that invests in businesses in East Africa. I knew the answer to this first challenge lay in a solid business model.
The Jacaranda Health model comprises two components: (1) mobile vans that go into the neighborhoods we want to reach and increase healthy birth outcomes with antenatal care (ANC) and birth preparedness; and (2) Jacaranda Maternity clinics in fixed locations near the slum areas, where women can go for respectful obstetric care, safe delivery, family planning and post-natal care (PNC). The mobile vans boost demand for services and create a direct link with patients, while the fixed clinics offer comprehensive care and bring in more revenue. To keep costs down without sacrificing quality of care, we rely on clinical interventions that have been shown to work,along with business innovations that have been found to boost efficiency and cost-effectiveness.
It’s our hope that some of our rules of thumb for creating a sustainable model might be useful reference points for our peers in the maternal health field. Here are five lessons we’ve had to learn:
Understand your unit economics. Providing high-quality health services costs money – for supplies and consumables, equipment, staffing, and training, as well as to cover depreciation of fixed assets like medical equipment. But it’s not enough simply to know the cost of each individual line item. To truly understand the costs of running your business, you have to understand your business in terms of what investors often call “unit economics.” Understanding unit economics means figuring out the cost and revenues from each component of your business. For us, that’s: How much does a single clinic cost to run? How much does a particular service (an ANC visit, the delivery of a baby, dealing with an obstetric complication) cost to provide? You would be surprised how few health care providers can answer these questions. Yet it’s essential to know all of this, because that “unit” is what you will be scaling up, and it’s far better to fine-tune it at the outset than muddle through once you’re running multiple facilities.
Understand your market and their ability to pay. Many long and boring books are written about market segmentation and pricing, but the basic takeaway is that finding the right price for services – especially for low-income clients – doesn’t just depend on your costs; it also depends on what your customers can afford. At Jacaranda, we realized after extensive market research that we would have to price our ANC services below what each appointment costs us to provide, because women in our areas are accustomed to subsidized ANC from government facilities. However, based on the findings of our initial focus groups, there seems to be less price sensitivity around the cost of actually delivering a baby, so we aim to recover the up-front loss in the price of delivery. We will know more as we test our prices with customers.
Be creative about your cost structure. What opportunities are there to adjust your model to lower costs? In urban areas, leasing facilities may be more cost-effective and give you more flexibility than buying or building clinics. Or, to use a work-in-progress example from Jacaranda’s experience: We know that post-natal care (PNC) visits within the first week are critical, but it’s often too onerous for mothers to travel to a clinic during this period, and sending a community health worker (CHW) on a home visit is costly. So, in collaboration with a team of economists from the Harvard School of Public Health, we will be evaluating whether mobile-phone calls using a checklist can be as effective as an in-person visit at catching complications. We’ll let you know what we discover.
Use health systems to increase cost efficiencies. This is where things get interesting. Given the cost of providing care, the only way to provide excellent service and recover the costs is to be dramatically more efficient than most other health care providers. Jacaranda is accomplishing this through systems and processes: information systems to track patient records, cashless transaction options, procedures that reduce breakage and waste, and creative strategies to help staff see more patients.
Don’t forget about marketing. A fundamental business equation relevant here is revenue = price X quantity. Sustainability relies on a good stream of revenue, and to boost revenue, you have to increase the number of patients visiting your clinic. Many healthcare organizations forget that marketing is one of the best ways to do that. Our current marketing activities include referral bonuses, promotional pricing, community health talks, partnerships with employers, and community health worker mobilization, and we’re constantly working to develop and test new ideas.
In describing these five lessons learned, I’ve mentioned several topics we’ll be writing more about soon — specific initiatives within our research, marketing, monitoring & evaluation, fundraising and clinic design efforts. We have plenty more to say on each of these topics in future posts.