IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus Country: India Sector: Health Care IFC Investment: $10 million NephroPlus Chronic kidney disease (CKD), which causes people to lose their kidney function over time, affects nearly 12 million Indians.1 Once kidney failure occurs, affected individuals require a kidney transplant or weekly dialysis treatment to stay alive and will live only a few months at most without treatment. Demand for dialysis is growing at a rate of 31 percent stringent regulation, low kidney donation rates, and poor in India, compared to eight percent globally. India’s 2 infrastructure in the country. Moreover, kidney transplants high rates of diabetes and hypertension, as well as can fail. This makes dialysis a critical alternative for people increased awareness of CKD and treatment options, living with CKD. have contributed to rapid growth in demand for dialysis. Despite the importance of dialysis, more than 90 percent Yet dialysis providers have shied away from expanding of the 230,000 Indians newly diagnosed with CKD each services as they struggle to make clinics profitable in a year die within months due to lack of treatment. Services 3 low-margin industry. Industry-wide operational are fragmented and largely concentrated in big cities. inefficiencies, often related to equipment deployment and Also, high prices and the need for frequent treatments organizational structure, keep costs high. A shortage of make dialysis a financial burden for many patients and trained nephrologists, nurses, and technical staff has also unaffordable for others. A kidney transplant is a permanent constrained the expansion of dialysis services. Reaching solution, but availability is extremely limited due to patients in lower income brackets presents a particular 1 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus challenge given the reluctance of providers to reduce prices HOW DOES DIALYSIS WORK? in the face of tight profit margins. All of these challenges have deterred new entrants into the dialysis market, widening The kidney performs the critical the gap between the supply and demand for services. functions of removing waste and extra water from the body. Dialysis artificially NephroCare Health Services Private Limited (NephroPlus), conducts these functions by circulating blood a provider network of dialysis services, entered the Indian outside the patient’s body using an external filter dialysis market in 2010 with the goal of transforming the called a dialyzer. Most NephroPlus patients are entire industry. The company provides the complete range on hemodialysis which is highly time consuming. of healthcare services that kidney failure patients need to Hemodialysis patients visit a clinic two to three lead productive lives, including hemodialysis, peritoneal times a week with each session lasting around dialysis, and kidney transplant services. To deliver these four hours. In the absence of an opportunity for a services NephroPlus designs, builds, and operates low-cost transplant, individuals afflicted by kidney failure centers that provide high quality and affordable dialysis require dialysis for the rest of their lives. services. Centers are established through partnerships with hospitals or as standalone facilities. At roughly $25 per treatment, NephroPlus prices are 30 to 40 percent lower than large hospitals in India—and up to 50 percent lower in some cases. Today, NephroPlus is the Vikram Vuppala, who worked as a healthcare services largest provider network of dialysis services in India with strategy consultant with McKinsey & Company in the 75 centers in 50 cities in 15 states across the country. Its United States and was looking for opportunities to centers are located in large metropolitan areas as well as improve the health sector in India, discovered Shah’s underserved, small cities. Through its presence in smaller blog. Vuppala contacted Shah and proposed the idea for cities, NephroPlus reaches patients who would otherwise a dialysis start-up. Shortly thereafter, Vuppala brought have to travel up to 100 kilometers for dialysis. The company on board Sandeep Gudibanda, whose entrepreneurial served more than 6,000 patients in 2015 and now provides experience with technology start-ups and social approximately 50,000 dialysis treatments each month. enterprises would make him a valuable asset to the team. The three of them founded NephroPlus in 2010. A PERSONAL JOURNEY Through their experiences speaking with nephrologists, In 1997, 21-year-old Kamal Shah, a software developer who dialysis staff, and scores of patients, the three co-founders co-founded a company that developed apps for Apple, identified several areas where NephroPlus could effect was diagnosed with kidney disease and put on dialysis. high-impact, fundamental changes to the sector. These After a year and a half, he experienced a failed kidney included improving the quality of kidney dialysis, reducing transplant and returned to dialysis. For many years, Shah the gap between the demand and supply of services, was on peritoneal dialysis, which allowed him to work particularly in underserved regions, and designing a model with minimal disruption.4 After being caught in the 2004 for centers that would overcome the operational and tsunami, however, he was badly infected and had to switch financial challenges experienced by other providers. to daily nocturnal home hemodialysis. In the years that followed, Shah started a blog to encourage others with kidney disease to lead a full life. 2 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus NephroPlus’s Value Chain An Overview of Challenges and Solutions Procurement Product Distribution Marketing & Service & Sales Development Value Chain • Expensive • Affordability of • Talent shortage • Lack of equipment and dialysis constrains awareness of consumables expansion of kidney disease • Low quality of services and treatment • Inefficient service delivery Challenges deployment of • Inefficient use of options in the Dialysis equipment in nurses Industry public hospitals • Lack of dialysis services outside large cities • Uses demand- • Reduces prices • Builds a skilled • Focuses on based approach by lowering workforce for preventative for distribution operational dialysis industry care of equipment at costs • Implements • Hosts community centers NephroPlus’s • Leverages public a streamlined events to raise Solutions • Purchases in insurance staffing awareness about bulk structure kidney disease • Implements to enable and treatments strict clinical expansion protocols • Establishes • Uses patient- centers in centric approach smaller cities 3 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus MOVING THE NEEDLE ON QUALITY AND PATIENT EXPERIENCE India’s dialysis industry also lagged in patient care, including consideration for patients’ psychological Dialysis services in India were generally of low quality when well-being. Counseling and diet support services were NephroPlus was first launched, due primarily to insufficient used in many countries to address challenges such as regulation and disorganized operations. Negligent clinical stigma, depression, and the impact of dialysis on a patient’s processes and infection protocols caused high rates of professional life. Most dialysis providers in India, however, cross infection, with more than a third of dialysis recipients had not introduced such considerations into their at risk of contracting a chronic viral disease such as care mandates. Hepatitis C, Hepatitis B, or HIV.5 Cross infections occurred when the blood of an infected individual came into contact Having undergone lengthy treatment sessions, Shah with the blood of an uninfected individual. knew that incremental changes to service delivery could go a long way toward making a dialysis patient’s life feel NephroPlus believed that it needed to become a role model more normal. NephroPlus developed a care philosophy in in order to bring about the desired improvements in the which all patients were treated as guests (‘guest care’). industry. The company focused on identifying processes Implementation of the idea entailed the creation of a it could implement in its centers that would ultimately comfortable dialysis experience with safe and painless raise quality standards among all providers. The risks of treatment. The company also offered pick-up and drop- cross infection, for example, could be drastically reduced off transport service, to reduce dependence on family through stringent clinical processes for hygiene. Yet service members, while dietary counseling and patient support providers generally did not take necessary precautions groups promoted mental health. and, in the absence of industry regulation, were not held accountable for negligence. NephroPlus engaged international nephrologists to introduce standardized clinical procedures across all their own centers to eliminate cross-infection. 56-step process NephroPlus Dialysis Index Identifies and eliminates potential Enables the company to track patient sources of infection during dialysis. outcomes on a monthly basis This patent-pending process is NephroPlus’s and compare outcomes across implemented by NephroPlus Measures to patients and centers. It is staff at all centers. Reduce Cross modeled on the “Good Dialysis Infections Index,” which is used to measure Zero infection point kit dialysis performance in many countries, and is customized to suit Ensures that separate dialysis kits India’s dialysis market. are used for each patient to reduce cross-infection risks. 4 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus KEEPING COSTS DOWN Another priority for NephroPlus was achieving and maintaining profitability, which has long been a challenge for Indian dialysis providers plagued by inefficient operations. From its inception NephroPlus kept operational costs low through several measures: LEAN STAFFING. Many hospitals in India mostly used nurses to perform all tasks including lower-skilled, non-medical tasks such as data entry and machine operations. NephroPlus opted to create new staffing categories such as a dialysis therapist for medium value-add tasks and a dialysis assistant for low value-add tasks. Nurses could then be used for very high value clinical care and tasks related to medical complications, reducing the number needed to manage a single clinic. At the same time, NephroPlus trimmed overall staffing costs through a differentiated pay scale commensurate with skill and training level. VIRTUAL SUPERVISION. NephroPlus introduced a centralized patient monitoring system which enabled medical staff at its centers. This ensured optimal distribution of resources and headquarters to monitor patients at service avoided waste. centers through closed-circuit television. The company also created an online portal to collect patient data to support Together these measures became the critical building virtual supervision. Clinical data ranging from a patient’s blocks for NephroPlus’s low-cost service center model, one medical history to their weight and blood pressure was that it would replicate throughout India. entered into the portal during each session. If an issue arose at a center—for example, whether a patient with low To begin operations, NephroPlus raised $200,000 from hemoglobin required medication—an on-site staff member angel investors along with personal savings from Vuppala. could call experts who provided medical advice by instantly They established three centers in the first two years of accessing this data. operation. The first clinic—a small facility with five beds and ten employees—opened in Hyderabad in the state of BULK AND DEMAND-BASED Telangana in South India in 2010. An additional $400,000 PROCUREMENT. NephroPlus purchased from investors funded a second clinic in Hyderabad the consumables and equipment in bulk, allowing same year. A third clinic followed a year later, set-up in a the company to negotiate prices 15 to 20 medical college in a small city about 100 kilometers from percent lower than large corporate hospitals. In addition, Hyderabad. a management information system helped staff share and monitor their use of consumables and equipment across 5 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus MAKING DIALYSIS MORE ALIGNING INTERESTS OF AFFORDABLE PARTNERS In order to serve more low-income people, NephroPlus NephroPlus entered into revenue- needed to both increase the number of service centers and sharing agreements with private hospitals for make dialysis services affordable. Market prices for dialysis its captive centers. The company billed guests were on average INR 20,000 (roughly $310) per month, and split the revenue with the partner hospital. a steep price for the poor. NephroPlus’s low-cost model It also partnered with lead nephrologists at each enabled it to offer services at prices 30 to 40 percent below of its centers, from whom it secured an upfront market prices. Yet despite this significant price decrease minority investment. These arrangements aligned the poor found it difficult to afford treatment. stakeholder interests at each center and helped to ensure consistency in an expansion strategy NephroPlus had to think of additional ways to make its that involved an increasingly diverse group of services accessible to the poor. It began to register its stakeholders. centers with the government, which allowed patients to pay via public insurance plans. The Indian government offered two types of public insurance: Employees’ State Insurance (ESI) for workers earning $230 or less per month and a white-card plan for individuals below the poverty line.6 People using white-card insurance plans paid no out- of-pocket costs for treatment. This enabled NephroPlus to deliver dialysis to those least able to pay for services even at a reduced price point. As of 2015, approximately 25 percent of NephroPlus patients used public insurance to cover their treatment costs.7 But even with no out-of-pocket expenses for treatment many poor Indians faced transportation expenses and foregone income which prevented them from seeking treatment. So NephroPlus introduced other measures, including subsidized travel, to make treatment more accessible for public insurance patients. NephroPlus’s early centers had been set up as standalone facilities to shift their guests’ association with dialysis SHIFTING TO HOSPITAL-BASED away from being “sick” toward being a normal part of life. However, nephrologists and guests wanted proximity to a CENTERS hospital in case anything went wrong during treatment. To By the end of 2011 NephroPlus had grown to five centers, accommodate this NephroPlus reoriented its distribution delivering roughly 10,000 kidney dialysis sessions per year, strategy to establish clinics within private hospitals called and securing $4.25 million in equity from Bessemer Venture “captive centers.” To do so, the company would either Partners, a venture capital firm which invests in enterprise, assume control of an existing dialysis ward or would build consumer, and healthcare technology start-ups worldwide. a new center within a hospital looking to expand into dialysis services. 6 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus To reach more low-income patients, NephroPlus also bid for government contracts to build dialysis centers in public hospitals. As of 2015, the company had four dialysis centers NephroPlus offers at public hospitals in South India. Roughly 500 patients received treatment at these centers with no out-of- services at 30 to 40 pocket costs. A 2016 study found that 67% of NephroPlus’s percent below market prices; Two-thirds of its patients were considered to be living at the base of the pyramid. NephroPlus continued to establish standalone centers, but only as a secondary strategy. patients live at the base ADDRESSING THE SKILLS of the pyramid. SHORTAGE In 2012, NephroPlus created Enpidia, a dialysis training address the shortage of skilled technicians in India’s dialysis institute for technicians and nurses, in Hyderabad. The industry before the company embarked on expansion. institute offered standardized training according to the company’s best practices, ranging from clinical protocol Enpidia offers a two-year program covering technical and technical know-how to the firm’s unique “guest care” training in dialysis, patient care etiquette, and spoken philosophy. The company also trained employees of English. It is the only Indian institution registered with hospital centers it acquired so all staff were sufficiently BONENT, the certification agency for dialysis personnel equipped to implement its practices. The purpose was to in the United States. Enpidia graduates can work at Figure 2: Key Milestones in NephroPlus’s History NephroPlus Five centers, 23 centers, founded 10,000 dialysis 90,000 sessions sessions 2013- 2015- 2010 2011 2012 2014 2016 First center established First center within a public hospital 75 centers, opened in 300,000 Hyderabad Enpidia established sessions 7 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus COMMITMENT TO QUALITY AND PATIENT CARE NephroPlus centers or elsewhere. As of 2015, 60 to 70 percent of BONENT certified dialysis staff in India worked NephroPlus is committed to adapting its with NephroPlus. methods in order to remain current with evolving international best practices. A recently introduced GOING NATIONAL audit mechanism, for example, will ensure that quality standards are met across all facilities. While NephroPlus began in South India, it aimed to expand its services to other parts of the country over time. This Technology: Investments in cutting became a reality in 2013 when the company opened its first edge technology and equipment centers in the North and West, increasing the total number enable improvements in the of facilities from 23 to 40 between 2013 and 2014. The company’s patient monitoring company’s success also led to the creation of several other capabilities and maintain its high standard of dialysis companies, helping to create a healthy ecosystem. treatment. NephroPlus centers use a Reverse Osmosis Remote Monitoring System, for example, NephroPlus’s expansion also stirred interest among new which enhances monitoring of water quality investors. In 2014 the company raised $10 million, including during dialysis. The centers also use the “button $7 million from the International Finance Corporation hole” technique in which blunt needles are (IFC), and an additional $3 million from Bessemer Venture inserted in the same spots every time a patient Partners. This was IFC’s first healthcare venture capital undergoes dialysis. This technique is estimated to investment in South Asia and the first from IFC’s $250 reduce pain during treatment by 90 to 95 percent. million Early Stage Investment Program. IFC was a long- term investor and had the ability to support NephroPlus Patient Surveys: Another quality through future stages of growth. IFC later invested control area is guest care. To an additional $3 million in 2016. The investments in ensure excellence NephroPlus NephroPlus were part of IFC’s broader healthcare sector seeks regular patient feedback strategy, both globally and in India, which aimed to through surveys that identify “pain points.” For overcome obstacles to the development of accessible and example, NephroPlus has installed televisions and affordable healthcare facilities. Internet access at centers in response to patients’ complaints of boredom during treatment. Internet As it grew, NephroPlus further honed its approach to access allows professionals to work during selecting cities for its national expansion. The company treatment. Patients can also opt for nocturnal and first assessed the level of need by examining dialysis daily short dialysis before or after work at select demand and supply in various locations. It then identified locations. key hospitals and nephrologists to approach for partnership in the selected cities. Partner hospitals became key players in NephroPlus’s national expansion. As of 2015, centers established through partnerships with hospitals accounted for 52 centers. Increasingly, NephroPlus leveraged these relationships to achieve efficiencies and better deliver on its mission. In 8 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus late 2015, for example, NephroPlus expanded its hospital- NephroPlus organized the world’s first Dialysis Olympiad, based services to include peritoneal dialysis and kidney for example, a game day attended by 500 patients from transplants. It also hosted community events with partner across India. Importantly, these events were offered free of hospitals in order to raise awareness among a broader charge in order to encourage active participation. population and potential patient base. LEADING CHANGE IN THE INDUSTRY Raising Public Awareness Building a happy community among patients has been a Through its ambition to “change the way dialysis is done in cornerstone of NephroPlus’s holistic approach to “guest India,” NephroPlus’s mission has transcended the walls of care.” Given the low level of awareness of chronic kidney its own treatment centers. Unique standardized processes, disease and treatment options among people in semi- patent-pending innovations to prevent cross-infection, urban and rural areas, NephroPlus has developed education and staff certification and expertise have all served as programs and continues to host community events. Some models for the dialysis sector. Enpidia has benefitted the events provide hands-on support. At NephroPlus Kidney broader industry by producing high-caliber and certified Camps, for example, staff check kidneys and facilitate technicians. follow-up appointments. This event was designed to both identify kidney disease and raise awareness at the pre- By engaging in advocacy work, NephroPlus hopes to diagnosis stage to encourage screening. improve quality standards for dialysis services in India as well as regulation of the industry. The company is working Other events were focused on having fun and promoting with the Indian Society of Nephrology, for example, to the idea that dialysis can become a normal part of life. introduce standardization and accreditation processes and 9 IFC INCLUSIVE BUSINESS CASE STUDY | NephroPlus procedures in order to prevent the ad hoc establishment context, it must consider other factors such as policy of dialysis centers that do not meet clinical quality advocacy, talent acquisition, supply chain development, requirements. and the availability of public insurance programs—all of which have enabled the company to deliver affordable, LOOKING AHEAD high-quality dialysis in India. As it seeks to expand access to the underserved, NephroPlus is focused on countries Over the next five years, NephroPlus aims to reach over that have the greatest need and that can accommodate 40,000 patients and help create 10,000 skilled jobs, affordable prices for dialysis. including doctors, nurses, and dialysis technicians. Almost a third of these jobs will be for women. For more information on NephroPlus is on track to continue its growth in India: The inclusive business at IFC, visit company is planning to establish one clinic in every district www.ifc.org/inclusivebusiness of the country by 2018. Also, half of its future centers will be located in smaller cities to make dialysis services more accessible to lower-income patients. Future clinics will continue to be a mix of hospital-based and stand-alone centers, with an emphasis on increasing the number of centers in public hospitals. Continuing to serve those on public insurance will be key to reaching low-income RIGHTS AND PERMISSIONS populations. © International Finance Corporation 2016. All rights reserved. The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission International expansion is also on the horizon for may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content NephroPlus. The company has set a goal of expanding to included in this work, or for the conclusions or judgments five additional countries by 2020 and is planning to open described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, clinics in Africa and elsewhere in Asia. As NephroPlus typographical errors and technical errors) in the content assesses whether it can apply its model in an international whatsoever or for reliance thereon. ENDNOTES 1 Pacific Bridge Medical. 2013. “India’s Dialysis Market.” http://www.pacificbridgemedical.com/publication/high-rates-of-chronic-kidney-disease-lead-to- medtech-opportunities-in-india. 2 IBID 3 Narayan, Adi. Bloomberg Businessweek. 2012 “The Big Market for Dialysis in India.” http://www.bloomberg.com/news/articles/2012-01-05/the-big- market-for-dialysis-in-india. 4 In Peritoneal Dialysis, a plastic tube is placed in the stomach via surgery. Cleansing fluid enters and exits the body through this catheter, initiating a filtering process. This form of continuous dialysis allows the patient to control extra fluid more easily and poses fewer restrictions in terms of diet, daily activities, and ability to work. 5 NephroPlus. 2014. “Cross Infections in Dialysis Units.” http://www.nephroplus.com/cross-infections-in-dialysis-units. 6 The Below Poverty Line benchmark is determined using various parameters which vary from state to state in India. In Andra Pradesh, white cards are issued to individuals with a monthly income equal to or below INR 11,000 ($US 166). More information at: http://www.archive.india.gov.in/howdo/ service_detail.php?service=7. While public hospitals accept both insurance plans, private providers must attain government approval in order to accept either form of public insurance. 7 This figure is expected to grow to 30 percent by 2020. 10