Aravind Week 1

We have officially completed a full week in our internship at Aravind Eye Care Systems in Madurai. It has been an eventful week, replete with new streets, fun adventures, and some extraordinary heat. You hear reports about a heat wave striking India, but the truth is that the reality of the heat is tough to grasp unless you are really in it. And even then sometimes you fail to fully realize how much you are impacted by it… This week, I unfortunately got a little ill with a fever and some gastrointestinal issues that I will skip over for the benefit of any readers considering eating in the next few hours. The walls of our hostel known as the Inspiration (rather unfittingly in this case), are littered with warnings to use bug repellant because cases of Dengue Fever (definitely not a fun mosquito-transmitted-disease…) have been seen in the area. In the midst of my little bout of sickness, I made the sudden realization that I had been bitten by a mosquito one day earlier and then proceeded to endure a somewhat panicked (though now in retrospect, slightly comic) short period of time, where I legitimately thought I might have contracted Dengue Fever. Luckily, working at a hospital, I was able to see a physician today, who very kindly assuaged any lingering concerns and arrived at a far less dire diagnosis tied to the heat and potentially some ill-prepared sugar cane juice.


But enough of the heat! The week has been about much more than Dengue scares. We have really started to get to know the way that Aravind works and are beginning to get into the substance of our projects. For me, the most interesting element has been learning about the way that care at Aravind is actually paid for. Coming into the summer, I knew that Aravind was unique for its amazing efficiency and low costs, which are facilitated by the sheer number of patients that are seen (to give an idea of how many patients there are: at the base hospital in Madurai, there were over 2850 patients who came just on Monday alone). However, what I knew less about was the way that the hospital was actually financed and collected money. As a hospital system that is devoted to a charitable mission of eradicating needless blindness, Aravind does not charge patients exorbitant prices and use ravenous debt collection agencies to wring out as much revenue as possible. Instead, Aravind allows the patient to choose how much he or she pays. This is something I have never seen before… As Americans, we are definitely used to a system that requires a payment from a patient. But there are many charitable hospitals, especially in the developing world, which will give care for free and use donations to sustain care. However, I think that an individual hospital system allowing patients to choose payment for care would be something new to most from the states.


How does such a payment system work? (I am going to take this moment to apologize to anyone not interested in health care or health care economics because the nerd inside of me is about to take over with these next paragraphs.) There are actually multiple out-patient and in-patient units at Aravind’s Madurai hospital. Patients can choose between paying and free sections when they come. In the free section, patients pay virtually nothing (a cataract procedure would be just about $10). In the paying section, patients pay the Aravind rate for procedures, glasses, and drugs (still not that high relative to the US, but nevertheless at least 10 times greater than the free section prices).   The doctors and nurses rotate between the two sections, and quality as far as outcomes, is demonstrated to be equal between the two. If the quality is equal and the prices are so different, then my question from the beginning was why do patients ever use the paying section???


The answer here is that the paying section has far nicer amenities. There are A/C facilities, individual rooms, and more comfortable beds amongst other things. In short, patients pay for a more comfortable experience. And this is to the benefit of Aravind, because the revenues generated from the paying section make it possible to support both the paying and free sections.


But for me the choice of roughly 50% of patients to use the paying section is still interesting, and I think that I have realized what I see as provocative about it. In the field of health care economics, there has been a debate over the last thirty years in the literature about whether health care behaves like a “necessity” or a “luxury” good. Necessities are things that you spend money on no matter what; so when you’re income rises, you continue to spend the same amount. Luxury goods are the opposite: proportion of money spent on these goods goes up as income rises (in economics, this would be something with an income elasticity of demand greater than 1). Examples of luxury goods would be diamonds, private planes, and other cool, but also ultimately unnecessary items.


To me, the Aravind model appears to offer a natural experiment testing whether health care behaves as a luxury good or a necessity.  The fact that half of patients at Aravind (the ones presumptively with higher incomes) choose to purchase care when there is an equally high quality, but cheaper alternative, appears to potentially offer evidence that health care can be a luxury good.  One of the things that I am hoping to do in the coming weeks is explore whether the incomes between the two groups (paying and free) of patients are in fact different to a degree that would support the luxury good hypothesis.  I have written far too much and probably digressed to some uninteresting topics for almost all, so I will leave it here!

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About Vivek Nimgaonkar

Rising Senior in the Roy and Diana Vagelos Life Sciences and management Dual Degree program, majoring in Biology and concentrating in BEPP and HCMG at Wharton. Intern at Aravind Eye Care Systems in Madurai Tamil Nadu for summer 2015.