Saturday, July 16, 2005

Charity or helping the poor and needy

Teaser

One of the ST (July 16) Forum page articles today has the title, "A charity should not be run like a business". It begins:
AMID the controversy over the National Kidney Foundation (NKF), I want to raise my concern at a deeper problem: the commercialisation of charities. The disturbing thing about NKF is how it ran itself as a business and, indeed, sees itself as a business. It constantly compares itself to a business and sometimes refers to the donations received as revenue or turnover. Such commercialisation is likely to lead to a culture where employees and management see themselves as under the employ of the business, and that their salary and bonuses are 'entitlements' for the service they provide. They compare their compensation to private companies and expect similar benefits. A charity is, after all, a charity...
And there's more in the same vein. The next one, however, takes a different tune: "Not fair to blame Durai for $600,000 salary". This one goes:
I HAVE always been impressed with the NKF, and how it is managed like a business. The success that it has enjoyed is testimony to the effectiveness of Mr T.T. Durai's role as the CEO. In fact, I think there is much that other charities can learn from the NKF. The measure of a successful charity has to be its ability to raise funds. The fact that the NKF has a $262-million reserve is the best measure of its success as a fund-raiser. This is what makes the NKF different from other charities in Singapore - it is extremely successful by any business standard...
I won't quote more (if you really want to read them, and do not have access to ST or STI, drop me a note and I'll use the "email article" function on the STI webpage to send it to you). Nor is my concern here really to consider the pros and cons of the above two points of view (for that, I can recommend no better than Heavenly Sword's recent tour de force).

Out of this world

Rather, I want to tell a story--and this time, it's a real life present day story--about the Aravind Eye Care System, based in Madurai, India (hat tip to this book; scroll down).

In brief, Aravind is a profit making institution providing healthcare--specifically, for the eye; and very specifically, the cataract eye surgery. The equipment and service is world class. The quality of care compares favorablely with the Royal College of Ophthalmologists, UK, so much that British patients have been travelling to India to get their surgery done there in recent years. (A resident from Harvard Medical School who was there at one point also remarked that he was getting more clinical experience than any of his classmates in Harvard, as he got to see many instances of rare eye diseases that back in Harvard, you only get to read about.)

At this point, one might think: must be expensive to go to Aravind. And that's where the shocker lies: 60% of the patients are nonpaying patients while the remaining 40% pay about US$50 to $300 for cataract surgery. (It cost about US$3000 for the equivalent surgery in the US.) Even allowing the differences in cost of labor, the contrast is out of this world, considering the quality of care that Aravind provides. Furthermore, Aravind is not only debt free, runs a surplus, but has been financially self-sustaining from day one. No government grants, no donations, never asked for them either. How is this even possible?

The founder, Dr. Venkataswamy ("Dr. V") says he was inspired by McDonald's. Nothing mysterious, merely the observation that an "In-depth attention to inputs and process steps guarantees high-quality outputs":
Dr. V has developed and standardized the Aravind process, in which the first step is more than 1,500 eye camps where the poor are tested for vision problems and those needing help are admitted. They are then transported to hospitals. This is different from the more popular on-site eye camps in villages and small towns in India. The conditions of sanitation and medical care in such camps cannot be controlled as well as they can be in specially designed hospitals developed for this purpose. In the Aravind process, technicians, often young women drawn from the local areas and trained in eye care only, supplement the work of doctors. Patient preparation and postoperative work are done by these technicians. Doctors perform only surgeries. The process flow allows a doctor and two technician teams to perform more than 50 surgeries per day. Because the process is so well developed, technicians and doctors are so carefully trained, inputs are fully controlled, and the system and values are rigidly enforced, Aravind boasts of an outcome rate that is among the best in the world. (Prahalad, 37; emphasis mine)
In other words, process innovation drives the costs way down, thus enabling very low prices, thus allowing Aravind to serve "Bottom of the Pyramid" customers--the poor and needy.

A thought (slightly revised July 16, 1100 -0400)

I do wonder if in the NKF uproar and the subsequent soul searching over how charity organisations should conduct themselves, an alternative has been overlooked.

"Charity organisation"--of the scale of an NKF anyway--did not, does not, could not survive on charity alone. It has to be thoroughly professional and business-like in efficiency--in translating the charity of the donors, on the one hand, into actual relief for the patients under its care, on the other hand. And there is no better way to guarantee this professionalism than by paying good money for the best brains that money can buy--and I am not talking about unnecessary toilet fixtures or shenanigans with the travel perk (after all, it is possible to overpay a CEO even in the profit making world).

There is thus an important sense in which the "charity organisation" is a misnomer: the small time donors putting in his $10 from a take home pay of $1000, the volunteers putting in time and effort, and the staff on half pay because he or she is there for the cause--that's where the charity resides. But the organisation--it cannot run on charity alone precisely if it wants to be the best steward for the charitable contributions of its supporters.

It is undeniable that Dr. V has deep compassion for the poor and needy--remember that 60% of the patients do not pay--that the very foundation of Aravind is inspired by his desire to do his bit to help the lot of fellow men. But what he runs is not a "charity organisation" of the kind that we might be familiar with, i.e., one that asks for and is sustained by our charity. And because it does not do that, the issues that plague us about how "charity organisations" ought to be run simply do not arise for Aravind.

Perhaps what we need to rethink is not how "charity organisations" should be run, but the more basic question of how the poor and needy could be helped. And it is not obvious that they are always best served by the charity of donors, that is, it is not obvious that that they could not be even better served by other means.

Something to think about for the aspiring social-entrepreneur.

coda: yes, this is all related to my "freakonomical turn"...

update: see also the long comment left by Prodigal.

* * * * *

Some more background on Aravind: Aravind started in 1976 with a 11-bed private clinic (in Dr. V's brother's house, no less). The mission: to eradicate all needless blindness in Tamil Nadu, if not in the entire nation of India. Today, the System consists of five hospitals, manufacturing centers for lenses, sutures and eye care related pharmaceuticals, training institute, international eye bank, a woman and child care center, a postgraduate institute of ophthalmology (awarding MS and fellowships, and a center for community outreach programs. The 1,500 bed hospital at Madurai alone performs some 95,000 eye surgeries every year. The five hospitals (Madurai, Tirunelveli, Coimbatore, Theni and Pondicherry) together perform 190,000 surgeries every year, 45% of all eye surgeries in the state of Tamil Nadu, 5% in the whole of India (Prahalad, 265-266).

* * * * *

pertinent:

From ST Forum Page (July 21), "It costs much less to have dialysis in KL" by Cindy Yim Ah Hoe (Mdm):
...The cost of a dialysis session in Singapore...ranges from $178.50 to $283.50 for the non-subsidised patient.

My mother, who undergoes dialysis three times a week, pays a lot less as a non-subsidised patient at private dialysis clinics in Malaysia - RM100 (S$44.40) in Taiping or Kampar, RM170 in Kuala Lumpur.

With the ringgit being worth less than half of a Singapore dollar, one wonders how these private profit-making clinics in Malaysia could survive and thrive even though they never canvass for donations from the public...
(Note: according to Mercer's Global/Worldwide 2005 Cost of Living Survey City Rankings, Singapore has an index score of 88, while Kuala Lumpar, 67.1; so, theoretically, Singapore is 31% more expensive than KL).

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