In San Francisco, the Pacific Vision Foundation is piloting a new model of specialty clinic that is designed to be able to accept and treat paying patients and non-paying patients exactly the same: offer the same procedures, by the same doctors, under the same roof, while maintaining sustainable profit margins. While seemingly implausible in the U.S., this model, which is being developed with support from the Pioneer portfolio, has hundreds of successful examples overseas.
Below is the first of a series of interviews with two of the project’s leaders: David Roe, who trained as a lawyer and has 30 years of experience in public interest strategy and environmental and human rights advocacy; and David Green, an Ashoka fellow, vice-president and a recipient of the MacArthur “genius” award, who helped to create an eye care model in southern India that has been replicated in several other countries. Check back over the next three days to find out what needs to happen for this model to work in the U.S., what opportunities could emerge through health reform, and the potential for replication in other locations and other forms of care.
What is the history and inspiration behind this project?
David Green: Through my work and the work of the Aravind Eye Care System in southern India and other training centers, we have helped maybe 250 eye-care programs become self-financing, where the volume is high and revenues cross-subsidize care for those who can’t pay. (Editor’s note: Last year, the five Aravind eye hospitals performed approximately 250,000 eye operations – 53% of them for free, 22% at two thirds cost, and 25% paying well above cost – and realized a substantial profit.) I’ve been involved with four or five programs in India and two in Nepal. I worked in Bangladesh, in China. In Egypt, we set up the largest eye care program in the Middle East. It now is basically self-financing, where revenues from paying patients support care for those who can’t pay. So it’s a well-proven model.
Over two years ago, Susan Day, chair of the Ophthalmology Department at California Pacific Medical Center,and I came up with the idea of doing a feasibility study on aspects of the Aravind model that we might adopt here in the United States to make eye care more equitable. The huge advantage we started with was that the eye department of San Francisco’s biggest and best-known private hospital and its chairwoman, a very distinguished ophthalmologist, really wanted to see if we could give this a go. So it wasn’t like “build it and they will come.” It’s more like, we’ve got real doctors who do this work every day, who are interested in pursuing this unprecedented business model, where revenues from insured patients will cover care for those who aren’t insured.
David Roe: The core idea is to care for people who can’t afford it – how can you function in a profit-making context, and essentially give away a fair amount of the care you’re providing, and still have it pencil out? This odd-sounding idea has been proving itself in other countries for close to a third of a century.
What are some significant ways that the model you’re advancing differs from standard specialty care?
David Green: What we’re doing is demystifying cost and margin structure. Back when we started, intraocular lenses cost $300. Everyone thought we were nuts to think that with no background in manufacturing, we were somehow going to make these. But an initial feasibility study showed us that we could probably make and sell these lenses for $5 and have it be profitable. Today, the manufacturing arm of Aravind, Aurolab, manufactures these lenses for close to a dollar each. We sell them for $2.
We are also penetrating the true cost structure in a hospital and surgical center. For instance, what assumptions do we want to test to see where we can get our cost structure down, where we maximize the margin from Medicare and other third-party insurers? What type of control, governance and shareholders do we need to have to use profit margin to support care for those who are too poor to pay, or to match up some of our profit margin with appropriate fees that they can afford to pay?
David Roe: I think a lot of what we’re doing that’s innovative will be in that realm of financing. We’re looking to bring together investors – possibly the doctors but also foundations doing program-related investments, which count against the amount you have to give away as grants each year; or mission-related investments, which are really the same as investing in anything that a foundation would put its principal into. The problem is, these MRIs and PRIs have to stand on a solid business footing. One thing we have to offer is that the business underneath this is very familiar. It’s the business of the practice of medicine and surgery, so when you look at our business plan and where the money comes from, it’s not from some untried idea. It’s from a very familiar kind of business, within a structure that has high social value as well.