Ziqitza Healthcare Limited: Challenge of Scaling up Emergency Medical Services (EMS) in India using Public-Private Partnership (PPP) Mode

Introduction

Shweta Mangal, CEO of Ziqitza Healthcare Limited (ZHL) was returning home when she received a phone call from her senior manager in Jaipur (Rajasthan) in May, 2013. The manager informed her about the decision taken by the Health and Family Welfare department of the Rajasthan government to take over the operations of running medical ambulances from ZHL. Shweta could not understand the reason behind such an extreme step, just a few days ahead of the scheduled meeting between ZHL team and health department officials to resolve all major issues. The Rajasthan government had signed a three-year agreement in 2010 with ZHL under Public-Private Partnership (PPP) mode allowing ZHL to operate more than 300 state ambulances to provide emergency medical services (EMS). Though this agreement allowed ZHL to provide EMS to a wider segment of population and scale-up their operations but the relationship between the two parties had been rocky despite a promising start. While looking out from her car window at the rush hour traffic in Mumbai, Shweta kept thinking about the ups and downs of this partnership, the initial euphoria generated by this agreement and the doubts and concerns of the ZHL founding team at the time this agreement was signed.

She clearly remembered the celebratory mood at the ZHL office when this contract was awarded to them by the Rajasthan government in 2010. This partnership was going to quadruple the number of medical ambulances operated by ZHL and increase the population served by them to 100 million (Alex 2010). The company was awarded this contract on the strength of its commitment to EMS, its track record and the fact that it had emerged as the lowest cost bidder. This move was seen by experts as a major step towards providing quality, timely and affordable EMS to a wider segment of the Indian population. The term EMS had evolved over time to reflect a change from ambulance service to a system in which actual medical care was provided in addition to transportation. India, by virtue of its demographics and number of people needing these services required high-quality, affordable and timely EMS and a successful PPP could expand the reach of these services while saving countless precious lives.

With experts hailing this agreement and the entire staff celebrating, the founding team was aware of the operational challenges that this agreement presented. They had to maintain current high-quality service standards while adjusting to the ambulance infrastructure provided by the government and scale-up their operations to make these services widely accessible within the state. Though they were confident of meeting this challenge, the major issue bothering them was the challenge of working with the government, which shared the same social objective with ZHL but had little experience of partnering with private service providers. The work culture, operating procedures and decision making processes of the government were very different from that of a private organization and the founding team was apprehensive about these issues.

Ziqitza Healthcare Limited Dial 1298: Inception

ZHL and Dial 1298, its branded ambulance service, was founded in 2005 in Mumbai (India) to provide high-quality, timely and reliable EMS at an affordable price. The word Ziqitza comes from Sanskrit words chikitsa, meaning ‘medical treatment,’ and zigyasa, meaning ‘quest for knowledge.’ Ziqitza was the brainchild of five friends Naresh Jain, Manish Sacheti, Ravi Krishna, Shaffi Mather and Shweta Mangal, who left their lucrative jobs to start this venture. The genesis of this idea could be traced to the diametrically opposite experiences of the two founding members of ZHL with EMS in two different parts of the globe. When Shaffi’s (founding member) mother choked in her sleep in India, he was clueless about medical support facilities like ambulance services and could not obtain suitable transport other than the household car. Krishna (founding member) lost a close friend in a road accident due to lack of availability of timely medical attention (Desai 2009). In contrast, when Krishna’s mother had a heart attack in New York, USA, an ambulance arrived within five minutes and this timely medical intervention saved her life (D’Souza 2009). These two different experiences left a deep mark on them and subsequent discussions within friends highlighted their strong desire to improve EMS in India. This was the impetus behind the initiative of ‘Dial 1298 for Ambulance’. In the words of the founders:

‘We wanted to bring services like 911 ¹ and 999 ² to India.’

They began working on this idea in 2003 with the intention of doing detailed research and presenting their findings to the government about how these services could be streamlined. They examined various successful and failed models of EMS across the world to come up with a suitable model for India. They found that many government-supported medical ambulance services had already failed in developing countries, but it got them thinking whether this kind of initiative could be undertaken in the private domain. During this time, Shaffi won a scholarship at London School of Economics (LSE) and there he got an opportunity to work closely with the London Ambulance Service (LAS). He built a lasting relationship with them, wherein LAS agreed to help them in launching these services in India. This turned out to be a big step in the incubation of ‘Dial 1298 for Ambulance’. After Shaffi’s return, the friends did a pilot run in Mumbai in 2004 by equipping two ambulances as per LAS standards. Finally, in April 2005, the founders began this venture with ten ambulances and a state-of-the-art call centre in Mumbai. The ambulances were fitted with advanced life-saving equipment, doctors and paramedics to administer oxygen and provide emergency medical care. The call centre, operating 24 hours, had features like a detailed digital mapping of the city, tracking system for ambulances, and advanced medical priority dispatch software. To start the service, the founders tried to acquire a three-digit phone number, as used in United States (911) and United Kingdom (999), which patients could call easily to access these services. After approaching the telecommunications department, they learnt that three-digit numbers were allocated only for government programmes and they could instead get a four-digit number beginning with ‘12’. They zeroed in on ‘1298’ and hence the initiative was named ‘Dial 1298 for Ambulance’.

Need for Emergency Medical Services (EMS) in India

A report by the Ministry of Health and Family Welfare, Government of India mentioned injury as one of the leading cause of deaths in India (Annual Report to the People on Health 2010). It stated that the global average of road accidents for every 1000 vehicles was 0.75 but in India it was sixteen accidents, so the ratio of traffic accidents was 21.3 times higher in India than the World average. Furthermore, the Transport Research Wing, Government of India, mentioned that each year more than 100,000 people die from road accidents (Transport Research Wing 2011) in the country (see Exhibit 1). World Health Organization (WHO) has projected that by 2020 road crashes would be a major cause of deaths in India, accounting for approximately 546,000 deaths annually (WHO 2004a). Around 30 per cent of accident victims in India die due to delays in transportation or lack of access to timely medical care; 50 per cent die in hospitals within five days due to infection which may be caused by primitive modes of transportation and only 20 per cent die on the spot as a result of injuries (Mangal 2010). Research points out that cardiac diseases and stroke would be a major cause of death and disability for Indians by 2020 ³ and these patients require emergency and timely medical attention.

Even in cities like Mumbai, it was extremely difficult for a patient suffering from a major accident, heart disease or stroke to reach a doctor within the first hour and hence, most victims would be deprived of critical medical intervention at the time referred to as the ‘golden hour’ to save a patient’s life, provided that proper medical treatment was be provided. It was the lack of adequate and timely medical support that made the situation difficult rather than availability of medical facilities. As per ZHL, Mumbai alone had about 100,000 emergency medical cases per month (see Exhibit 2), out of which only 10 per cent were serviced by medical ambulances. The majority of people relied heavily on auto rickshaws ⁴ or taxis or personal vehicles for emergency transport owing to their perceived low-cost and easy availability. On the other hand, ambulances run by hospitals and NGOs were not widely used due to lack of awareness, perception of unreliability and lack of timeliness. A study conducted by ZHL found that only 4 per cent of patients were transported by medical ambulances across the country and most people often adopted a scoop and run approach of using the nearest available vehicle to transport the patient.

In India, services provided to transport patients requiring emergency medical attention were either unavailable or outmoded or unreliable and the response time was simply too high, and communication between ambulances and hospitals was virtually nonexistant. There was a dire need for a nationwide EMS and if one projects a requirement of one ambulance per 100,000 population, India roughly required a fleet of 10,000 ambulances for a population of over a billion people, which would require an estimated operating cost of US $ 280 million per year with average operating cost of US $ 24,000 to US $ 28,000 per ambulance per year. ⁵ With the Government planning to raise health care expenditure to 3 per cent of the GDP, ⁶ a commitment of US $ 280 million towards EMS was possible. According to Mather:

‘There were no organized ambulance services across India when we started out as it was micro-fragmented, individual units. People didn’t call ambulances to go to hospital.’

ZHL-Initial Growth and Financial Sustainability

In its first full year of operation, ZHL serviced an average of twenty-eight calls a day, of which 20 per cent were emergency calls and the percentage of free calls was around 25 per cent (see Exhibit 3). The number of ambulances owned and operated by ZHL grew steadily and emergency calls increased at an impressive rate of 30 per cent to 40 per cent each year. There were a number of early success indicators for Dial 1298 services; between 2005 and 2007, there were more than 30,000 completed incoming telephone calls (D’Silva 2007). Around 15 per cent to 20 per cent of services provided in response to the completed calls were free or subsidized, indicating that their services were touching all social strata within Mumbai. As ZHL began experiencing early success and gathering momentum, its leadership was charting the five-year plan that would increase their effectiveness within Mumbai by increasing their reach and reducing response time for EMS and taking the company beyond Mumbai (ibid.).

While starting the ZHL, the founders set three goals-1) meet global service delivery standards; 2) provide services to all regardless of their paying capacity and 3) reach long-term financial sustainability. In accordance with its mission to provide EMS across India, ZHL developed a long-term plan of expansion. They were able to expand into Kerala within the cities of Ernakulam and Thrissur by the end of 2008 starting with five advanced life support (ALS) ambulances. The service area was further expanded to cover two more cities, Alleppey and Kottayam in June 2009, with addition of five ALS and ten basic life support (BLS) ambulances, making a total of ten ALS and ten BLS ambulances in Kerala as the company planned to cover the entire state (Author, 2009).

Right from the inception, ZHL differentiated itself by positioning the organization as a high-quality, affordable, efficient and reliable EMS service provider. The ZHL team wanted to develop an operating model that would create a financially viable and scalable EMS platform to expand their geographical reach and make a larger social impact. They wanted to reach the emergency caller within 15 minutes initially and later decrease that to an average response time of 6–8 minutes as in most developing countries. Looking at the available ambulance infrastructure, traffic conditions and urban infrastructure of the major cities in India, this was a very challenging goal. The founders were clear from the beginning that though the venture had been launched in Mumbai, they had to scale-up to make a larger social impact and make it financially sustainable. For this ZHL needed infusion of capital, clear future growth strategy and a robust business model. Upon entering their third year of operations in 2008, the founders set goals for increasing their market reach, improving efficiency and becoming financially sustainable. This meant close monitoring of key operating metrics, such as number of trips an ambulance makes per day, average charge per trip, and the ratio of paid to free services. ZHL business model targeted a ratio of paid to free ambulance trips of 80:20 and put 20 per cent as the upper ceiling for free services. A hospital outreach team was created to build relationships with various hospitals to refer patients to them. In 2007, only 20 per cent of the calls coming into their Mumbai Control and Dispatch Centre were made directly by individuals, and the remaining 80 per cent were transfer or referral calls from hospitals. Today, Dial 1298 medical ambulance services were available in seven districts of Kerala, fifteen districts of Orissa, all districts of Rajasthan, Bihar and Punjab along with Mumbai and Chennai in India.

Funding

ZHL began their operations with ten ambulances and state-of-the-art call centre in Mumbai in 2005. To make a beginning, the founders pooled their personal savings to the tune of $ 120,000 and Ambulance Access for All Foundation (AAA Foundation) donated 6 ambulances to ZHL. The founders knew that ZHL needed to acquire more ambulances to fully leverage the ambulance network and call centre infrastructure to meet their core objective. However, to expand its operations and reach the goal of seventy ambulances in Mumbai, ZHL needed an investor (Alex 2010). This was a challenging task because the investor should value ZHL’s compelling mission of a making larger social impact by creating a financially sustainable venture. They started searching for investors with experience of investing in social ventures because they realized that traditional investment options might not work in their case. A ZHL investment advisor suggested that the founders should approach Acumen Fund, which had a reputation for making social investments. The founding team met with Mr Varun Sahni from Acumen Fund India office in early 2006. Mr Sahni and his associate, Mr Vikram Raman, thereafter met Brian Trelstad, Chief Investment Officer of Acumen Fund to discuss potential investment options in ZHL. Brian was impressed by the focus and commitment of the ZHL team and their passion for improving India’s access to quality emergency medical services at an affordable price. He found ZHL’s social objective compelling and was impressed by the sound financial understanding of the founders and became convinced that the venture would be sustainable. Acumen recognized that if ZHL experienced growth and success, its impact on India’s population would be both substantial and demonstrable. After completing due diligence process, Acumen Fund decided to make a $1.5 million equity investment into ZHL in two tranches in lieu of 30 per cent equity stake and one board seat. The infusion of capital was used to expand the fleet of ambulances, increase their awareness campaign and meet working capital requirements.

Using Cross-Subsidy Model to Become Financially Sustainable

Keeping their social mission in mind, ZHL initially decided that people would be given the option to pay depending on their affordability believing that those who could afford would pay for these services. Very soon they realized that their pricing strategy was flawed and could not be sustained. While considering various pricing options, the founding team met with Dr Sam Pitroda, who impressed upon them the need to develop a suitable pricing strategy to scale-up their venture to make a larger social impact. This led to the development of sliding pricing strategy based on cross-subsidy model in which, people who used their services for going to private hospitals paid the entire fee, and those who used it for going to government hospitals paid a subsidized fee whereas, accident victims and those who declared their inability to pay were transported free of cost. So the pricing was based on the choice of hospital reflecting their affordability, where well-off customers selecting expensive hospitals paid the full fee, while the poor received a discount of up to 50 per cent off or even a free service. Additionally, victims of accidents and disasters were transferred to government run hospitals, free of charge (Lee 2009). The fee varied from US $ 6 for basic services to about US $ 12 for cardiac care (D’Silva 2007). The founders realized that this pricing strategy would lead to revenue generation and make the venture financially sustainable while meeting its social objectives. In addition to providing EMS access to the poor, ZHL created value proposition by providing high-quality healthcare services in emergency situations in a timely and cost-effective manner.

ZHL developed two distinct streams of revenue; one through fee associated with EMS and another through advertisements. For advertising revenue, ZHL, in addition to displaying its 1298 number, placed large multicolour advertisements on its ambulances, thereby providing a moving billboard facility to the corporates. In initial years of operation, advertising revenue outpaced EMS revenue, with 1298 generating advertising revenue of US $ 48,000 ⁷ in 2006 and US $ 200,000 in 2007. The revenue in service fee grew quickly, from US $ 32,000 (2006) to US $ 145,000 (2007), to US $ 160,000 in 2008, which touched US $ 240,000 in 2009. This increase in revenue reflected both an increase in ambulance trips as well as increase (from US $ 6 to US $ 12) in average charge per trip. ZHL leveraged their corporate relationships such as with Tata AIG, who provided them monetary support in lieu for corporate social responsibility advertising on 1298 ambulances.

Ambulance Services

Strategic Partnerships, Awards and Recognitions

Since its establishment, ZHL had developed key partnerships to maintain world-class services. The founders spent two years researching various ambulance service models that existed across the world, and finally settled on LAS as partner. To meet the objective of delivering high-quality service, ZHL developed partnerships with leading service providers like New York Presbyterian Hospital and American Heart Association (AHA) to meet global service delivery standards. LIHS, Mumbai’s premiere emergency care training centre, provided medical training to Dial 1298 staff. Over the years, ZHL expanded its partnerships with University Hospital of Cornell and Columbia Medical Schools, Harvard Humanitarian Initiative, American Association of Physicians of Indian Origin (AAPI) and AHA. Recognitions and Awards for ‘Dial 1298 for Ambulance’ Project came in steadily. Some of the major awards and accolades that came their way included; Godfrey Philips National Bravery Award for Social Act of Courage 2007 and Times Foundation Recognition Award for Life Saving Service in Mumbai 2006. In response to all the recognition and glowing accolades, the founding team (see Exhibit 8) stayed focused on their core objective and their core philosophy come through in Shweta’s words:

Saving a life is one of the most rewarding experiences a person can undergo in one’s life. The feeling of creating something new, something which will not only make money but benefit the society at large is what keeps us going.

Scaling up the Venture using Public-Private Partnership (PPP) Mode

Since the onset of economic reforms in 1991, the Government had been encouraging private sector participation in many areas of public services to overcome the problem of resource constraints and improve the quality of public services as well (Author 2006). In most cases, participation of private players came through the Public-Private Partnership (PPP) mode. There was no single accepted definition of PPP. It generally involved a contract between a private player and government, in which the private player provided public services and assumed significant risk in the technical, operational and financial sustainability of the project. In certain PPPs, service cost was borne by the users of the service and not by the taxpayer, whereas in others, service cost was borne wholly or in part by the government whereas the private player made financial investments to bring about specific services, or operate these services efficiently or both (Ministry of Finance 2010a). The government supported the PPP projects by providing revenue subsidies which included tax breaks, or giving guaranteed annual revenues for a fixed period of time. Rajasthan was the first state to formulate a policy for build-operate-transfer (BOT) PPP projects in 1994 (Ministry of Finance 2010b). Rajasthan government encouraged PPPs in urban development projects related to transportation, waste and information technology (Author 2006). However, there had been little partnership activity in the healthcare sector beyond providing subsidy for specific medical tests (see Exhibits 9 and 10). Given the resource constraints faced by the government and state of healthcare services in the public sector, there was a compelling need for private sector participation in healthcare services through PPP mode.

Despite the optimism generated, the PPP mode had met with varying degrees of success and progress had not been very encouraging. There were many examples of PPP mode like Delhi Airport Metro Express, Gurgaon Toll Plaza, where these partnerships had failed. There were many issues in PPPs, which needed to be examined to make these partnerships successful for the larger public good. Since PPP projects operated in public utility services; a supportive operating environment, a harmonious blend of the organizational culture and operating styles of the government and the private players, and a sound understanding of the business model to make these projects financially viable was extremely important for private players to function independently and effectively in PPP mode.

ZHL had expanded its geographic reach at a rapid pace since its inception and was instrumental in changing the face of EMS in India. Their commitment to the cause of EMS and quality of services had led many state governments to show willingness to partner with them. Though, ZHL had been apprehensive about working with the government, they understood that this could be the way forward to making their services available to a larger segment of the population at an affordable price and making a larger social impact. In 2009, Bihar government approached Ziqitza with a unique proposal—the government wanted to run a pilot project with them to provide quality medical ambulance services in Patna, the capital city. ZHL agreed to run the pilot as it was focused on the under-privileged segment, dispatching five BLS and five ALS ambulances. Emergency callers paid a reduced, flat rate of US $ 6 under government-subsidized scheme, compared to the market rate of US $ 12 for ALS ambulance transport (Author Year). ZHL received US $ 20,000 per month from the Health Ministry to operate in Patna, with the prospect of scaling across the state, based on the success of the city pilot. The big breakthrough came when the Rajasthan government signed an agreement with ZHL in 2010 allowing them to operate over 300 medical ambulances of the state government across the state for a period of three years.

This partnership in PPP mode generated a lot of enthusiasm as well as some apprehensions within the founding team but helped ZHL to scale-up their services and achieve their social objective. From just 10 ambulances in 2005 to 407 by 2010, the number grew to more than 700 ambulances across Mumbai, Kerala, Bihar, Rajasthan and Punjab by 2012, which ZHL planned to expand to 1,000 ambulances by 2014 (see Exhibit 11). The founding team recognized the importance of PPP mode as a route for growth and the next step towards making a larger social impact but they were also aware of the challenges presented by these partnerships. However, Shweta maintained that their biggest achievement was the total number of calls completed over the seven years of operation till 2012, around 10 per cent of the calls were emergency calls and over 12 per cent of the calls completed were free or subsidized, thus fulfilling its core objective of making the service available to the needy irrespective of their ability to pay (see Exhibit 12). In a span of a few years, ZHL had responded to approximately 250,000 emergencies and was able to save more than 9,500 lives.

Emerging Dilemma for ZHL

ZHL had signed agreements with a few state governments in PPP mode and these agreements increased their reach, scaled up the venture, made the venture financially sustainable and met their core objective of providing quality EMS to all segments of society. They had taken a leap of faith despite certain apprehensions and gone ahead with these partnerships. However, Shweta and the founders were aware of the challenges these partnerships were likely to pose as their experience of working with the Government of Rajasthan had been a mixed bag. The initial one year of this partnership was smooth but soon wrinkles started appearing, though the partnership continued with some effort and accommodation on ZHL’s part, problems started cropping up on a regular basis. This agreement ended in April 2013, but since the Rajasthan government could not finalize the next service provider, they requested ZHL to continue operating ambulances for another three months, to which the company agreed. ZHL claimed that the Health department had not paid an outstanding amount of approximately US $ 3.6 million despite repeated reminders following which the company had to ground some ambulances. This stood in contrast to the claims made by the Health department that ZHL was demanding undue payments and it was in response to ZHL grounding the ambulances, that the Health and Family Welfare department decided to take over the operations of medical ambulances in May 2013 from ZHL.

A scheduled meeting between ZHL and health department officials was to be held soon to resolve these issues when this news of taking charge of ambulances came in. Shweta and the founders were stunned to hear this news and it appeared as if their worst fears about working with the government had come true. They wondered what lay ahead and whether ZHL should continue to expand through PPP route or should they reassess their growth options after this incidence. Which direction was likely to work in the long run, in terms of bringing financial sustainability as well as creating a higher social impact? These questions haunted Shweta and the founding team as they considered the potential costs and benefits of working with governments and braced themselves for the stormy meeting that lay ahead with the Department of Health and Welfare of the Rajasthan government.