Artigo Da Saude

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International journal of Science Commerce and Humanities Volume No 1 No 3 May 2013

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respected corporate global strategy researchers and professors, Prahalad and Hart, in an article published atHarvard Business Review, The Fortune at the Bottom of the Pyramid 2. According to the authors, the Bottomof the Pyramid (BOP) segment provides a new context for business innovation and strategies for companies, aswell as for the development of community organizations.

The purpose of this research is to identify and to describe examples of private provision of health care

or public-private partnerships in Brazil that present an organizational model and management practices able torespond to the needs of the poor with quality and efficiency. The purpose of this study is also related to theunderstanding of the tendencies for organizational and business models applied to the provision of healthservices for the poor and also the critical factors for their success or failure.

The execution of the research was divided into two distinct stages: the first stage consisted of abibliographic review, followed by a search for potentially interesting experiences. Preliminary survey wasbased on website searches with focus on the identification of strategies and organizations that would fit theprofile, followed by interviews with health experts. All professionals interviewed have worked for both publicand private sectors, and are currently occupying management positions in their organizations.

An inventory of organizations engaged in providing assistance to low income population through theoffer of quality and effective services was done in the first phase of the survey. This inventory presents an

innovative approach in their management models. We identified fourteen (14) relevant experiences as well asthe implementation of some changes by health organizations to face the challenge of providing health servicesfor the poor. Three relevant experiences were selected for the case studies from this inventory.

The second phase consisted of data acquisition from primary and secondary resources to elaborate thecases studies. Primary data was collected through interviews in depth with key personnel, managers anddirectors, followed by observation and visits to the organizations. Secondary data was gathered from theorganizations documents.

This article was sectioned in three parts: in the first part, we briefly introduce the main concepts relatedto BOP; in the second, we present the characterization of Brazilian health system and also organizations thatare adopting models to attend low income population. Next the research was followed by the selected cases,showing the organizational strategies adopted by health organizations to attend low income population. Finally

we present our conclusions.

I - The BOP Business ModelThe BOP is the social and economic definition for the four billion individuals in emerging countries

whose annual per capita income falls below and including US$ 1500, or $3000,00 in Purchase Power Parity.These countries have become the target of companies and organizations not only for the assistance of theirconsumption needs, but also as business opportunities .

In Brazil, low income sector totals 114.5 million people, accounting for 65% of the countryspopulation, but only 22,6% of the total household income, or $171.585,3 million in PPP. About 86% of thelow income sectors (LIS) live in urban areas.3

Because of this scenario we can address four fundamental characteristics: scale, permanence,efficiency, and efficacy, a market approach and business model can be a more effective response to global

poverty, since the solutions must be durable and survive politicians and political agenda. Addressing the coreof the problem requires the essential ability to ultimately scale an intervention to affect not thousands, butmillions of people. Success demands initiatives that can be deployed across generations. The solutions cannotdepend ultimately on resources determined by the finite attention spans of human beings, on political and

bureaucratic process. Given the size of the problem and the scarcity of resources, effective responses must alsoincorporate the most productive utilization of those means. Empirically, industries and markets havedemonstrated an ability to operate massively, permanently and efficiently45.

The core of the market approach to the BOP is the recognition of the deprived population as economicagentsconsumers and producerswho make decisions in market transactions as other segments do, and this

behavior allows the operation of markets in the pursuit of more efficient solutions.These solutions will benefit the BOP segment by creating capacity for consumption (by selling servicescompatible with their family budgets) and by developing the insertion of these segments in the market


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economy. To create capacity to consume is necessary that the products or services attend three conditions: beaffordable (poor can pay), accessible (delivered and distributed considering the conditions where the poor live)and available (to be delivered when and where the poor need).

Prahalad 6argues that the term innovation describes a solution for a problem in the market and a newcombination of factors in the organizational context. An innovation is not necessarily a technological

innovation, it can be a new service or a new form of organization. To attend the BOP organizations and currentbusiness models it must be innovated to alter cost, quality, and delivery standards of products and services.The products or services must reach low income population, must be available to communities in the

periphery of urban centers and in remote regions, considering local conditions.The World Resource Institute Report 3 emphasizes the need of value creation, enabling the LIS

householders to find their own route out of poverty. The solutions may involve market development effortswith elements similar to traditional development toolshybrid business strategies that incorporate consumereducation; microloans, consumer finance, cross-subsidies among different income groups; franchise or retailagent strategies that create jobs and raise incomes; partnerships with the public sector or with nongovernmentalorganizations (NGOs).

The low income sectors differ greatly throughout the world. There is no model that fits all, so its

important to understand the key dynamics that affect the success of strategies and benchmarking experiences.In the next section, the institutional aspects that lead entities to provide health care services to lowincome population will be presented in order to contribute to the adjustment of the BOP model to Brazilianreality.

II - The Brazilian Health SystemThe Brazilian Health System is constituted by a public subsystem, a private and a public-private

subsystem. It is important to understand how the resources are used by each subsector7.The public subsystem is universal-.it could be considered as Public Health Insurance with Premium

Zero. The private subsystem is formed by providers ambulatories and hospitals- and financing services Health Insurance and Private Health Plans. Last, there is a mix of health services in the private and public

subsystem with interconnection of them 7 .Under the Brazilian Constitution of 1988, article 196, health is every citizens right and a duty of the

State. The national health system created in accordance to this constitutional precept establishes universal andfull coverage. The system is decentralized and over 5,6 thousand municipal authorities are responsible for themanagement of health services. The public system is co-financed by the three levels of government, and out of

public expenditures ( 3.67% of the GDP) the federal government contributes with 45% of the resources (1.64%of the GDP), State governments with 27% (0.99% of the GDP), and City governments with the remaining 28%( 1,04% of the GDP) in 2010 .8

In spite of the legislation sanctioned throughout the years, the financial resources for the Unified HealthSystem (SUS) have been insufficient to support a universal public system with quality. The public expenditure

per capita in Brazil totals just US$ 177 a year, compared to 526 dollars in Argentina, 221 dollars in Chile, 390dollars in Costa Rica. 9 The decentralization and municipalization established in the legislation were notenough to form a regional and integrated assistance network for the provision of efficient quality services. Dueto the characteristics of Brazilian municipalities, out of which 75% have less than 20,000 inhabitants, thedecentralization led to the fragmentation of the services, which require, to operate efficiently and providequality services, an adequate scale. In many cases, hospital assistance units are idle because the demand forservices is low, or, in some cities, there are no hospital units to assist medium or high complexity cases,transferring the demand to other cities, particularly to large urban centers, which then suffer from the overload.There is a gap between the offer and demand of services, reflecting ineffectiveness in a systemic scale 10.

SUS also faces a serious problem in relation to the prices it practices. SUS presents a chronicunderfinancing problem, since in the SUS pricelist, the values paid fall below the costs for many procedures.

As a consequence of the shortage of resources for the financing of services, problems such as a lack ofmanagerial competence to manage services and resources arise, and are serious in most of the municipalities,leading to a deterioration of the quality of the services.


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With reference to coverage, about 90% of the Brazilian population are SUS users; 28.5% useexclusively SUS and 61.5% use SUS and some other assistance services, mostly health insurance and privatehealth plans. Almost 9% of the population does not use SUS at all.

To face these problems, Brazilian federal government has regulated the Law 8.080 from September19th, 1988 (known as the Organic Law of Health) through the passing of the Decree n 7.508, June 28 th, 2011.

The content of this Decree emphasizes the organization of SUS, health planning, health assistance and theinterfederal articulation, considering the following main issues: health regions, an organizative contract ofhealth public action, the health map, an assistance network in health and other aspects in order to increase thecomprehension of SUS, give more lucidity in the management of SUS, more juridical security in theinterfederal relationships and augment social control11 . Despite its publication and also the efforts of manymunicipal health managers to sign the organizative contract, there is still a gap in Brazilian Health System.

This situation has lead the higher income population to seek Brazilian private subsystem. Thisinteraction between public services and private offer is a significant feature of health services in Brazil. IndeedBahia 1213highlights that it has many institutional, financial and regulation contradictions between the publicand private sectors. Public health services are provided through SUS, but the provision of services involves

public and private providers. In 2007, there were 7,646 hospitals in Brazil, out of which 6,162 (80,6%) held

agreements with SUS14

. The hospitals had about 443,210 beds, out of which 294,244 (66%) were private, abasic feature of the Brazilian system: although the private system is considered supplementary, it holds 2/3 ofthe total beds in the country 15. The Brazilian hospital system is a system in which the provision of services ismainly private but the financing is public. In the ambulatory system, the situation is the opposite, as almost of the ambulatories are public, so that both provision and financing are public.

The private subsystem covered 21% Brazilian population in 2008 and had a per capita budget thatamounted to 5.5 times the public budget, which emphasizes one of its problems, high costs. The other problemof the private system refers to the set of restrictions it imposes on its affiliates, limiting the number of days ofinternment that are covered, the diseases covered and the value of the reimbursement it practices. Finally,according to a working hypothesis that has often been raised in the press, insurers and health plans practicecream skimming, that is, give more attention to diseases that require lower costs in secondary treatment but

raise difficulties when requested to treat problems that require a more complex treatment.There are some private initiatives to offer health products and services to the low income segment.

Many companies are adopting market segmentation strategies creating brands and specific units for this marketsegment. Popular health plans and insurance are a market segmentation strategy aimed at attending lowerincome brackets in the sense that the prices offered are lower than those offered by other insurers, but high as ashare of the income of LIS clients. There are also large insurers, such as Intermdica, with over 1 million

beneficiaries, that have their own assistance network, well known for the quality of its services, but plans areoffered just to companies. According to a survey carried out to assess the opinion of Brazilians about the healthsector, 57% of the interviewees had never held a health plan before. Others had abandoned previous plans dueto the high price or to the loss of the job which offered the plan 16. A key issue understanding LIS markets isinformality, the majority of the workforce is employed by organizations that are not legally organized

businesses, or are autonomous, or are self employed, so the restrictions and impositions practiced byhealth plans or insurance, in addition to the price, show that these initiatives are far from offering ways toachieve significant progress and to include the LIS population in the market and benefit from it.

Brazil has a solid tradition in health services managed by non-governmental entities in the third sector.There were, in 2002, 3,798 non-governmental health organizations, 2,009 hospitals and 1,789 other healthservices17 . The private organizations oriented to the segment in the Bottom of the Pyramid are the SantasCasas, managed by Charity Fraternities, which were the first health assistance institutions created in Brazil andare still active today; charity hospitals created to serve immigrant communities and supported by donations.

The charity sector is the main private provider of health services to the low income population. Thereis, however, a specifically Brazilian characteristic that influences all the activities oriented to low income

families and that makes these activities feasible. All initiatives we will examine present a source of financingthat is dependent on public resources through the use of fiscal exemption mechanisms.Under the current legislation, for entities to be considered charities, they must obtain a certificate


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(Certificado de Entidade Beneficiente de Assistncia Social, CEBAS) granted by a council (Conselho Nacionalde Assistncia Social, CNAS). For hospitals, three alternatives were established by Decree 4.327/2002: theoffer and effective provision of 60% or more internments through SUS; and, when the local SUS managerdeclares the impossibility of reaching the 60% quota, the application by the entity of a percentage of its grossrevenue, varying from 20% to 5%, in free services. The variation depends on the actual percentage of services

provided through SUS. The Decree establishes a third alternative for the granting of the Certificate, theclassification of the hospital as strategic for SUS 1819.The establishment of legal requirements and a stricter control over charity institutions led the entities to

seek new management models and strategies to adjust to the legal requirements. But none of the entities thatprovide services to the low income population would be financially feasible if the legislation did not guaranteefiscal exemptions.

The determining factor for the formulation of strategies is the dependence on SUS resources. Theorganizations that do not depend directly on SUS resources replaced their philanthropic and social assistancemodel oriented to the deprived population by a Social Responsibility model, work within the community andinvest their own resources to improve the quality of life of the population. Their activities have a moral andethical character, and include the public formed by its stakeholders, such as employees, the community, public

and non-governmental institutions.The main challenge for health service organizations that depend on SUS resources and attend mostlythrough SUS was to operate and administrate a network in association with SUS which would maintainhospital care with dignity and efficiency for its users, solving the organizations financial support difficulties.

This challenge faced by the organizations led them to adopt strategies to increase sustainability andindependence, and to design the trends for management models.

In the context of the Social Responsibility model, partnerships including entities of the civilian society,companies and public organizations were developed to make social investments and ventures feasible.

The Private Health organizations see the service to the community as part of their social responsibility,developing projects and actions to assist the deprived population. From initiatives and isolated projects, theorganizations have evolved to permanent activities and structured programs. The relevant experience here is

the Einstein Program in the Paraispolis Community (PECP).Many organizations in the third sector are also active, many founded by doctors and professionals in the

health area which develop projects to serve the deprived population, such as the Associao de Assistncia Criana Cardaca andTransplantadas do Corao, Casa do Climatrio, Centro Corsini and Centro Boldrini,Grupo de Apoio a Adolescentes e Crianas com Cncer, applying marketing cause related tools to appeal fordonations of the public in general and donors.

In order to increase revenues and reduce the dependence on SUS, some entities adopted the hybridmodel - Two Doors - such as Santas Casas (Santa Casa de So Paulo, Santa Casa de Porto Alegre),University Hospitals (Instituto do Corao Hospital das Clnicas) . This model serves two publics, thosewho come through SUS and those who come through health plans, without making any distinction in theassistance. Many organizations are improving the system and adopting cross-subsidy strategies, mostlyhospital conglomerates, a network of hospital units whose strategic management is centralized in a controllinggroup as a holding that manages all the units. The units serve different market segments one unit will servehigher income clients and transfer its technical and financial resources and competence to other units, thussubsidizing the units that attend the low income segments. All the administrative, financial and humanresources administration is centralized in order to achieve higher financial and managerial efficiency and

provide better assistance.In order to describe the organizational strategies that reflect the main tendencies in the health private

sector, three relevant cases will be presented.III. 1. Social Responsibility of Private Health Organizations -

The Einstein Program at Paraispolis Community (PECP) represents the transition from a model of

charity focused on social assistance to a social responsibility investment in the community.The program had its origin in the Pediatrics Assistance Ambulatory of the hospital, an ambulatory andinfirmary with 24 beds located within the facilities of the hospital. The Volunteers department and the


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managers realized that it was necessary to reformulate the pediatric services, as the treatment offered was notefficient, the return rate of patients was extremely high, and sophisticated technological resources were beingused to solve relatively simple health problems. This resulted in an increase in costs without an effective healthassistance, which would jeopardize assistance in the long term. The Einstein Program for the community wasdesigned with its focus on: replacement of the individual-curative approach by a collective, preventive

approach aimed at health promotion; provision of quality assistance to the population in the bottom of thepyramid allowing the continuity of treatments; focus on the needs of the target public, considering that most ofthe population served by Pediatric Assistance lived in Paraispolis, a slum area close to the hospital, one of the

poorest regions in the municipality of So Paulo.PECP provides assistance to deprived children, guaranteeing a full follow-up for 10 thousand children

from 0 to 10 years of age in the community. Furthermore, it stimulates prevention and health promotion in itsAmbulatory - Center for the Prevention and Attention to HealthCPASbuilt in the community, with the aimof guaranteeing a better physical, psychological and social development for the population.

The medical assistance provided in the Ambulatory is oriented to registered children, who receive freeroutine and emergency assistance, as well as medicines and clinical exams. Each registered child receives acard that works as a full health plan, giving access to medical assistance in general pediatrics, in over 18

specialties, and to programs oriented to pathologies, nurse services, and social work.The agreement model of the program was created with special characteristics, becoming one of the

innovative aspects in the provision of services to the community. It is a health plan managed and financeddirectly by the Sociedade Israelita Albert Einstein, which allows the provision of services in specializedmedicine to the registered children when necessary.

The model of agreement calls the attention because it is an efficient strategy for the offer of a series ofmedical specialties at reduced costs, as the professionals are paid just for the services provided. Thus, theambulatory is in a position to expand considerably its clinical staff without having to pay directly the expensesof maintaining hired professionals. Nevertheless, the quality standard of the Einstein network is preserved, asonly doctors previously registered in the network can be summoned by the agreement. The same procedure is

used for internments, when all the hospital services, including surgeries, medicines and exams are paid byHospital Albert Einstein.The PECP contributed to an increase in efficiency and the reduction of the institutions costs, which

would not have been feasible if the 24-bed pediatrics infirmary of the previous model had been maintained.If the Health Safe Care for the registered children had not been created, HIAE would have had to

maintain 10 beds for the internment of the children registered at the disposal of the ambulatory with theresources and technology available today. Table 2 shows a simulation using the costs incurred in 2006 for thePECP and the cost estimate for internment in the Pediatric Assistance of the HIAE, to maintain thehospitalization in the HIAE would cost 2,8 times more ( R$ 14.512,00 cost per internment) than the cost ofHealth Insurance (R$5.244,00 cost per internment), without providing the flexibility in assistance it allows

Table 2 - PECP Internment Costs X Cost of Pediatric Assistance in 1997

Internment Costs

Health Insurance

Einstein

Paraispolis

Pediatric Assistance

HIAE

Number of internments 1,136 1,136Average Cost/ Patient DayinR$

920,00 3.224,94

Average Time of Internment ( indays)

5.7 4.5

Cost per Internment 5.,244,.00 14.,512.,23Total Cost of Internment 5.957.184,00 16.485.893,28

Source: Data provided by PECP managers


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The expenses with the Einstein Program in the Community of Paraispolis accounted for 16% of thetotal expenses on Corporate Social Responsibility programs and actions in 2006. A total of R$ 35.422 thousandwere spent in programs and actions (2006). Since the opening of the ambulatory, 17,534 children have beenassisted, a number estimated after the inflow and outflow of the ambulatory. The 10 thousand children who aredirect beneficiaries of the medical assistance in the ambulatory account for about 60% of the children from 0 to

10 years of age in Paraispolis.PECP benefits effectively the bottom of the pyramid, as 39.5% of the population earns less than 2 MW( Brazilian Minimum Wage) and 12.27% of the population are below the poverty line (US$ 1 per capita perday - No Income and 1 MW), as shown in a research carried out by the So Paulo City Housing Secretariat(Secretaria Municipal de Habitao de So Paulo), but more than that, it enables access for high qualityservices, building a community based health infrastructure and a safe health care for children, creating socialvalue for the community. The operation is not profitable, but it is subsidized by the Corporate SocialResponsibility activities of the Hospital.

Figure 2 - Bottom of the PyramidParaispolis Community

Source: Developed by the authors based on data supplied by Analytical Report.21

III. 2 Partnership with companies, third sector organizations - Fund Raising Model GRAACC- Group

for the support of adolescents and children with cancer

The next relevant experience that will be presented is GRAACC - Group for the Support of Adolescentsand Children with Cancer, a non-governmental organization created to raise resources and support the

provision of assistance to children and teenagers with cancer.The entity was created in November 1991, at a time when children with cancer were treated in a few

beds (3 or 4) in the Pediatric Oncology Sector of the So Paulo Hospital, maintained by the So Paulo FederalUniversitys School of Medicine (Escola Paulista de Medicina da Universidade Federal de So Paulo), a

medicine teaching institution in Brazil. The hospital, as every public medical and teaching institution, had toface financial constraints, delays caused by bureaucracy, and was in no condition to supply popular demandwith the reduced number of beds available.

Today GRAACC maintains its own hospital in So Paulo, the Pediatric Oncology Institute (Instituto deOncologia Peditrica, IOP), a highly complex reference center.

The consultations and internments are paid by the Unified Health System (SUS), by health plans andprivate patients. As a result of the policy of providing equal services to all patients, 95% of the patients comefrom SUS (Table 3). GRAACC adopts an open door system, independently of the form of payment.GRAACC gives preference to SUS patients since, in order to collect resources, it is important to define theservice as oriented to those that cannot pay and depend on SUS, which functions as a strong appeal for donors.

Above 5 MW

From 4 to 5 MW

From 3 to 4 MW

From 2 to 3 MW

From 1 to 2MW

Up to 1 MW

No income

6,32%

20,70%

6,52%

MW: Brazilian Minimum Wage

1 MW = R$ 380,00

FamiliesBelow he

PovertyLine

Bottom ofhe Pyramid

13,95%

27,50%

9,17%

2,88%

39,55%


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Table 3 - SUS X Health Plans 2004/2006

2006 2005 2004

Service

s (N.)

Percenta

ge

Service

s (N)

Percenta

ge

Servic

es (N)

Percentag

eHospital Covered

Population

SUS 53,522 95 40,410 98.99 31,168 99.58Health Plans andPrivate 2.817 5 414 1.01 130 0.42

56.339 100 40,824 10031,.29

8 100Internments

SUS 888 94.17 988 92.16 938 92.87Health Plans and

Private 55 5.83 84 7.84 72 7.13943 100 1,072 100 1,010 100

Source: Social Results GRAACC, 200622GRAACC has two income sources: public and private funds. The resources to maintain IOP come from

medical assistance revenues (SUS, health plans and private patients) and from resources granted by the firstsector (government), donations from the second sector (corporate), and from the third sector (NGOs) and

private patients.SUS accounts for 70% of the operational revenues and 95% of the clinical services, while private health

plans account for 1% of the services but 18% of the operational revenues. If the institution depended on SUSresources and other operational revenues, it would have accrued an operational deficit of R$ 9 million (2006),

R$ 11million (2005) and R$ 8million (2004). The operational revenues and the resources raised from publicsources are not enough to cover IOPs operational costs (GRAACC, 2006). The institution responded by diversifying income sources and raising resources in the private sector.

Thefund raising structure implemented accounts for theremaining60% of the resources needed by GRAACC.The revenue sources are: Telemarketing, Donations by Private Citizens or Corporations, Campaigns andEvents.

The orientation of the services to the Bottom of the Pyramid was confirmed through a survey carriedout by the Social Service of GRAACC. The family income of 71% of the patients falls below three minimumwages, as presented in the graph below:

Figure 3 - Family Income of patients

Abo

12

Fro

8 to 11

Fro

4 to 7

Fro

1 to 3

U

to 1 MW

No

5%

19%

MW

Brazili

Minim

Wa1 MW = R

FamiliBelo

hPove

Lin

Bott

oh

P ra

5%

53

13

5

71%


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Source: Developed by the authors based on data supplied by GRAACCThe base of GRAACCs strategy is to set up a fund raising structure that will provide long term

financial support for the organization, enabling it to provide access to health treatment for all, reducing thepoverty penalty and promoting equity, as the chances of cure wont be reduced further due to the absence ofconditions for following up and treating adequately the disease.

III. 3 Public and Private Financing - Cross Subsidy ModelAssociao Congregao de Santa Catarina (ACSC) is a religious and philanthropic organization. It is

the executive branch of the Congregao das Irms de Santa Catarina, which is made up of a conglomerate ofphilanthropic organizations that lend social work, health and educational services to the needed population.

In the health sector the ACSC is active in four states of Brazil, distributed in the southeast and centralwest regions, including the two largest Brazilian cities, So Paulo and Rio de Janeiro, and smaller cities suchas Santa Tereza (Esprito Santo), Cceres (Mato Grosso), Petrpolis, Terespolis and Trs Rios (Rio deJaneiro).

Santa Catarina network operates and manages their own seven hospitals and two public state Hospitals(So Paulo) under the Social Health Organizations (Organizaes Sociais de Sade, OSS), managed by ACSC

by means of a management contract with So Paulo State Health Department. It works with the Family HealthProgram in partnership with the So Paulo County Health Department and administrates three outpatientfacilities

The management of Santa Catarina Network is complex, involving crucial issues such as how tobalance the offer and demand of the services provided so that at least 60% of the assistance is provided to SUSpatients. This is necessary to guarantee tax breaks and simultaneously a large enough number of health planpatients and private patients to assure a volume of revenue that will allow the organization to cover theoperational and maintenance costs of the network, as the resources received from SUS are insufficient to coverall costs.

An alternative for the organization would be the adoption of the two-door hybrid model for allinstitutions in the network - all of them would see 60% SUS patients and 40% private and health plan patients.

The smaller county institutions, however, would not present volume enough to reach the target, and thoseinstitutions that could easily achieve the goal, like Santa Catarina Hospital, would have to forego the revenuefrom health plans and private patients.

Faced with this challenge, the organizations strategy was to adopt a general vision of the network,verifying the opportunity for gains of scale and making the most of synergies, seeking solutions that were nolonger local.

The cross subsidy model established that the institutions in the network would be characterized,according to their financial situation, as resource suppliers and resource recipients. The suppliers ofresources are the Maintaining Units and the recipients of resources are the Maintained Units. The source ofthese resources is the employer quota of INSS, which is waived by INSS and passed on to those hospitals that

present negative results.The maintainers would not carry out patient care through SUS. In other words, the revenue obtained

would come all from health plans and private patients. Maintained institutions, on the other hand, present amix of patients, in which the majority is made up of SUS patients, thus benefiting the bottom of the pyramid. Ifthe Maintaining units were not able to make the cost of health treatment feasible, they would not be able toguarantee the attendance and the quality of the services.

However, in compensation, the maintained institutions see the greater number of patients via SUS,written up by the network which guarantees the benefits of the organizations tax breaks.

The Social Organizations of Health see patients only and exclusively through SUS and are not includedin the same financial mechanism used to transfer the resources. They work with a fixed budget and receivestate resources under management contracts. Exclusive SUS patient care is a strategic variable to make the

networks management viable.In 2006, all the patient care given to SUS patients was computed and the Santa Catarina networksappointments and internments accounted for 78% of patient care, whereas 22% by health plan and private


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patients. Inverse conduct can be seen analyzing the revenues with health plan and private patient revenuesrepresenting 96% of operational revenues and the SUS revenues are only 4% of operational revenues.

The Maintaining units make viable and leverage Maintained units with financial resources. TheMaintained Units and Social Health Organizations attend the population by SUS.

A simulation of how Maintaining units make viable and leverage Maintained units was carried out from

unit costs and unitary revenues for patient care. For each institution in the network, the unitary results forhealth plan and private patients and those of SUS were estimated, obtained by the difference between revenuesand expenses. The unitaryresult was multiplied by the number of patients seen, generating the results for eachhospital.

The simulation shows that Casa de So Jos has the greatest unitary margin for patient care. Thevolume of patients attended, however, is small. Santa Catarina hospital is the leading hospital of the network,

presents the second highest unitary revenue and the biggest volume of patient care, generating the biggestresult. The other institutions show deficits, but the positive results of the Maintainers compensates the deficitand guarantees a positive balance for the network as a whole, reinforcing the models sustainability.

The following table presents a simulation of the models financial results for the year 2006.Table 4Unitary Result (Health Plan and SUS) in 2006

Institutions

Unitary

Expendit

ures/Pati

ent care

in R$

Unitaryrevenue

Health

plan/pri

vate

patients

R$

Unitar

y

reven

ue -

SUS

Health

Plan

Unitary

result

SUS

Unitar

y

result

Casa de Sade S.JoseRJ

2.388,22 2.688,46 300,25

Hospital Sta CatarinaSP

959,59 1.133,18 173,59

Hospital Sta TeresaRJ

710,26 494,06 253,22 -216,20 -457,04

Hospital So JosRJ

139,18 125,85 67,92 -13,32 -71,26

HMRegina ProtmannES

111,56 67,36 39,05 -44,20 -72,51

Hospital So LuizMT

267,04 178,63 97,99 -88,40-169,04

H.Cln.N.S.daConceio

174,14 217,01 63,14 42,86-

111,01

Operational Result

Source: ACSC Accounting and Financial Information, 2006 2324

The scale of attendance is strategic for the model to achieve positive results. On one hand, theMaintainers must have a high number of private and health plan patients in order to guarantee the financialresults. The Maintained hospitals, on the other hand, must have a high number of SUS patients to guarantee thetax breaks (Table 5).


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Table 5 - Total Financial Results in 2006 23 24

Institutions

Total

patients

seen per

day)

Private

andHealth

plan

patient

visits

SUS

patients

Resulting

total (R$)

Casa de Sade So JoseRJ 51.911 51.911 015.586.171,1

4Hospital Santa CatarinaSP 164.760 164.760 0 28.600.171,8

Hospital Santa TeresaRJ 49.849 22.492 27.357

-17.366.115,55

Hospital So JosRJ 113.745 87.225 26.520 -3.051.991,64Hospital M.Regina Protmann

ES 42.243 10.323 31.920 -2.770.868,52Hospital So LuizMT 30.381 9.818 20.563 -4.343.980,8Hospital de Cln.N.S.daConceio 69.490 18.495 50.995 -4.867.988,25Hospital Geral de PedreiraSP 365.977 0 365.977 0Hospital Geral de ItapeviSP 131.926 0 131.926 0Programa Sade da Famlia -

SP 290.123 0 290.123 0Centro de Referncia doIdoso - SP 175.913 0 175.913 0Assist.Mdica Ambulatorial -SP 149.983 0 149.983 0

1.636.301 365.024

1.271.277

11.785.398,18

The cross subsidy makes the financial management of the network possible, the Maintainers are thecenterpiece of the network to the extent that they maximize its results, making other institutions feasible. It is amodel that does not lead to a choice between serving SUS patients or health plan and private patients. On the

contrary, there is a convergence of interests because it is fundamental that Maintaining units leverage thegathering of revenues from private patients, but they can only keep up this patient care if the Maintainedinstitutions kept up patient care via SUS, otherwise they would not continue to enjoy tax exemptions.

The benefits of the model are not restricted to the networks financial management. The integration ofservices allows the standardization of work procedures and alignment of human resources management, supply

purchases, logistics and maintenance of equipment that brings gains of scale, greater efficiency and improvedquality in all the network, and above all benefits the patients that receive the same quality of services.

ACSCs organizational strategy allows the creation and maintenance of competences. The model isrecognized as the trademark of the institutions. The maximization of the networks strategic performanceconsolidated real cooperative advantages and has led to the networks self-sustainability.


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CONCLUSIONThe study of these cases shows the main strategies and organizational changes adopted by health

service providing organizations. These strategies are relevant for the Brazilian reality.Research has shown that the BOP model is not replicable in other regional and institutional scenarios as

a market supported business. The main factor in order to innovate the business model for the health sector

indicated by Prahalad requires that service providers present a low unit price and profit, in order to gain inquantity and scale of attendance. The cases and experiences reported in the health area by Prahalad and in theWRI report are not financially sustainable without the injection of resources by public and private donations.In the case of Brazil, the BOP model seems unfeasible without financial support from the private sector or

public financing, either directly or through tax waivers.The preliminary study we have conducted in order to select the three entities that were subjected to a

deeper analysis, and presented in this article, indicated that the market model - in which a company produceslow cost prosthesis,goods or services to attend a large number of individuals and remain financially sound - isnot present.

These two situations are illustrated by the three examples given. The first case is of an entity whosepriority is to attend the lower income population, made up of SUS clients (95% of the cases), but has to resort

to private donations from individuals or corporations to remain financially feasible (the GRAACC case).The second case is mixed (PECP). The entity receives material support, in the form of human andfinancial resources from a high quality health service provider (HIAE) and offers high quality and efficientservices to the BOP population of a slum. The private financial support is possible in the HIAE case because itcan count on tax exemptions granted by the Federal Government precisely because it assists the BOP

population.This case shows, in the case of Brazil, the tremendous importance of governmental intervention in the

health sector in Brazil, both directly, as a service provider (attending a population of 150 million in SUS), andindirectly, by financing the private health sector through tax breaks.

The important role played by the financial support granted by the government is particularly evident inthe third case. The ACSC operates in two ends. In one, it attends high income clients, who pay through health

plans or from their own resources, generating a financial surplus (Hospital Santa Catarina/SP and Casa de SoJos/Rio de Janeiro, called, in this paper, maintaining hospitals). Part of this surplus originates from taxreductions to which the Santa Catarina complex has the right due to the fact that over 60% of its services are

provided to SUS clients.In the other end, with this surplus, partly generated by tax exemptions and partly generated by the

revenue of the maintaining hospitals, Santa Catarina complex finances the other hospitals that make up itsnetwork (here called maintained hospitals), which attend preferentially the SUS population and operate at adeficit.

This crossed subsidy scheme allows the maintained hospitals to provide their professionals access tothe guidance of high level professionals, besides other synergies in the human resources area, and economiesof scale in the financial area. For this reason, we suggest that the Health ministry should stimulate the adoptionof the crossed subsidy scheme by other hospitals, whenever it is adequate.

The results of the research seem to indicate that the pure BOP model presented by Prahalad does notapply to the case of Brazil. It is classified as a country with a per capita income of US$ 7,995, a country with ahigh average income, and in which 8% of the GDP is spent in health, out of which almost half is provided bythe public system and where the government intervention in the health sector is imp ortant. The pure BOPmodel shall apply in the case of India, a country that presents a per capita income of US$ 950, and a nationalincome of US$ 1,176.9 billion , in which just 1% of the GDP is spent in health, and with a low income

population of about 924 million .It is important to recognize that in certain situations, in which the market mechanisms are not available

or insufficient to generate investment opportunities, other actors are fundamental.

There are many lessons to be learned from these experiences related to management. The Bottom of thePyramid model, which implies the formation of alliances between companies, governments and NGOsworking together and mobilizing resources to create products and services in order to provide the needs of low


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income populations, offers a huge market potential for the private health sector.The PECP generated value by building an Einstein unit in Paraispolis and perceived the bottom of the

pyramid as a client that deserves the same quality in services that is provided to the top of the pyramidsegment. As of this project, a system of franchise can be created for units in partnership with insurancecompanies and health plans for specific publicssuch as children, women and the elderly in the low income

segment.GRAACC was the pioneer institution that showed that it is possible to achieve a convergence betweenpublic and private interests, to build a brand and reputation using market, communication and financialstrategies, and to achieve financial balance and social results. It also showed that partnerships can develop newand unique competences for all the parties involved. The formation of these partnerships promoted anexchange of experiences and competences between the stakeholders, so as to integrate corporate strategies andmanagement tools to meet the demands of the society, regarding children with cancer.

The cross subsidies model adopted by the Santa Catarina made available the balance and synergyneeded to offer a network of health service to users with quality and efficiency and permit a better resourceallocation.

In all three cases it could be seen that it was the public-private partnerships that brought results to the

organizational models. In the health sector, considering that market initiatives are still not mature enough,there is still a long path to cover in order to create a profitable business model.For the public sector, these analyses can help focus on reforms needed in the operational and regulatory

environment to allow a larger role for the private sector. For the civil society, organizations can frame thedebate on poverty reduction in terms of enabling opportunity and less in terms of aid.

The BOP business models foundation for success are the values, beliefs, a strong organiza tionalculture of quality service, equality, social responsibility, sustainability, entrepreneurship. The model can helpus to overcome the feeling of impotence and resignation that we feel when faced with poverty. The cases

presented showed that the investment in the Bottom of the Pyramid may open opportunities for growth and fornew ventures.

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