Ethics of a Monopolizing Hospital Cafeteria

This material is part of the Giving Voice to Values curriculum collection (www.GivingVoiceToValues.org). The Aspen Institute was founding partner, along with the Yale School of Management, and incubator for Giving Voice to Values (GVV).

Now Funded by Babson College. Do not alter or distribute without permission. © Mary C. Gentile, 2010

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Cafeteria Services at Bharat College of Medicine (A)1

Introduction In 2009, four years after his appointment as the Dean of the Bharat College of Medicine (BCM), Dr. Singh faced a problem. Residents, students and medical consultants from the various hospital departments were repeatedly coming to him about the cafeteria services on the hospital premises. Students complained that they had no food available on campus after classes. The cafeteria served only snacks (at unreasonably high prices) and not food. Young resident doctors often consumed food in the makeshift and unhygienic shacks outside the campus. As a result, there were increasing complaints of illness among them. Despite numerous complaints to the Medical Superintendent (MS) of the Hospital, there was no change. The students (through their union) argued that if competition were encouraged, they would have access to more reasonably priced, better quality food and beverages. They requested that the Dean intervene and brought pressure through their supervisors and parents. On a normal day, the hospital-cum-medical college played host to over 10,000 people. While the rules of the hospital permitted the operation of four canteens to serve their food and beverage needs, it presently had only one cafeteria2 in operation. The cafeteria was a franchise of a reputed multinational chain that was operated by the Medical Superintendent’s (MS) son3. It served

1 Developed by Professor Ranjini Swamy and Professor C.M Ramesh of Goa Institute of Management, India. This case was inspired by actual events but names and other situational details have been changed, and interview sources left un-‐‑credited with permission, for confidentiality and teaching purposes. 2 In this case, a canteen refers to a food service establishment within the hospital premises (inside the buildings) that provides table service and offers snack food, beverages and hot lunches/ dinners. In this case, Cafeteria refers to a kiosk set up to primarily sell the products of a multinational chain. It serves selected snack products and beverages but not hot lunch or dinner and does not have table service. 3 The son had completed an undergraduate course in Commerce (15 years in the education system). He was not a qualified engineer or doctor, which is what most youth aspire to do in India.

This material is part of the Giving Voice to Values curriculum collection (www.GivingVoiceToValues.org).

The Aspen Institute was founding partner, along with the Yale School of Management, and incubator for Giving Voice to Values (GVV). Now Funded by Babson College.

Do not alter or distribute without permission. © Mary C. Gentile, 2010 2

instant packaged noodles, packaged soup, tea/coffee and some baked snacks (but not a traditional hot lunch or dinner). There were indications that the prices of items in the cafeteria had more than trebled over a short time: for instance a cup of coffee that initially cost Rs 5/- was now available at Rs 25. The Dean wanted to provide the students, patients and staff with reasonably priced, safe and good quality food and beverages. However, meeting this objective was a challenge given the “investment” of the Medical Superintendent in the cafeteria. Background The Bharat College of Medicine (BCM) was a fully state-owned and funded institution that was set up more than forty years ago. It comprised of (a) a hospital that provided inexpensive medical care and (b) a medical college that imparted undergraduate and postgraduate medical education. The Dean, Dr. Singh, administered the institute with the assistance of the Director (Administration) and the Medical Superintendent (MS). Dr. Singh was responsible for the overall academic and administrative functioning of the hospital and college including the deployment and appraisal of interns, doctors and administrators. He reported to the Secretary4 of the state government’s Public Health Department. The MS was responsible for the deployment and performance of the Nursing and Para-medical staff, the maintenance of the premises (including support facilities like cafeterias, electricity supply, water supply, stores and the pharmacy), and the procurement of supplies and services. The Director (Administration) was a state-government appointed non-medical professional deputed to the post for a temporary period. He was responsible for maintaining all personnel records. The MS and the Director (Administration) formally reported to the Dean. As a publicly funded institution, the hospital was accountable to the government for its performance. The Comptroller and Auditor General’s5 (CAG’s) office formally audited the performance of BCM every year and reported its findings and observations to the Dean for his comments. The findings, along with the Dean’s comments, were sent to Public Accounts Committee of the Legislative Assembly for further action, if any was warranted6.

4 The Secretary of a Ministry or Department is a career bureaucrat. He reports to the Minister of the Department, who is an elected representative of the citizens of the region and a member of the ruling political party. 5 The Comptroller and Auditor General’s office audits the performance and accounts of all government departments and offices. It helps the Finance Committees of the Parliament and the State Legislatures examine the reports of various ministries/ departments for their accuracy, regulatory compliance and performance against objectives. The CAG reports are submitted to the concerned departments for action/ explanation. The Parliament-appointed Public Accounts Committee finally reviews the CAG’s reports and initiates appropriate action. 6 In case the Dean provides necessary clarifications or takes the necessary action, the CAG reports this to the Public Accounts Committee (PAC). The PAC is headed by the Leader of the Opposition in the local legislative assembly. The present leader of the PAC (in 2013) is a close relation of the Health Minister referred to in the case.




The hospital catered to the medical requirements of about 1,500 in-patients and about 2,000 outpatients every day. One or two relatives normally accompanied and stayed with each patient at the hospital. The hospital employed about three thousand people (including doctors) to cater to the patients’ medical requirements. In addition, the college had about 600 students and 400 resident doctors. The large community of staff, students and visitors required eateries catering to their food and beverage requirements. The hospital-kitchen only catered to the in-patients’ dietary specifications. In reality many patients (roughly 40%) ate food from alternate sources, as the food was bland. Two canteens operated within the hospital premises: the OutPatient Department (OPD) canteen catered to the outpatients and their relatives while the Hospital canteen catered to the rest. The canteens were contracted to caterers for three-year periods in return for a monthly rental. The canteens offered lunch, snacks and beverages at very reasonable rates and yet were profitable7. Besides the canteens, small illegal shacks outside the hospital premises offered cheap but unhygienic food. Private restaurant entrepreneurs could not set up legitimate eateries outside the hospital premises, as the government owned most of the surrounding land and did not approve of allotting this land to them. The birth of a cafeteria and its aftermath In 2006, the MS approached the Public Health Department for permission to operate a fast-food franchise within the hospital premises, in the name of his son. He had already opened such franchise outlets in several other colleges across the city. The proposed outlet (hereafter referred to as the cafeteria) in BMC would primarily offer snacks and beverages of a multinational firm. It would require the allotment of some land (about 20 square meters) within the hospital’s premises to set up a kiosk. The Public Health Department awarded the contract to the MS’s son, without calling for other bids8. The minimum rent was fixed at Rs 1200-1400 per month9. The Dean, however, set the monthly rent at about Rs 30,000, which the franchisee readily agreed to pay. The franchisee began operations in 2007, from about 20 square meters of prime land within the hospital premises. The land was initially leased to the franchisee for a three-year period that was quickly extended to ten years, renewable every ten years for another twenty years. The hospital

7 In 2005-06, when the hospital called for fresh bids for the canteens, the caterer who won the contract for the OPD canteen agreed to pay a monthly rental of Rs 225,000 to the hospital! Evidently he saw the potential to earn enough to pay such a rental. 8 Usually when the BMC signed a contract for running a canteen or cafeteria, it specified the prices at which the food items could be sold. However, in this case, the agreement had been signed between the MS and the Public Health Department, not the BMC. (The BMC had been bypassed.) It was not possible for the Dean of BMC to overrule the agreement made between the Public Health Department and the MS (who represented the franchisee). The Dean of BMC did not even know details of the terms and conditions of the agreement. As far as the BMC was concerned, there was only an agreement by the franchisee to pay a rent –there was no discussion or agreement on the prices. 9 The Public Works Department normally set the minimum rents expected for the land (based on a formula that factored in the type and amount of land required).




rules permitted only a three-year lease as the frequent review of lease terms would help the government maximize its revenue-earnings. The ten-year lease term offered to the franchisee flouted this rule. When the Dean raised an objection, the Health Minister overruled it saying that an extended lease would attract ‘better’ franchisees. With the opening of the cafeteria, there were now three options for obtaining food within the hospital premises: the OPD-canteen, the Hospital-canteen and the new franchise cafeteria operated by the MS’s son. Many people in the hospital initially welcomed the new cafeteria. Staff, students and patients at the Casualty Ward and Operation Theatre could now access beverages and snacks at the cafeteria during the late hours, after the canteens closed. Initial prices of the snacks/tea at the cafeteria were comparable with the rates offered at other academic institutions in the state. However, things began to change. The new cafeteria usurped an additional 400 square meters of prime land nearby and developed it into a small garden with benches. The Dean protested the occupation of more land by the franchisee, since he planned to use that land to create more parking spaces. He suggested that the Health Minister review the cafeteria contract in light of the hospital’s requirement for parking space. When the MS heard of this, he asked the Dean why he was “kicking his son’s stomach.” He pleaded with the Dean to protect the interests of his son. The Dean assured the MS that he meant no harm; he just needed some more parking spaces. Meanwhile, the Health Minister sought to ignore the Dean’s suggestion. In 2008, the MS cancelled the OPD-canteen contract because the contractor was unable to pay the rent10 and employed under-age staff. The Food and Drug administration had recommended closure of the canteen for this reason. The hospital-canteen contract was also terminated shortly thereafter due to “unhygienic surroundings”. Patients and staff had begun avoiding this canteen as the surroundings were not cleaned regularly. There were rumors that the cleaning staff had been instructed to not clean the areas close to the hospital-canteen. The affected canteen contractor chose not to approach the court, even though there was a good chance that the court would have stayed the termination of his contract. The contractor was illiterate and came from the neighboring state; he did not enjoy political influence in the local administration. As an outsider, he felt he would not get any support if he went to court11. Once the canteens closed, the cafeteria introduced more snacks such as sandwiches and patties. However, the prices of snacks and beverages in the cafeteria rose steeply; they were significantly higher than the prices charged (by the same franchisee) at comparable outlets in other academic

10 He had undertaken to pay the BMC Rs 225,000 per month However, his earnings from the canteen were apparently not enough to cover the rent. 11 A similar problem occurred when the Public Health Department wanted to discontinue the contract with the existing pharmacist (who ran the pharmacy in the hospital). The pharmacist was a local person and well-connected politically. He took the matter to the High court and got a stay order on the Department’s decision to terminate his contract. Even though the Health Minister raised the issue in the parliament and sought his removal on grounds of supplying sub-standard drugs, he was not able to remove the pharmacist.




institutes. After the closing of the canteens, there were no outlets serving lunch or dinner12 on the hospital premises. Anyone wanting food either settled for snacks at the cafeteria or ate at the unhygienic eateries outside. Resident doctors and students, who were hardest hit by these closures, began agitating for the resumption of canteen services13. The MS requested the government for permission to float a tender for new canteen contractors. However, the government inordinately delayed the approval of tenders. When the BMC finally floated the tenders, there were no takers for a variety of reasons. One, the terms and conditions of the tender14 were not lucrative for the bidders. The MS had apparently promoted the idea of a single contractor for running the 20-25 canteens across all public hospitals in the state, including BMC. As a result, the tender stipulated that a caterer must have a turnover of several crores and be running several food establishments in the state to qualify as bidder. Very few could therefore qualify to bid for the contract.15 Two, in interactions with interested parties, the MS apparently cited inadequate power- or water-supply in the hospital premises as reasons why they should not bid for the contracts16. Meanwhile, resident doctors and students continued to suffer. Hospital operations started to be affected, as resident-doctors reported ill. The problem Dr. Singh felt strongly for the suffering and frustration experienced by the students. It was a matter of shame that they were falling sick due to unhygienic food at a hospital. He did not mind the MS running the cafeteria. However, he strongly felt that other contractors also needed to have such an opportunity, so that students had more options and could access safe food and beverages at reasonable prices. He sensed that any solution to the problem would require dealing with the MS, who had a major stake in the controversial cafeteria. He wondered how he could help the students without (a) antagonizing the Public Health Department officials & the MS and (b) adversely affecting his image as the Dean.

12 The cafeteria was too small to serve traditional hot food. The contract with the multinational apparently did not permit the MS to operate competing outlets that served food. 13 The college had a Students Union which was not very strong. 14 The terms and conditions of the contract were stipulated by the Public Health Department. 15 A conservative estimate of the earnings from the cafeteria is as follows: If one half of the estimated number of people needing food at the campus chose to consume just one cup of coffee a day, this would mean 5000 cups of coffee. Each coffee is priced at Rs 20. This means revenue of Rs 100,000/- per day. The margin of profit on coffee is about 40%. This meant a gross profit of Rs 40,000/- per day or Rs 1.5 million per month. The rent was Rs 30,000/- per month. Salary to about 3 coffee preparers and 3 cleaners is estimated at Rs 35,000/- per month. Therefore, the net profit was to the tune of about Rs 1.1 million per month just from coffee! 16 Power supply, water supply & cleanliness of the premises were the responsibility of the Medical Superintendent.




Like other group A employees17 of the hospital, the MS was appointed by the Public Health Department. He had worked with the BMC hospital for thirty-five years, starting as a Medical Officer and rising to the position of the Medical Superintendent in 2002 (despite not having the post-graduate qualifications for the post of Medical Superintendent). He had a deep understanding of the system and its people and shared a personal friendship with many, including the Dean. He was very helpful to others, especially politicians and bureaucrats: if any of them visited the hospital, he would wait for them outside his office, open doors for them and take them to the concerned departments for check-ups/tests18. He never said no to anything they asked. He belonged to the highest caste-group in the local community, as did many powerful local politicians. He was close to the religious head of the caste-group, who apparently influenced important government decisions such as appointments to critical positions. He was also very close to the Health Minister because of his caste affiliation and willingness to help the Minister using any means. While he was due for superannuation, everyone expected the Public Health Department to extend his services as the MS. The Public Health Department decided service-extensions based on their confidence in the person. His “performance,” as measured by the formal appraisal system, was not so relevant. Given the goodwill towards him in the political establishment, the MS stood a good chance of continuing in the hospital. Dr. Singh had joined the hospital in early 1980s as an Assistant Professor through the Public Service Commission. He had risen to the position of Professor in 1990s. As an “outsider”19 to the state, Dr. Singh depended on his professional excellence (rather than on any ‘godfather’) to progress in his career. He did not enjoy as much influence among his higher-ups as the MS, but he had the respect and goodwill of several. Maintaining good relationships with government authorities was critical because they made important decisions (including the commissioning of more canteens). His relationships with the authorities were, however, largely task-focused. He drew comfort from the fact that even if the authorities were unhappy with him, they could not remove him from the position of the Dean20. At most, they could decide to not extend his tenure as Dean or prevent him from attending conferences. The Dean was sure that he wanted to help the students’ access safe, reasonably priced food. However, he had to achieve this without antagonizing people and compromising his image. He did not expect to achieve this objective overnight but hoped to set the stage for change in the longer-term. This required persistence: he had seen the system wear people down over time,

17 Employees of the hospital were categorized as Group A, B, C, or D. All Group A and B appointments, including the teaching faculty, senior administrators and doctors (except resident doctors) were selected by the Public Service Commission and appointed by the Public Health Department. 18 The Dean did not do this. If the politicians/ bureaucrats came to his office, he spoke to them civilly and arranged for help. He did not receive them at the entrance or go out of his way to meet them when they visited the hospital. 19 His first visit to the state was after his appointment. He belonged to a region that was culturally very dissimilar to the region in which the hospital was located. 20 The rules of public hospitals did not permit the removal of the Dean except under exceptional circumstances.




especially when they began to waver from what they knew was right. Whom should he approach for support? How could he present the issue to them? How could he persuade them to address the problem that students were facing?

Last Revision: 2/4/14

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Ethics of a Monopolizing Hospital Cafeteria