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HEALTHCARE The Next Big Thing? It's a jigsaw that has puzzled corporates for years. Now, thanks to a new organised-retail type business model the business of healthcare may well end up being the next big thing. By Suveen K. Sinha ''Healthcare is the next big thing'' ''There's a revolution waiting to happen
in healthcare'' ''After IT, it is going to be the turn
of healthcare'' ''Healthcare is the next big thing''
Still, these remained the destination stores of the healthcare domain. The supermarkets, a corporate presence in neighbourhood clinics, and the real harbingers of the rev, were (and are) nowhere to be seen. Worse, there's some sort of vile-pursuit-of-Mammon stigma attached to the business of healthcare. ''It's not a business,'' emphasises Naresh Trehan, the medic who heads Escorts Hearts Institute.
So, healthcare remained a bridesmaid, and companies seeking diversification opportunities that promised higher returns than the market, opted for infotech. And the numbers have stayed abysmal: India, a country of a billion people, spends just $17 billion a year on healthcare; the US does $1.2 trillion. India has a hospital bed for every 1,300 people; first world countries have one for every 250; and the World Health Organisation recommends that each country have at least one for every 700. Oh, and lest we forget, 70 per cent of the US-spend on healthcare comes from the private sector. Still, dismissing claims that healthcare could be the next big thing could prove presumptuous: two companies which coincidentally share some sort of blood-link, are approaching the business from its supermarket end (or 'bottom-up' as the CEO of one of the companies insists on calling it), an approach that has also been discovered by a born-again vet of the business. The first is Analjit Singh's Max India that will build, by 2005, a network of between 35 and 40 primary care clinics, four diagnostic centres (with ambulatory surgery facilities), two medium-sized hospitals, and a large state-of-the-art tertiary care hospital.
And Apollo, which is extending its destination-store concept of speciality hospitals to more locations within and without the country-Mumbai, Colombo, Dhaka, Muscat, Dodoma, Accra, and Riyadh-has tweaked its business model to create Apollo Lifestyle Clinics, 200 of which will open their doors for business by end-2002. The economic logic behind these ventures is straightforward: address the educated middle-class that may prefer the benefits offered by an 'organised' corporate clinic as opposed to a neighbourhood general practitioner; and continue to tap overseas markets to fill up the capacity in the speciality hospitals. Says Narayan Seshadri, Head (Business Consulting), Arthur Andersen: Some of our doctors are really good but continue to practise in hospitals one may not like to visit. They will perform better in an organised and efficient system. If the doctors can be given a value proposition, it will make a great difference.'' One thing that sets the two new ventures apart is the language of numbers their CEOs speak. ''This isn't about philanthropy,'' says Vinay Singhal, the CEO of Fortis who's had stints at HLL and JK Synthetics before this. ''A healthcare business must be run on a commercial basis if it has to grow.'' Adds Max Healthcare CEO Nripjit Singh 'Noni' Chawla: ''Ours is a business-for-profit.'' And one benefit they will almost certainly offer is better service. If a Dubai-based NRI wishes to undergo heart surgery at its hospital-costs in India are one-tenth those in Western Europe and the US-Fortis arranges everything from the ticketing onwards. ''We have to acquire a customer-orientation. That's how the hospital-phobia will go away,'' chuckles Singhal. Adds Chawla: ''The central point of our module is customer focus. We are training doctors, nurses and technicians in that aspect.'' Indeed, Fortis has a single-line brief for its six-man hr team screening applicants: all recruits must have a mindset to serve. Getting The Biz To Work It's not as if past efforts at organised healthcare haven't paid off. Apollo closed 2000 with revenues of Rs 278.9 crore and a net profit of Rs 27.83 crore. But the business is a capital-sink. A 200-bed hospital could set a company back by as much as Rs 70 crore. For those interested in specifics, Max will invest Rs 400 crore over the next four years in its network. An MRI (Magnetic Resonance Imaging) machine, for instance, could cost as much as Rs 10 crore. A hospital can conduct a maximum of 10 MRI scans a day, with each earning between Rs 5,000 and Rs 7,000. A basic number-crunching exercise indicates that it will take 10 years to just recover the cost of the machine. Then there are the costs associated with staffing the hospital, and running it 24 x 7. ''There is no way a hospital (of our scale) can be profitable in the first five-to-seven years,'' says Trehan.
It is on the basis of this economic principle that Max's Chawla expects the Dr Max Network (that's what it is called) to start generating profits in three years; and Fortis' Singhal, the hub-and-spoke one, in mid-2004. And the sector could benefit when the private healthcare insurance business takes off. ''This,'' avers Reddy, ''should greatly enhance people's ability to pay for high-quality healthcare.'' There is more that it could achieve: like midwifing the emergence of the concept of Health Maintenance Organisations-firms that offer a managed care health plan that provides healthcare in return for a fixed payment from individuals or employers. While the US-experience with HMOs has been a patchy one-type HMO into any search-query and you are likely to end up on webpages rubbishing them-there's one thing that they will prevent: unnecessary tests, medication, even surgery that many believe form the other side of organised healthcare. |
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These
declarations can be attributed to just about anybody: chief executives,
analysts, consultants, even futurists at large. If healthcare is still
everyone's bridesmaid-of-choice, not a happily married mother-of-three,
there must be reason for it. Not that there have been no efforts in the
organised, or corporate, healthcare space. In 1984, Prathap C. Reddy set
up the first of what's now become the five-hospital Apollo chain; the
Escorts group followed suit with the Escorts Heart Institute in 1988; and
pharmaceutical company Wockhardt did its bit by opening a hospital in
Bangalore in 1989, and another in Calcutta last year.
The second is Fortis Healthcare, in which
Analjit Singh's nephews Shivinder and Malvinder (sons of Ranbaxy's late
Parvinder Singh) own an 84-per cent stake. In April this year, the hub of
their unique business model, the Rs 155-crore Fortis Heart Institute at
Mohali near Chandigarh, will start operations. Then, by end-2002, the
spokes-diagnostic centres and health maintenance clinics in Amritsar,
Jalandhar, Ludhiana, Shimla, Jammu, and Ambala-will be in place.
Lobbying for tax-breaks is one way out.
Reddy's wishlist includes ''granting an infrastructure status to
healthcare, and the reduction of duty on equipment''. Another way out is
to leverage a business model that captures customers at the primary-care
level through a vast array of neighbourhood clinics, and channels the flow
of patients upwards if the need for specialised care arises. Says Seshadri:
''Given our population, the volumes will come from preventive or primary
care that will also channel the flow of patients into secondary and
tertiary care. Secondly, in the long run, the money may come more from
preventive care since an improvement in its quality will reduce the number
of patients needing tertiary care even as the number of beds goes up in
super speciality hospitals. And insurers insist on preventive care.''