Surely, Rs 80,000 crore ought to make up a sizeable industry. That's what India spends every year on healthcare. But if you see a modern medicine man wince at the word 'industry', it's because the business is too fragmented-and unorganised-to be called an industry.

That's set to change, now that healthcare has attracted the attention of Corporate India. Watch the investments. Over the next two years, some Rs 4,000 crore will be ploughed in to modernise Indian healthcare services. Most of that will go into hospitals.

High-value hospitals, that is, with state-of-the-art equipment. Can the Indian market sustain them?

Yes, given two conditions. One, the players get their business models right. And two, patients don't have to bear the burden of their own bills. If, in other words, the new facilities are able to deliver good value propositions, and the concept of medical insurance expands beyond Mediclaim's tiny 2-million base in India.

Next Big Thing

Healthcare, already growing at an annual 13 per cent, could easily be the Next Big Thing for Indian corporates. Take hospitals, the main focus of corporate attention. According to an estimate, India will need some 80,000 new hospital beds every year for the next five years. The established players-Apollo, Escorts, Wockhardt, Hindujas-are on an expansion spree. Others, such as Fortis Healthcare, which has a cardiac hospital at Mohali, near Chandigarh, are also keen to spread out.

Apollo was the first to announce plans for a nationwide chain. "Healthcare," explains Pratap C. Reddy, Chairman, Apollo Hospitals Group, "ties in nicely with a world headed towards knowledge capital and leveraging that to create wealth. It's a lot like software, where if you have the talented people you have already won."

Thankfully, the best of Indian medical education has always been rather competent. This ensures the supply of doctors. What they need is the machines, the systems, the works. The typical per-bed project cost is estimated at Rs 4 lakh for a general hospital, Rs 15 lakh for a secondary care hospital and Rs 35 lakh for a tertiary (multi-speciality) hospital.

Drug-makers, such as Ranbaxy and Max, are natural entrants to the business. Says Analjit Singh, CEO, Max Healthcare Institute Pvt Limited, of Max Healthcare: "Max's entry into healthcare has been motivated by a combination of social and financial aspirations, as well as a desire to be the most admired company in the country for service excellence.'' Max expects its 200-bed hospital in Delhi to open doors by 2003-end. The idea is to make global-class services available in India.

That's perhaps why the Piramal group, which runs Wellspring Hospital in Mumbai, has chosen foreign equity participation as its route to the market. It has a 50:50 joint venture with BUPA, a leading healthcare player in the UK, to set up health centres across Mumbai.

The interesting thing is that even corporates with little or no prior connection to healthcare, are getting in. The Thapar Group, for instance, has decided to set up a 200-bed multi-speciality hospital in Gurgaon (project cost: Rs 100 crore). Says Vipen Kapur, Managing Director, Ballarpur Trading and Infrastructure Ltd: "BILT is continuously scanning the environment for business opportunities that are relevant in today's business scenario. Healthcare is one of them.'' The specific opportunity here is location: Gurgaon is a bustling new upmarket suburb that remains underserved.

For similar reasons, the Mumbai-based builder, Hiranandani Group, is planning a 100-bed hospital in Mumbai's suburb Powai. It will service not only its high-rise complex there, but also the entire Sion-Thane belt. Says Niranjan Hiranandani, Managing Director, Hiranandani Group: "It will have ICU and trauma care facilities, with special emphasis on paediatric care and gynaecology.''

Similarly, the A.V. Birla group intends building a 400-bed super-speciality hospital in Pune. Other aspirants include the Sahara Group, which has recently signed a project management agreement with the Apollo group to set up and run a 350-bed hospital in Lucknow. Sahara intends investing Rs 150 crore in the first phase of the project.

Another ambitious project is that of the Bangalore-based Sagar group, an education and automobiles player that has tied up with Apollo Hospitals to build a 250-bed multi-speciality hospital in Bangalore. The group plans to invest Rs 700 crore in the sector over the next seven years.

Getting The Models Right

For all that action, the corporate revolution still needs to gain momentum. One deterrent is that it's a long-gestation business. Ask Joe Curian, CEO, P.D. Hinduja Hospital and Medical Research Centre, and he will tell you that though the 351-bed hospital in Mumbai was fully-functional by 1985, it became profitable only 17 years later. Newcomers, however, are looking at shorter break-evens. "Being a capital-intensive business," says Max's Singh, of his Delhi venture, "profits will only start trickling in after five years.''

According to Abhijit Bhowmick, Director, Feedback Ventures, who helps companies set up hospitals, the key issue will be quality. This is a complex issue. "Unlike others, healthcare is a business of soul,'' contends Sriram Khattar, head of strategy, Escorts Healthcare, "because it involves questions of life and death.''

"Our endeavours are aimed at creating a unique value proposition for our consumers." Habil Khorakiwala, Chairman, Wockhardt Group

Success might also prove to be a function of the business model adopted. Max Healthcare, for example, believes that initial success lies in getting the referral network right, to attract patients. The company has developed a 'hub and spoke model', by which its primary care centres, under the banner Dr Max, and diagnostic and secondary care centres, under the Max Medicentre brand, will refer patients to the tertiary hospital. A doctor network is being cultivated, too. The important thing, says Singh, is that the three levels are in constant communication.

Escorts Hospitals, famous for its cardiac surgeons, has already done an enviable job of the hub-and-spoke model. It has been running a successful outreach programme, with its doctors holding 'heart camps' at corporate locations and the like, to keep people conscious of their heart condition (many Delhi executives discovered their problem only because of this). In addition, Escorts has a referral network of diagnostic centres, heart command centres, and satellite clinics.

Apollo, which owns around 12 hospitals, has started a chain of franchised family health centres that will sport the Apollo brand and benefit from its management controls. Says Reddy, "The franchise model will be volume-driven with an emphasis on reliable and quality service.'' The risk here: factors beyond Apollo's control could harm its image. But if done correctly, it could be a pathbreaking expansion route.

"The franchise model will be volume-driven with an emphasis on reliable and quality service." Pratap C. Reddy, Chairman, Apollo Hospitals Group

Insurance Conundrum

Perhaps the biggest spanner in the wheel is the slow pick-up of health insurance in India. It's a classic chicken-and-egg situation. Corporates need a vast health insurance base to bank on, while insurers need large-scale corporatisation of healthcare, to be viable as insurers.

Insurers complain that medical fraud is so widespread, that they'd go bust just settling claims. Mediclaim, the only product available, is still paying out more money than it receives as premium.

Foreign health insurers remain numb to the market. The healthcare system is too frail, they whine. Another put-off: the seeming failure of the Red Ribbon campaign to turn India's HIV trend around. The US-based health insurer CIGNA gave up India in November last year. It's a no-go for others, too. Sad, given that the country has some 315 million potentially insurable lives, according to a BCG estimate.

Suggested solutions include hospital credibility ratings and third party administrators (to cross-check claims), but these will take time to prove effective. Moreover, as Sangeeta Reddy, Executive Director (Operations), Apollo (and a third party administrator herself), explains, hospitals will cooperate only once they're under real competitive pressure.

Anyhow, a start is a start. Modern hospitals are on their way. May they proliferate. Competition is a good stimulus. The success of corporate projects could set the stage for a mutually reinforcing relationship between insurance and healthcare.