Most hospital chains are now looking at innovative, niche health care models for acquisition and expansion, instead of basic ones. Rising real-estate costs and increasing competition have prompted this attitudinal change.
While players like Fortis, Max and Apollo, with well-established networks in metros and Tier-I cities, are eyeing less-intruded geographies and multiple models for expansion, small but speciality health care players are exploring options such as day-care surgery centres and single-specialty tertiary care.
For example, of late, many day-care surgery centres, where patients go under the scalpel and return without an overnight stay, have sprung up. Multi-speciality Nova Medical Center, Mumbai-based Beams Hospitals, Vasan Eye Care and Centre for Sight, renal care centre Nephrolife and dialysis chain RenKare are all operating in this segment.
According to Deloitte Touche’s senior director, strategy and operations, Charu Sehgal, the change can be attributed to the increasing competition coming.
“An increasing number of players in the health care are exploring new and innovative business models to tap larger number of patients and venture into less-intruded geographies, and enhance service-offering levels. Various unconventional formats are being tried out by some of the new entrants. This has also increased the willingness of existing players to experiment with new healthcare delivery formats,” said Sehgal.
Besides, experts say the rise in real estate costs have also played a significant role, as companies look to various low-cost models, including that of expansion in smaller cities, where the cost of setting up a hospital is substantially lower than in metros or tier-I cities. Health care companies, including major players, are also opting for operate-and-manage model and joint ventures to reduce investment in infrastructure and get an early return.
“The fundamental drive in last couple of years has been to see how one can create a new health care delivery system and infrastructure at a lower cost, because there is a fast escalation in infrastructure costs. So, one also has to see that the return on investment is increasing,” said Fortis Group Chief Executive Officer Vishal Bali.
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Fortis, which bought the hospital business of Wockhardt in December 2009, has seen tremendous expansion in the last few years. The company has opted for multiple models for growth, starting from primary care and day care specialty to hub-and-spoke hospital chains. It has also opted for the asset-light model to save on investments by taking real estate on lease.
| FINDING THE MIRACLE CURE Pressured by increasing competition and rising infrastructure costs, hospital chains are looking at more viable business models that can serve as lifeline in the long run |
| > DAY CARE SURGERY |
| Speciality centres where staying overnight isn’t required Players: Nova Medical Center (multi-specialty), Beams, Vasan Eye Care and Centre for Sight ophthalmology), Nephrolife (renal care), RenKare (dialysis centres) |
| > EXPANSION IN TIER-II, -III CITIES |
| These are seen as areas with growth potential Players: Apollo, Fortis, Max, Global Hospitals and Manipal Group |
| > LEASE/ASSET-LIGHT MODEL |
| Real estate is taken up on a rental basis, without investment in an asset Players: Fortis, Apollo, Narayana Hrudayalaya |
| > SINGLE-SPECIALITY TERTIARY CARE |
| Hospitals cater to patients in a therapeutic area that mostly involves high-end surgery Players: Healthcare Global (oncology) and Shankar Netralaya and Aravind Eye Hospital (ophthalmology) |
| > OUTPATIENT CLINICS |
| Standalone departments Players: Apollo, Vasan Eye Care, Wellspring Healthcare, MAcare |
| > JOINT VENTURE/O&M MODEL |
| One partner looks after facilities and technology, the other is the service provider Players: Apollo-Yash Birla JV in Thane, Singapore’s Pacific Healthcare, India’s Vitae Healthcare JV, Singapore-based Parkway Group JVs with Apollo Group and Mumbai-based Asian Heart Institute and Research Center |
| > HEALTHCARE CITIES |
| All services, such as wellness, day care surgery, preventive medicine, etc provided along with R&D, medical education & training Players: Narayana Hrudayalaya, Apollo, Medanta, Chettinad |
| > HUB-AND-SPOKE MODEL |
| Satellite hospitals in adjoining areas would entertain cases first, referring the critical ones to the nodal hospital Players: Apollo, Max and Fortis |
Opting for multiple, innovative models helps fast-track growth, said Bali. The Fortis chain of hospitals is growing at 28-30 per cent yearly.
A large number of corporate and health care delivery players are exploring setting up chains of multi-speciality clinics in different parts of the country, said Sehgal. While Apollo has a network of 50-60 outpatient clinics, Vasan Eye Care has set up 80-100 eye care hospitals. New players like Wellspring Healthcare have plans to set up a large number of clinics across India.
“Apart from investments, the disease factor is also a trigger for change. With the kind of diseases emerging these days, we need more single-specialty hospitals than multiple-speciality ones. This also requires less investment from the point of view of the company,” said Anurag Dubey, associate director, healthcare IT & healthcare delivery, South Asia and West Asia, Frost & Sullivan.
According to a recent report of PricewaterhouseCoopers, the Indian health care industry is estimated at Rs 3.5 lakh crore ($65 billion), growing at a compounded annual rate of 15 per cent.