After this whirlwind lunch interview, Shivinder M Singh, managing director, Fortis Healthcare (India), cleans up his desk with a paper napkin, folds it neatly and tucks it under his empty plate. Perhaps a fetish for organisation is Singh’s vice, but fastidious preparation has worked for him. In 10 years he has taken Fortis Healthcare from a single facility in Mohali to being the largest private healthcare provider in the country on the back of a string of canny acquisitions. The group currently boasts a total strength of 8,000 beds and 56 multi-specialty hospitals across the globe. Now Singh has decided to turn his attention to “the pressing issues of the country and where can we make a dent”. He tells Alokananda Chakraborty and Richa Prakash how Fortis plans to make reliable and affordable healthcare accessible to all.
How would you define affordable healthcare? Where does Fortis stand in making reliable and affordable healthcare accessible to all?
I believe there is a big gap between the perception in the market place and the reality of the world. On a quality parameter, Indian healthcare is among the best in the world, for what we do. But we don’t do everything. So if you talk about the latest genetic stereotyping and fixing mutation of the genes at the foetal level, we don’t do all that stuff. But we do a lot of high-volume stuff that is critical for healthcare. In what we do, I think India is comparable to even the Western countries. You take America, the leader in healthcare. We can compete with them head-on on the quality parameter in terms of outcome, in terms of clinical quality.
Indian healthcare is probably the cheapest in the world today, cheaper than any country you want to compare it to, keeping in mind the quality benchmark. Think of the other countries that are doing well in healthcare — Singapore, Thailand, South Africa... We are cheaper than them also. So if you look at a price-point basis, which is a big bug in India, we are perhaps the cheapest in the world today. If I were to compare India with the US for the stuff that we do, we do it at may be one-tenth the price, at a comparable quality.
When you look at it in the Indian context, healthcare is still seen as very expensive. But in all probability, the five-star hospitals are cheaper than the three-star.
Can you explain?
Let me tell this: The branded ones are actually cheaper than the unbranded because of a certain level of expertise that does not exist in an unbranded hospital. Then you have to add to it the fact that the branded do much more complex work than the unbranded. So the nursing home guy does angioplasty which the hospital also does. But we are not just doing angioplasty; we are doing much more complex work. Because we have a reputation to protect, we are much more transparent. If somebody has a problem with us, he can go to the newspapers and you’ll carry that story. But if it’s about some Sharma nursing home, no one will notice.
Even within India the top-notch facilities are cheaper than those at the bottom. Then there is something for which Fortis can take credit. Since we walked into the business 10 years ago, we’ve actually changed the paradigm of costs in the country. Fortis started in 2001 and today, after 10 years, we have not changed the price points. As a result, we’ve actually caused a healthcare deflation. So whereas a Rs 100 procedure done in 2001 should be around Rs 200 today, it’s sitting at Rs 95-105. We have kept them static. I don’t think it gets noticed much, but we take credit for it. If you look at the price of fuel when we started and the price of fuel today — there’s a huge difference. Now look at the price of cardiac surgery when we started and now: Is there a huge difference?
I think these innovations that have happened in the market place by virtue of the processes that have come up and the kind of efficiency we have brought into the company, and therefore the country, are largely unnoticed.
How do you plan to take healthcare to more people?
Coming to what we want to do... we have only touched the tip of the iceberg. So if we have reached a million people, there’s the billion-plus population. So we are not really relevant in that sense. We asked ourselves, can we look at a standardised, low-frills model and take it to tier-2 and tier-3 markets and try to reduce the cost for the patient? Look at the invisible costs that a patient goes through today. If a patient is coming from Saharanpur to Delhi, the procedure may cost Rs X but there is the added cost of transportation, boarding, lodging, productivity loss....
So the idea is to bring it to or somewhere near his home town. We don’t want to reduce the level of clinical care because that’s what we stand for. We want to reduce the frills and therefore reduce the price points. Even if we look at a 50 per cent reduction in the cost of the procedure, we are actually looking at a 70 per cent reduction for the patient. Our objective now is to see whether we can come up with a different brand promise that assures the Fortis quality of clinical care but at the next level of service, so to speak. In a lot of ways we are approaching it like the Nano — which is about providing the same quality to the lower end of the spectrum. Making it cheaper for the consumers by taking it to their home towns.
You often say you want Fortis to be the McDonald’s of the healthcare industry. Where do you see the parallel — in the cost structure or in the standardisation?
The way I see it, McDonald’s has managed to de-glamourise, standardise a burger, and has made it accessible to everyone in the world at a low price point. It’s managed to take the same product across markets — you get the same quality and experience everywhere in the world. So the key is standardisation and replicability. Standardisation also happens at Bukhara, you get the same dal every time you go there. But it hasn’t been able to replicate it. You don’t get the same dal at the Bukhara in Hyderabad or Chennai. When I talk about McDonald’s in healthcare, I mean the same quality and the same kind of ethos go into the product; the same ambience, the same customer service are available to you at every Fortis hospital. Standardisation is easier for a hotel but not for a hospital because the guy giving care in the hospital, unlike in a hotel, is not at the lower end of the bargain but the top end. So it’s difficult to standardise him. But the idea is not to have clones, but the same processes so the patient’s safety is assured.
Of course, it also has an impact on costs....
Standardisation affects the cost by virtue of the fact that you don’t have to replicate the same process in a number of places. You can reduce the number of jobs at the front end. You can standardise them, it gets easier as you go along. The quality improves and errors, a major cost in healthcare, reduce. The idea is that if I have a hospital in a tier-3 or a tier-4 market, and it runs on the same system, it’s cheaper for me to run it.
We are doing this project, called Project Next, which, in a nutshell, is hospital-wide ERP. It’s costing us a bomb, roughly $5 million. But that’s across the entire network and it’ll put everything on the same platform, front and the back-end. By virtue of having scale, you can actually do more and you can do it cheaper.
You spoke briefly about the low-cost model. So have you fine-tuned the plan? What will be the brand called?
No, we haven’t got a brand as yet. We looked at what we’ve done, what we do in the hospitals today. Say we do a 100 different types of procedures. The top 5-7 per cent of the procedures actually cost the most amount of money. For the more complex procedures, I need a lot more technology and equipment and a higher degree of specialisation. So we decided we will do only X of the hundred procedures in the tier-2/3 facility. Say, we’ll do 90 out of the 100. By knocking off those 10 complex procedures, we’ll end up reducing the cost of technology a lot, the cost of space a lot, and consequently the needs at the front end. So by knocking off just the top 10 per cent, I knock off a lot of the domino effect, much of the CAPEX (capital expenditure) and OPEX (operational expenditure).
And therefore my whole package becomes lighter to deliver from the cost point of view. If I were to turn around and say I don’t do the top 10 of cardiology, I’ll probably knock off four different types of equipment, I won’t need three different types of doctors. So the doctor at tier-2/3 will be able to handle 90 per cent of the procedure and for the higher level he can refer the patient to the next facility. Therefore, I optimise talent at the central level, and I’m able to make healthcare cheaper and closer to you.
I feel there are three things we need to do to take it to the last man standing in the country. First, we need to get an emergency network. The guy who is in an emergency should get immediate access. Second, we need diagnostics because early diagnostics is half the problem (solved). Third, we need a preventive mindset and therefore preventive capabilities at the doorstep.
Say, I take the 600,000 villages in the country and link each to a network which has got an emergency response. The villager has the basic diagnostic facility to figure if he has a problem early enough. And there is a preventive structure in place where there are annual health-checks and other such mechanisms. Actually, I have a model that will work towards a healthier country. So take this tier-2 brand, which is actually a 200-bed operation that doesn’t have the top 10 per cent facility. As long as I get to the core of emergency, preventive and diagnostics, and I can take it deeper, I actually have a model that can work very well for our country. It may not work for other countries. The idea is to get to that level.
Coming to the SRL network, many of the facilities are actually franchised. If you’re talking about standardisation, how do franchisees fit into the network? There’s always this question whether a franchise will deliver the same quality....
In the SRL space there are two critical things we need to look at to make sure quality does not get compromised. One is the collection of blood, and second is the quality of testing. We only franchise the collection centres, not our labs. We have over 800-900 collection points in the country. We train the phlebotomist on the drawing and preservation of the blood samples and all the testing is done by us. There’s no lab that is not run by us. The critical point is the training for the draw of blood.
In the pre-internet era, the SRL network was probably one of the most complex in the country. We could actually track our sample anywhere. Even today we have one of the most sophisticated logistics networks. We promise a 24-hour turnaround time anywhere in the country. We have picked up samples from Leh to Kanyakumari. Today, we have 38-39 labs but that time we had only two labs, in Delhi and Mumbai. So the samples had to get to Delhi or Mumbai; the more complex procedures would go to Bombay. Even then we were getting back with the results in 24 hours.
In our race to reach the last man standing, SRL is going to be critical because it already has a vast network. So if I talk about diagnostic, preventive and emergency, we already have the diagnostic reach; we can use that to expand further.
What about primary healthcare?
At this point we don’t have any plans to get into primary healthcare because primary healthcare is a lot of OPD (outpatient department) and GP (general physician), and it’s difficult to have a network where you can add value to a GP working as a standardised tool in an environment like India. So our focus is more on the curative side. The complexity of having a primary care doctor where you actually ensure that he comes on time, he follows certain procedures, is rather difficult as a concept in India.
And I’m not too sure that a customer will see any exceptional value in coming to a Fortis primary centre than go to his GP who anyway has a family bond with him. Even today, you will call a family physician first, no matter if it’s a heart-attack or a burn. Then you’ll go up the value chain. I don’t think that concept will change in a hurry. So may be down the line, but not right now.
You have also spoken many times about entering medical education in India. What’s keeping you?
The current laws. We — private players — are not allowed to set up medical colleges — you need a minimum of 25 acres, the bed to student ratio is controlled, how much square foot you need to build is controlled.... It doesn’t work for the person setting up. A medical college can’t be set up by a for-profit company, you have to be a society. You can’t take investors’ money and put it in an instrument that doesn’t give returns. There are a lot of other laws around it which actually make it impractical to set up a medical college.
So what is the way forward for Fortis... what is your benchmark?
Ten years is a very small time in our (healthcare) industry. It takes seven/eight years for a hospital to be established and even start having some credible market. To have gotten to this size and scale is a pretty good place to be sitting at. Now we are looking at the pressing issues of the country and where can we make a dent.
Talking about benchmark, we don’t really compete with the Indian players. We want to be globally respected. We have done a lot of investments and spent a lot of time to create a standardised, replicable model. Most great institutions around the world are single shops, not multi-geographic. On top of that, we want to be a global player. We already have presence in some countries and are looking to expand further. In that sense we are unique. Our model is different but the clinical quality is the same.
There’s no benchmark for us if you are talking of the model. You can say we are trying to be what Johnson & Johnson is in the services space. But we are not really comparable to any one brand or model.
Our plans for the future are a little complex. We need seven to eight verticals to build a franchise both in India and internationally. We want to set up speciality centres, and offer medical education. Going forward, we would like to increase focus on the mother and child space. In 10 years, we have come a long way as a brand. But India still ranks poorly in terms of healthcare. As a country you cannot be proud of these statistics. So we are kicking off a project around mother and child care, including childbirth, ante-natal and post-natal care, things which go a long way in keeping a family healthy.
