Davids catching up with biggies in hospitals race

The huge gap between demand and supply of hospital beds in the country isn’t benefiting just the big groups such as Fortis, Apollo and Manipal. Smaller chains like Bangalore-based Nova Medical Centre and HCG, and New Delhi-based Medfort Hospitals too see ample space for growth.

Estimates by Ernst &Young suggest India would need 1.75 million hospital beds by 2025. However, the current supply is limited.

According to Alistair Stranack, partner and global healthcare practice head at strategic advisory firm Parthenon Group, the challenge is not only setting up newer centres, but bringing affordable healthcare to the middle and low income groups by using models that reduce costs more than traditional hospital settings.

“Models operating in single specialty, day care surgery; which reduce the need for large scale in-patient facilities, thereby reducing cost to patients, could make treatment affordable for a large section of the population,” says Stranack.

And therein lies an opportunity for the smaller hospital chains.
Nova Medical Centre, a chain of daycare surgery units, plans to invest about $225.5 million to set up about 100 centres by 2014.

Medfort Hospitals has plans of setting up about 60 diabetes and eye care centres in Andhra Pradesh, Maharashtra, Orissa, Tamil Nadu and Uttar Pradesh. It has raised Rs60 crore for the purpose.
Likewise, HCG, a chain of 18 cancer care hospitals, is strategising on opening up 10 more centres in the next one year.“As such chains still make a small number, they can be scaled up rapidly,” says Stranack.

Gaurav Malhotra, CEO of Medfort, says the chain, which currently runs seven hospitals in the National Capital Region, would go to places like Nasik, Vijayawada, Coimbatore and Baroda. “There is a huge opportunity in therapeutic areas like diabetes and eye care, and no pan-India chains.”

Similarly, there are no pan-India chains catering specifically to all aspects of cancer care, says Dr B S Ajaikumar, chairman and CEO, HCG Hospitals.

Moreover, such centres end up costing a little less than super specialty hospitals, as they require less capital to set up.

Indeed, going by Medfort’s Malhotra and Suresh Soni, chairperson of Nova Medical Centre, the cost to patient will be about 15% less than any regular super specialty hospital.

“The investment required to set up such a centre is only Rs5-10 crore as the space and manpower is less compared with a cost of Rs70-80 lakh per bed incurred by super specialty hospitals as they are set up on larger tracts of land,” says Ankur Bharti, consultant, Technopak.

And yet, the margins for such centres are high as they are mostly surgery driven, says Bharti.

For an eye hospital, the margins would be between 30% and 50%, while for cancer hospitals it would range between 19% and 20%.