Single-specialty hospitals making waves in healthcare

Situated off a busy junction in Wadala in central Mumbai is a hospital providing services for cataract, lasik, cornea, contact lenses, and anything and everything to do with eyes.

Likewise, amid the traffic-heavy Corporation circle in Bangalore is a hospital offering chemotherapy, radio surgery for cancers of the lung, pancreas, prostrate, breast, colon, leukemia and other cancers.

Even though the services provided by these two hospitals are as different as the scalpel is from the stethoscope, they have one binding factor—both are single-specialty hospitals (SSHs) catering to one particular therapeutic area.

Look beyond the Apollo and Fortis hospitals which supply every service from cardiac to diabetes and from cancer to orthopaedics under one roof.

SSHs are making quick waves in the $40 billion healthcare market in India.

As SSHs are focused on one field, they can offer end to end services and personalised care in that core area, says B S Ajaikumar, chairman and CEO of HealthCare Global (HCG) Enterprises, a chain of 17 cancer hospitals headquartered in Bangalore.

According to S Natarajan, chairman and MD, Aditya Jyot Eye Hospital, Mumbai, SSHs are also easier to run and manage.

Furthermore, the staff working in SSHs also get trained and geared towards providing particular type of care, says K K Sethi, chairman, Delhi Heart & Lung Institute, a five-year-old 100-bed hospital.

“We have a core team of doctors focused on heart and lung, and also have visiting consultants incase other complications arise,” says Sethi.

Industry experts say that SSH is a good business model with high margins and less investment.

Alistair Stranack, partner, global healthcare practice head, at advisory firm Parthenon Group says that it is well established internationally that hospitals focused on limited specialties demonstrate superior performance both therapeutically and financially.

Average margins for an eye hospital could be between 30% and 50%, while that for a cardiac care hospital would be between 25% and 28%, says Ankur Bharti, consultant, Technopak.

“The margins in SSH are high as they are mostly surgery driven and surgeries are expensive. A SSH also needs less manpower, equipment, and infrastructure,” says Bharti.
Margins for cancer hospitals are estimated between 19% and 20%.

Typical per bed investment for a multi-specialty hospital (MSH) is three to four times higher than that for a SSH depending on the area of focus, says Vikram Gupta, COO, IndiaVenture Advisors, a private equity firm.

“The typical estimated project cost for a cancer specialty hospital is Rs 25-30 crore, excluding the land cost.”

A 100 bed cardiology hospital could cost Rs 15-20 crore, while a nephrology (kidney) set-up could cost Rs 10-12 crore, Gupta says.

Stranack says that as one of the biggest challenges for hospitals in attracting funds is the high capital requirement and long payback associated with the sector, specialty hospitals can certainly be a more attractive proposition. However, other industry experts believe that MSHs are more viable. Nikita Trehan, director, Trinity Healthcare in New Delhi says that often insurance companies are not keen on SSHs. “There could be medical complications which could arise at times, hence its better to go to a MSH.”