A ‘semi-urban only’ hospital chain plans to expand further into small towns

With the healthcare sector zooming ahead at 15% annually, all hospital chains, big and small, are planning aggressive expansion.

However, unlike the Fortis’ and Apollos, which are spreading their wings from the metros to overseas centres, a Karnataka-based hospital chain is planning expansion only in towns with a population of 300,000-400,000, and provide services at substantially lower rates for patients.

With a game plan as aggressive as corporate chains, Vaatsalya Healthcare Solutions (VHS) intends setting up 30 hospitals in the next three years, but in places such as Davangere, Bellary, Chitradurga, Tumkur — all in Karnataka; Guntur, Warangal, Rajamundry, Kakinada, Nellore — all in Andhra Pradesh; and Satara, Latur, Nanded, Ratnagiri, Karad — in Maharashtra.

Dr Ashwin Naik, CEO and co-founder of VHS says that since their first hospital in 2005, in Hubli, the focus has always been on non-metros, since metros and places such as Pune, Hyderabad, etc always manage to attract new hospitals.

“There is a pressing need for good healthcare services in tier III and IV towns, which have to be provided at affordable prices to the middle-class, and lower-middle class people residing there.”

Operating on a policy of low investment and high utilisation, VHS will set up 70-bedded hospitals, catering mainly to the requirements related to maternal and child care, general surgery, medicine, as well as diabetes and dialysis.

Alistair Stranack, partner, global healthcare practice head at strategic advisory firm Parthenon Group, says that India needs new healthcare models that have lower costs and capital requirements than traditional settings.

VHS currently has about 10 hospitals in Hubli, Gadag, Bijapur, Mandya, Hassan, Mysore, Gulbarga, Shimoga in Karnataka, and in Narasannapeta and Vizianagaram in Andhra Pradesh.

Dr Naik says the Rs35-crore-VHS works on a strategy of providing those healthcare services, which are needed by 70% of the local communities.

“The main requirement in all these areas pertains to paediatrics and gynaecology. There is a great need for neo-natal intensive care units as well as dialysis units. We are keeping 10% of the capacity for neo-natal intensive care.”

The strategy of not including high-end specialties such as neurology, urology, cardiac care, that don’t carry a pressing requirement in these towns, as well not investing in expensive infrastructure such as CT scans, MRIs, etc will bring down the cost to patients, say healthcare experts.

ENT surgeon Dr Gopal Dabade, president of the Drug Action Forum, Karnataka, says healthcare facilities in semi-urban areas will benefit the local communities only if they are made affordable.

“A huge chunk of people are pushed into debt due to healthcare costs. Over 60% borrow funds to meet hospital expenditure. Unless costs are low, hospitals in rural towns will not make much of a difference,” says Dr Dabade.

However, Dr Naik says that on the whole, for a patient, the cost would be approximately one fourth of what a 70-bed city hospital would charge, or about one tenth of what a multi-specialty hospital in a metro would charge.

This is because the investment for such models is a fraction of what goes into multi-specialty city hospitals, says Ankur Bharti, consultant, at management consulting firm Technopak.

“Moreover, our methodology consists leasing existing nursing homes and converting them into hospitals, which brings down the overall project cost,” says Dr Naik.

Corporate hospitals in cities need an investment of about Rs70-80 lakhs per bed, while the model of no-frills, leasing, and focus on primary care would need about Rs1-2 crore for setting up each hospital, says a healthcare consultant in Mumbai.