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New Models of Healthcare Delivery

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hospitalThere is a need of healthcare infrastructure in any form – be it single specialty, multi-specialty, hospitals or specialized clinics that have come up in many cities. The demand and supply is definitely a skewed one in healthcare. In addition, the accessibility to healthcare is also a challenge. At times, the funds are available but there is a lack of infrastructure, or if the infrastructure is available, there is a lack of quality doctors and manpower to run the hospital.

Novel Trends

Multi-speciality is the mainstay now for delivery of traditional healthcare formats across multiple speciality and super-speciality. However, as these are usually a large set-up, there are many barriers of entry points from a real estate perspective. Usually, the real estate should take 20 – 30 percent of the overall project cost, however, in metro cities especially in Mumbai, the real estate itself takes about 60 – 70 percent of the funding. Therefore, the newer models that come in are in usually in the form of joint venture, wherein one partner owns the land and the other runs the brand of the hospitals similar to the hotel model. This can be applicable to both multi-specialty and single specialty. This model of ownership will take its own shape in the coming years, and more investors and real estate players will explore this format in various forms.

Single specialty model of hospital chains is a model that has been extremely successful in the western countries especially the US. There are top ranked hospitals, and there are specialty center of excellence for orthopedic, spine, hernia, or eye centers. They bring-in profit ability from an investor point of view and bring-in efficiencies by standardizing the processes thus saving on investments, energy, consumables, manpower, etc. Hence, specialty focused hospitals becomes a promising proposition from the investor’s point of view and the physicians’ point of view. The benefits should pass on to the patients. One of the similar model has already been launched by Sunridges specialty Hospital, Juhu.

The other format which comes as the specialtyfocus is more possible in the future, as the investments that a multi-specialty demands in terms of real estate, bigger infrastructure, will take 5 – 7 years as the turn-around time. Moreover, if one considers the end-to-end timelines from planning to return on investment, it takes close to one decade. In addition to the timeline, there is a limitation of the promoters, as the statutory requirements take its own time. Thus, overall, the hospital model has three major challenges, one is to have the promoters and investors ready, second is to have a planning and design efficiency, and third is operational efficiency, which again are challenges today. So, all these three factors will ensure the success of the model. If one takes the models of the United States and implements them in India, there is lot of localization elements that needs to be incorporated to make the venture successful.

Growth Positive

Developing cities are more attractive for the promoters for healthcare investment, as there is a balance between real estate and equipment infrastructure investment. In addition, doctors from in and around the region of the developing cities would like to settle due to lower cost of living. The best examples arethose of Pune, Aurangabad and Nasik. A large corporate centre would usually get into the tier-II cities, set up an optimum size hospital infrastructure with multi-specialty and then try to grow. This model is more stable as EBIDTA margins are promising. The major reasons for its success will be that the government is not investing much in these areas for healthcare and India has an affordability advantage. Thus, overall, the challenges in healthcare are huge, however at the same time it is a promising area for investments.

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