Wednesday, September 27, 2006
Healthcare Tourism
Medical Tourism Meets Healthy Opposition
Just before I left to the US, there was this story in the Times of India by Chidananda Rajghatta that talked about some opposition from a US Trade Union to sending their members to India for medical treatment. Blue Ridge Paper, the company which was supposed to send its employee to India for treatment has had to find a locally available (within the US) alternative. Surprisingly, both the Indian and the US media have been quite silent about this. A google search very quickly revealed the original story.
But then this would have been an expected outcome to too much focus on the low cost of medical treatment in India. In an earlier post I had suggested that our pitch should be based more on the world class treatment that is available here rather than talk about how a procedure would only cost 15-20 % of what it would cost in the US. The primary fact is that no one (not the employer, or the patient, or the hospital even is aware of what a procedure actually costs-the prices being used in most comparisions are actually special prices negotiated by large health insurance companies for their members, and not necessarily the costs incurred by either the smaller companies-in fact the uninsured are faced with the highest costs !!!)
By this unnecessary focus on the low costs, the message actually being sent is that the quality of services is low enough to be delivered at these low costs. No wonder that the USW has opposed the move to send employees to India for treatment. Sure, there could be political angles to this, but then healthcare is certainly no IT, and India should certainly want to avoid any opposition to healthcare outsouring (the opposition to IT outsourcing died out soon after the 2004 presidential elections, but healthcare could be a completely different situation, and just when the market is opening up, one wouldn't suggest anything that could hinder its growth)
Just before I left to the US, there was this story in the Times of India by Chidananda Rajghatta that talked about some opposition from a US Trade Union to sending their members to India for medical treatment. Blue Ridge Paper, the company which was supposed to send its employee to India for treatment has had to find a locally available (within the US) alternative. Surprisingly, both the Indian and the US media have been quite silent about this. A google search very quickly revealed the original story.
But then this would have been an expected outcome to too much focus on the low cost of medical treatment in India. In an earlier post I had suggested that our pitch should be based more on the world class treatment that is available here rather than talk about how a procedure would only cost 15-20 % of what it would cost in the US. The primary fact is that no one (not the employer, or the patient, or the hospital even is aware of what a procedure actually costs-the prices being used in most comparisions are actually special prices negotiated by large health insurance companies for their members, and not necessarily the costs incurred by either the smaller companies-in fact the uninsured are faced with the highest costs !!!)
By this unnecessary focus on the low costs, the message actually being sent is that the quality of services is low enough to be delivered at these low costs. No wonder that the USW has opposed the move to send employees to India for treatment. Sure, there could be political angles to this, but then healthcare is certainly no IT, and India should certainly want to avoid any opposition to healthcare outsouring (the opposition to IT outsourcing died out soon after the 2004 presidential elections, but healthcare could be a completely different situation, and just when the market is opening up, one wouldn't suggest anything that could hinder its growth)
Tuesday, September 26, 2006
US Healthcare
System in Crisis
Have been travelling in the US the last few days. Right now am in my hotel room in Boston, on the banks of the Charles River, and right across from where I am is the Mass.General Hospital, one of America's best ranked Hospitals. Everytime I go there, the feeling is overwhelming, and I wonder when one of our institutions will grow to that stature.
But what beats me, is that despite having a large number of world class facilities, the overall healthcare system seems to be in crisis. Almost everyday, the newspapers have some story about the spiralling costs of healthcare, the growing numbers of the unisured, and the problems the baby boomers are expected to face. And the more I read these, the more convinced I am that Indian Healthcare entrepreneurs can demonstrate interesting models that can help the US healthcare system come out of the hole it is in right now.
Have been travelling in the US the last few days. Right now am in my hotel room in Boston, on the banks of the Charles River, and right across from where I am is the Mass.General Hospital, one of America's best ranked Hospitals. Everytime I go there, the feeling is overwhelming, and I wonder when one of our institutions will grow to that stature.
But what beats me, is that despite having a large number of world class facilities, the overall healthcare system seems to be in crisis. Almost everyday, the newspapers have some story about the spiralling costs of healthcare, the growing numbers of the unisured, and the problems the baby boomers are expected to face. And the more I read these, the more convinced I am that Indian Healthcare entrepreneurs can demonstrate interesting models that can help the US healthcare system come out of the hole it is in right now.
Thursday, September 14, 2006
Project Development
Mergers and Acquisitions
In an earlier posting, I had written about mergers and acquisitions being an attractive option today for rapid scaling up of healthcare delivery organizations. When I wrote that I was really thinking of the large players like Apollo, Wockhardt, Manipal, and Fortis. But it seems like there is a lot more action happening in this space.
Sometime last week, there was a story in the Economic Times about the Meenakshi Medical Mission, Madurai, acquiring a stake in a hospital in Tirunelveli. And a couple of days ago, another story about a Hospital in Kanchipuram acquiring Devaki Hospital, Madras. Am sure there are many more instances that may not have made it into mainstream media.
This is good stuff, and I think that activity levels will go up even further. The more one thinks about this, the more it seems like this is a good way for consolidation to happen in this industry. The current level of fragmentation is quite inefficient, and most of the smaller providers will be better of as part of a larger entity, which can then implement best practices, and ensure better quality of care to the patients.
In an earlier posting, I had written about mergers and acquisitions being an attractive option today for rapid scaling up of healthcare delivery organizations. When I wrote that I was really thinking of the large players like Apollo, Wockhardt, Manipal, and Fortis. But it seems like there is a lot more action happening in this space.
Sometime last week, there was a story in the Economic Times about the Meenakshi Medical Mission, Madurai, acquiring a stake in a hospital in Tirunelveli. And a couple of days ago, another story about a Hospital in Kanchipuram acquiring Devaki Hospital, Madras. Am sure there are many more instances that may not have made it into mainstream media.
This is good stuff, and I think that activity levels will go up even further. The more one thinks about this, the more it seems like this is a good way for consolidation to happen in this industry. The current level of fragmentation is quite inefficient, and most of the smaller providers will be better of as part of a larger entity, which can then implement best practices, and ensure better quality of care to the patients.
Friday, September 08, 2006
US Healthcare
Fast Growth Companies
Fortune Magazine's 2006 listing of the 100 Fastest Growing Companies in the US expectedly has a large number of Healthcare Companies. Of these I found two very interesting (and not because they are both in the top 20). Amedisys, ranked 7, is a home nursing care and hospice specialist, whereas inVentiv Health, ranked 15, provides drug firms with services in clinical trials, sales, and marketing.What is interesting is that both these companies have 3 year revenue growth at close to 50%, and a significant part of this is coming through acquisitions.
Amedisys' strategy of providing low cost, outcome driven healthcare at home, seems to be paying off (the company reported revenues of $ 438 M for the last 4 quarters).
inVentiv Health (formerly known as Ventiv Health) provides a comprehensive range of clinical, communications and commercialization services to take pharma products from development through launch to commercial success. For over 200 industry-leading healthcare companies, inVentiv Health is the partner of choice (revenue for the past 4 quarters was $ 609 M)
I have come across at least one Home Healthcare Services organization right here in Bangalore, but am not sure they have been able to scale up. With a growth in the number of older people, as well as the difficult traffic situation, one would expect that the demand for home healthcare in the metros should be going up. How can we build successful businesses around this opportunity?
Fortune Magazine's 2006 listing of the 100 Fastest Growing Companies in the US expectedly has a large number of Healthcare Companies. Of these I found two very interesting (and not because they are both in the top 20). Amedisys, ranked 7, is a home nursing care and hospice specialist, whereas inVentiv Health, ranked 15, provides drug firms with services in clinical trials, sales, and marketing.What is interesting is that both these companies have 3 year revenue growth at close to 50%, and a significant part of this is coming through acquisitions.
Amedisys' strategy of providing low cost, outcome driven healthcare at home, seems to be paying off (the company reported revenues of $ 438 M for the last 4 quarters).
inVentiv Health (formerly known as Ventiv Health) provides a comprehensive range of clinical, communications and commercialization services to take pharma products from development through launch to commercial success. For over 200 industry-leading healthcare companies, inVentiv Health is the partner of choice (revenue for the past 4 quarters was $ 609 M)
I have come across at least one Home Healthcare Services organization right here in Bangalore, but am not sure they have been able to scale up. With a growth in the number of older people, as well as the difficult traffic situation, one would expect that the demand for home healthcare in the metros should be going up. How can we build successful businesses around this opportunity?
Tuesday, September 05, 2006
Healthcare Tourism
Media Favorite
We know that the Indian media likes to write about our being the preferred destination for Healthcare Tourists from across the world. And to retain the interest of the reader, the journalist has to keep varying the flavor of the story. Since the basic Indian value proposition seems to be Low Costs for even the most complicated medical treatments, no scribe can refrain from talking about this. But to give the story that little angle, we have someone writing about employer sponsored tourists. Or about Indian Hospitals tying up with Medical Tourism Companies for patient flows.
But what beats me why the Indian Media is devoting so much of its energies to Healthcare Tourism. What beats me even more is why is it wasting so much space to talk about Low Costs? Sure, PR agencies representing Healthcare Tourism companies are getting their customers good deals (it is a no-brainer that a 60 cc news story will score over a similar sized ad), but what is the desired outcome? The media plays a very important role in building a business, but then it is important to realize that there are always two sides to building any business. At the risk of oversimplifying, I call these the demand side, and the supply side.
It is reasonable to assume that the demand side consists of the countries from which we hope to attract patients. And thankfully, the media in some of those countries has been writing about how one can expect to receive world class medical treatment in India. Strangely, while there is mention of lower costs, they don’t seem to be going overboard (like the Indian Media is) about how much lower (maybe they have realized that while World Class can cost less, it may be a bit difficult to imagine world class co-exist with cheap. And why, one might ask, should world class be sold at such low prices anyway?)
The supply side consists of all the Indian Hospitals that hope to attract the Healthcare Tourist. And it is here that the media can actually play a catalytic role. By writing about what it is that the tourist looks for when choosing a city/hospital in which to receive treatment, the kind of post-hospital support he expects, whether this can be delivered remotely (after all India provides help desk support to the developed world across industries), media can encourage meaningful dialogue about what needs to be done to ensure that the tourist who does land up here receives medical treatment that he will gladly recommend to his friends/relatives back home.
To a country that has rarely believed in quality processes even to attract the domestic patients, depending instead on the celebrity power of a few physicians to keep the beds occupied, accreditation by a national/international agency to ensure quality does not come easy, and it will take them some time to understand the importance of these. And media can surely help here.
We know that the Indian media likes to write about our being the preferred destination for Healthcare Tourists from across the world. And to retain the interest of the reader, the journalist has to keep varying the flavor of the story. Since the basic Indian value proposition seems to be Low Costs for even the most complicated medical treatments, no scribe can refrain from talking about this. But to give the story that little angle, we have someone writing about employer sponsored tourists. Or about Indian Hospitals tying up with Medical Tourism Companies for patient flows.
But what beats me why the Indian Media is devoting so much of its energies to Healthcare Tourism. What beats me even more is why is it wasting so much space to talk about Low Costs? Sure, PR agencies representing Healthcare Tourism companies are getting their customers good deals (it is a no-brainer that a 60 cc news story will score over a similar sized ad), but what is the desired outcome? The media plays a very important role in building a business, but then it is important to realize that there are always two sides to building any business. At the risk of oversimplifying, I call these the demand side, and the supply side.
It is reasonable to assume that the demand side consists of the countries from which we hope to attract patients. And thankfully, the media in some of those countries has been writing about how one can expect to receive world class medical treatment in India. Strangely, while there is mention of lower costs, they don’t seem to be going overboard (like the Indian Media is) about how much lower (maybe they have realized that while World Class can cost less, it may be a bit difficult to imagine world class co-exist with cheap. And why, one might ask, should world class be sold at such low prices anyway?)
The supply side consists of all the Indian Hospitals that hope to attract the Healthcare Tourist. And it is here that the media can actually play a catalytic role. By writing about what it is that the tourist looks for when choosing a city/hospital in which to receive treatment, the kind of post-hospital support he expects, whether this can be delivered remotely (after all India provides help desk support to the developed world across industries), media can encourage meaningful dialogue about what needs to be done to ensure that the tourist who does land up here receives medical treatment that he will gladly recommend to his friends/relatives back home.
To a country that has rarely believed in quality processes even to attract the domestic patients, depending instead on the celebrity power of a few physicians to keep the beds occupied, accreditation by a national/international agency to ensure quality does not come easy, and it will take them some time to understand the importance of these. And media can surely help here.
Monday, September 04, 2006
Project Development
Finding Capital
Around the time that Dr.Prathap C Reddy founded the Apollo Hospitals Group (in the mid 80s), the biggest challenge to healthcare entrepreneurs was to find Capital. Strangely, Hospitals did not have industry status at that time and were therefore not eligible for funding from the development financial institutional (that sanctioned loans at reduced rates) and had to borrow from commercial banks at market rates of interest. I remember signing a loan agreement in 1989 at 21 % !!
That was then. Today, not only have interest rates on borrowing come down, debt itself is no longer the preferred means of funding for healthcare projects. Not only are promoters investing their own money, they are also aggressively seeking out equity funding. A new breed of investors have emerged (many of who made their money from other sectors like IT) and willing to back them up are players like Private Equity Funds and Venture Philanthropists.
What this means is that entreprenuers can have visions on any scale and there will be someone willing to bank roll that, though the newer class of investors may specify more aggessive timelines for demonstrating financial viability. These investors might also insist on constantly innovating the business models.
But all this is surely good for the Indian Healthcare Industry. Most of the current investment of around $ 2.5 Billion every year goes towards adding around 80,000 Hospital Beds. In the mid-80s the Corporate Hospital was a huge innovation in a country whose private sector consisted of mostly physician owned nursing homes. Today, the Corporate hospital seems passe.
What will be the next big idea ?
Around the time that Dr.Prathap C Reddy founded the Apollo Hospitals Group (in the mid 80s), the biggest challenge to healthcare entrepreneurs was to find Capital. Strangely, Hospitals did not have industry status at that time and were therefore not eligible for funding from the development financial institutional (that sanctioned loans at reduced rates) and had to borrow from commercial banks at market rates of interest. I remember signing a loan agreement in 1989 at 21 % !!
That was then. Today, not only have interest rates on borrowing come down, debt itself is no longer the preferred means of funding for healthcare projects. Not only are promoters investing their own money, they are also aggressively seeking out equity funding. A new breed of investors have emerged (many of who made their money from other sectors like IT) and willing to back them up are players like Private Equity Funds and Venture Philanthropists.
What this means is that entreprenuers can have visions on any scale and there will be someone willing to bank roll that, though the newer class of investors may specify more aggessive timelines for demonstrating financial viability. These investors might also insist on constantly innovating the business models.
But all this is surely good for the Indian Healthcare Industry. Most of the current investment of around $ 2.5 Billion every year goes towards adding around 80,000 Hospital Beds. In the mid-80s the Corporate Hospital was a huge innovation in a country whose private sector consisted of mostly physician owned nursing homes. Today, the Corporate hospital seems passe.
What will be the next big idea ?
Saturday, September 02, 2006
Project Development
Mergers and Acquisitions
A couple of days ago, there was this news about Nicholas Piramal increasing their stake in Dr.Phadke Path Labs. The same news item talked about Metropolis Labs acquiring pathology labs in the UK, in addition to some in India. The last year has seen some high profile mergers and acquisitions in the healthcare space. One of the largest is the Fortis Healthcare takeover of Escorts Hospital in Delhi. Another is the Apollo Hospital acquisition of Imperial Hospital in Bangalore. There was also some news about Cadila Healthcare (a pharma company) taking a stake in the Apollo Hospital in Ahmedabad. Manipal Health Systems has been busy too picking up hospitals in different parts of the country. All this is so exciting.
When I came into the industry, the greenfield project route was the only way to set up a healthcare project. This often built in huge time lags because of various approvals that had to be obtained. Resulting in cost escalations. Not to mention loss of credibility among the investors, which in turn made raising capital that much more difficult. Which meant that many of the projects came into existense with the chips loaded heavily against them and therefore could never become financially viable. Many such projects will be willing targets for an aggressive acquirer.
Another aspect is that the scale of vision has evolved. A couple of decades back, a doctor with a good reputation built a Nursing Home, or a small hospital (maybe 50 beds, or even less), or a Poly-Clinic. His reputation (combined with that of his doctor partners) ensured steady patient flows, and financial success. In most cases the intent was that the next generation would take over and continue running the place. In many instances, the next generation is not keen to run the place. Also competition from larger hospitals has eroded the patient base. These larger hospitals are investor funded, and often part of a large group. These smaller hospitals too could become targets for the larger hospital groups, unless the owner/promoter enlarges his vision and becomes an acquirer himself.
Both scenarios could play out in tandem. But one thing is for sure. There is going to be significant consolidation, and most of the smaller sized projects will get gobbled up either by a larger player, or become part of a chain of similar sized projects.
A couple of days ago, there was this news about Nicholas Piramal increasing their stake in Dr.Phadke Path Labs. The same news item talked about Metropolis Labs acquiring pathology labs in the UK, in addition to some in India. The last year has seen some high profile mergers and acquisitions in the healthcare space. One of the largest is the Fortis Healthcare takeover of Escorts Hospital in Delhi. Another is the Apollo Hospital acquisition of Imperial Hospital in Bangalore. There was also some news about Cadila Healthcare (a pharma company) taking a stake in the Apollo Hospital in Ahmedabad. Manipal Health Systems has been busy too picking up hospitals in different parts of the country. All this is so exciting.
When I came into the industry, the greenfield project route was the only way to set up a healthcare project. This often built in huge time lags because of various approvals that had to be obtained. Resulting in cost escalations. Not to mention loss of credibility among the investors, which in turn made raising capital that much more difficult. Which meant that many of the projects came into existense with the chips loaded heavily against them and therefore could never become financially viable. Many such projects will be willing targets for an aggressive acquirer.
Another aspect is that the scale of vision has evolved. A couple of decades back, a doctor with a good reputation built a Nursing Home, or a small hospital (maybe 50 beds, or even less), or a Poly-Clinic. His reputation (combined with that of his doctor partners) ensured steady patient flows, and financial success. In most cases the intent was that the next generation would take over and continue running the place. In many instances, the next generation is not keen to run the place. Also competition from larger hospitals has eroded the patient base. These larger hospitals are investor funded, and often part of a large group. These smaller hospitals too could become targets for the larger hospital groups, unless the owner/promoter enlarges his vision and becomes an acquirer himself.
Both scenarios could play out in tandem. But one thing is for sure. There is going to be significant consolidation, and most of the smaller sized projects will get gobbled up either by a larger player, or become part of a chain of similar sized projects.
