Sunday, January 06, 2008

 

2008-Time to Consolidate

2007. What a year it was. India rocked. Across the board. The stock market, real estate, T20, bollywood, and of course healthcare.

New hospital projects being launched are no longer as exciting as they used to be, there are so many of them. Pharma retail seems to have taken off well, the buzz around medical tourism is a little muted, and everyone seems to be talking accreditation and quality standards.

One development that caught my attention is the entry of private equity, big time into the healthcare delivery space. Some of the large hospital projects have always had Private Equity participation, but for the first time, mid size hospitals seem to have caught the fancy of the PE players. And many of them are launching dedicated funds that will invest in mid size hospitals. ICICI Venture has already announced a bunch of such investments, and by the end of the year, it seems likely that the fund would have assembled 15-20 investments aggregating 1000 beds or more. On the one hand we have the large hospital chains acquiring hospitals across the country (practically every chain has added to its network in 2007), and now we have a PE driven consolidation.

Who will benefit from this. The patient, the physician, the owner of the hospital, or the investor. Considering that the fund will get involved in activities like hiring and procurement, as well as quality standards, one would expect patients to benefit immensely. Many of these mid size hospitals are underutilized and the presence of seasoned managers brought into the act by the fund will surely boost the financial performance of these hospitals. So physicians, owners, and investors will benefit as well.

As of now, seems like win-win all around. We'll have to wait and see. One challenge will be the availability of top talent, both medical as well as non-medical. But maybe there is an opportunity to set up executive training programs targeted towards healthcare professionals. As well as promote the concept of membership organizations.

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