India on the Prowl
Corporate Groups are looking at overseas ventures. Nayantara Som explores the reasons for hospitals spreading their wings.
According to the 2007 report, ‘Opportunities in Healthcare-Destination India’ brought out by Ernst and Young Pvt Ltd in collaboration with the Federation of Indian Chambers of Commerce (FICCI), Indian healthcare is poised for a ‘mercurial growth of over 15 per cent annually over the next five-seven years’. Now with corporate hospitals looking at overseas opportunities, there is no denying that Indian healthcare is all set for skyrocketing growth and to position itself on the global map of healthcare. Africa, the Middle East, United Kingdom, South East Asia, the United States of America, Latin America, Fiji, Australia —you name it and Indian hospital groups are penetrating these markets.
|“We are in discussions with a couple of groups for tie-ups in the three regions of Europe, Africa and the Middle East”
– Dr Narottam Puri Executive Director, Business Development
Market analysts opine unanimously that medical tourism, also known as medical value travel, is the main impetus for corporate groups setting their sights abroad. By investing overseas, hospitals attract patients not just to their franchisee chains, but also to their parent group in India. Says Dr Narottam Puri, Executive Director, Business Development, Max Healthcare, “By going into countries like Malaysia, Afghanistan, Bangladesh and the Middle East, where the quality of services is minimal, they intend to bring in patients to India.”
Kolkata-based Rajashree Sengupta, Executive Director, Technology Advisory Services, PricewaterhouseCoopers, avers, “With medical tourism grabbing the limelight now, these investments will be a stepping stone for patients, especially from the UK, streaming in to India.” International ventures are expected to see a growth rate of 20 per cent CAGR in medical tourism in coming years, according to a 2005 report by Frost and Sullivan.
Sandeep Sinha, Programme Manager, Healthcare Delivery and Healthcare IT practice, South East Asia, Frost and Sullivan, agrees, “Industry experts have woken up to the fact that Apollo and Wockhardt hospitals have the calibre and expertise to go in for international ventures.”
|“For the US, specialities like ophthalmology and neurosurgery will work, while in the UK orthopaedics and cardiac specialities will do well”
– Dr Rakesh Kapur Manager, Risk and Business Solutions
Ernst and Young Pvt Ltd
Some groups like Kolkata’s BM Birla Heart Research Centre and Apollo Hospitals Group will take doctors and workforce to their international set-ups. Experts opine that this will be a boost because Indian doctors are revered for their clinical knowledge and expertise. Dr Rakesh Kapur, Manager, Risk and Business Solutions, Ernst and Young, concurs, “People abroad are only willing to shell out their income to get treatment from Indian doctors and hospitals who have established a name abroad.” This has further promoted invitations pouring into Indian hospitals to invest on foreign soil.
The economic benefits from these ventures cannot be ignored. Says Dr Vivek Desai, Managing Director, HOSMAC, Mumbai, “International ventures are profitable because the Return of Investments (ROI) is much higher. A simple case like a CT Scan which will cost Rs 2,000 in India will cost around 800 Dinar (Rs 8,000) in the Middle East.”
With branding becoming the mantra for most hospitals, these ventures will also help them in enhancing their brand equity in the market. Hospitals are exporting themselves to the global market. They are spreading awareness, increasing their brand equity and image among foreign patients.
Hospital groups are also looking at attracting NRI patients to their set-ups abroad. Apollo Hospitals Group, for instance, is targeting places like the UK and the Middle East with a large Indian populace including doctors. “Yes, we are definitely targeting the Indian population in all our ventures. So, now instead of them travelling to India for their treatment, we will be tapping them in the country they are based,” says Ravi Anbil, Chief Executive Officer, Apollo Global Projects and Consultancy Division, Chennai.
|Despite the steep competition, hospitals surprisingly are targeting even South East Asian countries like Malaysia. Manipal Health Systems (MHS) is venturing into Malaysia. Says R Basil, CEO and MD, MHS, “The newly built hospital will be located at Kapala Batas in Mainland, Penang. The construction will commence in October 2007 and should be operational in 18 months. We have selected Kapala Batas, as an alumnus of Kasturba Hospital, Manipal has offered to build the hospital, and it is ideally located to cater to patients mainly from Bangkok and Indonesia.” The project at Malaysia is proposed to be a 200-bed multi-super speciality hospital with a focus on cardiology, orthopaedics and nephrology. Here Manipal Hospitals has taken up the facility management of the hospital. The landowner will construct the building. “We would be investing on the latest equipment and infrastructure. We are looking for a staff strength of over 200 aramedical/administrative personnel recruited locally. On the clinical front, we would be looking for the best talent from across the globe,” Basil adds.|
Max Healthcare at present is looking to invest in Europe, Africa and the Middle East. “We are in discussions with a couple of groups whom we can tie up with in the three regions,” reveals Dr Puri. Apollo Hospitals Group tops the charts for investment as they are now looking at countries spanning from the Middle East, UK, Bahrain, Mauritius, South Africa, Nigeria, Ghana, the US, the Caribbean Islands, Fiji, Latin America and Central Asia. Last year, business was up by 50 per cent from its international revenues alone. “We intend to set up high technology, tertiary care hospitals in all these countries. We will have visiting doctors and medical specialists as part of our continuous medical education,” informs Anbil.
The latest on the cards for the Apollo Group is its hospital in Yemen due to be commissioned in September this year. The hospital was half built and the group agreed to complete the facility and bring in their medical and technical expertise. An amount of $25 million has been invested for this 160-bed super-speciality hospital. The Group is also looking at Fiji. “Usually, patients from Australia and New Zealand and Fiji go to countries like Singapore and Thailand for their treatment. So setting up a hospital in Fiji will bring in these patients from Australia and New Zealand. We are working with the promoters at present,” says Anbil.
Africa is another destination for hospitals. “We are constructing a super-speciality hospital in an effort to establish Antigua as a medical tourism destination,” says R Basil, CEO and MD, Manipal Health Systems (MHS). According to industry sources, Bangalore’s Narayana Hrudayalaya is also looking at openings in South Africa.
|Developing economies like the Middle East, Central Asia, African nations, neighbouring countries like Bangladesh, Nepal, Sri Lanka, South East Asia and even Bhutan are being tapped. “Most of these projects are joint ventures as collaborating with a local partner will make administration easier for a group,” adds an expert.
Groups adopt either of two business models, build a hospital from scratch or take up the facility management of an existing hospital under their brand name. Experts opine that taking up the facility management of a hospital is a safer option. “A facility management model has less risks, the investments are less and these hospitals can be operational in about two-three months,” explains Dr Rakesh Kapur, Manager, Risk and Business Solutions, Ernst and Young. On the other hand, a hospital set up from scratch will be subject to higher risks and in most cases the operations commence after 20-24 months. Specialities also depend on the country been explored. “For the US, specialities like ophthalmology and neurosurgery will work, while in the UK specialities like orthopaedics and cardiac specialities will do well,” adds Dr Kapur.
With most corporate hospitals going the IPO way, financing these ventures becomes easier since banks in India prefer not to lend to hospitals. Money for these ventures is pumped mainly through private equity. “Around 10 years back, India saw a stream of NRI doctors setting up hospitals here without even looking at the business angle. They suffered losses and packed up. This was a huge loss for the banks,” informs Dr Kapur.
East and West
“The Gulf countries have a large Indian population, most of the doctors are from India and also culturally they are amiable,” says Dr Kapur. Sharjah, Kuwait, Qatar, Oman are some of the countries targeted in the region. According to analysts, even Iraq has requested a corporate group in India to build a hospital. Says Vivek Shukla, Healthcare Marketing Consultant, “In the UAE, health insurance has become compulsory for all. Companies are bound to get their employees insured. People are ready to spend on private hospitals for their treatment.”
Though groups like Apollo have major plans for the UK and the Caribbean islands, other groups are not so keen on targeting these regions, mainly because of their existing high-quality healthcare services. “The UK and the US are difficult prospects as the legal system is very strict there,” says Sinha. Indian investors now are also looking at the CIS countries. Dr Kapur points out, “CIS countries are lucrative. Though they are not ready for investments now, things will gradually open up.” Apollo Group is in the process of setting up a venture in Mongolia. “At Mongolia, we will have a consultancy expertise. We are also looking at Kazakhstan and Georgia,” says Anbil.
Not all Rosy
Overseas investments are definitely a boost to Indian healthcare, but there are a few skeptics. Many opine that apart from establishing its brand and creating a global presence, these investments will not have a major impact. Most importantly, many even opine that like in the past there are possibilities of these ventures not working.
Hospitals usually have a minority stake in international ventures. Take the instance of the Apollo Hospital’s venture at Colombo where they had invested around Rs 10 crore. Unfortunately, last September, it was forced to sell its 33.22 per cent stake in Apollo Hospitals to Sri Lanka Insurance Corporation (SLIC), who in fact had the largest stake in this venture, for a consideration of Rs 72.84 crore. The exit came in the wake of a tiff with SLIC over stake ownership. Moreover, it would have been difficult for the Group to carry on operations with such a small stake. Rumour has it that even its Dubai venture is in trouble. Apollo’s franchisee hospital, Siddhartha Apollo in Kathmandu is now only Siddhartha Hospital as the tie-up ran into trouble with some expectations of both sides not being met, says a source.
“The dynamics are different in different countries. Groups flourishing in India assume that they can replicate the same model in other countries and reap the same success. If you wish to open shop overseas, there are a variety of factors that need to be studied, culture, healthcare buying patterns, psychographics, Government policies, tax laws, industrial growth of the country,” says Shukla. MHS’s venture in Nepal was a similar case. Despite the research conducted before its onset, operations of this 700-bed hospital are on a downward curve as the country largely has rural population who perceive the hospital as an expensive entity outside their means and resources. The problems multiplied since doctors and experts in this hospital were not well versed with the local language and culture. It may have helped more if local doctors were also included in the panel of doctors. The hospital did plunge into the concept of Corporate Social Responsibility (CSR) by going into the villages, having free medical camps, trying to placate the Maoists and allocating free beds to poor patients but that has not produced results.
In the Middle East, a larger part of the populace are able to afford good healthcare. “People here are super rich and if they need treatment, they would want the best and hence they will go to countries like the US and UK. They are willing to shell out that extra penny,” adds Shukla. Moreover, as far as tapping the Indian population is concerned, experts opine that Indians would rather come to India and get treatment from the parent hospital.
“The main attraction for most of these Indians is that their families are based in India. So for them, it is a trip for their treatment as well as a mini holiday,” says Shukla. Language is another problem posed for many Indian groups. “Many groups ignore this factor, but actually it is a hurdle. In countries like Latin America, language is a stumbling block and can pose a big challenge in the long run,” says Dr Puri.
Even in countries like the US and the UK where quite a few hospitals are contemplating investments, the scenario is different altogether. The UK healthcare system was a socialised system where everything was operated by the Government-run National Health Service (NHS). But now with NHS going the private way, the system is in a state of flux. Moreover, with an Indian doctor held in the car bomb attack at Glasgow airport in Scotland, life may be difficult for Indian doctors aspiring to practice in the UK. In the US again, the dynamics are different again where Indian doctors require extra qualifications and credits.
|Among neighbouring countries, Bangladesh is poised to be one of the most lucrative markets for Indian investment. Earlier, the industry has seen Apollo Hospitals Group in a joint venture with its Bangladeshi partner STS Holdings, Dhaka. The main aim behind the set-up was to cater to a large populace of patients who would otherwise be travelling to India or other neighbouring countries for treatment. Industry experts also opine that this investment was an answer to Mount Elizabeth and the Mount Sinai Hospitals. Now, with Bangladesh having a comparatively stable economy and regime, Indian hospitals are looking at penetrating this country through both joint ventures and standalone entities.
Kolkata’s BM Birla Heart Research Centre is at present looking at setting up hospitals in Chittagong and Dhaka. According to an inside source, AMRI from the same city is also looking at investing in Bangladesh. “A large chunk of patients coming into India for treatment especially in cities like Kolkata are Bangladeshis. Hence, if a hospital sets up a branch in Bangladesh, they would channelise patients to their hospitals within their home ground,” adds Kolkata-based Rajashree Sengupta, Executive Director, Technology Advisory Services, PricewaterhouseCoopers. Similarity in culture and opening up of its economy are some of the other reasons for the country to be a magnet for investment.
Says Dr Aninda Chatterjee, Medical Superintendent, BM Birla Heart Research Centre, Kolkata, “According to the CII Mckinsey report ‘Growth opportunities for Indian healthcare’, Kolkata is the first stop for treatment for patients coming from Bangladesh, Nepal and Bhutan. Hence, setting up a hospital in Bangladesh will be beneficial for us as now we are directly going to their doorstep.” The hospital in Dhaka is due to come up in a year’s time. In Chittagong, they have taken over the management of a sick hospital. The Group is also contemplating opening up in Bhutan. “Bhutan needs a hospital and state-of-the-art services more than any other country,” informs Dr Chatterjee.
India – A Better Market for Investment
Experts believe that India is better ground for investment. Skyrocketing growth is expected in myriad fields in the healthcare pie to make India a magnet for investments. “India has a population of around 1.2 billion and healthcare industry is growing at 15 per cent annually. So why go abroad?” asks Shukla. However, it is never a bad idea to look overseas as it improves our global presence and is a bonus for Indian healthcare.