Single Specialty | The Model Is A Hit

Fifty-seven-year-old Madhav Gupta was first diagnosed with cataract around two years ago when he visited a multi-specialty hospital in Gurgaon for an eye checkup. “My first appointment with the doctor and he clearly told me I needed to go under the knife for cataract,” he says.

Since it was a surgery, no less, Gupta decided to get a second opinion. This time, at Centre For Sight, an exclusive eye-care network. “My family and friends guided me to this place because it has multiple doctors focussing on one particular area of healthcare. Plus, it offers end-to-end solutions, including post-operative care.” Satisfied, Gupta underwent the surgery and is now cataract free.

With the contours of healthcare changing in the country over the past few years, the popularity of out-of-the-hospital, single-specialty healthcare centres is increasingly gaining steam and throwing up significant opportunities for emerging healthcare businesses across a gamut of sub specialties. In fact, it is the ability to offer a custom solution for a specific requirement by single-specialty chains coupled with specialised infrastructure that is driving the growth in the segment.

Single-specialty hospitals or day-care centres as they are typically known focus on specialty care services in any one area of healthcare — it can be eye care, dental care, fertility and oncology, to name a few. Almost all businesses in the single-specialty segment including Eye-Q Hospitals, Centre For Sight, MyDentist, Clove Dental are lining up significant expansion plans.

The other popular model integrates all the primary care or day-to-day healthcare needs under one roof within single specialty — somehing that India badly needs today.

“The business model in healthcare is undergoing a paradigm shift and different models are co-existing successfully in the market,” says Amit Varma, managing partner at private equity firm Quadria Capital. “Single-specialty chains bring all the advantages of specialisation right from mastering best protocols to creating a repository and rolling out a factory like model which brings in efficiency of services and help accelerate the foot print,” he adds.

Wellness and primary-care chain Healthspring focuses on the primary-care model that encompasses the hugely unattended pre-hospital space from home care to responding to emergency medical situations. Promoted by Gautam Sen and son Koushik, Healthspring is planning a pan-India expansion of its network from 24 to 200 centres in two years. “We are talking to some large PE funds to raise the next round of funding to back the expansion,” says co-founder and CEO Koushik Sen.
Another startup that believes in the model but in post-hospitalisation care is Bangalore-based Medwell Ventures. Promoted by former CEO of Wockhardt Hospitals and Fortis Healthcare Vishal Bali, Medwell offers homecare services, including nurses, physiotherapists and doctors who take over after patient discharge.

Many of the private equity and venture capital deals in the healthcare space during this calendar year in India were in the newly emerging day care, home and primary care and single specialty space. For instance, between January and October 2015, PE and venture capital firms invested $1,071 million, of which, $228 million went into primary healthcare or single specialty hospital, as per data from Grant Thornton. The total number of healthcare/pharma deals during the same period stood at 39.

Interestingly, what’s tickling investor interest is the rising number of mergers and acquisitions besides of course the growth prospect of the sector overall. Healthcare has always been seen as a safe bet as returns are relatively assured, say experts. It primarily caters to the domestic market and is independent of any slowdown gripping other sectors riding the domestic consumption wave.

Growth Of Day Care
It is no secret that healthcare has mammoth potential in the country and is witnessing robust growth. Especially low-capital and investment-friendly business models are increasingly prospering. They benefit all stakeholders alike — patients, entrepreneurs and risk capital investors.

Certain procedures in healthcare especially pertaining to eye and dental typically do not require hospitalisation and people often do not treat them as major ailments, says Avnish Bajaj, managing director at venture capital firm Matrix Partners India. “For certain healthcare procedures, it’s always more comforting for patients to walk into day-care centres than visit tertiary multi-specialty hospitals where patients come with major ailments,” adds Bajaj.

Today, the ‘healthcare consumer’ can no more be treated only as a patient. With the rise of branded private hospitals across the country, there has been a major shift in people’s attitude towards doctors and hospitals. Today, the quality of doctors and attention that patients get in day-care chains are at par with multi-specialty hospitals.

As far as the business side is concerned, single-specialty healthcare works out to be less capital-intensive compared to traditional multi-specialty healthcare. “Better outcome for patients in terms of both finances and treatment and equally good outcome for investors in terms of returns are the key factors driving the growth of single-specialty hospitals, says Mahipal Singh Sachdev, an ex-AIIMS ophthalmologist who founded Centre For Sight.

Currently, Centre For Sight is looking to go public with fresh issue of shares to raise about Rs 115 crore and an offer for sale of up to 2.54 million shares by existing investors. While Sachdev declined to comment on the prospective IPO route, sources close to company say it plans to ramp up the number of eye-care centres.

“Around 70 per cent of all the planned procedures today can be done in day-care centres,” says Mark Britnell, chairman and partner, Global Health Practice, KPMG. “In fact, globally this has become a trend and India, where healthcare is still at a nascent stage, is also catching up,” he adds.

For investments in single specialty, the gestation period for any project is low compared to multi specialty where the capital requirement is huge. The cost of a single bed in the latter can go up to Rs 50-80 lakh. Plus, there are issues pertaining to low-capital efficiency that make even the best hospitals to break-even operationally not before a year and a half , and in about six on capital expenditure.

“Single-specialty centres require fewer beds as patients are discharged sooner. This definitely leads to faster asset turnaround,” says Ajay Relan, promoter of CX Partners. “The break-even period thus, is much shorter,” he adds.

Biggies Too Target Single Specialty
Day care in the healthcare segment is no more restricted to emerging businesses. A host of tertiary multi-specialty hospitals such as Fortis and Apollo are also investing in this category alone. For instance, in the maternity category, both Fortis and Apollo have single-specialty chains under brands Fortis La Femme and Apollo Cradle, respectively.

Industry experts say that going forward, the rapidly evolving single-specialty hospital and clinics industry in India is likely to transform the facade of the under-penetrated healthcare sector. So much so, that the definition of single specialty is also likely to change as hospitals tap categories such as cancer and heart, as well. India is definitely going the global way.

paramita@businessworld.in ; unni@businessworld.in

(This story was published in BW | Businessworld Issue Dated 28-12-2015)