A Business Case for Branded Primary Healthcare Services In India

This winter Delhi has been smothered with fog or rather smog. While, I am one of those who enjoy the cold and love my walks in the neighbourhood park, pretty much like almost everyone else in the city I am not immune to the cough, cold and the respiratory track infections that that the damp and the cold brings.

I have been struggling with a bad cough for the last few days and have been wondering that it is perhaps about time I saw a family physician. Unfortunately, we do not have a regular family physician and I am not sure where to go. I also know if the problem worsens and a fever materialises I would go and see a specialist at Max Hospital and with a course of antibiotics I would be fine.

However, this is not the way it is meant to be. For something like this shouldn’t I be going to a neighbourhood clinic and getting the problem fixed before it became bad enough for me to see a specialist at a big hospital? And this brings me to the point that we need good quality and reliable primary healthcare in our neighboourhoods. There is a significant business opportunity here waiting to be tapped.

A Little bit of History

Apollo Hospitals tried setting up Apollo Clinics a few years ago. I was part of the founding team, which went into planning the clinics and the business around them. Apollo however was clear that it was not going to own or fund these clinics. They were supposed to be franchised with Apollo providing medical knowhow, its brand name, some of its doctors and IT support connecting the clinics with the hospitals. Ratan Jalan the than CEO had a vision of opening 200 clinics in 3 years. The clinics were supposed to provide outpatient services, namely consulting with doctors, diagnostic imaging services which included an X-Ray and an Ultrasound basic cardiology diagnostics like an ECG and a Treadmill test and a pathology sample collection centre. We sold some of these franchises and the Apollo Clinics started functioning with the first one commencing operations in Janakpuri in New Delhi. The owners were businessmen running a computer hardware store in Nehru Place and had no prior experience of healthcare. Similarly a few other clinics were also franchised and were set up in Delhi, Kolkata, Bangalore and elsewhere . However, it became apparent early on that Apollo was hardly serious about this business. They were keen on netting more patients for their large hospitals through this network and saw these as no more than referring centres and the support that was promised to the franchise owners  never materialised. The smarter ones quickly realised that in this new business they were pretty much on their own, learnt the ropes of this new business fast and managed to survive. Many did, many shut shop. Apollo was hardly bothered with any of this.

Max Healthcare too experimented with Dr. Max Clinics in New Delhi. Two clinics were set up in South Delhi. Unlike Apollo, Max invested in the clinics and had no desire to franchise. This experiment unfortunately failed mainly because Max in those days was focussed on rolling out its large hospitals and these clinics did not get any management attention. They were just not worth the trouble in the larger scheme of things and were closed down after a few years of experimentation.

The Learnings

While Apollo and Max both tried to set up Primary Healthcare Clinics, they were hardly serious attempts at the business. Apollo did not want to invest and was keen on skimming profits at the cost of the hapless franchisees and Max was just not ready at that point in time for something like this.

Apollo Clinics had a large upfront investment of approx. Rs. 20MN in the venture and since they themselves were not investing, they allowed the costs to go up and with the franchisee not knowing any better, they got away with this. When we crunched the numbers at Max we realised that a fairly decent clinic can be set up for as much as INR 5-7 MN.

The biggest challenge really here was about getting quality doctors (Family Physicians, Paediatricians, Internal Medicine, Obs and Gynae and Cardiologists) to join the clinic. Since the clinic is a very local enterprise one would want to pull in local doctors. However, we discovered at Max that many of them were just not interested as they saw the clinic as serious competition. They were afraid that if they moved to a Dr. Max Clinic and asked their patients to come there, the patients in future might prefer the superior and more professional services of the clinic. We tried hard to convince the local doctors that we sought a win win partnership but it really did not go anywhere.

The solution thus lies in forging a relationship with the local prominent doctors, which safeguards their economic interests. This can be achieved by asking them to invest in the venture. Thus 50% of the ownership of the clinic can reside with the lead consultants in the clinic. Thus let us say a sum of INR 2.5-3.5MN can be invested by the doctors and the balance by the entrepreneur, who sets up the business. A city like Delhi can easily absorb at least 100 such clinics and the model can be scaled up and rolled out across the country.

The clinics can than be established as a chain and can be marketed under a single brand name, 50% owned by an entrepreneur and 50% by local doctors. The clinics can all be connected under an IT backbone and data can be shared seamlessly. This can also open up enormous revenue possibilities from scientific research and allied work. Costs can be driven down by centralised purchasing and efficient supply chain management. Superior and unique customer experiences can be delivered through processes integrations and people training. I personally believe time has come for these clinics to emerge and claim their rightful place under the sun.

Finally, will this mean the McDonaldisation of primary healthcare in India? Well, may be yes, but than don’t we all love the neighbourhood McDonalds.

Pic Courtesy http://theapolloclinic.com/CorMainArticle.asp?Id=3