It is a billion-dollar market with hardly any national-level player. Outsourcing in the Indian healthcare sector is a huge but highly scattered activity with most players opting for outsourcing services locally.
This is despite the fact that hospital chains have been mushrooming and more players are having to deal with issues of IT, food & beverages, recruitment & manpower training, accounts, facility and equipment maintenance. According to a recent Healthcare Outlook report by consultants Technopak, healthcare outsourcing is a roughly $1-billion market that’s expected to grow at a cumulative average rate of 20 per cent over the next few years. “The main reasons for outsourcing of services include functional and industry specialisation, and cost and technology considerations. The outsourcing providers are offering a wide array of highly sophisticated specialised services at an affordable cost to the provider. In turn, the contractors get a larger market share, making the arrangement mutually beneficial,” says the report.
But from the user’s perspective, the market is still fragmented, with no national-level integrated player capable of handling the specialised outsourcing needs of hospitals.
“There is a real need for some specialised, nationwide player in this field as it is growing and, typically, today it would be 5-7 per cent of revenues for most healthcare players. This would mean big money if one is looking at bigger players. A nationwide single player would mean greater standardisation,” says Vishal Bali, CEO, Wockhardt Hospitals Group.
Bali adds that the rationale for outsourcing is “always embedded with higher efficiency and cost advantage. Both can be delivered only by players who specialise in these activities and have a national footprint and scale”. The opportunities are varied. For instance, there’s space for a large player to create a specialised hospital dietary catering service, and cater to multiple hospitals.
Similarly, as Bali points out, there is an opportunity for a largeformat, specialised hospital cleaning services company, a concept established by Servicemaster Company in the US. Maintenance services is another area of specialisation that could attract a pan-India player.
One firm that has made steady progress is the Mumbai-based Radhakrishna Hospitality Services (RKHS in quick-speak). It began by offering catering services to offshore and maritime players 30 years ago. In 1995, it sensed an opportunity in the healthcare space and began providing food services to Lilavati Hospital in suburban Mumbai. Today, it offers these services to 42 hospitals, including the likes of Apollo and Max Healthcare; and its range of offerings has gone beyond food services to include housekeeping, laundry, some technical services (electrical) and facility management.
It has plans to get into maintenance of medical equipment. Other than healthcare, it offers services to players in IT/BPO, travel, education, manufacturing industries, offshore and maritime. “Today, food services constitute 80 per cent of our total turnover and facilities management close to 15 per cent. But in 4-5 years we expect food services to be 60-70 per cent and facilities management at around 25 per cent,” says Sunil Nayak, CEO, RKHS. In 1996-97, RKHS had a turnover of Rs 32 crore. The company expects to hit Rs 500 crore by March 2009 and three times that number over the next five years.
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—E. Kumar Sharma