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No-frills health care

A hospital chain in Karnataka wants to do to health care what Air Deccan did to aviation. Its early steps are encouraging.

Print Edition: March 21, 2010

For V.T. Patil, 62, a dialysis session meant travel first and treatment next. The resident of Bijapur in Karnataka would travel 98 km up to three times a week to Sholapur in Maharashtra for the procedure that becomes mandatory when kidneys fail to function normally. Others from Bijapur make the 110 km trip to Miraj, again in Maharashtra, for a consultation with a nephrologist.

Not any more, after a new hospital came to town. A Vaatsalya Healthcare Solutions-run hospital, set up in Bijapur in 2008, attends to some 10 dialysis procedures a day—a sizeable number for a medical facility its size. The scale underscores a fundamental market need that Vaatsalya is trying to address: seven of 10 Indians live in villages and semi-urban areas but have to make do with two of 10 hospitals and healthcare facilities in the country.

Vaatsalya is today arguably the first Indian hospital network in the country that is totally focussed on Tier II and Tier III towns. At the moment in Karnataka, it has hospitals in Hubli, Gadag, Bijapur, Mandya, Raichur, Hassan, Mysore, Gulbarga and Shimoga. To penetrate these markets, Vaatsalya is built as a low-cost model that promises affordable and accessible healthcare services.

Vaatsalya Healthcare Solutions

FOUNDER: Dr Ashwin Naik

INNOVATION: Health-care delivery in Tier II and Tier III towns.

MODEL: A no-frills model that offers affordable and accessible healthcare services. It scans locations where it can be an early mover and have a huge catchment and be able to offer a better technology alternative locally.

SCALE: Close to 10 hospitals set up

"No-frills does not mean qualitycost trade off," cautions Vaatsalya's Founder & CEO Dr Ashwin Naik. "To us, a decent private room need not necessarily mean a room with an LCD TV; there could just be an ordinary television with local channels. In most locations we may not even provide an air-conditioner but we do not compromise on the quality of medical equipment," he says.

In some towns, he argues, Vaatsalya facilities are the best in the region. For instance, in Gadag, 60 km from Hubli in Karnataka, the chain's facility is the only one with a neo-natal intensive care unit. The model is also made affordable by other elements. Vaatsalya outsources specialised diagnostic and radiology tests (like thyroid profile test and computer tomography, or CT, scan). "This model has more to do with execution rather than as a business model innovation," says Dr Naik. It focusses on four specialities—paediatrics, gynaecology, medicine, and surgery— against as much as 20 areas that multi-speciality entities normally engage in.

A Vaatsalya hospital has 30-50 beds as against 150-200 that is usually the case with bigger players. It is now taking up a local partnership route with revenue-sharing arrangements. This lowers initial capital outlays (so that there is not much pressure for immediate returns) plus lower expenses on real estate depending on the location (does not typically buy land). Vaatsalya is then able to price a normal child delivery procedure at around Rs 6,000 as against at least Rs 12,000 at hospitals in bigger cities (it can easily climb to Rs 50,000 in the topend hospitals in big Indian cities).

Next, the focus is on scaling up the model. "We are spending most of our time now in institutionalising what is done here and on documentation so that it becomes a cookie-cutter approach as we expand," says Dr Naik. On the drawing board are plans to replicate the model in states such as Andhra Pradesh, Maharashtra, Madhya Pradesh and Orissa. To him, the most crucial point is that it has already proven to be a sustainable model. "Today", he says, "70 per cent of our units have already reached break-even validating our assumption that there is an opportunity for a player like us both financially and socially!"

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