or the rich, famous and pregnantliving in Hyderabad’s upmarketJubilee Hills, there is The Cradle, ahigh-end, luxury ‘birthing centre’recently launched by Apollo Hospi-tals. It’s a relatively new idea, at thetop end of India’s booming privatehealthcare business. But the biggerinnovations are happening at theother end of the economic spec-trum, closer to the bottom of thepyramid. One such is unfolding atLifeSpring Hospitals in Chilkalgu-da, Secunderabad, less than anhour’s drive from Jubilee Hills.

Many of the city’s poor live inChilkalguda. When their women gointo labour, some head to Life-Spring. It is clean, airy and well-staffed. Its rates for maternal deliv-eries and surgeries such as hys-terectomies are displayed promi-nently on a board outside the gener-al ward. Normal deliveries cost`4,000, a fraction of what other pri-vate hospitals would charge. Forpoor patients, the rates are as mucha source of comfort as the treat-ment itself.

Inside the ward, each bed is sepa-rated by a pink curtain and there isa separate cot for a caregiver. Theenvironment is frugal, functionaland affordable.

“All our hospitals are close to urban slums and the working poor,”says Anant Kumar, CEO of thematernity hospital chain whichruns nine centres in AndhraPradesh, including in Rajah-mundry, Vijaywada and Nellore.“Our customers will not travel more than 2 to 5 kilometres for delivery.”

Cut to Rewari, a town of one lakhpeople in Haryana, 82 km south-west of Delhi. Known for its brassproducts and close to the industrialhub of Manesar, Rewari is notexactly the boondocks. Yet, last yearwhen resident Jagannath Bathla,73, needed cataract surgery for hisright eye, it felt like one.

Bathla would have to travel 50 km by road one way to the town ofMahendragarh for something city-dwellers would get in the neigh-bourhood. Then he heard of Eye-Q,a new eye hospital right in the heartof Rewari. In September last year,he got his right eye operated thereand was back for the left earlier thismonth. “It’s just five minutes to the hospital,” he says.

Eye-Q is targeting smaller citiesbecause people end up wasting timeand money, and foregoing income totravel for care, says Rajat Goel,founder CEO who teamed up witheye surgeon Ajay Sharma to startthe company in 2007. EyeQ runs 10hospitals in places such as Hald-wani and Sahranpur in northernIndia where it charges 30% less forsurgeries than its super-specialityhub in Gurgaon. “It is providing aGurgaon facility at Rewari prices,”says Vishal Vasishth, founder MD of Song Investment Advisors, which invested an undisclosed amount in Eye Q in 2010.

TIGHT COST CONTROLS

For the better part of the lastdecade, a small but growing numberof entrepreneurs have been invest-ing their energies and resources toanswer a question that mostlyengages only policy makers andcharities — how do you make quali-ty healthcare affordable, accessible

and ubiquitous?“Initially, the approach was build

and people will come,’” says AshwinNaik, CEO and co-founder of Ban-galore-based Vaatsalya, which ven-tured into semi-urban areas of Kar-nataka with its brand of multi-spe-ciality hospitals in 2005. It now has10 such centres. “But over time theindustry realised that one shopdoesn’t work for everybody.”Affordable healthcare is not entire-ly new to the private sector.Deviprasad Shetty’s heart hospitalNarayana Hrudayalaya and charita-ble eye hospitals SankaraNethralaya and LV Prasad offerhigh-quality, affordable care. Butthey are exceptions, present only incities. “Momentum has just comeinto affordable healthcare,” saysAbhishek Singh, head (healthcare) at Crisil Risk & Infrastructure Advi-sory. “Even the lower middle classhas been getting conscious aboutquality but did not have options at areasonable cost.” LifeSpring andVaatsalya have been early moversand their growth has emboldenedothers, including investors.

“The biggest learning from Vaat-salya is that this model is worth-while and scaleable,” says VineetRai, founder CEO of venture capitalfirm Aavishkaar, an investor in thecompany. Last year, Rai’s venturefund put an undisclosed amountinto New Delhi’s GV Meditech tohelp it expand beyond one hub hos-pital in Benares into several spokehospitals — smaller than the huband with limited specialties — andmicro clinics in villages and townsof Uttar Pradesh. Meditech’sfounder MD, gynaecologist InduSingh, had been mulling over this.But Aavishkaar “possibly strength-ened her conviction by telling herwe had done it before,” says Rai.

Similarly, in 2010, Kolkata-basedstart-up Glocal Healthcare raised `15 crore from Sequoia Capital, andElevar Equity to set up eight ruralhospitals in a year. It has ambitionsof doing 2,000 such hospitals overseven years. The first one will beready this June, says CEO Sabahat Azim.

Make no mistake. Low cost doesnot mean cutting corners. Rather, itis “about providing quality withoutthe corresponding price increasesor at lower cost,” says Meghna Rao,country director, Acumen Fund,which invested `5 crore in LifeSpring in 2008.

Doctors are paid competitively;there is investment in training ofauxiliary staff; there are hospitalinformation technology systems tokeep track of patients and clinicaloutcomes; patient feedback is alsoactively sought.

These companies are high-quali-ty, replicable, and scaleable justlike the large chains, but with somekey differences. The aim is to havehospitals that are accessible andefficient, run with a tight controlon cost, and a firm grip on pricing.“It demands tremendous manage-ment since they have to work on atight budget,” says MuralidharanNair, partner (healthcare), Ernst &Young. They are much like theUdipi hotels known for inexpensivequality fare.

SHARED RESOURCES

Hospitals have always been high-cost, high-gestation projects. It costs

`80 lakh to `1 crore per bed to set upa tertiary care hospital in a big city.Such hospitals focus on big-ticketsurgeries such as heart or cancer.But these entrepreneurs focus onlow-value but high-frequency serv-ices, whether it is child birth, gallbladder surgery, eye care or kidneydialysis. This helps them cut set-upcosts and use volumes to drive oper-ational costs lower. “We have foundthat 95% of the health need in ruralareas is secondary care,” says Azim.

“India needs more models in pri-mary and secondary care,” saysVishal Bali, CEO, Fortis Global.

They build small hospitals. EachLifeSpring centre has 20-25 beds,Vaatsalaya has 70-100. Vaatsalyaalso does not invest in specialisedtools such as CT scanners that costcrores if they are available locally.It chooses to refer patients there.“We have made it clear that we arein the business of appropriate tech-nology and not latest technology,”says Naik.

There’s another reason for thisprudence. “Conventionally, everyhospital puts in everything into thesystem and then the doctor gets acommission on every procedureperformed which is an incentive forunnecessary investigation,” saysAzim of Glocal.

Eye-Q’s network shares both doc-tors and equipment. For instance,retina equipment is expensive butnot used as frequently as a ‘phaco’

or cataract machine.So a retina specialisttravels once a weekto four centres fromthe hub with theequipment in theback of a car or bytrain. These centreshave pooled patientsin advance.

This sharing hashelped cut the cost ofa centre from the ini-

tially estimated `2.5 crore to `90lakh. This also helps maintain con-sistency of service quality, saysDeependra Vikram Singh, a retinaspecialist at Eye-Q who travels everyweek to Rewari, among other towns.“Because specialists are movingacross, they can observe any defi-ciencies (in the smaller hospitals) tohelp improve and ensure that quali-ty of eye-care becomes uniform.”

“We reduce cost not by providingless, but providing more, more effi-ciently,” says Glocal’s Azim. “At`9,000 for a C-section we get the sametarget profit margin as a private hos-pital gets charging `20,000 becauseour costs are low,” says LifeSpring’sKumar. Such low-cost chains couldbreak even in 6-18 months.

THE HARD ROAD

In 2009, when Vaatsalya firstapproached Manjunath Doshetty, akidney specialist, working in Ban-galore’s reputed Manipal Hospital,he hadn’t heard of them. But Vaat-salya, it appeared, had researchedhim thoroughly. They knew thatDoshetty was a native of Gulbargain North Karnataka where theywere planning to start their newesthospital. Doshetty admits that theabsence of infrastructure and staffto practise his discipline in hishometown had forced him to moveto Bangalore. Dialysis requiredequipment, qualified nursing staffand an intensive care unit with

trained paramedics. There was allof one in Gulbarga, and it wasn’t upto speed. Vaatsalya was promisingto change that.

Doshetty knew there was demand— many of his patients travelled allthe way from Gulbarga to Banga-lore some 600 km away. Others weretravelling 100 km to Sholapur. Achat with doctors in other Vaatsalyahospitals convinced him and he has-n’t looked back. “We are growing tobe a good family now,” he says. Vat-salya has hired 20 such consultantsfrom cities, native to Gulbarga, andmoved them to its hospital, he adds.

This is tougher in some areas. InUttar Pradesh, “there is a paucity ofmany trained doctors who are will-ing to work in slightly more remoteareas,” says Rai. Meditech hasstruggled to find doctors for its‘spoke’ hospital in Ghazipur, a two-hour drive away. Currently, a gynae-cologist, a cardiologist, anorthopaedic surgeon, and an eyesurgeon travel once a week or fort-nightly from the hub to the spoke.“Initially the doctors did not want totravel,” admits founder Singh, butwith her persistence and with thelocals fussing over them, the doctorshave come around. The companyhas also firmed up a satellite linkwith ISRO which will help provideremote care. Others such as EyeQpartner with senior doctors whoalready have a local nursing homebut none to bequeath it to. EyeQtakes over their practice, upgradesit and puts them in charge.

An important carrot, says Azim of Glocal, is the absence of pressureto justify the hospital’s capital investment by advising unnecessarytests, or procedures. This is echoedby the other hospitals. “We have notargets and we don’t ask them to dounnecessary hysterectomies,” saysLifeSpring’s Kumar. (AndhraPradesh is known for such practices).

MILES TO GO

Soon, it will be time for these low-cost entrepreneurs to expand, forwhich they will need capital. Initial-ly, only social investors — those whodo not measure returns in financialterms alone — backed them. TheAcumen Fund that has invested inLifeSpring is one example. But asthese models scale up, “they willattract traditional investors,” saysRao of Acumen.

For instance, Song Advisors, aninvestor in Eye-Q, looks at a combi-nation of financial return andsocio-economic development. Andof Glocal’s two investors, ElevarEquity is focused on improvingservices to the base of the pyramidwhile Sequoia is a mainstream pri-vate equity investor.

“Healthcare in the space that weare investing has the potential togrow 50% to 100% year on year,”says Rai. “Since we invest in theearly stage, valuations normallyscale up and you may find an exit tothe next round of investors.”

Will large corporate chains endup acquiring such companies? “AsIndia advances its healthcare deliv-ery system to create a wider deliv-ery base, we need many more suchmodels,” says Fortis’ Bali. “Theydon’t necessarily have to convergewith the larger players but canenjoy their space.”

(Additional reporting by Vikas Kumar)

Special Feature Low-cost Healthcare6 THE ECONOMIC TIMES | BANGALORE | THURSDAY | 12 MAY 2011

A small but growing band of companies wants to make healthcare affordable, accessible, and ubiquitous. Like the

larger groups, their services are of a high quality, but costs are kept under a tight leash. With early models starting

to scale, social investors are not the only ones being drawn to such companies, writes Gauri Kamath

These

companies

focus on

low-value

but high-

frequency

services,

which helps

them cut

set-up costs

The Udipis of Healthcare

F

Started

2005Hospitals

10

Promoter: Ashwin Naik

and Veerendra Hiremath

Investors: Aavishkaar,

Oasis fund and Seedfund

Expansion Plans: From two

states to five states in 5 years

Model: Set up affordable

secondary care hospitals in

semi-urban and rural areas

Focus: High-frequency, rela-

tively low-value procedures

such as maternity, paedi-

atrics, general surgery, inter-

nal medicine, dialysis, mini-

mally-invasive procedures

Early challenges: Hiring

and retaining doctors

and nurses

“You have

to reduce

capex

drastically

so as not to

worry about

recovering

it over a fixed period”

Some solutions

� Bring back specialists

native to the town who

have moved to the city

because of no local

options or infrastructure

� Partner local nursing

colleges for internship

and to design curriculum

� Employ local doctors to

generate visibility for

the brand

ASHWIN NAIKCo-founder & CEO, Vaatsalya

A visiting doctor from Eye-Q’s Gurgaon hub examines a patient at its spoke hospital in Rewari, 82 km away from Delhi ASHWANI NAGPAL

VAATSALYA

Started

2007Hospitals

11

Promoter: Rajat Goel and

Ajay Sharma

Investors: Song Advisors

Expansion Plans: 50 in the

next two-and-a-half years

Model: Hub-and-spoke. Hub

is a super-speciality hospital

in a city while spokes are

smaller hospitals in tier-2

and 3 towns.

Focus: Complete range of

eye care or ophthalmology

services

Early challenges: Attracting

doctors. Since eyecare is

technology-intensive, keeping

equipment cost down while

making the service affordable

“We found

that even 100

km beyond

Delhi,

healthcare

infrastructure

was poor... we

brought in better quality at

the same price”

Some solutions

� Partner local doctors

by buying out and

refurbishing their

practice and keeping

them in charge

� Share doctors and less

frequently-used equip-

ment (like for the

retina) between several

centres located within a

specific radius

RAJAT GOELCo-founder & CEO, Eye-Q

EYE-Q

Started

2005Hospitals

09

Promoter: HLL LifeCare

Investors: Acumen Fund

Expansion Plans: 30 by

July 2012

Model: Network of low-cost

hospitals in cities for the

urban working poor

Focus: Maternity, child birth

and other gynaecological pro-

cedures

Early challenges: Keeping

set-up costs down, assuring

patient compliance

“We ask

prospective

employees

to visit a

government

and private

set-up before they

decide to join us”

Some solutions

� Be ruthless about cost

not related to care

� Outsource pharmacy and

lab services, don’t procure

medicines upfront

� Health workers, nurses

fan out into community

ANANT KUMARCEO, Lifespring

LIFESPRING

Started

2002Hospitals

05Promoter: Indu Singh

Investors: Aavishkaar

Expansion Plans: Reach 12 in

two years

Model: Set up a hub-and-

spoke model of secondary

care hospitals in cities and

small towns and a network

of micro-clinics in villages

Focus: Super-speciality care in

the hub, secondary care in

spokes, primary in

micro clinics

Early challenges: Big city

lure among doctors makes

hiring and retention tough,

paucity of trained auxiliary

staff, finding inexpensive

locations

“When

people

seek out

healthcare,

they come

prepared

to sell their land”

INDU SINGHMD, GV Meditech

Some solutions

� Coax doctors to travel to

spokes once a week by

providing comfortable

travel and lodging. Use

telemedicine.

� Partner with large hospital

for specialist support

� Use government skilling

programmes to train

locals for micro clinics

� Partner local panchayats for

space to run micro clinics

GV MEDITECH