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Faster, cheaper, better: Our view on the future of elective surgeries in India

By on February 14, 2019

Anant, one of my uncles, went through a varicose-veins surgery recently. While the surgery was successful, our overall experience was horrendous.

Our first challenge was to find the right hospital. Since none of the larger hospital brands cared for small cheque elective surgeries such as varicose-veins, we relied on the Internet to find good hospitals. To my surprise, cyberspace was full of junk marketing material but lacked customer reviews for surgical procedures. Also, it was hard to trust reviews as most of the reviewers were unknown to us. However, beggars can’t be choosers and after a lot of research, we finalized a 100-bed hospital in Safdarjung, Delhi.

Once at the hospital, we realized that our challenges had just started. Our time at hospital was filled with long waits for the surgery, myriad consultations and lab tests. These waits increased our hospitalization period from 1 to 5 days and consequently inflated our bill amount. While checking out, we experienced a lack of transparency around procedure costs, extra charges and insurance coverage. As a result, while the surgery was conducted flawlessly and we even became friends with the surgeon, the experience left us feeling cheated.

Once the discharge formalities were over, I wondered if we were the only sufferers or whether our experience was symptomatic of a more widespread problem. With some help from Google, I found some data around waiting periods in Indian hospitals:

Additionally, a claims ratio (Value of claims processed / Value of premium collected) of 58% for private insurers makes it hard for customers to get their claims

 

The state of affairs left me shocked – it was clearly a systemic issue. I wanted to understand the root cause(s) and after interviewing multiple industry experts, realized the following –

  • Hospitals do not understand Internet and rely on word of mouth, newspapers and banners for publicity. Thus, online patients rarely get the right information
  • Influx of capital investments in the industry has led to an excess of unutilized OT space. An average OT has only 25-35% utilization
  • Regulations mandate setting up of ward rooms, ICUs and emergency treatment areas along with the OTs. This increases capex further, and shoots up the cost of surgeries
  • Most hospitals run as mom-and-pop businesses, without standardized processes. Large chains with standardized processes are few, and focus only on higher value surgeries like cancer and heart

It occurred to me that the elective day care surgeries industry faces the same problem which the hotel industry faced 7 years ago – huge capex, excess unutilized inventory, no quality standards and lack of online information. And my immediate next thought was –

Could one build an asset-light hospital brand for elective surgeries like Oyo did for hotels?

Such a venture could create a win-win proposition for hospitals, patients and surgeons by –

  • Enabling hospitals to monetize spare OT capacity
  • Providing 3x more patients to patient hungry elective procedure surgeons
  • Reducing the cost of surgery by upto 40% for patients by optimizing the OT and surgeon cost

After meeting numerous start-ups and hospital CEOs, I feel this is possible for the following reasons –

  • Full-stack business model without asset ownership
    In healthcare it has been very hard to capture value without owning the customer. However, owning the customer has required significant capital investments, which depresses returns and limits scalability of healthcare service providers. Utilizing excess (nearly 70-80%) OT capacity presents an opportunity that allows customer ownership (leading to revenue collection, pricing power and cost control) without significant capital investment.
  • Scalable acquisition channel
    Online customer acquisition is highly scalable and customer behaviour involving online research will only accelerate. Rich online content, webinars, influencer marketing, referral networks etc. offer avenues to scale the online user acquisition beyond just Google and Facebook ads.
  • Centralized operations (not centre dependent)
    Both acquisition and fulfilment operations could be centralized in this business, which makes this much more scalable than typical centre-by-centre healthcare delivery businesses.
  • Factory model of operations
    By focusing on a select set of surgical procedures, and making them highly process-oriented, one can improve not only surgical outcomes and patient satisfaction, but also the productivity and efficiency of operations.
  • Brand building opportunity
    By focusing on serious medical procedures and taking ownership of the entire stack, one can create a brand in healthcare delivery (and not healthcare referrals) which will significantly improve financials in the long run

However, this will not be an easy business to run. A successful player needs to standardize surgical procedures and scale the healthcare delivery and acquisition machinery. Also, there will be direct competition from local hospitals which would offer the same procedures at a cheaper cost and from branded hospital chains where the cost of surgical procedures will be covered by health insurance.

Despite these challenges, I feel there is a huge opportunity to create an asset-light hospital brand for day care surgeries which could offer access to high quality treatment at an affordable cost. I would love to talk to you if you are also thinking about solving the same problem. Please feel free to write to me at mridul@stellarisvp.com

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