Alvarez & Marsal, a leading consultant firm, is of the view that Indian healthcare sector despite its technologies, skills, maturity in creating international models of excellence in quality of care and outcomes is yet to address the needs of the small towns.
 
The concentration of hospital beds in top tier towns leaves large unaddressed markets, scarcity of quality institutions and clinicians which result in healthcare inflation in the private market.
 
“Prospective investors need to see the emerging green shoots for cost-effective hospital delivery models in small towns. This could enable healthcare providers to offer services for price conscious segments and continue investor interest in select segments with proven high-return on capital employed (ROCE) models,” according to Kaustav Ganguli, healthcare lead and senior director with Alvarez & Marsal.
 
Investors are taking note of more cost-effective, higher-ROCE hospital chains that are operational across towns catering to low-to-mid income groups. This is in contrast to the metro-focused super-built, high capex hospital assets that have garnered most of the hospital investments so far. There is now growing conviction and understanding of how to deliver tertiary care services in a margin-accretive manner to price-conscious segments, he added.
 
In its report on ‘Healthcare performance improvement - unlocking value creation opportunities in Indian hospitals’ the company pointed out that the need for a holistic approach towards performance improvement addressing factors affecting revenue enhancement, direct cost reduction, overhead optimization and working capital management.
 
The biggest challenge that plagues the scalability of any business model in Indian healthcare is the sheer dearth of talent: doctors, nurses, allied health professionals (AHPs) as well as leadership and management talent. There is skewed access across urban-rural areas because the government’s delivery system has been largely ineffective. The private players are still trying to discover financially viable business models for geographies where demand density and affordability are low. The broken system for primary and preventive care leads to inordinate disease burden for the hospitals. The other concerns are low penetration of payer models making most of the healthcare spend discretionary and out-of-pocket. There is also the challenge relating to data sitting in silos which prevents effective analytics for proactive interventions.
 
Therefore the government should focus more on providing primary care and rely on private interventions and partnerships for a large part of secondary and tertiary care. So that over a period of time the government’s principal role should be that of a financier and regulator to address the needs of the small towns, he said.