Taking tertiary care beyond major metros

The scarcity of clinical talent, skewed ratio of subsidised and full pay health services are just two of the bumps delaying a ‘happily ever after’ in India’s smaller towns

As hospital chains and speciality focused facilities expand beyond the Tier 1 and 2 metros, is it a smooth ride? What are the bumps along the way?

In January, rating agency ICRA projected that private hospital chains are expected to add over 30,000 beds in the next four to five years at an investment of approximately Rs 32,500 crore. While metros like Delhi NCR, Mumbai and Bangalore are expected to remain focal points for this greenfield or brownfield capacity expansion, hospital chains are also looking at mergers and acquisitions to diversify their geographic reach and/or speciality mix in addition to increasing their scale of operations.

To start off, our cover story in the April edition focuses on how healthcare majors are Navigating healthcare in Nashik, an emerging healthcare hub in Maharashtra. While some corporate hospitals have a presence in Nashik, there are many smaller standalone hospitals as well. On the public healthcare front, schemes like Ayushman Bharat and state schemes, like Maharashtra’s Mahatma Jyotirao Phule Jan Arogya Yojana (MJPJAY) scheme, have improved awareness, access and affordability to healthcare facilities.

The rationale for expansion of national hospital chains to smaller cities is clear and can be a win-win for all sides. Patients do not need to travel to cities for tertiary care if advanced care is available closer to their place of residence. Larger hospital chains expand their geographical footprint, as higher volumes lead to economies of scale.

However the criticism is that private care is more expensive for patients and the entry of such players into smaller towns causes local nursing homes (smaller than 50 beds per facility) to shut down. Already operating on wafer thin margins, they struggle for cash flow and over a period of time cede market share to national chains with deeper pockets.

Another feature of smaller towns is the larger percentage of patients claiming subsidised care under various schemes. If a hospital is unable to maintain a balance between subsidised care and full paying patients, it would take longer to break even. If this balance remains severely skewed towards subsidised care over a period of years, the facility would not have enough operating capital, as the time lag for reimbursements ranges from a few months to years.

For their part, hospitals allege that patients who can afford treatment, and thus do not fall under the prescribed income bracket (annual income below Rs 2.5 lakh), manage to procure Ayushman Bharat (or MJPJAY cards in the case of Nashik) and demand subsidised care. “You drive up in a Mercedes Benz and then flash an MJPJAY card! Is that fair?”, reasoned a hospital chief.

The flip side is that there have been cases of smaller private hospitals misusing central schemes to claim benefits under Ayushman Bharat under the names of dead patients etc. Let’s hope that the panel set up to review the Ayushman Bharat scheme in early March, headed by Dr V. K. Paul, member (health) of the NITI Aayog, will identify and suggest ways to address these loopholes.

Talent is a big speed breaker to building a sustainable presence in smaller metros. Most doctors would not like to relocate from metros to Tier 2/3/4 locations. Properly trained nursing and paramedical staff too is in short supply in such locations.

The scarcity of specialist doctors in smaller towns leads to poaching between the larger hospitals. Doctors too resist the practice of being full time consultants at one hospital, a requirement of some national chains. Thus strategies which work in metros will have to be tweaked for smaller locations.

Inspite of these constraints, even though at least one national chain hospital has pulled out of Nashik for some of the reasons mentioned above, the lure of expanding brand presence remains. Growth will come from locations which have the real estate to put up greenfield facilities. The cost of land in metros weighs down the balance sheet and stretches the time to break even.

Larger hospital chains have found ways to build a presence in smaller locations. Talent can be upskilled, as there are many online upskilling courses available, from the nursing, paramedic, clinician to hospital management cadres.

The search for economies of scale will lead more healthcare chains to set up connecting spokes in smaller locations, connecting them to larger hubs, always scanning for the next frontier of growth. Balancing unmet medical needs with corporate ambitions calls for a judicious mix of reading the demographic/socio-economic profile, identifying the underserved disease niche and creating a sustainable ecosystem to serve the interests of both sides.




Ayushman Bharatrural healthtertiary caretier 2
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