Our Hospital Setups With All Facilities Cost Us Rs 10-15 Lakhs Per Bed Versus Rs 1.5 Cr Per Bed: Dr Shuchin Bajaj
Dr Shuchin Bajaj, Founder Director, Ujala Cygnus Hospitals speaks with BW Healthcare World on the evolving scenario of tier 2 and tier 3 cities, maintaining profitability, operating on low costs, leveraging technology and overcoming challenges of delivering healthcare in the towns
Post-Covid patients in India are becoming more and more aware of their rights as well as their health, said Dr Shuchin Bajaj, Founder Director, Ujala Cygnus Hospitals. He said people are now really aware of their health. With the increasing penetration of health insurance and availability of healthcare which does not cost out of pocket. More and more people want to avail a plethora of healthcare services from elective to emergency services in tier 2 and tier 3 towns.
Dr Bajaj believes healthcare delivery is experiencing a revolution in tier 2 and tier 3 cities, where there is an explosion of healthcare needs which have gone unmet for decades as big hospital chains stuck to the cosmopolitan cities.
Ujala Cygnus Hospitals is one of the few tertiary care hospital chains which has managed to turn profits in the smaller towns and the chain currently operates 19 hospitals in the non-cosmo cities of India. Dr Bajaj speaks with BW Healthcare World on the evolving scenario of tier 2 and tier 3 cities, maintaining profitability, operating on low costs, leveraging technology and overcoming challenges of delivering healthcare in the towns.
How do you think the hospital sector has evolved in Tier 2 and Tier 3 cities in the last few years? And how did you start setting up hospitals in these cities?
The progression of healthcare in terms of hospitals specifically that took place in metropolitan cities about 20 years ago is now happening in tier 2, and tier 3 cities. It is percolating down, so if you see the evolution of healthcare maybe 20 to 30 years ago, in the 1980s, if you had a heart attack or critical injury, etc you had to fly to the US or Chennai where the first Apollo was to get an angioplasty. The same thing was happening in the smaller towns till we came in, one would travel to the big cities like Delhi or Chandigarh and there was no way you were going to get an angioplasty in small towns like Kethal or Riwari or Kashipur. So we understood that most of the healthcare was being provided by small nursing homes, which actually failed when they were needed the most.
The nursing homes would do hernia, hydrocele, deliveries and cesareans. But when you had a heart attack or a critical illness, you had to go to Delhi. So that is what we tried to solve. And now we have 19 hospitals opened in small towns where there is nothing else. And we provide all kinds of tertiary care facilities, ICUs, Modular OTs, Neurosurgery, Cardiology, Trauma and Blood Banks.
Why do you think big corporate hospitals have stuck to the cosmopolitan cities? Any advice that you would like to offer to hospitals who want to foray in tier 2 and tier 3 cities?
So my message to anyone who wants to go to tier 2, tier 3 cities is, the future is truly there, ‘Bharat’ is where 70 per cent of our population lives. And almost 31 per cent of our population lives just in these tier 2 and tier 3 cities while only 8 per cent of our population lives in cosmopolitan cities and tier 1 cities where 85 per cent of our facilities are present. So the population that you want to access is there and it's a huge market.
But nobody actually goes there to do it, because it's not in their DNA. If you ask big city players, how much will it cost to set up a hospital with a NABH accreditation, and with facilities like modular OTs and ICUs, blood banks, dialysis facilities, neurosurgery facilities, and cardiology facilities among others. And if they say a number that is Rs 1 crore to Rs 1.5 crore per bed, it would be taken very comfortably. But if you spend this much in a small town you can never ever hope to recover your money. The return on capital will be abysmal and many large players have actually tried it, they have gone to the smaller cities burned their fingers and come back. So you need to be very lean in your setup costs very lean.
Our hospital setups with all facilities cost us around Rs 10 to 15 lakhs per bed versus Rs 1.5 crores per bed. As doctors we know where to put in money and where to save it, we do not goldplate any of our assets. Another aspect is having your costs fixed as much as possible. If you work on a big city model of star doctors and paper procedures, fee for service kind of model you will not be able to earn money in these towns because schemes like Ayushman Bharat, DSI and CGHS are extremely low paying.
How have you managed to operate on a low-cost hospital setup?
As doctors, we know what affects patient outcomes. All our equipment will be the highest possible equipment that you will get in any other metro hospital. Our quality compromise is zero, but we know where to save. Our beds will be locally made. Our monitors will be sourced directly from a country which makes very cheap monitors. Our curtains, linen, furniture everything will be locally sourced and will be very cost-effective.
We know our supplier of suppliers, we go really deep into our supply chain to source things and build them ourselves rather than sourcing it to anyone. Because if you build a modular OT and source it to a modular OT manufacturer, it will cost you anywhere between 50 lakhs to 1.5 crores for one OT. We build it in less than 12 lakhs because we make everything ourselves but every piece of equipment will be the same even down to the doors. As we source everything directly from the suppliers and build it ourselves.
How has technology helped your hospitals?
Technology has helped us a lot right from our supply chain discoveries where we use a lot of technology to our healthcare delivery assets. We operate some paperless hospitals, and our Srinagar hospital is one of them and hence is truly paperless. We manage our clinical outcomes and our audits based on technology, our entire hospital information and management software is cloud-based software, so we can access each and every hospital from wherever we are. We can see live what's going on and our data analysis also helps us a lot in making efficiencies in the system, building more profitability into the system and ensuring we are sustainable.
What are the challenges that you have faced working in these small towns?
I think the biggest challenge of course is attracting the right medical talent to work with you. Doctors are still, I think, not very difficult to get but good-quality nurses and paramedical staff are very tough to get. You have to keep training them and upskilling them. Another challenge is managing the affordability part as I said we have solved accessibility and availability but still affordability is an issue, some people are willing to pay even the highest cost but most people do not really have the money to access healthcare.
So one needs to ensure that one has an affordable solution. And third, of course, is to have statutory compliances that we have to take care of that each and every hospital should be very compliant. The availability of buildings that have these specific sets of standards in place is something that needs to be taken care of in smaller towns at a much higher scale compared to the bigger towns.
How do you envision healthcare delivery enfolding in tier 2 & tier 3 cities?
All these towns are catering to a population of 1.5 to 2 million people around them in the district at the very least. So the healthcare scenario is changing quite rapidly. It is replicating what happened in metropolitan cities. This acceleration will further be compounded by the intensive government policies now. The government wants to reduce out-of-pocket expenditures as much as possible. So when everyone is insured in India, smaller nursing homes will fail to keep up with the demands of the insurance companies, the statutory compliances, NABH accreditation, the paperwork etc.
Because they clearly do not have the bandwidth to do that. The bigger chains will face a lot of trouble working at the rates that the government insurance companies give. So I think Ujala Cygnus is situated right in the sweet spot. Where we work at low costs with high margins. And we have demonstrated that even at working at low cost you can actually earn profit. So healthcare is now evolving from the earlier model of low volumes, high margins that the private hospitals used to function on to a very high volume low margin business, which most private players will have to adopt.