In June, Fortis Healthcare turned ten. On the occasion Managing Director Shivinder Mohan Singh rather exuberantly announced a 10/10 vision – to launch 10 hospitals in 10 weeks. Six have been launched so far, taking the Rs 1,483 crore group’s network of hospitals to 67. For these expansions, funding is not a concern, says the MD. “In the last five years, our net worth has grown 50 per cent CAGR basis annually. Our revenue has grown by 70 odd per cent over five years. Every year we felt that ab nahin hoga (it won’t happen again), but it has happened again,” he says, as he shares with Business Line key strategies in the decade long journey. Excerpts:

This growth has come mostly through acquisitions?

I am not shy about that. With acquisitions, you are in business faster. You do a deal in eight nine months and you are in business. Greenfield is more expensive to do. You take eight to nine months to sew up a land deal and then it takes five years to build in the case of greenfield ventures. The maths does not work that easily. Acquisition is also So, certainly the scale has come through acquisitions. But we have grown through all four routes - Greenfield, acquisitions of running facilities, project stage acquisitions (which are buildings ready plus or minus) and management contracts. Obviously the value in each cannot be compared. But in terms of sheer number of facilities, we have grown in all four spaces.

Has your revenue per bed gone up?

The revenue per bed is partly a function of pay. But it’s a lot more a function of competence in terms of productiveness and efficiency - than pay. It’s not revenue per bed going up is equal to pricing going up. In fact, one of the things we pride ourselves in our tenth year, is that we have not changed our cardiac pricing market at all.

On principle, what we understood was that if you want to have a differentiator in this business, and actually make money, it cannot be in terms of pricing because of sensitivities. It has to be by virtue of getting productivity into this system. It’s a bit like manufacturing. You have got a factory that produces 100 cars, but if you are able to produce 250 cars in the same factory, you got better ROI..

So over time, compared to 2001, when our Mohali facility started with its first cardiac surgery, today we are doing cheaper cardiac surgeries than ten years ago. What we have figured out is if you can make your delivery mechanism much more efficient, you can do the same job in a lesser time frame. Therefore, the TAT (turn around time) goes down and the churn goes up. In other words, the fewer number of days a patient spends in hospital, lesser he or she pays.

What about wage bills and medical inflation?

The effect of changes in drug pricing would hit the organization. We won’t pass on to the patient. We did a study 2-3 years ago, which showed that the cost of just medical manpower has gone up 90 per cent over the seven years we had been in business. Wage bills have been going up 10-15 per cent per year. But now it has more than doubled thanks to the sixth pay commission. Yet, we did not change our pricing, but became more productive.

This we could do, because we work in a staff model. The productivity benefit goes throughout the organisation. If we worked in a fee-for-service model, we would have been cleaned out by now. So, our model has inherent strengths.

Why have you kept your International business separate from Fortis India?

When we went for the Parkway deal last year it came as a rude shock to those connected to Fortis. Our investors, doctors, employees were taken by surprise. Most of the concerns were on whether we will focus more on international space than the Indian business. So we reviewed our strategy. We were very clear that we wanted to go international but we also didn’t want any of our stakeholders to get jittery. So we took a conscious call that instead of disturbing this set up, we will keep it separate and see down the line what happens. We honestly didn’t expect the kind of growth that we have seen international space. We have grown pretty fast in the last 8-9 months. Now the anxiety levels are gone.

So, does that mean you are considering a merger between the two?

Merger is a strong word. But there must be a relationship between the two entities. We also do not want entanglement between our two companies so we have demarcated our market for the two biz …companies. But so far internationally, not much has happened in the hospital space. Sri Lanka is an investment where do not manage it, the Singapore hospital is not ready, Australian venture is in the dental segment and Hong Kong is primary centres. But as things happen going forward there will be synergies between the international and Indian businesses. Indian unit will benefit with what we are doing globally It is too early to say how but for surely there will be synergies.

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