Why are Single Speciality Hospitals Prospering?

Says Mr Gaurav Malhotra, Medicover Fertility MD – A Single Speciality IVF Chain of Clinics.

The global health care sector is undergoing some major shifts. As suppliers, payers and investors across the globe are attempting to deliver effective, economical and equitable care, it’s leading to a system that’s opening new operative models.

Private equity and working capital have driven the expansion of the health care delivery sector in Asian countries. In the last decade, investors have raised over $3.4 billion to invest in infrastructure, medical technology and progressive clinical delivery, giving patients access to a globally bench marked personal health care delivery system.

This 1st wave of capital gave rise to several multi-speciality hospital networks that expanded across the country. It additionally led to the creation of huge standalone hospitals also where the capacity ranged from 300-500 beds with a mean demand of 850-900 sq. ft/bed.

Single speciality healthcare centres across the country are increasingly gaining importance and giving significant opportunities for emerging businesses and private equity investors, however, there are certain challenges that start-ups operating in the sector are facing.

Mr Gaurav Malhotra says that for healthcare start-ups, the cost of the capital is too high. Besides, the cost of rentals or land is high when compared to multi-speciality hospitals. As a start-up when it comes to procuring free land, it becomes difficult, but when you establish a multi-speciality hospital, you might often get the land for free from the government. Moreover, there are no tax benefits too that single-speciality hospitals, or day care centres typically get to avail.

Single-speciality hospitals or day-care centres as they are commonly known their main focus is on speciality care services in any one area of healthcare and it can be ophthalmology centres, dental care, fertility centres and oncology centres, to name a few. Almost all businesses in the single-speciality segment are lining up significant expansion plans.

There has been much said and written about single speciality chains and their expansion plans with patients increasingly coming to them, but there are certain points that may hinder the growth of the overall sector. When prices increase in setting up a clinic, they are typically passed on to the consumers, in this case, it’s the patients. Mr Gaurav Malhotra exclaims that even bank interest rates for healthcare start-ups are high. Since this is a social sector, benefits in interest rates would have certainly helped.

Conventionally, healthcare has always been an interesting area for investors and within the sector, single speciality is gaining the interest of the investors because of the nature of the business and the quick returns it guarantees. In fact, it is the possibility to offer a solution for a specific requirement by single speciality chains coupled with the specialized infrastructure that is driving the growth in the segment.

As per data from Grant Thornton, so Private Equity and Venture Capitalists firms invested $1,071 million, of which, $228 million went into primary healthcare or single speciality hospital, the total number of healthcare/pharma deals during the same period stood at 39. Interestingly, what excites the investor’s interest is that the rising number of mergers and acquisitions besides the growth prospect of the sector overall.

Furthermore, for investments in a single speciality, the incubation period for any project is low compared to multispecialty where the capital requirement is actually huge. The cost of a single bed in a multi-speciality set-up can go up to Rs 50-80 lakh. Moreover, there are issues concerning low-capital performance that make even the best hospitals to collapse operationally not before a year and a half and in about six on capital expenditure.