Columbia Asia is the McDonald’s of Medicine
Image: Saeed Khan/AFP for Forbes India
Hospitals treat patients. They wheel the sick in, patch them up and send them on their way. It’s a simple business. Of course, the intricacies are complex but the business philosophy is straightforward: The more patients you treat, the more money you make. You can take the Fortis and Apollo Hospitals route: Build large (over 300 beds) super speciality care hospitals in metros in prime non-residential areas. Or you can be like Columbia Asia and build hospitals with a 100-bed capacity providing secondary care in non-prime, non-residential areas in tier II and III cities.
The average Columbia Asia hospital costs Rs. 80 crore and 12 months to build from scratch. Typically it takes 14-16 months to break even. Matthew Powell, the Malaysia-based managing director, says almost all Columbia Asia hospitals in India break even in the first year and generate profits from the second year on. Columbia Asia has seven hospitals in India currently, in cities like Bangalore, Kolkata, Delhi area, Patiala and Mysore. It also has hospitals in Malaysia (eight), Vietnam (two) and Indonesia (one).
Powell has no doubt about what will be the growth driver for the company. He is betting big on India. By 2012, he will have invested $180 million to build 17 hospitals in the first phase. Plans for the second phase are being finalised.
“India will be our primary market…India’s explosive growth in middle income group, market, demographics is what excites us,” says
In India, the company already has 3,300 employees and is headed by Dr. Nandakumar Jairam, the chairman, and ex-Oberoi Hotels executive Tufan Ghosh, who is the CEO.
Columbia Asia positions itself as the McDonald’s of the healthcare business. Value-for-money, efficient delivery of service, a uniform service experience across its chain — all this is backed by very high usage of IT. All medical records and lab reports are maintained digitally; doctors across all Columbia Asia hospitals can access them on their computers. Its charges are 15-20 percent cheaper than comparable hospitals in the area. For example, an ultrasound here costs Rs. 800 while one at Apollo costs Rs. 1,200.
Columbia Asia’s main focus is secondary care. Studies show that over 90 percent of the $46-billion healthcare business is in secondary care. Secondary care hospitals are also cheaper and faster to build and operate; not being in critical tertiary care means less investment on high-end medical equipments and specialist doctors. By strategy, Columbia Asia likes patients to have a short stay in its hospitals — this helps it keep its per bed income high.
The hospital does not charge differential rates for the same procedure for people staying in different categories of rooms. For example, if two patients are undergoing cataract surgery, the one staying in single-bed room typically is charged a higher rate for the surgery as against a person who stays in the double-bed room. “It is a major scam. In the US, you will lose your licence if you did it,” says Dr. Arvind Kasaragod, chief of medical services, Columbia Asia.
Columbia Asia tries not to slip up when it comes to ethics. It is answerable to its owners: The 150 Seattle-based individual and institutional investors who raised $300 million to invest in building a healthcare business in Asia. The fund is managed by the investment management firm Columbia Pacific and is routed through Columbia Asia, its wholly owned subsidiary.
But as it grows, challenges have begun to show. Hospitals are getting crowded, waiting periods have gone up. Its hospital in Hebbal, Bangalore, was built to handle a peak capacity of 300 patients but is already handling 670 a day.
Some sceptics say absence of star doctors — who can pull in patients — is another challenge. “That is a drawback of their model,” says Kuldeep Chaudhary, CEO, Indian Health Consultants.
But Columbia Asia doesn’t need these star doctors for the vast majority of its cases. It needs well trained doctors. And that is something that its hospitals have in good measure. Kasaragod, 46, a specialist in paediatric critical care, has spent over 15 years in the US. Around 25 percent of the Columbia Asia’s 850 doctors have done some kind of overseas stint before joining here.
Another problem is attrition. “For us the single biggest challenge is sourcing the right people [nurses and doctors],” admits CEO Tufan Ghosh. With high attrition among the nursing staff, it already has a tie-up with five nursing institutions and plans to do more in future.
Most of its full time doctors are typically younger doctors who are offered a 12-month fixed retainership, as is the global practice. Soon they are moved to revenue share where they give 20 percent of the earnings to the hospital. This helps the hospital keep its doctor acquisition cost low and in sync with its revenues.
Challenges notwithstanding, Columbia Asia is optimistic and expanding. While so far all the funds have come in the form of equity, it is now looking to raise up to 50 percent debt to finance its future growth. It has a tie-up with SBI for three ongoing projects.
Growth will not come easy, but Columbia Asia is in no hurry. Despite being funded by an investment fund, Powell says that they have a very long-term investment horizon, beyond 5-10 years. “We don’t have a specific exit on our minds,” says Powell. There will never be a pressure to take short cuts to grow the business, he says. “We feel very strongly about it [ethics and transparency],” he adds.