What are the biggest business pressures healthcare leaders are facing today?
Leading Metro and Tier 1 markets have seen a profusion of ‘quality’ healthcare infrastructure creation by leading corporate players over the last few years, both through organic and inorganic means, leading to significantly enhanced organised competitive intensity in these top tier markets. The ensuing challenge in these markets, as the gap between addressable demand and supply narrows, will be to drive differentiation and sustain handsome organic growth.
The other challenge relates to mature urban consumers in India becoming far more knowledgeable and hence discerning in their choice of healthcare service providers. This will imply that providers would need to show differentiation not only in clinical outcomes but also in how they offer customised experiences to patients and their families.
Apart from these market related challenges, the impending regulatory threat of pricing scrutiny and control is the other challenge that healthcare providers may have to deal with in the not-sodistant future.
What expansion strategies are working, and which ones are proving risky in the current environment?
The brownfield expansion and integration playbook is now a fairly well-developed one, with multiple corporate and PEinvestee groups employing that well to drive rapid topline and EBITDA expansion. The issue with the inorganic expansion model is that after the rapid consolidation witnessed in this segment over the last few years, not too many large, scaled regional businesses are available for further consolidation by the larger players. By contrast, greenfield expansion models, while enabling far better control on design and quality, present challenges to meeting the quicker return metrics thresholds that healthcare investors demand.
How are cost pressures influencing pricing, margins, and long-term sustainability across healthcare segments?
In steady-state units, median realisation growth ranges between four to eight per cent as an outcome of both pricing revision as well as continued improvement in case mix. This realisation inflation therefore more than balances out the inflationary trends on material costs, employee costs and doctor costs. In facilities, where there is handsome volume growth to top this realisation growth, operating leverage leads to margin expansion over time. In the medium term therefore, margin sustainability for well-established brands should not come under pressure.
However, if there are macro events that cause shock to the growth rates of the economy thereby slowing down income growth, pricing growth sustainability may well come under pressure. In today’s volatile global geopolitical landscape, one cannot completely rule out the possibility of such shocks.
What operational capabilities are becoming non-negotiable as healthcare platforms scale? Which operational improvements deliver the quickest financial impact?
Data and AI will collectively become central to how successful healthcare groups play in this business over the next few years. Traditionally, most healthcare providers have been used to treating patients as episodes, merely as admissions and discharges who are forgotten post-discharge. However, given the increasing competitive intensity and maturing consumers, most groups are starting to evaluate interventions that would give them a singular view of the patient across the entire continuum of care – right from the point in time the patient searches about a disease on Open AI to first or follow-up instances of consultation through to admissions and post-discharge engagement.
The other capability that will lead to differentiation is patient-centricity and service excellence. Culturally, most healthcare providers have been used to thinking of clinical aspects first and non-clinical service excellence as a ‘nice to have’. This is likely to change in an environment where patients become more informed and demanding. Groups that will forge ahead are the ones that will learn from the hospitality industry, drive a cultural transformation and start placing the patient at the center of everything they do.
Thirdly, as groups scale and payers become a more dominant channel in India, emphasis on clinical outcomes, and correspondingly on pathways, processes and systems that drive better outcomes will become critical.
Overall, data and governance will be at the heart of enabling the three shifts outlined above. Groups that do this better will emerge as winners.
What should leaders fix first – processes, technology, or talent? How do fragmented systems impact decisionmaking at the leadership level?
In healthcare services, it is important to choose one of these aspects over the other. There is no service without outstanding clinical and nonclinical talent. There is no quality or experience without processes. And, there is limited governance, evidence-based decision-making or life-long patient engagement without technology. All three elements need to be worked upon in tandem.
Fragmentation in systems and more importantly fragmentation in operational, clinical and financial views across the network impedes the ability to drive the ‘network effect’. Without this uniformity, a healthcare network is just an amalgamation of disparate units without the benefits of centralised best practices.
How should leaders prepare their organisations for tighter pricing and regulatory scrutiny?
India is slowly transforming from a health economy that used to be largely dependent on out of pocket payments to one where increasingly payors, both government and private, are enhancing their penetration and impact. In this changing environment, cost efficiency and ethical healthcare will increasingly become non-negotiable. Cost efficiency will be contingent on efficiency in procurement, in doctor mix and operating model tailored to formats and geographies and in driving higher productivity in employees leveraging technological interventions. As an example, we expect AI solutions to play an increasing important role in areas like the contact center for customer interactions, thereby optimising costs as well as in charting out patient specific, custom interaction pathways in the early part of the patient journey, thereby lowering patient acquisition costs and driving higher effectiveness in customer funnelling.
What will define a winning healthcare business over the next five years?
Tomorrow’s winners in healthcare will have the following cornerstones for their success:
- Data and AI as a strategic tool for patient engagement, service excellence and quality
- Transition to a consumercentric, patient-first approach and investment in brandbuilding
- Greater standardisation of clinical pathways, processes and systems – thereby readying the business for an environment that has greater contingency on payors
- Cost focus and more nuanced operating model choices (formats, focus specialties, doctor engagement models) as groups expand to lower tier towns
- Best in class capabilities in acquisition and successful integration to drive synergies
The sands are shifting rapidly and the healthcare landscape may well look very different another five-six years down the line!
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