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Trehan prescribes lower charges for healthy returns

Joe C Mathew  |  New Delhi 

The opening of the country's biggest private healthcare facility, “Medanta — the Medicity”, was quiet but the facility is buzzing with activity. Promoted by Naresh Trehan, the iconic cardiac surgeon who set up Delhi’s Escorts Heart Institute 22 years earlier, the hospital complex in the satellite city of Gurgaon has already treated hundreds of patients in the past few weeks, though it is yet to be officially inaugurated.

Naresh trehanTrehan said Medanta, of which he is chairman and managing director, had performed over 500 heart operations and 450 orthopedic procedures in the past six weeks. The Rs 1,000-crore project, partially thrown open to patients in January, is creating ripples in the capital city’s fiercely competitive corporate healthcare market.

On completion, the hospital will have 1,200 beds across a dozen therapeutic areas, much bigger than the 650-bed Indraprastha Apollo, the biggest facility currently in Delhi. In addition to corporate hospital chains like Fortis, Max and Columbia Asia, hospitals promoted by groups such as Paras and Apollo Tyres are among Medanta’s competitors.

“All the big names (in the profession) have teamed up with Trehan. I would expect that they have the ability to fill up beds faster than any other greenfield hospital project,” said Krishnakumar Sankaranarayanan, a heathcare expert with

Trehan moved out of Escorts after it was bought by Fortis Healthcare, the country's second largest hospital chain. Since he was already working on the Medicity project, the new managment perceived a conflict of interest.

His team and he then moved to Apollo Hospitals, the country's largest healthcare chain. Trehan now has a team of  doctors drawn from corporate hospital groups such as Fortis, Max and Apollo, and this should help in attracting patients.

According to Trehan, of the 600-odd beds already operational, over 300 are occupied. Critical specialities like cardiac care are full. With a staff strength of over 2,000 – including 300 doctors and 1,100 nurses – the hospital is specialising in areas such as cardiac, cancer, kidney transplant, diabetes and plastic surgery.

Price advantage
“We are amortising over a larger base and are able to keep our prices down. It costs 15 to 20 per cent less for all procedures as compared to any other hospital,” Trehan says. For instance,  cardiac surgery, which should cost Rs 2.25 lakh normally, would be about Rs 1.9 lakh, he said.

Normally, a start-up hospital would take one to two years to establish itself. During the period, healthcare experts expect its occupancy rates to be 10 to 25 per cent. Medanta seems to have an early advantage, but the key question is whether it is sustainable, say experts.

“Today, most of the surgeries are elective ones. The patients decide where to go. Most of the surgeries taking place in Medanta today must have been planned earlier, after these patients consulted Medanta doctors in their previous institutions. The question is whether it will continue,” says Sankaranarayanan.

Trehan is confident there is no match for his institution.  “The methodology behind this project was, there is no institution like the Mayo Clinic (in the United States) in this part of the world. We have set up one now. The man and the machine have been matched at the highest level. And, we have provided all the features required for patient safety. But, to sustain such a model, we need to make it affordable. That’s why we have kept the price down. We also have five per cent free and 20 per cent subsidised treatments here,” he said.

Medanta also has outreach programmes where its doctors conduct health camps across North India on a daily basis. Healthcare analysts feel the break-even period for a project like Medanta could be seven to eight years.

Partnership model
While a typical greenfield project would have had a huge interest component to its recurring costs, Medanta has a cushion due to the partnership model adopted by Trehan, which allows him to work on lower costs. The hospital has US-based Avenue Capital, a venture fund, as an equity partner. The other equity partner, Punj Lloyd, developed the infrastructure for Medanta. The third partner, technology collaborator Siemens, provided the latest medical equipment.

All three are long-term partners, which has helped Trehan bring down the fixed costs at the initial stage, analysts say. They have helped him avoid the high interest payments associated with debt-heavy projects.

Trehan did not provide the equity break-up, but said his investors and he were willing to see Medanta function on a lower profit margin than others. “They should not look for a 30 or 20 per cent profit margin, but should be satisfied with a 10 per cent margin,” Trehan said. 

He also said all leading doctors heading different specialties in Medanta will have a stake in the project.

Research is another area of interest. US-based Duke University has already tied up with the institution for collaborative research and clinical trials. Trehan said Medanta would also have affiliations with other institutions around the world. “There are many. Since we have just started, collaborations haven’t been signed yet,” he said.

Trehan is also eyeing medical tourism as a major revenue generator. The proximity to Delhi’s international airport, the state-of-the-art technology, international medical collaborations and quality surgeons are all buttressing these ambitions.

One year from now, Medanta will be fully operational and fully occupied, Trehan feels. The hospital will then get a VIP for an official inauguration. That is when the announcement of the opening of a full-house Medanta will be made, he hopes.

First Published: Wed, March 03 2010. 00:08 IST