NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, July 17, 2014

Access to high-quality, low-cost healthcare services is a big challenge in many African countries. There are few public hospitals in most areas and those available are often under-staffed, under-funded and lack basic facilities. Low-income earners and people residing in rural areas face even greater difficulties accessing the most basic care.

Entrepreneurs are increasingly investing in thehealthcare sector to bridge the gap, but they face a myriad of hurdles in delivering quality services as well as value to shareholders, and have to challenge accepted approaches.

As Africa’s population increases and incomes rise, the demand for wider access to high-quality and affordable healthcare is expected to climb. A report by professional services firm KPMG, titled ‘Delivering high-quality, low-cost care at scale’, highlights case studies of successful hospital chains in India that African businesses can learn from.

Here are the success stories of three hospitals started byentrepreneurs in India and the strategies they have deployed to scale their operations and be commercially successful.

Targeting under-served areas

The Vaatsalya chain of hospitals, founded in 2005 by two doctors Ashwin Naik and Veerendra Hiremath, targets clients in semi-urban and rural areas who have limited or no access to healthcare facilities.

Key components of the business model include bringing doctors back to rural areas and reducing the brain drain, making no major real estate investments and eliminating frills such as decor, ward kitchens and cafeterias.

Every year its 50-70 bed capacity hospitals each serve more than half a million patients, offering core services that include mother and child care, general surgery, diagnostics and emergency care.

The chain expands its hospital network based on people’s needs in a particular region, the gap in health service provision, and the availability of doctors either locally or those who are willing to move to that geography.

“This combination of targeting an under-served but large market focusing on common conditions, gives Vaatsalya a clear market niche and sufficient scale and focus to achieve cost savings – most of these are benefits from standardisation, flow and specialisation rather than economies of scale,” says KPMG.