Sensing an opportunity in the demand and supply gap in India’s healthcare space, New York based private equity company GTI Group has launched a unique business model where it is seeking partnership with specialist doctors to launch day care surgery centres. Christened as Nova Medical Centre, around 100 such centers will be launched with an investment of Rs 800-Rs 900 crore by 2013.
The first centre has come up in Koramangala in Bangalore, the second centre is coming up at Greater Kailash in New Delhi while a third centre will be launched in Mumbai. In the first phase of the project, 25 day care centres will be launched with a total cost of Rs 250 crore by December 2011.
So how does this model work?
With focus only on surgeries, the GTI Group in partnership with a team of 30-35 established surgeons from multiple specialties launch a centre which costs Rs 7.5 crore. GTI Group invests 70 per cent while the team of doctors have to invest the remaining 30 per cent. A surgeon with atleast 10 years of experience is invited to be a partner and has to make a minimum investment of Rs 3 lakh and maximum upto Rs 10 lakh.
Unlike in a hospital where the surgeon has to share his fees with the hospital and has no share in the profits made by the hospital, in a Nova centre, he gets his entire professional fees, 30 per cent share from the profits made by the centre and a fully convertible debenture (FCD) for the amount he has invested which will be converted into equity at the time of intial public offering (IPO) or a strategic sale in 2013.
“For setting up a corporate hospital an investment of Rs 200 to Rs 300 crore is required which takes six to eight years to breakeven. On the other hand, it takes 90 days to set up Nova centre, which will breakeven in six to eight months,” said Girish Rao, managing director & CEO of Nova Medical Centres.
“Thus, the doctor earns back the Rs 10 lakh invested within 24 months of the launch of the centre and still continues to remain the owner of the centre,” added Rao.
According to Suresh Soni, partner, GTI Group, the centre will have the capacity to undertake around 600 procedures per month and patients will save 10 to 15 per cent less than what they will spend in a corporate hospital.
“Around 80 per cent of the cost involved in building and running a hospital are from the non-operating areas such as waiting area for visitors, parking area, rooms, reception while the cost from an operation theatre (OT) is just 10 per cent. However 80 per cent of the revenue earned by a hospital is from the OT,” said Soni.