Dr Devi Shetty bats for infra status of healthcare

Excerpts from India Business Hour on CNBC-TV18 Watch the full show »

He's been called the Henry Ford of heart care. Dr Devi Shetty is all set to expand his low-cost cardiac hospital chain, Narayana Hrudayalaya, in 2012. But to meet capital requirements, Dr Shetty is reworking his business plan to an 'asset light model', Syna Dhenugara and Shereen Bhan of CNBC-TV18 report.

Back from a four-day visit to Cayman Islands where he launched the first phase of the USD 2 billion 'health city', Dr Shetty believes his first off-shore venture will be a game changer for the way healthcare is delivered in the developed world. Narayanan Hrudayalaya operations in India are reported to earn after-tax profit margins of 7.7%, significantly higher than most private US hospitals.

"With Health City in Cayman Islands, we want to show the US that heart surgeries can be done at half the cost," says Dr Shetty, chairman of Narayana Hrudayalaya. "It is a very important venture because we have to prove to the world that this model is feasible not only in India, but also off the shores of America," he says. Dr Shetty believes that unless the US changes its systems, no one else will.

Nonetheless, in India, Narayana Hrudalaya is already proving to be a game changer. In December last year, the low-cost tertiary healthcare chain inaugurated Asia's largest pediatric hospital in Mumbai. This 1000-bed hospital also has infrastructure in the out-patient department to treat 3,000 children every day.

But the project Dr Shetty is most excited about is the low-cost hospital in Mysore which will be the first 300-bed super-specialty hospital in India to be commissioned in just six months, for USD 6 million.

To deal with the rapid expansion, the group is now reworking its business model to meet capital requirements.

"We have seen our capital requirement come down as we have tweaked our model a little bit," says Dr Shetty. "For instance, in Whitefield near Bangalore, our new hospital that is coming up on land held by the promoter, he is bearing construction cost as well. So we are moving towards an 'asset light model'," he elucidates.

Things might get a little easier for private healthcare players if the budget, due in March, grants infrastructure status to industry, making it easier for companies to raise loans and expand faster.

Dr Shetty is confident of getting the infra status this year. "We will be surprised if we don't," he tells CNBC-TV18. "It is essential that private hospitals take in patients covered under various state insurance schemes like Yeshaswini and RSBY. It has to be a combined effort of state and private players... a give and take," he says.

While Dr Shetty makes a strong argument, fiscal constraints may however make it difficult for the finance minister to include this wishlist in his prescription for growth.

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