Saturday, November 5, 2011

Hospital for Profit

I have been to Fortis Malar and also Apollo and noticed the buzz of activities, the processes followed, world class infrastructure, foreign country patients, cutting edge technology, high skilled doctors and the cash ringing offices.
What a beautiful growth story! Fortis and Apollo are trying to make an organized health care sector. They not only focus on multi-specialty hospitals, but also are having a chain of clinics as well. People coming to these hospitals are surely going to increase, what with raising income level, sedentary and stressful life leading to chronic diseases and a booming health insurance.
So are Hospital stocks looking like stable, defensive stocks?
Well almost! Let’s have a closer look. You have a heart disease, do you go to Apollo/ Fortis. For me which hospital is not important? I want the best doctor. Who is the best doctor? You choose a doctor because he is recommended by your physician/friend/relatives. If the doctor visits a Hospital then you go there. You don’t go to a Hospital because it’s a good brand. The brand of Hospital is not really as important as the doctor’s brand.
A doctor will have to pay more % of his income to a branded hospital than an unbranded one. Usually a good doctor with decent money in his pocket will open his own clinic and ppl throng to those clinics.
Hospital really make the mark in in-patient services like surgery, monitoring of patients and using of cutting edge technology for treatments, which cannot be provided by a doctor in a small clinic. Here a good corporation can ensure quality process, reliable service.
Hospitals can charge any amount of money and the patient cannot bargain and Hospitals can generate profit, but it just doesn’t make sense. Hospitals (just like education institutes) are for serving people. They should really be a Not For Profit organization. In some fields, charity and service mentality should be the focus, Hospital is one such field.
Fortis and Apollo are improving standards of the Hospitals in India and those professionalism is really necessary in this unorganized sector. These companies will sustain and generate enormous amount of profit.
But there is this eternal dilemma, if I go in as an investor I want them to make all possible tests for the patient, let him undergo a big surgery, let him be put in a monitoring unit for 3 days. Should I entertain a patient who is seeing a Physician or a patient with rare disease, let me go to the second one he will give me high margin. But the patient in me always wonders, are they doing this test because its best for me, or is it best for the shareholder!
What should be the agenda for these hospitals, to increase the revenue 3 folds in 5 years! Hospitals should really pray that their income should reduce, that they should close some of their hospitals (meaning Healthy nation)
‘Hospital for Profit’ is an oxymoron.