My Notes from AR 2019 where I have focussed on story aspect of Narayana Harudalaya rather than numbers.
To provide high quality healthcare with care and compassion at an affordable cost on a large scale.
A 225-bed hospital in the year 2000, is today a 7,155 capacity-bed multi-specialty healthcare services chain that provides superior tertiary healthcare at affordable costs. Headquartered in Bengaluru, we have a network of 23 hospitals (multispeciality and super-speciality healthcare facilities) with 7 heart centres (super- speciality units) across 18 locations in India and 1 multispeciality hospital in Cayman Islands.
7,155 Capacity Beds
16,690 Full-time employees and associates including 3,644 Doctors as of March 2019
We have been globally recognised as a disruptive innovator in the field of healthcare for proving a model that combines world-class healthcare delivery with a cost-conscious mindset ”
We recognise the power of digitisation
A few years ago, we took a decision to develop the capability to build software in-house and so we created the NH Software Development Centre. This team is building the next generation of hospital information systems, electronic records, and clinical decision support systems that will help us achieve high quality of clinical outcomes without putting a financial burden on our patients. I would like to highlight some of our ongoing projects:
We don’t have the luxury to sit still because the world is changing, and we must change to remain relevant in the 21st century. Just like AirBnB built the world’s largest hotel chain without building any rooms, and Uber built the world’s largest transport company without buying any cars, I believe that the world’s largest healthcare company of the future will not build any beds.
Online Diabetes Clinic
Digital health may have started in developed economies, but it is desperately required in India which is struggling with the shortage of medical specialists. India is the diabetic capital
of the world, with 7.2 million diabetes patients (International Diabetes Federation, 2017), yet it has only around 600 diabetologists to treat them. We believe that online diabetic care is the only way forward because a diabetologist sitting at home in front of a computer can treat 10 times more patients than seeing patients physically in clinic. NH has developed CURA diabetes outpatient application which treated over 34,000 patients in the last two years. Eight months ago,
we launched an online diabetes management system that treats more than 2,400 patients online.
NH-Atma, NH-Medha, and Kaizala
The entire NH network will transition to a home-grown Hospital Information System built by our team over the next couple
of years. This software, which we have affectionately named NH-Atma , will be the foundation upon which our digital infrastructure will be developed. NH-Atma is cloud-based, fully scalable, and can integrate with all the existing infrastructure in the hospital. It has taken us 2 years to develop the software, but it is the first and most important step in our digital transformation.
As a low-cost healthcare operator, NH relies on accurate and timely data to help us make important decisions. We have a large team that can analyse this data and help us to identify inefficiencies in the hospital. With developments in AI and predictive analytics, we will soon be able to identify problem areas before they become serious events. Our data analytics product, called NH-Medha , has been a valuable tool in helping hospital administrators cut down costs, and doctors to make better clinical decisions.
Kaizala is an application developed by Microsoft that NH
has adopted as an in-house messaging platform. We have developed multiple cards that run on top of Kaizala to help
our teams communicate better. Our e-ICU cards have made
a huge impact on care management for patients in the ICU. Our doctors can manage an ICU patient’s condition from any part of the world using only their mobile phones. This simple technology has led to better clinical outcomes, shorter patient stays, and lesser medicine consumption in our tech-enabled e-ICU. The digital assets we have invested in, will help us scale our operations to serve millions of patients across the world without building or owning hospital beds in the future.
Making a Shift in our Growth Metrics
Several years ago, I made a statement that NH will build 30,000 beds and become the world’s largest healthcare operator. Now we believe that hospital bed count as a growth indicator is quickly losing its relevance.With better systems to enable optimal usage of manpower and equipment, we can serve more patients with the same infrastructure. NH Average Length of Stay has decreased from 4.3 days in FY 2015-16 to 3.9 in FY 2018-19, while the number of discharges increased from 1.9 lakh to 2.6 lakh.
Our Facility in the Cayman Islands was the first attempt by an Indian company to run a Joint Commission accredited hospital in the Western world. We prudently deployed a phased approach to this investment, wherein we started off as a minority partner with 28.6% stake and increased our stake to 100% in the fourth year of operations. We are very pleased with the performance of this hospital as it registered a 22.3% year-on-year revenue growth in FY 2018-19 and an EBITDA margin of 24.1% in Q4 of FY 2018-19 translating into an impressive EBITDA margin of 17.4% for the FY 2018-19.
Management Discussion and Analysis
Indian Healthcare Landscape Sector Outlook
- Indian healthcare market is expected to grow at a CAGR of 23% over FY15-20E and reach US$280 bn by 2020
- Hospital segment constitutes ~71% of the market
- Medical tourism to contribute 15-20% to hospital revenue by FY20 from 5-10% currently
- Out-of-pocket expenditure on healthcare is ~61% - the highest in the world
- 7 beds per 10,000 population vs global average of 26 beds
- 3% specialist physicians cater to rural areas which comprises >70% of population
- India’s per capita income is expected to register a growth of 11% over FY16-21
- Deaths due to NCDs are expected to be 74% of total deaths in 2030 compared with 60% in 2012
- <20% population has health insurance,
20/day premiums for coverage of 0.5mn are available
Increased Prevalence of Non-Communicable Diseases
- India’s disease profile has shifted towards chronic diseases (cardiovascular, diabetes and cancer)
- Deaths due to Non-Communicable Diseases (NCD) is over 60% now and are expected to increase
- Cardiovascular diseases dominate causes of death with 26% share
Booming Medical Tourism Market
- Indian medical tourism industry is US$3 bn having posted
~20% CAGR in 2009-15 and is expected to clock ~30% CAGR over the next 5 years
- Indian hospitals treated 350K international patients in 2015 and the volume is expected to increase at 15-20% each year going forward
- Cost arbitrage (30-70% cheaper) to play a major role in attracting international patients
National Health Policy 2017 has set Ambitious Targets
Universal healthcare coverage - Increase health expenditure as a percentage of GDP from the existing 1.15 % to 2.50 % by 2025
The Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (PMJAY), the largest government funded healthcare program is targeting more than 500 million beneficiaries
Lack of infra and professionals
Capital intensive nature of business limits expansion
Disclosure:( I have >10% holding of my portfolio in Narayana Harudalaya & I am not Sebi registered advisor)