What’s all the Craze about Boutique Hospitals?


What if you are priority No.1 at your hospital? What if there are no waiting lines? These, of course, are the what-ifs on which we build our fantasies. But these are also the questions that interest every healthcare executive as well as investors. To answer this question, Healthcare Executive assess the long-term potential of boutique hospitals.


The term boutique hospital became popular during the early 2000s when big chains started setting up small hospitals to cater to medical tourism patients, and affluent Indians, who wanted exclusive services and did not mind paying more for it. It offers personalised care and specialises in high volume, inpatient, big-ticket surgeries.

So, what amenities do they provide for patients in the world’s second-most-populous country? In fact, for the patients, there are several features like uplifting music, snacks round the clock, besuited nurses, luscious interiors and comfortable seats. Further, there is no unnerving ambience, malodour or gloomy interiors.


Is it a Nice-to-have or must-have Business Model?


Boutique hospitals represent a steadily growing nascent trend in India. It has to do with capitalising on being able to offer high-quality healthcare to the upper middle class and above. With most major chains such as Apollo, Fortis and Wockhardt garnering attention for foraying into the industry, it shows promise. Piyush Jain, CEO and Co-Founder, ImpactGuru.com, points out that with growing socio-economic power about the working class in India, many well-to-do patients often end up going abroad for high-quality healthcare and treatments. This niche corresponding to boutique hospitals aims to capture that market by offering world-class healthcare right in their country.

Hinduja Group had allocated Rs 2500 crore over a two-year period to grow its boutique hospital network as early as 2007.


But can it Compete with Bigger Hospital Chains in the Same Locality?


“Yes”, says Jain. “They can compete. Interestingly enough, the bigger hospital chains are the ones that are keen to set up a network of small to mid-size hospitals. The bigger hospitals units tend to focus more towards scalability where these smaller units tend to focus more on a personalised experience. Rising set up costs and capital-intensive nature of the bigger hospital unity make the mid-size establishments quite an attractive option. The comparison between bigger hospitals and boutique hospitals might not be very relevant because there is a huge contrast in the variety of services that they choose to offer. Boutique hospitals focus towards caring for a lesser number of patients thus managing to build a strong relationship and a solid sense of community, with their patients. As for bigger hospital chains, their treatment and service are focused more towards scalability while inclining towards a treatment-for-all kind of model,” he explains.

So how does the model work? It provides patients hotel-like services. A concierge would welcome patient to the hospital, orient patient to its amenities, and walk him/her to their rooms, where they would be met by a personal nurse, who would take time to discuss their stay and schedule their appointment with a doctor.


Boutique Hospitals have a Clear Demographic Target which is Affluent Customers


The model is more suitable for big cities than tier II and tier III ones, where space crush is a issue. It is a known fact that a lot of people from tier II and III cities travel to metros for health complications. An average price conscious Indian patient will not be inclined to prefer boutique hospitals. Boutique hospitals still position themselves as a luxury treatment experience, while an average Indian mostly seeks treatment for necessity. Additionally, out-of-the pocket expenditures attributing to health and rising costs due to inflation are two essential reasons that an average patient might not seek out boutique hospitals.


Right Fit for India?


It is a nascent trend with a couple of big groups foraying into this niche industry. It is too soon to tell, but with the burgeoning growth, increasing disposable incomes and India's growing place in the healthcare industry for cost-effective treatments from accredited facilities at par with developed countries at much lower cost, the future looks promising. Let's not forget the vital place that boutique hospitals will grow to occupy when the medical tourism industry is expected to be worth $8-$9 billion by 2020.


Reasons for Optimism


But with the market’s attention fixated in recent days on how these hospitals would achieve break even, whether they would be able to raise funds to set up the facility, one key question has gone largely overlooked: Does setting up a boutique hospital make sense for the management? Dr /Mahendra Narwaria, from Asian Bariatrics, a 50-bed-boutique hospital based in Ahmedabad, points out that there is growth potential for the hospitals in an industry dominated by giants because patients value their privacy more today. “We never allow the patient to be alone at any point of time inside our hospital. We closely monitor their movement from entry to exit. There is a person to take care of them the moment they enter the hospital. There are ten consulting rooms and customer care executive immediately takes them to the consulting room. Today, patients are willing to spend Rs 4000- 5000 as consultation fee at boutique hospitals in metros, and Rs 2000 in tier I and tier II cities. It is also an attractive business model because Earnings Before Interest, Taxes, Depreciation, and Amortization (EBIDTA) is much higher for a boutique hospital than multi-speciality hospitals. EBIDTA of my hospital is around 35 percent. Even though the cost per bed is around Rs 1 crore, boutique hospitals perform better than multi-specialty hospitals. We have patients from Delhi, Mumbai and Kolkata coming to Ahmedabad. 60 percent of patients are from outside Gujarat, and 25 percent are NRIs,” he concludes.