Running a Hospital: Insights from a Docpreneur

By Deepa Natarajan

Docpreneur .jpg

Entrepreneur and third generation doctor Arun Mehra speaks to Deepa Natarajan about his tryst with the field of healthcare and the factors that are influencing its quality in India


He is a third generation doctor who is also a gold medallist. London trained consultant cardiothoracic surgeon, Dr Arun Mehra, is an excellent embodiment of the ‘reverse brain drain syndrome’. Leaving behind a high flying career at the famous St Thomas’ Hospital in London and a Harley street practice, he returned to India in 1995 and set up a successful practice at some of the most popular hospitals of Mumbai– Jaslok, Breach Candy, Lilavati and Nanavati. He finally turned entrepreneur in 2012 and today, he is the founder of a chain of super-speciality hospitals Tristar Hospitals.

With two hospitals operational with 230 beds in Surat, he now has his eyes on setting up a 120-bed hospital in Mumbai. In an interview with Deepa Natarajan, the award-winning doctor speaks about his journey so far and the challenges faced by the field of healthcare at the moment.    

Tell us a little bit about your early years in the field.

Being a doctor came naturally to me. My grandfather was a doctor and my father, now 93, is a doctor too.  Both my sisters are also doctors. In some ways, I am truly a global citizen. My father was born in Burma, as my grandfather was posted in Mandalay in the Indian Army. He began his medical schooling in Lahore but after 1947, he moved to Amritsar. After working in Gwalior and Jamnagar, he finally settled in Ahmedabad, where I finished medical school and became a surgeon. In 1984, I came to Mumbai to do super specialization in cardiac surgery.

I then went to England and returned to Mumbai in 1995. God was kind and I quickly established a very successful private practice in Jaslok and Breach Candy Hospitals. Today I live in Mumbai and have set up two hospitals in Surat along with my son, who provides the business brains behind the operation.

What made you take the leap of faith and set up your own hospital?

Dr Arun Mehra

Dr Arun Mehra

I believe that every doctor of my generation has a secret dream of making his or her own healthcare facility. Almost all doctors of my generation have trained or practiced in trust, government or semi-government hospitals, where there were severe shortages of facilities, manpower, instruments and equipment. There was no planning or futuristic vision, machines would be bought from public funds or donations, with no plan for maintenance or repairs and would lie unused for years for want of efficient systems.

Therefore we matured as clinicians always with the thought like "if only we could have done this or done that", we could have improved the outcome of thousands of our patients. We always wanted to build our own hospitals, to bring high quality medical practice economically and geographically to the doorstep of the common man. It is only with this thought that we extended our faith in the healing profession and took the entrepreneurial leap forward to set up our own healthcare facility.

How has technology affected healthcare over the years?

Technology has changed a lot and cardiac healthcare has become very safe. Today, we can perform complex open heart operations with upto 99.5 per cent success rate. Technology has revolutionised healthcare and many cardiac operations and procedures can today be performed by minimally invasive techniques, sometimes without even giving anaesthesia or opening up the chest.

Earlier, people were scared of the very term ‘open heart operation’ but today, it has become more affordable, available and acceptable.

What are the biggest setbacks that Indian healthcare is suffering from at present?

Healthcare infrastructure is capital intensive, labour intensive and requires intensive management. Equity funds and angel investors are happier investing in the wellness industry like say, a diagnostic centre, or an online portal, which requires less capital and is easily scalable. They are interested in models that are franchisable, easy to manage, are 9 to 5 workplaces, have less workplace challenges, no emergency work, and no legal responsibility. They shy away from investing in hospitals, although hospitals are actually the institutions which provide curative healthcare.

Working round the clock

Hospitals are 24x7x365 workplaces. Hospital is healthcare, emergency, hospitality, all rolled into one. No patient comes to hospital in a cool state of mind, so it is an extremely stressful workplace. Besides, a large number of the staff are women, and many of the hospitality staff come from a lower socioeconomic background.

Nurses and doctors employed in hospitals are at a stage in their career when they need experience, further training, and additional qualification. Several have budding families. Attrition rate and rotation of staff is 35-40 per cent, even in the best of hospitals.

Challenges from the press and media  

Healthcare is expensive. A hospital has to take a deposit at the time of admission. If a hospital asks for deposit at the time of admission, media accuses it of withholding treatment for want of money. If a hospital asks for settlement of its outstandings in case of a poor outcome, media alleges medical negligence in order to not settle the outstanding bill. Even if the outcome is good, bill settlement is a big issue.

Challenges from the government

Government healthcare schemes have very low tariff, and even worse bill settlement cycle. ESIS and other PSU bodies take forever to settle the bills, and make huge deductions to what are already low bills. Often we procure chemotherapy drugs at high prices, and the government bodies reimburse lower amounts. Our biggest challenge is to give first world outcomes with third world billing.

Is health insurance not helping?

Good question. One would think that healthcare insurance would be the solution as there would be no need to pay at the point of healthcare delivery. However, the penetration of the health insurance schemes in India is very low indeed. For an insurance scheme to succeed, it has to have a wide base of premium collection, so that the claim ratios are low. In India, healthcare insurance is still in its infancy. So the premium base is low and the claim ratio high. Insurance companies therefore hire third party administrators to avoid paying out claims, and incentivise bill reduction. This ironically leaves the insured as well as the healthcare provider feeling cheated and reduces his faith in the system.

What are the solutions?

Health is a state subject and negotiations are required with the state government. We have had several rounds of negotiations with the Gujarat government and we have managed to get some incentives:

The Gujarat government will give 10 per cent subsidy on capital expenditure, and a 3 per cent devolution of interest payable to banks. It also will give a cashback on the duty the state government charges on the electricity used by a hospital. But there is a long way to go.

For instance, the government can take away GST on healthcare. Earlier, a lot of states didn’t have VAT on medical implants and some equipment like kidney dialysers. But with the introduction of GST,  there is nothing in healthcare that hasn’t been affected. Even implants or an artificial structure or organ has GST on it. This has impacted hospitals by between 5 to 12 per cent. For instance there is 18 per cent GST on lease rental, for which a hospital cannot claim setoff.

All government schemes should settle hospital claims promptly and electronically, with liability to pay commercial rate of interest in case of delay beyond a few weeks.

What’s the future like?

What is happening currently is the ‘uberisation’ of healthcare. Big operators are working below the cost price, making the smaller units go bust and acquiring them at low prices. In 10 years, there will be five or six big players with hospital chains with backward integration with in house pharma companies and insurers. Healthcare costs will jump up from 10 per cent of international process to about 60-70 per cent of international prices. The hospital industry will become viable, capital will flow into it and quality and service will also improve.

How do you see your role as an entrepreneur in this scenario?

I am an eternal optimist and my entire attitude is positive. We will have to work out disruptive mechanisms, like shorter hospital stays, innovative indigenous medical devices to save costs and improve outcomes and reduce our dependence on imports. We can analyse our vast data that can create algorithms and find cures without expensive diagnostic modalities… the possibilities are endless.

If someone can solve the problem, it is doctors like us who are committed to providing healthcare solutions. Our motive cannot be profit or viability - it has to be the passion to heal. Once we ensure that our motives are right, the rest of the things will fall in place.