BBA MBA and PostGraduate UnderGraduate Management Courses: Convenience Healthcare

IIPM is A World of Career

It has the right strategy to focus on customer care, open speciality institutes. But will its hub-n-spoke model work?

A religious trip to Vaishnodevi Temple turned bad for the Sehgal family. On his return, Rajiv Sehgal, Executive Director, GKB, met with an accident. He was rushed to Delhi, but no hospital would admit him without an enquiry. Only Max Healthcare did it. Says his wife, “It provided us with all the support we needed. When it comes to care, we think Max is the best.” Such comments speak volumes about the growing popularity of Max Healthcare.

Reveals Sanjay Rai, Director, Sales & Marketing, Max Healthcare, “We treat our patients in a totally different way. Gone are the days, when patients where treated as patients. Now, they are treated as customer. We believe in this principle. We have implemented world class services in our hospitals and we have a 70% occupancy rate.” In a bid to strengthen relationship with the patients, Max has offered facilities or commissions to doctors who refer patients for diagnostic tests.

This is the right strategy to adopt as healthcare in urban India becomes matured and developed. Look at developed markets like the US. According to a recent article in McKinsey Quarterly, “New research indicates that the US patients and physicians are more and more likely to base their choice of hospitals on non-clinical aspects of a visit – like convenience and amenities. Yet few hospitals have the marketing skills, the organisational structure, or the operating approach needed to deliver a distinctive experience in the way that retailing and hospitality companies do.”

Therefore, success in healthcare, in a sense, will be all about customers’ delight. And Max has been at the forefront to strategise it. In addition, the group has joined hands with Harvard Medical International, an arm of Harvard Medical School, and Singapore General Hospital for clinical practice, research and training. Max Healthcare can also claim to be the pioneer of the hub-and-spoke model in India.

Industry sources contend that Max plans to offer India’s first distance-education MBBS programme, and it is in discussions with America’s Oceania University. Sources reveal that while the theory part of the course will be based on long-distance model, the practical will be at various Max units. Adds Rai, “We have expanded, and entered into several JVs. This has helped us to focus on NCR centric delivery.”

However, it was not an easy road to health and success. Initially, the hub-and-spoke model didn’t work. Doctors saw organised primary clinics as competition to their private practises and, therefore, were unwilling to join Max. Patients didn’t prefer Max as it had few well-known doctors. In 2003, the CEO and Chief Medical Officer left the company. The next year, Harvard Medical International terminated its contract. But then nothing could stop Max’s promoter, Analjit Singh.

To woo customers to pay higher prices, Max forged alliances. Thus, it had dedicated customers, whose bills were picked up by their organisations. Singh realised that a more profitable category was specialised centres, where patients had to come because of a drastic shortage in urban areas. Hospitals constituted another lucrative segment that was tapped by Max. Pipes in Rai, “We have launched a Brain Suite, which is the best healthcare device for brain tumour. We have plans to create a national centre of excellence.”

This too may be the right strategy for the future. Another article in McKinsey Quarterly concludes that US hospitals and healthcare firms need to change their approach and focus to survive, and thrive. “A vital step is to compete on the basis of strengths in specific clinical service lines rather than relying on the power of full integration. Several large payers are already nudging hospitals in this direction by adopting a ‘centre of excellence’ approach.”

But Singh has to remain a little apprehensive about his horizontal integration approach. The 1990s witnessed a wave of hundreds of M&As in the US healthcare sector. They were all driven by the logic that such integration will lead to economies of scale, cost reductions, market power, and automatic patients referral. All of them eluded most buyers in a few years’ time. There was a grim realisation that being present in every field may not be a great idea, and multi-hospital systems “do not necessarily outperform independent hospitals.”

Today, the buzzword in America seems to be ‘boutique hospitals’. Stated a recent article in McKinsey Quarterly: “Private clinics… have already gone beyond private rooms to offer luxury suites, catered meals, and round-the-clock private nurses. In Seattle, the team physician for a professional sports franchise opened a practice that charged patients $20,000 a year for 24-hour access to medical services.... In Minnesota, a chain of “cash-and-carry” medical clinics in shopping malls promises walk-in patients that they will be able to walk out within 30 minutes, for a premium of about 75 percent over customary fees. ”

Moreover, as hospitals become focused and patients value conscious, healthcare firms will need to do what pioneers are doing in other services sectors. “Like cutting-edge retailers, they must identify the characteristics of the patients they can best serve and attract those people by creating specific value propositions,” says a recent global study. Only then can Max claim to be a glocalised healthcare group.

Edit Bureau: Sreoshi Ghose

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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