Investment planning: The holy grail for healthcare organisations

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Figuring out  which area of your healthcare business needs more investment is easier said then done. Here are some basic fundamentals which can get you started on the right path

The year 2018 has brought a lot of promise and business prospects for the healthcare sector in India. Especially, with the recent announcements made by the Union Finance Minister, Arun Jaitley during the Budget 2018 clearly indicated that the government now wishes to shift its focus on the healthcare sector with a view to increase accessibility and affordability of services to all. This indeed, is an opportunity that every healthcare organisation would vie. Industry optimists believe that this move would create an effective demand to trigger private investments in supply deficits areas. They also feel that this endeavour would increase insurance penetration in the country and create huge opportunities for insurance players, hospitals, diagnostic chains, local equipment players and telemedicine providers. Moreover, some also feel that this changing dynamics of the sector will open avenues for more private equity investments into the market, giving impetus to fund activity as well.

Going by this effervescence, some of the large hospital groups and diagnostic chains are now planning to expand their services in tier II and III cities and towns.

Large hospital chains such as Aster Medicity, Wockhardt Hospital are already planning new  strategies to capture untapped markets. Dr Azad Moopen, CMD, Aster DM Healthcare, during his recent IPO announcement informed that the group will be chalking out a new investment strategy after the recent budget announcement by the government. They informed that they would see the tier II and III cities as a good investment area.

Likewise, Zahabiya Khorakiwala, MD and Executive Director, Wockhardt Hospitals, in a recent meeting informed that the group will be looking to venture into new cities and town in the western region of India.

2018 investments on the card

This indicates that the year 2018 can prove to be an exciting year for Indian healthcare with more government focus, expansions and consolidations in the private sector as well as increased funding and investment activity to follow suit.

Sharing his investment plans, Varun Gera, CEO and Founder, HealthAssure, informs, “HealthAssure is looking to build new products and continue our aggressive expansion through the various channels of sales. We are also looking to continue our IT investment and our digital thrust which would help make the primary care ecosystem more accessible. We will also enrich our medical network which currently covers 3,100 primary care medical centres in 1000 cities. HealthAssure has also initiated international expansion and would continue to explore opportunities in Far East Asia and the Middle East. With a fresh round of investment, we are aiming to take our current figure of 1 million active subscribers to up to 2.5 million customers by 2020.”

Huzaifa Shehabi, COO, Saifee Hospital adds, “The company’s business plan for 2018 is striving very hard for quality across all spectrum. Quality is fundamental to every business and attaining a high-level of quality will have a direct, sizeable, impact in ensuring our patients are able to get cured of the various ailments that are afflicting them. Hospitals are judged not on how many patients visit their premises but how well they are able to serve the patients and provide solutions to healthcare issues and we believe that in order to achieve our targets, our efforts have to be bulwarked on quality.”

Dr Mradul Kaushik, Director, Operations & Planning, BLK Hospital, updates, “We at BLK are looking at investing $5-6 million in upgrading our clinical programmes and expertise in robotics, radio therapy etc. This is a new area we would like to explore as we believe that investing in it will add value the existing services we provide to our patients.”

Interesting to note that the above mentioned players are looking to invest in areas as digital technology deployment, human resource training, operating systems and more. Howbeit, all these plans will require valuable investment that needs to be judiciously executed. Here is where an effective and well-planned investment strategy comes to play.

Investment planning: For long-term goals

World over, business experts say that strategic planning is the holy grail for any organisational investment. Especially, for healthcare organisations such as hospitals, diagnostic centres, medical equipment players and technology providers, these decisions are crucial not only for resource allocations but for meeting long-term organisational goals. According to financial experts, strategic investment in right areas at the right time leads to growth of business in terms of operational and business efficiency that promises higher profitability.

“A carefully planned investment strategy is a practical way that can make sure that one maintains the direction and discipline needed to reach the desired goals,” opines Manish Sacheti, CFO, Ziqitza Healthcare.

Referring to Saifee Hospital’s plans in this direction, Shehabi states, “Investment planning is definitely necessary in order to provide the best services to our patients. At Saifee Hospital, our investment planning revolves around striving to achieve quality across the board, be it for patients seeking a cure for a certain ailment, consultation or even a health check up. We also agree that an investment strategy is an important cog in driving business growth as without proper planning, how can any organisation be truly innovative or ensure operations flow seamlessly across all divisions?”


Areas to look for future investment to create value for all

  • Digital technologies: In the age of the digital revolution, every healthcare organisation need to invest in digital technologies that will help create value for patients and employees. Experts say keeping aside at least 20 per cent of your investment budget for deploying digital technologies will be fruitful in the coming times.
  • Employees: Investment in employee upbringing, training and welfare will bring increase the motivation and increase the efficiency of the staff which will help an organisation to grow.
  • Operational system: An organisation should always invest in latest systems to improve the operational efficiency and remove the processes which are redundant.  Japanese companies, for example, always look for the best operational system which reduces the procedural delay and increases the turnaround time of the product  resulting in faster growth of business.
  • Brand building: Investment in brand building ensures brand equity. It not also attracts the attention of the customers but also investors, which helps in bringing more investment resulting in the business expansion, new products introductions, new technologies.
  • Product development: To stay ahead of competitors, organisations should always look at incorporating innovation very frequently. Companies that focus on innovation  deliver a consistent stream of market successes via successful businesses and products/ services  enhancing competitive advantage and achieving sustained growth.

Similarly, Gera mentions, “It is important to create an investment plan by studying strategic impact, market and industry conditions, which is more relevant in changing business environment now days. Right decisions, investments and implementations would help organisations concentrate their energies on the higher-yield actions, and not dissipate their resources on quixotic ventures and forlorn causes, thus leading to higher ROI.”

Well, Gera rightly points out that a clear and intelligent plan will yield higher ROI. In order to do so the following principals will play a key role in determining an effective investment strategy.

Five pre-requisites that is sacrosanct

Chalking out an investment plan sometimes seems complicated and arduous as it involves risk taking. Healthcare organisations sometimes end up exhausting their investment budgets on areas such as high-end equipment which at that point of time is not necessary to their business requirement, leading to wastage of resources and capital, which later become challenging to recover. Therefore, experts recommend breaking down investment planning into some basic fundamentals which can get you started on a path to better investing and achieving your long-term organisational goals.

  • Set your long-term goals: Goal setting is the most important principal that every business organisation needs to follow. It becomes the corner stone of every business activity within the said organisation. “A clear vision for your business is a must before you make that investment plan. One needs to be absolutely sure of what they want out of this investment be it, infrastructure developments, human resource, equipment installation or some business acquisition. It all boils down to your end goal. This will be the guiding force for the implementation of your plan,” suggests Dr Vishal Beri, CEO, Hinduja Surgical, Mumbai.
  • Analyse the current and future demand for your products/ services: No plan would work effectively, if it is not based on research and analysis of the market trends and dynamics. “To take positive steps towards a strategic investment plan, it is important that a thorough SWOT analysis is undertaken. This will help in breaking down each segment and then assess where your organisation stands vis-a-vis the healthcare ecosystem. But in order to drive real value, more time is spent on planning on how to capitalise on opportunities whilst simultaneously reinforcing against threats prevalent within and outside the system. These seemingly simple steps will in the long run allow an organisation to maximise benefits from their investment plan,” says, Shehabi.
  • Research on your need for investment: A thorough analysis of your organisation’s current opportunities and challenges will lead you to understand the need for investment. “Before you chalk out an investment plan, it is important to understand the need of your investment in a particular area. I have mentioned earlier that we plan to invest in robotics and radio therapy technology. Therefore, our first step was to evaluate the need of our investment, to see whether there is a true need and demand for this investment. How much will this investment help in creating value for our patients, employees and others associated with our hospital? All of these areas need to be looked at before delving into this decision and making a plan for execution,” instructs Dr Kaushik.
  • Capital budgeting: Once you have envisaged the organisation’s long term goal and analysed on the market demand and the need for the investment, the next step to prepare a comprehensive budget. Capital budgeting is a step by step process that businesses use to determine the merits of an investment project.  According to Dr Beri, an healthcare organisation need to keep at least 20-30 per cent of their revenue for investments that will yield them better returns. Additionally, Sacheti says, components such as return on investment, investment timing and profits the investment can bring in to the organisation and the time frame for the same, need to be studied while preparing the budget. This will help in designing an accurate budget and avoid unnecessary wastage of resources.
  • Be flexible while on the road: A successful investment strategy is one that is malleable to market trends and circumstances. Experts say that investment decisions are usually characterised by two important factors- uncertainty caused by market volatility and irreversibility of decisions due to various factors concerning the then market conditions. Both these factors are significant for investment decision and execution, thereby making it imperative for organisations to be flexible while preparing the blueprint of your investment. “Since the healthcare market is very dynamic and not much goes as per plan, it’s also very important to have the ability to be flexible while on the road and make corrective actions or change investment allocations, accordingly,” Gera  sums up.

Bottom line

Having said that, it is evident that the healthcare sector in India is currently at crossroads, where it needs to address several challenges that tamper its growth, while enabling itself to take advantage of the many opportunities open to it. Going by the words of Benjamin Graham, the author of the book The intelligent investor, “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

It is time healthcare organisations look at investing in areas that facilitate organisations to create value for its patients, partners, employees and shareholders in order to build a sustainable healthcare ecosystem for the future.

raelene.kambli@expressindia.com