Vaatsalya’s affordable and high quality healthcare formula for smaller towns

[Editor’s Note: On the sidelines of Sankalp 2011, I had the opportunity to briefly meet Dr. Ashwin Naik, Founder & CEO of the Vaatsalya chain of hospitals. I finally caught up with him in person at his Koramangala, Bangalore office last week. This post is based on our conversation, email exchanges and related research.]

One of Vaatsalya's NICU (Neonatal Intensive Care Unit) centers - a big draw for medium-risk pregnancies

Dr. Ashwin Naik, a graduate of Hubli’s KMC (Karnataka Medical College), obtained a Masters degree from University of Houston and worked at several US-based research institutions like Celera Genomics and Los Alamos National Laboratory before returning to India. As he re-connected with his batchmates, he noticed that most of them had gone to advanced medical institutes like AIIMS for specialization & super-specialization degrees. While many of them had a strong desire to return to their Tier 2/3 town moorings, their advanced training meant that there weren’t opportunities commensurate with their specialization in these smaller towns.

Ashwin noticed another trend. Patients from Gulbarga and Bijapur used to go to Sholapur for secondary healthcare services, from Shimoga & Hassan to Mangalore, and from Vizianagaram & Narasanapetta to Vizag. These were such well-established train sectors that hospitals and clinics in Sholapur/Mangalore/Vizag optimized their operations around train arrival and departure timings. These two trends coalesced in Ashwin’s mind and thus was born the idea of Vaatsalya, whose focus was to reduce the travel associated with medical care by taking high quality healthcare directly to Tier 2/3 towns and make it affordable. Travel is not only time consuming and expensive but, in many cases, not feasible particularly for young children or elderly people. Through an expanding footprint of Vaatsalya hospitals in Tier 2/3 towns, it provides a platform for doctors (with highly specialized skills) to return to their home towns and utilize their skills.

One of Vaatsalya's larger hospitals

Bringing down the cost

The biggest cost associated with starting and scaling new hospital chains is infrastructure (land and buildings). So how does Vaatsalya bring down the cost? Instead of creating hospital buildings from scratch, Vaatsalya hit upon the innovative idea of identifying an existing healthcare practice in the target town and acquiring it. The chief doctor/owner of the practice (usually a 20-30 bed clinic) would become the Managing Director of the new Vaatsalya-branded hospital. Instead of buying the hospital building, Vaatsalya enters into a long-term lease agreement with the clinic owner. Besides the model’s cost savings, there are other advantages as well:

  • Vaatsalya hits the ground running since the clinic already has an existing patient base and a standing in the town.
  • The chief doctor’s reputation makes it easy to hire the first round of doctors for scaling the operation.

A Vaatsalya celebration event

Vaatsalya’s Small Town Hospitals

Vaatsalya opened its first hospital in Hubli in 2005. The chain now has hospitals in eleven cities – eight in Karnataka (Hubli, Mysore, Gulbarga, Gadag, Shimoga, Mandya, Hassan, Bijapur) and three in Andhra Pradesh (Vizianagaram, Narasannapetta, Ongole). Barring Hubli and Mysore (which are outliers with population exceeding 7 lakhs), the population range of Vaatsalya’s target towns  range between 3 to 4 lakhs. Last week, Vaatsalya announced their third round of funding (from Aquarius Capital and Seedfund). The $10 million raised in this round will be used to grow from their current 11 hospitals to 40 in 3 1/2 years. Vaatsalya has a pan-India vision for growth but their immediate geographical focus will be in the Southern states where they already have a good brand awareness.

Vaatsalya’s employee count stands at 1200 today, of which 600 are nurses. Like most hospital chains, the doctors are not technically employees but ‘consultants’.

Not really BOP

Ashwin explained that while Vaatsalya is often characterized as a BOP play (e.g. winning Sankalp award for Healthcare Inclusion in 2009) , BOP’s not really their focus — it just happens to be one of their customer segments. Looking at the income demographic of a typical small-town, Ashwin categorized them into three segments (Top 10%, middle 60%, and bottom 30%). It’s only the middle 60% that’s Vaatsalya’s target demographic. The top 10% in these small towns continue to travel to larger cities like Bangalore for their secondary healthcare needs. The bottom 30% can’t afford Vaatsalya without help from central or state government insurance programs.

Vaatsalya supports a long list of state and central insurance programs – Karnataka-based Yeshaswini (started by Narayana Hrudalaya Foundation and catering to 17 lakh+ farmers) and Vajpayee Arogyasri (catering to 9 lakh+ BPL families), RSBY (Central), Rajiv Arogyasri (Andhra Pradesh’s flagship healthcare inclusion program covering 2 crore BPL families), National Rural Health Mission & Janani Suraksha Yojana (for neonatal and maternal care), Arogya Raksha Yojana, Sampoorna Surakhsa Yojana. This long list of BPL/healthcare inclusion programs highlights yet another Indian theme – lack of a coherent overarching program. Ashwin observed that many of these programs overlap in terms of coverage and demographics so there’s a clear opportunity for consolidation for greater efficiencies.

Fundraising

Vaatsalya raised their first VC round from Aavishkar and Seedfund (6 crores INR / $1.3 million), second round from Bamboo Finance (aka “Oasis”) and Seedfund, and the most recent $10 million Series C round from Aquarius Capital and Seedfund. It’s safe to conclude that Seedfund is a big believer in Vaatsalya.

Founding team with a new batch of nurses

Founding Team

Vaatsalya has four co-founders who are all actively involved in its continued growth and part of the management team.

  • Dr. Ashwin Naik (CEO)
  • Dr. Veerendra Hiremath (Hospital Planning & Procurement)
  • Dr. V. Renganathan (Alliances & Partnerships)
  • Rocky Philip (New Projects & Expansion)

 

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