Insurers are more efficient, Bali says, but they often deduct some amount from the price quoted by the hospital. In the National Capital Region, there’s an additional burden for some hospitals. They must keep beds reserved for those who cannot afford to pay and must be treated free of cost, since many hospitals were built on land provided by the government at prices lower than the market price.

Little wonder then that NH is no longer keen on expanding within India. While it will expand its latent capacity of about 1,000 beds in existing centres as and when the current capacity utilisation increases, the focus is now overseas.

Adding to this laundry list of issues, government policies in recent years have had a chilling effect on India’s hospital sector. Demonetisation, the goods and services tax (GST), price control of medical devices—cardiac stents and knee implants—and low rates proposed under the government’s Ayushman Bharat health insurance scheme have left Indian hospitals reeling.

While demonetisation—when the Indian government banned 86% of the country’s legal tender in 2016—affected the cash flow in the short term, GST has had a more lasting impact. It raised the input and service costs for healthcare, but hospitals couldn’t pass on the increase in costs since healthcare delivery was exempt from GST.

Then there’s the belief that private healthcare is overpriced. This has shaped government policies on price-capping. However, argues, Ashutosh Raghuvanshi, a medical doctor and group CEO and MD of Narayana Hrudayalaya, these three major policy changes instilled fear in the industry. “It [the industry] felt that margins are always going to be under pressure,” he says.

The recent announcement of the Ayushman Bharat health insurance scheme has only worsened industry sentiments. The low prices quoted by the scheme have left external investors more wary about the Indian hospital market than what they were 4-5 years ago, he says.

Incidentally, as the enthusiasm to expand declined in India, the reasons for Indian hospitals to expand in Africa has only grown.

Foreign treasure

Incidentally, the low price of Indian healthcare is what is making it a global draw. A Harvard Business Review piece in June stated that NH’s four-year-old hospital in the Cayman Islands was showing US healthcare providers the way forward. It estimated that the price of healthcare in India at NH’s hospitals was 2-5% of US prices, and NH’s hospital in the Cayman Islands was 60-75% cheaper than US prices.

It is ironic that Indian hospitals are often criticised for their price in India, and that is what is pushing them to go to countries where they are not just valued but can rake in much higher revenues.

Raghuvanshi says that the Cayman Islands is a stable operation doing reasonably well and the ARPOB (Average Revenue Per Occupied Bed) is over 10 times higher there as compared to an NH hospital in India. Although other countries in Asia and Africa would offer lower ARPOBs than the Cayman Islands, it is still a better opportunity than India.

The current price levels overseas, he says, are very high, costing about Rs 10 lakh ($13,980) for a bypass surgery which is priced at about Rs 3 lakh ($4,194) even in an expensive Indian hospital. Only those who cannot afford the African prices consider coming to India or going to other countries, Raghuvanshi says.

Secondly, adds Raghuvanshi, Africa has huge incipient demand. Take Nigeria, for instance, the most populous country in Africa. Nearly 150,000 Nigerians die of heart diseases every year, and yet, the country has only 3-4 catheterisation laboratories that are necessary for heart surgery. Indian hospitals are best suited to bridge this gap because they deliver quality care and are more cost-conscious than Western healthcare providers.

Hyderabad-headquartered dialysis chain Nephroplus, meanwhile, will be launching in East Asia in the next three months and the Middle East in the next six months. Vikram Vuppala, its founder and CEO, refused to share the names of the countries Nephroplus is targeting, but he is convinced that expanding in international economies would be a learning experience, bring more value to shareholders and better margins.

“If my operational EBIDTA (Earnings before interest, taxes, depreciation, and amortisation) or margins are approximately 25% and the price in the international economy is 2X, the absolute margins double. Initially, the cost would increase, too, to about 2X, but in the long-term (12-15 months), it could be brought down to 1.5X with operational efficiencies,” he says.