Strengths of HCG
Hub and Spoke model- HCG follows a hub and spoke model. A hub is the most advanced and the biggest establishment (hospital) with spokes being the smaller establishments around it. People living far from the hub will go to the spoke, and if the disease’s treatment is better suited by the hub then the patient goes there. This is done to provide flexibility to the patients by easing their travel and other processes and to visit the hub only if needed. This also creates more efficiency for HCG as they don’t need to build these advanced hubs/hospitals everywhere, which would make their balance sheet heavier.
Acquisition by CVC Group- HCG sold a majority stake to CVC Capital Partners to reduce debt and leverage on the balance sheet. There are various benefits of CVC coming in-
CVC has various investments in the healthcare/pharmaceutical/technology industries. CVC can bring in several synergies through their portfolio companies to grow and take HCG to the next level.
CVC group has brought in a new CEO for HCG, Raj Gore. Raj Gore is a seasoned global professional with more than 21 years of diverse experience in business management in North America, Asia, & Africa. Having been in the healthcare industry for 17 years, he has led business transformation and financial turnaround of acquired healthcare companies in India, Mauritius, and Vietnam. Previously, he served as the Chief Executive Officer for the Southern Region of Apollo Hospitals and Chief Growth Officer and Chief Operating Officer (NCR) at Fortis Healthcare Limited.
Super specialty Hospitals- HCG is a super specialty hospital focused only on cancer care and treatment. Unlike other hospitals, HCG is the only one in India which is cancer-focused. People prefer specialty rather than generic, as HCG is cancer-focused, and patients will go to a cancer specialty rather than a multi-specialty.
Rural focused- HCG’s strategy is to focus and grow in the rural region where other players are not interested due to several reasons, therefore they can easily create a brand there by being the early bird.
Talent attraction and retention- HCG being a multispeciality invites all the doctors and staff who want to excel and become an expert in cancer care. Doctoring in an art and all artists would like to perfect their art, and there is no better place to do this than HCG as it is the only cancer specialty hospital in India, with the most advanced technology and experts in the field residing there. The doctors who want to learn and become an expert will join due to these reasons. Therefore unlike other hospitals, HCG does not have a shortage of talent.
Asset light model- HCG does not invest in their equipment, they lease it through vendors in the form of pay-per-use equipment. This leads to fixed cost savings, lesser depreciation, and better margins.
Lowest ALOS in the industry- ALOS is the average length of stay, for hospitals they earn the highest margins and revenues in the beginning 2-4 days. If patients stay longer than that, the margins decrease and so does the revenue. Therefore the lower the ALOS the better. As the ALOS reduces the margins increase. HCG has the lowest ALOS as most cancer patients come for daycare and chemotherapy, and do not stay over a day or a few hours.
The best technology in the industry- HCG has the most advanced technology. According to the management, the technology used by HCG is way more cheaper and efficient than that of Apollo (one of the best hospitals in India). With the introduction of the new DA VINCI machines, they have made the surgery simpler and less stressful for the patients.
No need for huge capex- Before the acquisition by CVC, HCG had gone on a capex spree and done a huge capex funded by debt. All these new capacities were created but not utilized.
Current utilization levels-
Emerging/new centres- 68.5% utilization
Linac machines- 65% to 68% utilisation
Now as there won’t be any fixed cost increase and overall capacity utilization will be increasing, the operating leverage will kick in. This will lead to higher margins, ROCE, and asset turnover.
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