Taking A Big Leap

Sagar Healthcare and Diagnostics unveils expansion plans, looks to roll out new venture next year. By M Neelam Kachhap

Private healthcare landscape in India is dotted with family-owned businesses. Some of the most successful FOBs have successfully transited into tier I organisations and some even completed an IPO and became a PLC.

Sagar Healthcare and Diagnostics, a prominent player based in Bengaluru is set to take it a step further by taking their business global. The big leap is going to happen by the end of December 2015, with new service offering spanning the GCC region where they already have a small presence. “We want Sagar Healthcare to be a responsible, ethical and research-based healthcare providing organisation that is appreciated at an international forum,” says Dr  D Premachandra Sagar, Vice-Chairman – Sagar Group who is at the helm of these changes.

A resilient family owned business, Sagar Healthcare and Diagnostics is a part of the Sagar Group instituted by R Dayananda Sagar and Dr Chandramma Sagar that has interests in education, healthcare, hospitality, automobiles, technology and infrastructure. The group ventured into healthcare services in 1960 under the aegis of Dr. Chandramma Sagar with Chandramma Nursing Home. When the private healthcare wave hit India. Dr D Hemachandra Sagar, Chairman – Sagar Group and Dr D Premachandra Sagar, Vice-Chairman – Sagar Group inked a pact with Apollo Hospitals Group to help establish a 250 bed hospital in Jayanagar, heart of Bengaluru. The hospital became functional in 2002. Within a few years they, gained enough confidence to go solo and moved forward without support from Apollo. “Apollo came as project manager and we became their franchise. In subsequent years, we gained sufficient expertise in managing and operating the hospital and we ended the partnership amicably,” says Dr Sagar. It was around that time that they felt the need to be innovative and started work on the second hospital. The Sagar Hospital Banshankari is astate-of-the-art 415- bed multi-speciality hospital that came into existence in 2009. With 700 operational beds in Bengaluru, more than six clinics and a chain of pharmacies, Sagar Hospital was in good shape and looking to grow and conquer its share in the growing healthcare market.

The dream

By 2008, the company had augmented a strategic plan to grow quickly and spread fast. They had identify low hanging fruit opportunities to drive transformation immediately. Accordingly, the company was to setup 300-bed secondary care hospital in Bengaluru and 200 bed tertiary care hospitals in Mysore, Hubli, Davangere, Shimoga and Mangalore in Karnataka and in other parts of India at a project cost of about Rs 50 crores for each hospital. The Group had planned to set up a chain of 50 to 100 pharmacies and a chain of polyclinics in Bengaluru and other parts of Karnataka by the end of 2012. However, the economic slowdown crept up on the world by the end of 2008 and the company like many of its contemporaries put most of the plans on hold. “Global slowdown hampered our growth plans,” shares Dr Sagar. “We took a step back to analyse the situation and realised that healthcare in India did not perform as expected. Healthcare investments does not give you that kind of yield. We realised that hospitals cannot be build for profit generation alone but hospitals should be build as institutions delivering cutting-edge treatment along with research,” says Dr Sagar. “We also did not want to go for private equity investments before we had consolidated our business,” he adds.

The beginning of change

This was the time that Dr Sagar brought Ishiqa Multani on board as Executive Vice-president, Strategy and Innovation and President, Sagar Healthcare, Overseas Projects in 2013. The first non-owner, non-medico member to hold the title, Multani was tasked to introduce innovative operational strategies for improving operational efficiencies throughout the company. She had a Herculean task cut out in front of her. “Corporate restructuring at Sagar meant destroying old paradigms, creating an overall impact on the internal organisational culture, flow of authority, responsibility and information across the organisation,’ reveals Multani.

“As a first step, we had to put a conscious effort to restructure policies, programmes, processes and people. We had to do the de-layering of the pyramid to thin out the top, unproductive, highly paid layer. This ensured shorter and effective decision making,” she adds.

Business process re-engineering was another area that Multani worked on intensively. Hiring the right personnel for the right job can sometimes be very challenging, but extremely crucial in competitive environment.  “We had to change our criteria to hire people for preparing the discharge summaries wherein they are required to have qualifications in either medical transcription or a BSc degree as against the previous method wherein anyone who required a “patient care staff” job was hired and put on to do this work. This change worked in our favour as it meant lesser revisions, lesser turnaround time and higher patient satisfaction,” shares Multani.

“We also introduced a pre-admission process, which is located in the OPD. This is for patients who opt for elective surgeries, and can undergo all the tests before getting admitted. This saves time for both the doctor and the patient. Likewise, there are a few other areas that were looked in the and improved in a similar fashion by putting benchmarks in place,” she adds.

Playing on strengths

Leveraging her global management skills (a management degree from Exeter university and a PR firm in UK), Multani set about to rework the management style that is the hallmark of FOB hospitals in India.  “Every organisation, and every leader has a different style of management. For me, it was very important to engage each and everyone in the organisation. One size fits all cannot be applied in this case, hence, I have a participative management style with my fellow colleagues, and a few other key personnel across the organisation. It is ensured that they are all motivated and told the true worth of their knowledge and skills, which they have to exploit to facilitate a strong, efficient, operational environment. This, I feel, has given us better output from the same people. We never changed heads just because we saw lesser productivity earlie,.” she informs.

At Sagar Healthcare, management by objectives is encouraged among all key line managers and department heads. “We, together, set goals that are tangible, verifiable and measurable. These goals are revisited every month, and a checklist of expectations and achievements is maintained,” Multani says.

She believes that management by walking around is the key to know the ground realities and take corrective actions on time. “I believe that all employees and customers likewise, have something to suggest, right or wrong, constructive or not, and we have to listen to them. To be an effective leader one has to know the unfiltered, real-time information that never reaches the formal environment of a board room.” she opinies.

Finding the best fit

New management also meant new growth plans. Since, Sagar Healthcare was a family-owned business they were wary of outside investors. “Being a conservative, family owned business, we believed in organic growth for all these years,” says Dr Sagar. However, today he seems ready for the inorganic route, having studied the market and its potential. He is betting big on the new territories and innovative healthcare delivery model. “We are looking at various strategic mixes to grow in times to come. M&A, strategic alliances, franchising are now considered by the group, which wasn’t the case earlier,” he adds. Dr Sagar further says, “The company is geared for growth because  we are a debt-free facility so we have access to capital. We are equipped to handle the phase of growth and bring in growth capital.”

Sagar Healthcare and Diagnostics, a striking debt free healthcare company, plans to spend Rs 600 crores in the next five years, as it renews focus on its hospital arm after a five-year inertia, and expand business in new territories. “In the past 12 years we have invested Rs 500 crores in the company. Further, we plan to invest another 600 crores, combination of debt and equity in the next five years,” Dr Sagar reveals.

“The organisation has been cautious in its investments as we needed to figure out how to weather the current storm in the industry and still be well-positioned to take advantage of the next upswing,” says Multani. “The corporate assets are redeployed to look at expansion. Moving forward, we are looking at M&As, strategic alliances, and starting green field projects in the country and outside,” she adds.

Setting a trajectory for growth

“After slowdown we now have a new strategic plan which again entails expansions in Southern India,” says Dr Sagar. He believes that South is a good region because it compliments their larger tertiary care facilities. “We have to move. We need to focus on territorial expansion to drive business. So, NCR is a good bet as North has good prospects of growth. From there we can penetrate across India.” says Dr Sagar. After pondering some more he says new hospitals have to be started after a lot of due diligence. “It is not only about starting a facility but also understanding the gap analysis. In recent years, lots of facilities were flagged off. As a result, over capacity was created in one domain while there was lack of facility in another region. So this is due diligence as far as strategic expansion is concerned.” he says.

Sagar’s  next hospital will come up at Davangere by August next year. The hospital will have a capacity of 50 beds extendable to 100. A similar hospital will come up in Shimoga soon after. The hospital in Hubli is also on the cards. “We have commissioned one hospital in Davangere and Shimoga and the Hubli hospital is on the drawing board,” says Dr Sagar. The company is in talks with strategic partners to expand to key territories like the NCR. “We would announce strategic alliance to create 50 bed units pan India soon,” says Multani. The company also has plans to increase its polyclinic base in Bengaluru to 10 units by December 2015 and increase it to key locations across South India within the next two years. Over the next two years, Sagar Healthcare will focus on bringing its hospital, clinics and pharmacy projects on stream and consolidate the company. Recently, the company strategically re branded Chandama Nursing Home to Sagar Chandramma-Hospital and upgraded the facility. The company is also in the middle of re-branding its polyclinics. “The polyclinics will be re-branded and new brand identities will roll out in next two months,” informed Multani. Dr Sagar said that the re branding will help support further growth aspirations by helping connect the company to new consumers. He said ,”It’s something that reinforces our consumer promise ‘with you for life”.

Creating new markets

Sagar Healthcare and Diagnostics, will be the first India based company to spread its wings in the Middle East and North Africa (MENA )region beyond token presence. The company currently operates two polyclinics in GCC region one in Oman and another at Dubai healthcare city. “GCC is a big market for us,” says Dr Sagar. “We currently operate in one location in UAE and Oman and we are working on increasing our presence there,” he adds. “We are in the process of acquiring a few clinics there. We will complete five brownfield acquisitions by Dec 2015,” Multani adds. “We will have a chain of 10 polyclinics in UAE by June 2016,” she adds.

“To become a comprehensive player with critical size, presence in certain strategic locations becomes important. But the most important challenge is to create a strategy that is innovative. That was our play when we started,” says Dr Sagar. Indeed, Sagar Hospital is one of the best examples of the first wave of innovation in hospital design in India. “We changed the look-and-feel of the hospital,” he says.

Conquering emerging markets

The company has its sights set firmly on the planned launch of its polyclinics in GCC next year. “This will serve as a stepping stone to enter the African market, which is an emerging market,” says Dr Sagar.  “There is a huge unmet need for healthcare delivery in Africa,” Dr Sagar says. “Consider this, in 2012, 47 per cent of Nigerians visited India for health reasons. Other countries like Kenya also sends patients to India,” he adds. “We see Africa as an area not only for engaging as  a solution provider but creating jobs and bring abut a holistic development,” says Dr Sagar.

“There has been growing political momentum in developing healthcare facilities in some African countries and we are actively participating, in those discussions,” Dr Sagar informs. On its investment plans for Africa, he said that Africa would be a “major growth engine for its business” in the coming years. “In the MENA region clinical facilities have to have lot more focus on primary and secondary care. However, overseas expansion will have to be done at a point where we need to understand the most important part is assimilation of human resources,” Dr Sagar states. No wonder then that the Sagar Medical College is to be rolled out simultaneously.

Pet project –  academic medical centre

Sagar Medical College is Dr Sagar’s pet project. He envisions a world class academic medical centre which not only provides clinical and hospital care but  is also a leader in research and education. “When I talk about medical school I refer to a place where high level of intervention goes on. There are different group of people involved in medical schools who are able to do cutting edge research. This does not happen in India,” says Dr Sagar. “When you look elsewhere, say US and look at the big boys of healthcare, be it Cleveland Clinic, Mayo Clinic, Johns Hopkins they are all part of a university system. This is what I want to bring to India,” Dr Sagar says. “In future, a school of technology will have to partner with school of medicine to device frugal technology for healthcare. That is the only way forward,” says Dr Sagar. He also says that this can only happen if there is an exponential change in attitude and mindset of the regulatory body. “As part of the Dayananda Sagar University we are working to create an environment where doctors and engineers work together to solve healthcare problems. Of course, there are regulatory challenges but India will have to wake up to the globalised education system and do away with archaic medical education system,” he says.

The work on the medical school is already underway. Multani, who is also Advisor, Dayananda Sagar Institutions and Dayananda Sagar University, says, “Total investment for the new medical college is estimated around Rs 350 crores; out of which Phase 1 will see an investment of Rs 250 crores and Phase-II will have an additional investment of Rs 100 crores.”

“There is no doubt that healthcare in India is comparable to the Western world. Having said this, young India needs to now look in  to creating value in health IT, biomedical engineering, technical writing, research, management and complement healthcare industry. Dayananda Sagar University’s proposed medical college project has a vision that looks into creating such valued and innovative personnel who go on to enhance the overall worth of healthcare industry in India,” points out Multani.

Looking to reap full benefits of these investments from 2016-17 onwards, Dr Sagar said Sagar Healthcare will have a unique portfolio of globally competitive business with a new age, India-centric service with very high growth potential.

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