Super Bullish on Healthcare

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As investors fight over Fortis, doctors worry about reckless enrollment

THE PROFIT POTENTIAL in healthcare is so stark, it’s a wonder that the upscale hospital chain Fortis has not attracted more bidders for a takeover. Manipal Health Enterprises, which upped its offer in response to a Fortis shareholder outcry over its initial proposal, has been the frontrunner to acquire the chain, but a joint offer by Hero’s Munjals and Dabur’s Burmans has given its board yet another set of numbers to consider, even as Malaysia’s IHH Healthcare dangles still more money and China’s Fosun moves in as a tail- end suitor. All this hasn’t just thrown the board into a quandary over whether to opt for a smooth deal or top dollar—now for a bid evaluation committee to resolve—it has also stirred a minority shareholder revolt against some of its directors.

Till recently, Fortis was the flagship business of Shivinder and Malvinder Singh, the ‘Ranbaxy brothers’ who lost control of it earlier this year once they resigned and their creditors took over the shares they’d pledged in collateral for debt. This was soon after allegations surfaced that the brothers had siphoned away Rs 500 crore of the company’s cash, a scandal that emerged within days of their being asked by the Delhi High Court to pay Japan’s Daiichi Sankyo a reparatory sum of $500 million for having sold it Ranbaxy for $4.6 billion in 2008 without adequate disclosures on the risk of a run-in with the US drug regulator over exports to that market. The hospital chain’s operations have also raised eyebrows of late; last year, a top cardiologist was accused of being a direct beneficiary of profits made by a foreign supplier of costly cardiac stents, a conflict-of-interest that drew medical ethics into the spotlight and evoked a chorus of calls for state oversight of health services. All in all, however, Fortis remains a premier healthcare brand in India and few doubt the overall quality of its service set-up.

While the Fortis bidding war highlights the healthcare market’s prospects, a feeder sector that has attracted woefully low global interest is medical education. It’s open to 100 per cent FDI, says the Government’s ‘Make in India’ website, which estimates that the country needs as many as 700,000 extra doctors by 2022 to reach a ratio of one doctor for every 1,000 people, a WHO standard for health adequacy. This is what’s called a ‘stretch target’ in business parlance, and the Centre appears desperate to achieve it. Granting hospital access to half a billion via health insurance, after all, is part of a grand promise it has made, the fulfilment of which calls for a tsunamic supply of new hospitals and physicians.

According to the Medical Council of India (MCI), which oversees healthcare education, India has 61,140 seats available this year for MBBS courses at 476 colleges that have its approval, and less than half that number of seats for post-graduate degrees. What has kept foreign educators away, says a sector analyst, is uncertainty over revisions of the regulatory system. The Centre proposes to replace the MCI, an elected body of doctors accused of running a tardy and corrupt accreditation regime, with a National Medical Commission (NMC) devised to ease doctor supply and tighten integrity. In protest against such a shift, the Indian Medical Association argues that a centrally imposed regulator of medical schools could jeopardise a profession that’s for doctors to determine who else qualifies to join. These doctors fear that over time, the quality of Indian healthcare would be put at peril by new measures such as a multiple-choice all-India test (called NEXT) for a final MBBS degree, especially if loose testing combines with easy accreditation to let even, say, ayurveds get allopathic credentials; the Government, on its part, claims to have addressed these qualms.

The proposed NMC would be asked to control the fees for half the seats a private institution offers, letting the other half be used as money generators, a rejigged version of a formula widely in practice already. With nearly a million Indians vying for MBBS admission every year, private med schools have seen prices for ‘management quota’ seats soar into a range of Rs 50 lakh to Rs 1 crore per student. Yes, it’s big business, and most of the new med schools baying for approval are private. If observers worry about the quality of doctors suffering at the altar of supply, it’s also because of the reckless hurry of some states to award degrees. Madhya Pradesh’s rush to open medical colleges, for example, seems aligned with a poll schedule rather than clinical considerations of competence, given the state’s violations of the current rules on setting up new ones.

Working backwards from a big target and then taking a catapult shot at it works in many an industrial business, but healthcare isn’t exactly a factory product. India needs more doctors, not quacks.