Aster Health tweaking business strategy to align with 'Modicare'

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The UAE-based promoter- Azad Moopen- is looking expand in India, as it expects the new scheme to open up opportunities at places beyond the big cities.
The UAE-based promoter- Azad Moopen- is looking expand in India, as it expects the new scheme to open up opportunities at places beyond the big cities.

Mumbai: Hospital chain Aster DM Healthcare is reworking its business plan in India to focus on small cities and towns, because it expects the mega National Health Protection Scheme announced in the budget to open up opportunities away from big cities.

Aster, which is promoted by UAE-based Azad Moopen and runs hospitals in the Gulf and India, is looking for acquisitions to expand its presence in India. It was previously considering hospitals in large metro cities, but after the budget announcement, the group is considering other options.

“There is a serious case to invest in tier-2 and tier-3 cities and towns after this budget announcement, because we expect that people’s affordability to pay will go up. And, there will be availability of manpower with the announcement of new medical schools,” Moopen told ET.

For most hospital chain in India, their profit comes from two to four hospitals located in large cities. “Our experience, too, was that we did not make profit in small cities, because of various reasons including lack of affordability of our patients, and (lack of) availability of doctors,” Moopen said. At such places, hospitals have to keep their tariffs low. Aster gets just 20% of its revenue from India. But that is set to change with the company having plans to expand here.

It has also announced an initial public offering of fresh shares in India. The IPO will open on February 12, at a price band of Rs 180-190 per share to raise up to Rs 725 crore. Though critics have questioned the financial viability of the insurance programme, hospitals hope that it would allow them to serve a large number of patients while having a sustainable business model.

“I waited for 30 years for this announcement (on insurance cover). Intent is in the right direction. Now a poor patient can walk into a hospital with dignity,” Devi Shetty, founder of Bengaluru-based Narayan Health, told ET last week. However, healthcare analysts warn about the possibility of the programme falling short of the stated objectives if it was not well thought out.

“For private providers, an enhanced cover could potentially make this scheme attractive. Many private providers often avoid government scheme patients due to the poor cover and suboptimal pricing,” said Kaustav Ganguli, managing director of Alvarez and Marsal India, an advisory firm specialising in healthcare.

However, Ganguli said when fully implemented, funding the premium under this scheme could prove to be a significant challenge to both central and state governments.

“The budget does not clarify the source of funding for this scheme and while implementation may only gradually ramp up leading to a gradual increase in expenses over several years, the overall government funding requirement will still be many orders higher than the current number,” Ganguli said.

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