Health is wealth

Hospitals and medical colleges are big investment opportunities for the private sector

SANGAM PRASAIN
KATHMANDU, FEB. 18

Nepali business houses have stayed away from investing in the health sector for many years. Presently, some of the leading names in Nepal's private sector, the Khetan Group, NE Group and Upendra Mahato, have announced plans to enter the health sector in a big way.

The private sector has a strong presence in the domestic health sector through medical institutions like Om Hospital, B&B Hospital, Medicare Hospital, Kathmandu Medical College and Manipal Medical College. However, the latest wave of investments from the private sector shows that health is now turning into an investment area for them.

The Chaudhary Group was perhaps the first business house in Nepal to make a foray into the health sector in an institutional way. The group established Norvic International Hospital (then known as Norvic Health Care and Research Centre) in 1994. It is now operating with 100 beds. Two leading private hospitals, Om Hospital and Medicare Hospital, were upgraded from nursing homes to hospitals.

The expansion and success of private hospitals in India, ever growing need of quality health service and poor performance of public sector health outlets has provided immense opportunities for the private sector. Khetan Group chairman Rajendra Khetan said, "There is a huge gap between demand and supply in domestic health service." Khetan thinks the domestic market is large enough for private players to survive and make profits.

Cash-rich Khetan Group is currently looking for land for its foray into the health sector. According to Rajendra Khetan, the group will invest Rs 3 billion in its health project that includes hospital, medical college and nursing college.

After investing in Medicare Hospital, Upendra Mahato, former president of the Non-Resident Nepali Association (NRNA), is now gearing up for yet another venture into health. Mahato is working to start a medical college and hospital in Kathmandu. The proposed Ashwini Medical College and Hospital is a Rs 7 billion project. The college will have 100 seats and has already received permission from the Ministry of Education. According to sources, the medical college will be affiliated to Tribhuvan University or Kathmandu University.

CE Construction in a tie-up with another company has invested in Grande International Hospital at Dhapasi, Kathmandu with 200 beds. The Rs 1.2 billion project will be completed by February 2012, according to Vijay Rajbhandary, chairman of CE Construction. "The hospital will be a multi-disciplinary one to cater to the growing needs of patients," said Rajbhandary. "The hospital will be expanded to 500 beds within a decade along with a medical college and nursing college."

Of late, foreign joint ventures are slowly making inroads into the Nepali health sector. Norvic Hospital has recently entered into an agreement with India’s Medanta Medicity, one of the leading hospitals in India, for technology transfer and expertise in the medical field. Super Religare Laboratories (SRL), one of India’s leading diagnostic networks, opened a Super Religare Reference Laboratories (Nepal) in a joint venture with the NE Group.

The laboratory is a partnership between SRL and Life Care Services, a subsidiary of the NE Group. Each has a 50 percent stake in Super Religare Reference Laboratories which has a total investment of Rs 50 million. SRL is the largest and most trusted pathology laboratory network in India, servicing nearly 4,000 hospitals/path labs and over 50,000 doctors.

This JV, according to Ravi Bhakta Shrestha, vice chairman of the NE Group, is now mulling opening a boutique hospital in Nepal. "We're currently under negotiation with Fortis Healthcare Limited, one of SRL's promoters," said Shrestha. Though it is still not decided about the equity structure, Shrestha says the NE Group is keen to invest up to 50 percent in this venture. The boutique hospital will have 100 beds with world class health services.

Norvic is also going for a big expansion drive with an investment of Rs 1 billion. Apart from expanding its existing hospital at Thapathali by adding 100 beds, it is establishing a medical college at Lubhu, Lalitpur. There will be a 100-bed community hospital at Lubhu that will provide health service at relatively cheaper prices.

With the public health service still not being effective despite the government pumping in billions of rupees, the private sector's entry into it is believed to make health services better, professional and reliable. However, there is also the question of affordability. Will the common people have access to these high-end medical facilities? Will they be able to get services? These are some pertinent questions.

Khetan believes that with an increase in supply, the cost of health services will drop. "There is a huge gap between demand and supply. If we can manage to increase supply, we'll have a higher turnover, which will eventually allow us to provide health services at affordable prices," says Khetan.

Health entrepreneurs say that if properly developed, Nepal can attract patients from India due to cheaper medical costs and agreeable climate.