Dr Veerendra Hiremath, Co-Founder of Vaatsalya Hospitals, shares his experience of establishing one of India's largest healthcare networks.
October 10, 2016
In 2004, a phone in Malaysia was ringing. The owner of the phone observed that it was an unknown number from India. On picking the call, “Hello, am I speaking to Dr Veerendra Hiremath?” The brain was making every possible effort to decode the voice, “Ummm, Yes.” The caller, “Hey Veero… This is Ashwin… Ashwin Naik…” There were spontaneous exchanges of pleasantries as the mind wandered down the memory lane exploring those lovely days these two had spent at Karnataka Medical College, Hubli, now KIMS, almost a decade ago. Veero never knew what was in store after this call or that this call would change his life forever.
The two got down to business talk in the coming days. Ashwin proposed the idea of setting up a hospital network in Tier-II and Tier-III cities to Veero. Veero was delighted as he had been aspiring to do something like this ever since his college days. Off late then, he had been looking at Preventive Healthcare space to get his entrepreneurial journey started. On a couple of occasions, he took a couple of steps ahead and then, took them back. This time, it was different. Veero decided to resign from his job, return to India and get going with Ashwin to set up low cost hospitals in certain urban areas. While some thought he is perhaps too stressed out of his job and wants a way or a reason to get out, some others thought that it was absurd to do something like this. There were some who also thought that there could be a ray of hope but the sun doesn't shine too much in these parts of the nation. Perhaps, this was exactly why these two wanted to explore these parts. In the coming weeks, after a lot of brain storming, Veero booked his flight back to India for good.
Neither of them knew that they were in for a ride to touch a million lives. Today, Vaatsalya Hospitals (now Vaatsalya Healthcare), defining itself as A Private company promoting health in rural and semi-urban areas of the country, is the preferred destination for medical services at numerous locations. Leading magazines have referred Vaatsalya as a pioneer in healthcare services delivery in semi-urban and rural India. The All World Network featured Vaatsalya in 5th place in their list of India Fast 25 List published in 2010. Vaatsalya is a recipient of several awards including Frost and Sullivan Award for Healthcare Excellence in 2010, Sankalp Award for Healthcare Inclusion in 2009, LRAMP award in the enterprise category in 2008, BiD Challenge India in 2007 and many more. Vaatsalya provides affordable primary and secondary healthcare services across eight districts in Karnataka and three in Andhra Pradesh. Vaatsalya is currently managing 800+ beds, making it the largest low cost hospital chain in India.
A lot has been written, spoken and heard. The Vaatsalya story has been telecast several times in several TV channels. IIM Bangalore did a study on Vaatsalya and the same, further, featured as a case study at Harvard Business Publishing. This is a story about real human beings who took a bold decision to provide medical care with affection, in line with the meaning of the word Vaatsalya, to fellow human beings. Vaatsalya’s story is known to the world. When Ashwin & Veero speak, everything sits to listen to them like if it was a fairy tale. I felt the same when I sat with Dr Veerendra Hiremath (Veero), the Chief Operating Officer, who spoke about Vaatsalya's ideas, vision, future plans, business and entrepreneurship. It was too hard for me to believe. How could something so significant like Vaatsalya pop up successfully merely due to vision, plan and action? Is a good business model all that you need to succeed, in India?
I decided to take a dig into the micro story. It took a lot of time for Veero to come down to the micro level as he has been used to give interviews over the last couple of years where the general talk is about the economy, population, healthcare, governance, statistics, etc. Finally, he was digging into his memory lane to tell me what exactly happened. The Vaatsalya story, unheard, was soon in revelation.
In 2004, after Veero returned to Hubli, India, both Ashwin and he sketched their plan on a sheet of paper. A deep down analysis showed that there is a definite lacking of healthcare facilities in many towns in India. It was also learnt that most large hospitals are set up to treat the complicated medical conditions. People visited a clinic or a small hospital for primary healthcare treatment. Some basic information about prospective locations, the population, existing hospitals, services, etc. was studied and they decided to take the first shot at Gadag considering that many people from Gadag and nearby places traveled to Hubli for treatment as Hubli some fine hospitals. The initial capital was equally contributed by them and they realized that it does not suffice even half of their requirement to just get started. The obvious route for them was friends and family. Considering Ashwin worked in the US for a long period and Veero had a good number of friends abroad, they appealed emotionally to all of them. Money started flowing in. With a total of about $0.12 million (Rs 60-65lacs) in the bank account, Vaatsalya was ready to take off.
It was not a very difficult task to incorporate the firm, get the required permissions, lease the space and get started. When they decided to buy the property in Gadag, the price quoted consumed more than half of their seed capital. Strategically, they thought, "Let’s buy the property, mortgage it to the bank and get loan on the property. Thus, we would not be running out of cash." After due diligence, they decided to go for it. In the process of registration, they saw the other side of the world, which many see each day, for the first time. Whenever and wherever land is involved, India and Indians get more excited than usual. The land registrars discovered an unusual discovery and put the transaction on hold. On inquiring around, it was learnt that this is a regular yada-vada that should be answered with the required greasing. In the process of elucidating this issue, there were many lessons learnt, the hard way. It was resolved that, no matter what it takes, Vaatsalya would not be built on anything wrong.
Veero studied at ASCI, Hyderabad after MBBS at KMC. He never practiced the profession of a doctor. After ASCI, Veero worked for the Hinduja group managing numerous hospitals. Further, he worked in Malaysia with Medicom (which later became iSoft and now, IBA). His expertise in building graded hospitals was exemplary. For obvious reasons, he took over the ground process of setting up Vaatsalya, the land, the building, the premises, the equipment and the likes. In line with Ashwin’s expertise, he took over the responsibility of HR, administration, communications, etc. However, the duo handled everything that they could and this demarcation became visibly active only recently. Veero recollects, “We were like mad bulls, cocky people, chasing everything that it took to build Vaatsalya. Like with any startup, Vaatsalya became our life. There was nothing to look back. Conversely, there was also an unknown fear within us at times that we were unable to decipher. However, we kept running. Whenever I had any problems, he was there for me. Whenever he had any problems, I was there for him. Life went on.”
The Gadag registration issue did not seem to end. It now seemed that the Hubli project nearing completion and would ideally begin operating before Gadag. It happened.
In February 2005, Vaatsalya began its operations in Hubli. All was well. Things moved as per plan. Vaatsalya had some unique services to offer and believed that these would drive patients to their premises. 24x7 healthcare services in most small towns are unheard as the clinics/hospitals are run by individuals/family of doctors. The Government Hospitals ensured that someone, PG students in most cases, manned the hospitals at night and thus, they could be considered shut though the lights said otherwise. Further, it is a general trend that hospitals avoid admitting serious cases for various reasons that include unavailability of required equipment/facilities as well as the unending legal formalities that the hospital, the individual doctor personally in many cases, would have to do in case of a death. Vaatsalya began 24x7 services and due to availability of equipment and resources as well as willingness to do whatever formalities by, may be, making an employee responsible for all such interactions, Vaatsalya accepted most emergency cases and treat them. From a business point of view, there was a lot of stress due to these cases as a number of resources, including human, would have to work meticulously to get the result. Soon, it was observed that the cases that were hitting Vaatsalya after visiting 3-4 hospitals started hitting in the 1st or 2nd instance. Unknowingly, Vaatsalya was becoming the preferred destination for medical services for thousands of people. Nothing works better in a business involving human values than referrals.
Soon, doctors at Vaatsalya were seeing a good number of referral cases including some from other clinics. There were some flaws, for sure. One such example was that, unlike retail outlets, the glossy finish of the building was shying away people from entering the hospital assuming the hospital is expensive. It took them a lot of effort to change the perception through advertisements, referrals, contact programs, health drives and various other initiatives. The numbers were not very good but these were the only ones. The roses continued to show up, but not without the thorns.
There was no respite in Gadag. Catching a bus to Gadag in the morning and returning to Hubli in the evening with a sorry state of affairs had become a routine. Vaatsalya could not give up on the project as a lot of capital expenditure had already been incurred. Veero says, “Honesty is very expensive in India. That’s the reason why someone who has lived with honesty is always the most valued in the long run of life.” Things worsened. It was not about money anymore. Time, energy, patience, sensibility, everything was running out. It was time to take a final decision. They could not let this continue as it was impacting operations at Hubli as well as causing delays at Karwar, the next destination in line. Experienced elders suggested, “We told you that it would take a bit of compromise on whatever you boast as ethics. Your work would have been done on the first visit itself. In Rome, do like the Romans do.”
There was silence, a long one. Veero spoke, “The worst that could happen 5 years from now is that I could still be travelling between Hubli and Gadag like I do now requesting the officials to do the work. Even worse could be that I will lose whatever Rs 20-30 lacs that has gone out from our accounts. I am ready. I don’t want to spend sleepless nights all life thinking of the wrongs I did to build Vaatsalya. I would rather sleep peacefully accepting that I failed.”
Environment makes people. What an apt quote! In Rome, do as Romans do. For someone who has spent his childhood, the learning years, at a school like SSBJ, severing values is worse than anything else. A man who has spent his life with honesty, integrity and truth is a true success in himself. He doesn't need to do anything to prove his success more than holding his head up and walk in the crowd. “The school days were wonderful”, says Veero, “For me, even today, it is disbelief that we had teachers spending almost 18 hours a day with us. Can you even imagine doing this for someone? At 5.30am, we had our hostel superintendent ensuring we get up, have a cup of tea and reach the ground. At 6.00am, we had our PT teachers jacking us off. From 7.30am to 1.30pm, our classes run. At lunch, teachers accompanied us. At 4.00pm, they played basketball, volleyball, football, hockey, cricket, etc. with us. At 6.30pm, they would join us in the evening preps. At 8.30pm, they would be there at dinner. After dinner, they would stay back for an hour or two to help us in our studies. The next day, they are back. It literally shakes me up when I think of this now though I never felt anything unusual about it when I was in the school. The system is designed to build people. We have been built for the good. If not for the school, I would have been nothing today.” Indeed a strong statement. Conceivably, I had dug Veero too deep down the memory lane. He continued, “They cheered us at all competitions. The house spirit was not just a student affair. Unknowingly, we have learnt the true meaning of competitive spirit. We would be the worst of enemies on the ground. Back to the class, we became the best of friends. Unknowingly, our minds developed ahead of our age. We became our own support system. Sometimes, I read such stories in novels and I feel proud that I have lived this phase of life. By the time we reach 12th, we were, like, done with life. Today, I am blessed with the giant additional family. This is the greatest gift of life.”
Miracles do happen. After Vaatsalya resolved that they would not give up the Gadag fight on the previous night, one such miracle happened. The next day, when Veero reached the office, things had changed. The file went through. Vaatsalya bought its first hospital premises. Incidentally, it is the last one too. Miracles, generally, do not have an explanation. It went through just as easily as this. One important business lesson Vaatsalya learnt from this saga is to stay out of the business of real estate. It sucks time, blocks money, stresses nerves, trashes hopes and kills plans. Moreover, from cash flow point of view too, owning a building did not make much sense compared to paying the rents that were cheaper in these cities. Vaatsalya decided to either takes buildings under construction where they make changes as per their requirement or takeover existing hospitals. Vaatsalya began operations at Gadag in June 2005 and at Karwar in October 2005. “Even a moment’s distraction in the Gadag decision would have caused a lifetime’s guilt for Vaatsalya. There is God. He tests you. He helps you. He is always there for you if you do the right things. Today, we stand as an example to the world that one can strive, survive and drive business with clean hearts, minds and hands.”
3 hospitals were up and running. They didn't realize early that they were burning cash in the expectation of generating revenues. Full time doctors were hard to come. Consulting doctors charged a bomb. The Karwar project ran like a clinic, the Gadag project ran like an OPD and the Hubli project ran like a Daycare hospital. The experimentation with these 3 business models was on to learn the pros and cons. All of a sudden, Vaatsalya had become big. The salary bill went up, admin costs went up, rents went up and all these hollowed a dent in the Profit and Loss account. Things were running out of control and they realized that there is a need, now, to form a team and set systems in place. After some planning, things were put in order. These were mostly internal to Vaatsalya like the procedures, processes, work flow, reporting authorities, responsibilities, etc. There was a sigh of relief. However, in the course of working on urgent problems, the most important problems lost their significance. Soon, these conspired to create a panic. There was no more money in Vaatsalya’s bank account.
Problems become panic when you face them unprepared. Veero was average in academics but fantastic in sports and extra-curricular activities. After SSBJ, when he landed in KMC, he was in a state of panic. From being a lord of the rings, he felt like a frog that jumped out of the well. Seeing some of the brightest academicians as his classmates made his medical life hopeless ever before it began. There was a cultural shock. To beat all this, there was new found freedom. However, he could take control of the situation as well as temptations. “No matter what kind of life comes, I can take it and make things work. After all, I have been built for life. I wholly believe that the past cannot be changed, the future cannot be seen and the present is all yours.” says Veero.
Vaatsalya mortgaged the Gadag property with SBI for a loan. The line of credit was the first and the last lifeline that Vaatsalya had in this game. The plan to build a network of hospitals was appearing shaky. There was not a single rupee of profitable business transacted over the past one year at any of the hospitals. There was neither a ray of rope. Generally, hospitals break even in 2-3 years but they show some symptoms in terms of revenues as well as expenses, which was not being seen at all. The shrinking effect caused huge stress. At a business discussion, someone told, “Medicine business is not a joke. The way you are doing it, you will never make money. Close down now before you are forced to. Save whatever you can and run.” These words came in as a reaction to Vaatsalya rejecting a proposal to buy medicine from a vendor offering kickbacks. It appeared like the vendor was right.
In 2007, Vaatsalya exhausted SBI’s line of credit. It felt like you were just chucked off from the hot seat on 'Who wants to be a Millionaire?' and all that you earned till now is strapped off. Veero was there for Ashwin. Ashwin was there for Veero. Two cocky people mad at their passion, cohesive forces and a rush of unfound enthusiasm. Some phones across the world started ringing. To their surprise, there were more people asking for the bank account number than asking for the cause of this situation. “Luck plays a great role in life”, acknowledges Veero, “Today when I look back, I question myself, How did this happen? I mean, I was selling someone something that never existed. When I look at it now, I feel, I would not have considered investing it myself if I was in their position. While it was not so difficult for me, Ashwin faced a lot of problems this time in raising funds. He even went on to draw some funds from local money lenders on high interest rates. We had no other go. We didn't have money to pay the salaries or for any necessary expenditure at the hospital. The beds were unoccupied. Our calculations had gone haywire. People were taking too long to switch over to Vaatsalya. We could see change happening but at a frustratingly slow pace. We decided to stay on.”
Veero started developing an inclination for the hospital at Gadag. He started focusing most of his time there. On observing the day to day activities, Veero felt that there is a need to install an NIC here. He claimed that this could be a game changer for Vaatsalya. Due to various constraints, financial and otherwise, there was no decisive action taken. In the meantime, Veero met Preeti. The intuition to install the NIC was so strong that Veero pulled out Rs 5 lacs on his own front and installed the NIC on August 26, 2007. On September 26, 2007, Veero married Preeti. On the same day, the NIC was running a full fledged capacity. The hospital’s monthly turnover jumped from Rs 1 lac to Rs 3 lacs and today, it churns close to Rs 30 lacs a month. “Look, here I come. Your good time has begun”, chuckled his wife. It was too true to believe, for him then and for me now. Veero says, “It appeared like the most foolish, the stupidest thing to do but I did it. Sometimes, intuitions are too powerful. This is one decision that has stood by me ever after.”
Veero realized that there is a need for a scanning center at Gadag. Considering that Vaatsalya has no plans to do it, Veero embarked on a new journey to set up the Gadag Scan Center. He got in 68 doctors to associate with the center. In December 2007, Gadag Scan Center was live. The pace was just unbelievable. However, after a few months, Veero moved out of the board of Gadag Scan Center as Vaatsalya needed 100% of time. “2007 was a significant year for me. I was doing so many things at a time. It was great fun stretching beyond limits. It was the toughest year of my life and the best in productivity terms.” said Veero and coincidentally, his wife walked in to the home. This is not a fairy tale.
Soon, Vaatsalya was in news as it won a couple of prestigious awards. The financials were improving. The pace of new walk-ins rose. In April 2008, Avishkaar and Seedfund funded Vaatsalya with $1.5 million and this was a great breather. The expansion plans were back.
Vaatsalya started looking at many other cities across Karnataka. This time, they focused more on existing hospitals that could be bought and re-branded The big question that came up was, “Why would an existing hospital sell itself to Vaatsalya?” Nobody was able to find an apt reason. Soon, they guessed that there could be some doctors whose children might not be in the same field and thus, there could be a question on succession. Even if they decide to sell it to another doctor, the goodwill would never pass on as these hospitals were more famous due to the doctor than the name of the hospital. Other doctors were unwilling to join as it was a family business or they would have their own hospitals. It is a fact that practice and maintenance are two different activities and many doctors faced this problem of managing on both fronts. Vaatsalya decided to go ahead and put a word to see the response. In any case, there were only a few hospitals in each city were on their radar. Different approaches like meeting the doctors directly or through a common friend, organizing a Doctors’ Day and inviting all doctors in the city, etc. were followed. Things started to move. In one case, a doctor running a nursing home got a proposal in the evening, he called up Veero, they met at dinner and the deal was done overnight. In some cases, the discussions went on for more than 6 months with no serious results. Vaatsalya’s rebranding service agreement not only made these hospitals neutral entities but also carried forward the goodwill and other doctors were now willing to join. By the end of 2008, there were 10 hospitals under Vaatsalya.
Yet again, Vaatsalya had become big. The turnover had jumped from Rs 1Cr last year to Rs 5Cr. Vaatsalya was grappling with too many issues. The team had grown haphazardly big and aggressive. Ashwin and Veero were taking too many calls for too many issues that could have been resolved without their involvement. For a moment, Veero felt that they are losing out. They had been working 24x7 with no Diwali, no Eid, no Christmas and no new year. Operational difficulties were on rise. They discovered that most of these were permission related queries. It was decided to delegate responsibilities, restructure the team and stabilize growth. They started working on the ground to find ways and means to improve revenues by offering better facilities. Vaatsalya’s approach towards building facilities has been a game changer for them. Instead of offering facilities that all the hospitals already had, even though there was a good margin, they decided to offer facilities that are not available at other hospitals. They observed that there are no Dialysis facilities in Bijapur. People would either go to Solapur or Belgaum or Hubli for the same. The same was the case with Bagalkot and Gulbarga. The patients would travel every week to these cities and it added more to their pains. A patient, on facing a kidney failure, would have no hope of survival due to these issues and this loss of hope had become a bigger problem. Vaatsalya was gung ho with the plan. A critical life supporting treatment was made available at economical price of Rs 1000 per sitting against a price of Rs 2500 at Bangalore. The equations of the game were changing and this time, the odds were in favor of Vaatsalya.
Vaatsalya observed that there were significant numbers of cases of premature birth, low birth weight, etc. Thus, there is a need to have these children under observation for some time. Most districts did not have the facilities. In line with the objective, Vaatsalya started Neonatal Incubator Care Units (NICU) that has been another game changer in the growth story. Pediatric services were introduced. These services coupled with a transparent billing system grabbed attention and Vaatsalya started earning tremendous goodwill. So much that in a couple of complicated pregnancy cases, parents named their child ‘Vaatsalya’ expressing their gratitude to the doctors. “That day, I felt, I had made a difference”, says Veero.
Today, Vaatsalya has become a referral center for small areas. The degree of goodwill that Vaatsalya has earned is tremendous. Whenever there is a medical emergency, it has become common to say, “Vaatsalya bhej do!” meaning, “Go to Vaatsalya”. With a turnover of Rs 80Cr in the previous year operating at an EBIDTA margin of 12%-15% at hospital level and 3%-5% at the company level, Vaatsalya is a VC’s dream deal. Today, Vaatsalya faces the macroeconomic problems that all the hospitals in India face. A large number of patients in these areas have no health insurance, one major reason for corporate hospitals shying away from these areas. In most cases, the patients sell their assets or take a loan for surgeries. There have been numerous instances where the family gives a green signal for the surgery considering the criticality and Vaatsalya goes ahead and post surgery, the family declares that there are no funds. The low occupancy rates have also been a cause of concern from the business point of view. Vaatsalya continues to fight these issues like every other hospital in India.
Large plans are on way at Vaatsalya. With more funds coming in from VCs, the doors have been opened to explore opportunities. Veero has now taken up a project to set up Vaatsalya Training Academy that is supposed to train nurses on management skills, communication skills and other required skills. Veero says that nurses are the backbone of a hospital. He says that these skills can be learnt by them in 3-6 months. Today, nurses do whatever the doctor tells which is good in some ways and harmful in other. A general understanding of the system would help them take better decisions and contribute in the delivery process. Small matters like asking for the payment, breaking a bad news in the right manner, etc. go a big way in maintaining a favorable environment at the hospital. A lot of ideas have been flowing in to create the best low cost hospital network in India. From 17 hospitals under its cloud today, Vaatsalya aims to have 40 hospitals with a consolidated turnover of Rs 200Cr by 2014, a goal that doesn’t seem too impossible. Above all, Vaatsalya continues to touch thousands of lives each day helping them become better. That perhaps is the greatest source of happiness and inspiration for Ashwin and Veero.
It goes without saying that India needs more and more Veeros and Ashwins who can give us many more Vaatsalyas. Apollo Hospitals is undoubtedly another leader in providing superior healthcare services in India. Fortis, Manipal, Max and many others are doing a yeoman service in the space of medicine. Most of these hospitals have also been promoting and helping poor people to make use of facilities like the Yashaswini scheme, Rashtriya Swasthya Bhima Yojana, etc. while they are treated. All the organizations have to work together to ensure that the focus continues to be on ensuring a healthy life among people. We need many more initiatives in the field of modern healthcare. The time is not far when entrepreneurs will realize and we might see healthcare facilities mushrooming across the nation just like the way we saw an education revolution, gym revolution or the e-commerce websites revolution. Modern Healthcare is Touching Lives and I sincerely wish that the healing goes on forever.
Health is a state of complete harmony of the body, mind and spirit. When one is free from physical disabilities and mental distractions, the gates of the soul open - BKS Iyengar
October 10, 2016
October 10, 2016