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The single specialty segment is one of the most attractive healthcare services segments in India, driving large outcome and strong investor interest. The shift from unorganized to organized healthcare providers, the replicability of successful business models, and favourable unit economics are some of the key factors that have significantly contributed to its growth. Additionally, the feasibility of mergers and acquisitions, along with established pricing and integration strategies, make this segment lucrative for significant growth and investment opportunities.
At the recent Avendus Spark Annual Investor Conference, we curated a special panel around Single Specialty and going back to core competencies, spotlighting the growing clout of single specialty healthcare models in India. Moderated by Dr. Harith Ahamed, the session featured industry stalwarts like Dr. Kshitiz Murdia (Indira IVF), Vikram Vuppala (NephroPlus) and Dr. Arun Singhvi (ASG Eye Hospital). Here are some key takeaways from the discussion.
1. Key factors driving the proliferation of single specialty chain models with focus on core competencies
Single specialty healthcare centers, such as those focused on IVF, dialysis, and eyecare, are particularly effective due to several key factors.
Firstly, these specialties often involve minimally invasive procedures. As Dr. Kshitiz stated during the discussion, IVF typically requires no cuts or stitches, allowing for quick patient turnover, which is ideal for standalone centers. Similarly, advancements in laser technology have made eyecare surgeries more precise and less invasive, aligning with patient expectations for rapid recovery. In dialysis, most treatments are maintenance procedures, where a reasonably healthy person visits a dialysis center 2-3 times a week for sessions that last few hours without any invasive interventions.
Generally, many of these specialties involve low risk of complications as compared to complex surgeries, enabling a streamlined approach in single-specialty settings. As Dr. Arun emphasized, these centers also reduce the risk of cross-infection and hospital-acquired infections, further enhancing patient safety.
Moreover, the focused expertise of practitioners in these centers plays a crucial role. Dr. Kshitiz pointed out that IVF specialists often have training beyond general gynaecology, ensuring high levels of expertise that lead to better success rates. This specialized knowledge is equally important in eyecare and dialysis, where tailored services enhance the clinical outcomes and patient experience.
The convenience and accessibility of standalone specialties also play a vital role. They typically offer quicker access to care, shorter wait times, and streamlined processes, making it easier for patients to receive necessary treatments without the complexities of larger multi-specialty hospitals. This is even more important for patients in Tier II+ cities, where access to quality multi-specialty care is limited.
2. Sector benefits from limited competition and ample growth opportunity
Multi-specialty hospitals are largely focused on more profitable specialties such as oncology, neurology, cardiology, and hence do not pose significant competition to specialised players in the IVF, eye care and dialysis segment. As Vikram highlighted, hospitals often do not profit from core dialysis services, making the partnership model beneficial for both parties.
Competition from organised single specialty players has been favorable for the industry. Similarly, investments from organised single-specialty players in B2C efforts have created awareness and expanded the market. Due to the low market penetration and share for organised single specialty players, there are ample opportunities for new entrants as well as for existing players to grow.
In terms of growth strategy, each organization has its unique approach. Indira IVF currently operates a hub-and-spoke model with 160+ centers and plans to open 40-50 clinics annually to cross over 300 centers in next 3-4 years. Dr. Kshitiz emphasized on the importance of accessibility in addressing the demand for infertility treatments across India.
In contrast, NephroPlus is pursuing a mix of India and global expansion strategy. With over 470 centers across four countries - India, the Philippines, Nepal, and Uzbekistan, the company aims to serve 100,000 patients by 2030 across 15+ countries.
ASG Eye Hospital is primarily focused on expanding in India, after having expanded to Nepal and Africa. Dr. Arun believes that there is a need for ~700 centers in India- roughly a center in each district to meet the growing demand and to standardise the eyecare treatment in the country.
3. Technology drives better patient outcomes and operational efficiency
Technological advancements are pivotal in enhancing patient outcomes and operational efficiency in single specialty centers. In case of NephroPlus, ~95% of the patient queries are addressed by AI chatbots, leading to efficiency gains and making the large human-led customer service team redundant.
Other high-impact use cases include the implementation of electronic witnessing systems using RFID technology to tag patient samples by Indira IVF. It helps in tracking the flow of samples and prevents mix-ups during procedures. This RFID implementation has also enhanced operational efficiency by identifying process bottlenecks and training needs.
In eyecare, Dr. Arun noted that advancements in laser technology have transformed eyecare procedure. A focused eyecare player is able to continuously invest in latest technological advancements making the eyecare procedure more precise and less invasive leading to shorter OT exposure and quicker recovery for the patient.
4. Sector presents attractive unit economics, margins and returns profile
Single specialty players have demonstrated an attractive financial profile, driven by strong unit economics and capital efficiency.
Indira IVF operates an asset-light model, with capital expenditures of approximately INR 5-6 crores for larger hubs and around INR 1 crore for smaller spoke centers. The centers would typically have 75% gross margins and achieve EBITDA breakeven in ~18 months with steady-state margins exceeding 40% after 2-3 years.
NephroPlus operates across multiple business models and formats. For Brownfield centers, typical initial capital outlay ranges from INR 1-1.5 crores, being EBITDA positive from day one. The company expects EBITDA margins of 25-30% within three months for Brownfield center while Greenfield centers take about 9-12 months to breakeven. Typically, centers achieve steady state RoCE (return on capital employed) of 15-20% in India, with international operations yielding RoCE of 25-45% driven by higher price points, reflecting a robust return on investment.
ASG Eye Hospital primarily operates two kinds of centers: with LASIK and without LASIK. Capital expenditure ranges from INR 4-8 crores depending on the type of center (with or without LASIK). Typical steady-state EBITDA margins are around 35% or higher.
Conclusion
The single specialty healthcare model presents a compelling case for focused, efficient, and high-quality patient care. With a favourable and competitive landscape, strategic expansion plans, and strong financial metrics, these focused single specialty players are well-positioned to meet the growing demand for specialized medical services in India and beyond. As the healthcare landscape continues to evolve, the emphasis on single specialty care is likely to increase, benefiting both patients and providers alike.