Narayana Hrudayalaya: Play on Affordability?

“Our existing health insurance system operates on a fee-for-service model. It will pay you when you get sick, does nothing for you when you’re healthy and runs in the other direction if you have a preexisting disease. Large developing countries with low tax collection like ours cannot afford free universal health care on a fee for service model. So, as NH we would like to experiment with managed care where the interest of patients, payers and providers are fully aligned in an integrated manner. So, in this model care and coverage are seamlessly integrated and healthcare is delivered in a narrow network and the focus is on providing optimal levels of care and keeping your customers healthy.  This is a logical next step in our journey to create an affordable, globally benchmarked, quality driven healthcare services model.  So, to this effect, we’ve incorporated a new company Narayana Health Integrated Care (NHIC).”

– Mr. Viren Shetty, Executive Vice Chairman in Q4FY23 Concall

Stock Data
Ticker	NH
Exchange	NSE
Industry	HOSPITAL

Price Performance
Last 5 Days	-0.68%
YTD	+36.16%
Last 12 Months	+60.71%

*As of 22.06.2023

Company Description:

The company operates a network of hospitals and clinics across India, offering a wide range of medical services, including cardiac care, oncology, neurology, orthopedics, and organ transplantation. The organization has gained international recognition for its innovative approach to delivering high-quality and affordable healthcare.

Organizational Structure and Business Model:

Narayana Hrudayalaya operates under a hub-and-spoke model, with its flagship hospital in Bengaluru serving as the hub and various satellite hospitals and clinics acting as the spokes. This model enables the company to extend its reach to underserved areas and deliver specialized care through telemedicine and tele consultation services. The organization follows a patient-centric approach, focusing on affordability, efficiency, and patient outcomes.

Key Strengths:

“We are transforming our business to offer comprehensive healthcare services by becoming more patient oriented, digitally native and operationally efficient to offer high quality health care at an affordable cost. While continuing to consolidate our operations, we would simultaneously pursue growth opportunities both in India and overseas that derive synergies from our existing operations and maximize value for all our stakeholders.”

– Dr. Emmanuel Rupert, CEO & Managing Director in Q4FY23 Concall

• Key Services and Technological Advancements: The company offers a comprehensive range of healthcare services, including diagnostic procedures, surgeries, rehabilitation, and preventive care. Narayana Hrudayalaya has pioneered several innovative approaches, such as the use of telemedicine for remote consultations, tele-radiology for accurate diagnostics, and advanced robotic surgeries. These technological advancements have improved accessibility, reduced costs, and enhanced patient outcomes.

• Affordable Healthcare: Narayana Hrudayalaya is widely recognized for its commitment to providing affordable healthcare services. The company has implemented cost-effective measures in its operations, such as standardized treatment protocols, bulk purchasing of medical supplies, and efficient resource allocation. This focus on affordability has made quality healthcare accessible to a large segment of the population, including economically disadvantaged communities.

• Extensive Network and Reach: The company operates a robust network of hospitals and clinics across India, with its flagship hospital in Bengaluru serving as the center of excellence. The hub-and-spoke model enables Narayana Hrudayalaya to extend its reach to underserved areas and cater to a diverse patient base. This expansive network allows the company to provide comprehensive healthcare services and leverage economies of scale.

• Social Impact and Community Initiatives: The company actively engages in social impact initiatives to address healthcare disparities. Narayana Hrudayalaya has established low-cost hospitals and clinics in rural and semi-urban areas, extending healthcare access to underserved communities. The organization conducts community outreach programs, health camps, and health insurance schemes to promote preventive care and early intervention, thereby making a significant difference in the lives of individuals and communities.

Financial Performance: 

“Our ARPOB numbers have gone up to INR 1.35 crores per bed. This number in a time spread will continue to grow but we will not expect this to grow very fast because our focus is not to have this revenue per bed at a very high level, at a very fast speed because we want to retain that affordable for all policy and hence we will see this growth but will not be the best in the industry.”

– Mr. Nishant Singh, Vice President in Q4FY23 Concall

Narayana Hrudayalaya has consistently demonstrated strong financial performance, with steady revenue growth and profitability. The company’s ability to attract a large patient base, both domestically and internationally, coupled with effective cost management strategies, contributes to its financial strength. This financial stability positions the company for future growth and investment in innovative healthcare solutions.

Financial Results:

• Narayana Hrudayalaya Ltd reported Revenues for Q4FY23 of ₹1,222.00 Crores up from ₹941.00 Crore year on year, a rise of 29.86%.

• Total Expenses for Q4FY23 of ₹946.00 Crores up from ₹768.00 Crores year on year, a rise of 23.18%.

• Consolidated Net Profit of ₹173.00 Crores up 150.72% from  ₹69.00 Crores in the same quarter of the previous year.

• The Earnings per Share is ₹8.47, up 151.34% from ₹3.37 in the same quarter of the previous year.

Key Challenges:

• Rising Healthcare Costs: The healthcare industry is witnessing a continuous rise in costs, including medical equipment, technology, and personnel. Narayana Hrudayalaya must navigate these escalating expenses while maintaining its commitment to affordable healthcare. Balancing cost-effectiveness with quality care is a persistent challenge for the company.

• Infrastructure Limitations: As Narayana Hrudayalaya expands its operations and reaches underserved areas, it faces infrastructure limitations in terms of physical facilities, medical equipment, and skilled manpower. Developing and maintaining adequate infrastructure, especially in remote and rural regions, can be a challenge for the company.
  
• Talent Acquisition and Retention: Attracting and retaining skilled medical professionals is a challenge faced by many healthcare organizations, including Narayana Hrudayalaya. The company must compete with other healthcare providers to recruit and retain qualified doctors, nurses, and specialized staff. Ensuring a skilled workforce is crucial for maintaining quality care standards.