Chennai-Based MGM Healthcare to Set up South India-Focused Hospital Chain

MGM Healthcare, the privately held company of Chennai-based MGM Group, is planning to set up chain of hospitals across South India, starting from Chennai. MGM will soon be launching a 400-bedded hospital in the heart of Chennai at Nelson-Manickam Road. MGM Group, which runs two medical teaching colleges in Puducherry and Chennai under trust model, will be investing around Rs 400 crore on the upcoming project. The hospital is spread over 3.50 lakh sqft with 50 out-patient consultation rooms, 10 operating theaters and more than 100 critical care beds. The new hospital will be part owned and part leased model. The group isn’t limiting to one hospital, but has started work on another large hospital with 400-500 beds coming up near Velachery, one of the fast-growing suburbs of south Chennai. This hospital will entail a similar investment of over Rs 500 crore and will be entirely based on leased model. MGM expects the two upcoming hospitals in Chennai to take its bed capacity to 1000 in next two years.

The Chennai hospitals will act as the hub, around which the MGM said it plans put up hospitals in other tier-2 and tier-3 cities and towns of Tamil Nadu and adjoining states in next five years. Prashanth Rajagopalan, director of the MGM said the two hospital projects in Chennai are self-funded. Rajagopalan indicated that he is not averse to the idea of raising private equity at a later stage. On the logic of setting-up two large hospitals in Chennai, which is already a crowded market, Rajagopalan says there is still unmet medical need in the city despite having a competitive landscape. “The demand for quality healthcare within Chennai only increased over a period of time, there is still significant gaps in terms of services that are rendered. So, I don’t feel Chennai as a market is as crowded as Hyderabad or Delhi,” Rajagopalan said. On breakeven, Rajagopalan says it typically takes 3-4 years to become EBITDA positive and 5 years to become PAT positive. “These are CapEx intense projects, only established group having withholding capacity until the hospital become positive can sustain,” Rajagopalan added. But to achieve break-even much faster, MGM is banking on leveraging technology. To keep a tab on operational expenditure of the new hospital, Rajagopalan said he focused a lot on design thinking and automation.

The facility was a platinum LEED certified green building harnessing natural light and ventilation, in addition to using solar power. All these efforts will help us to cut power bills, which is major component of opex for a large hospital, Rajagopalan said. Another major component is the cost of human resources, Rajagopalan said they have leveraged technology to either improve productivity of existing individuals or reduce the manpower. The upcoming hospital have digital intensive care units (ICUs) where the patient’s vitals are constantly evaluated by computer-based algorithm on minute-by-minute basis, even predicting a stroke. This helps reduce the dependency on humans, and also eliminate human errors. The hospital also uses artificial intelligence in radiology departments to help read the reports. To help internal transport of material and reports – the hospital uses pneumatic tube system. “Tech is a tool to help us reduce cost of delivery and help improve clinical outcomes and customer experience,” Rajagopalan said. – Money Control

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