March 2014

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Economics of Good Health

Akash Rajpal has a solution for your woes over rising healthcare costs.

If you belong to the great Indian middle class, you probably remember your last hospital visit more clearly for the huge bill you had to pay on your way out. Especially since you did not have medical cover. Akash Rajpal, 37, set up Ekohealth keeping in mind this exact segment that pays for healthcare from its pockets and not its insurance cover.

 In April 2011, after 13 years of working in the healthcare sector in both public and private setups, Rajpal started Ekohealth with an initial investment of  Rs. 25 lakh. Rajpal was a practicing doctor for the first few years of his career, he then got inclined towards the management aspect of the healthcare industry. 

Discount deals
Ekohealth provides a membership card that gives patients access to discounts at diagnostic centers, pathology labs, chemists etc.
 
The firm gets access to discounted prices for its members by convincing healthcare centers to tie up with it and by directing patients to go to these centers, thereby helping hospitals save on the cost of acquiring a patient.
 
Rajpal explains that currently a certain percentage of the bill paid at a hospital goes to a general practitioner who has directed a patient to the hospital. But increasingly, as patients are getting more aware, they approach specialists directly, he says. This is where Ekohealth comes in. Through e-mail newsletters, texts and phone calls, it makes patients aware of discounted services being offered at hospitals, thus directing traffic to these hospitals.
 
But how is this different from a loyalty card or membership card of a certain hospital? Rajpal says that he currently has 100 member healthcare centers in Mumbai for patients to choose from, giving them the option of selecting the center they want to be treated at.
 
Save and smile
The company began its active sales about three months ago and has 1,000 customers so far. The membership, which covers a family of four for a `1,000-annual membership charge, gets members up to 50 percent discount on the price of the treatment at the hospitals it has tied up with. The membership, Rajpal says, will eventually cost Rs. 5,000 annually per family.
 
Rajpal says that he eventually “will have a database of information on which patients require what kind of service from which hospital.” This, he says, will then be his reference for negotiating lower rates with hospitals, which can bring down the costs of treatment.
 
Rajpal points out that patients with diabetes and hypertension are refused insurance and incur high healthcare costs. He shares that some of the case studies he referred to showed that diabetes patients spend Rs. 50,000 to Rs. 1 lakh annually on healthcare.
 
Such patients, getting a discount of anything between 10-50 percent, save enough to cover for the cost of the membership and beyond that, he says.
 
Expansion plans
Rajpal is also in talks with companies like Johnson & Johnson to provide glucometers at discounted rates to members of Ekohealth. “We can also be an ally to insurance companies,” says Rajpal. The company is in talks with insurance companies to convince those buying their health insurance products to also use the Ekohealth membership to bring down treatment costs and thereby benefit the insurance companies too.
 
Ekohealth is looking to expand to Pune and then Nagpur, beginning by looking at tier II cities in Maharashtra before expanding to the rest of the country. Rajpal says he plans to be present in about 20 cities in the next two years.
 
Staffing woes
The company is looking to raise funds from investors. Rajpal, who has bootstrapped so far, says that he can only expand to three-four cities in that manner. He is currently targeting to sell the product to 10,000 customers by the end of next year and 25 lakh customers in five years.
 
The company is targeting a Rs. 250 crore turnover in the next five years.
 
Rajpal has a team of 10 people and has outsourced his telesales efforts to a firm in Pune. He says that one of his biggest challenges so far has been getting employees. He is currently looking for a chief executive who has experience in the financial sector to run the operations of the company.
 
Case study
Shailesh Bane, a 48-year-old customer of Ekohealth, says that he has taken the Ekohealth product though he has health insurance. He is hoping that the Ekohealth membership will benefit him more as the company increases the number of hospitals it is affiliated to.
 
“I have received an average of 20 percent discount on my treatment costs the last few times I went to a hospital affiliated with Ekohealth,” says Bane.
 
“Since health insurance only covers you if you have been admitted or actually pays for your treatment cost later, Ekohealth’s product has been useful to me,” he adds.
 
A WHO report states that commercial insurance covers only about 1 percent of the healthcare spend in India.
 
Rajpal says that the government has done a good job with providing healthcare services to the poor, but the middle and upper middle classes are stuck with large medical bills with a barely existent support system.
 
So, is this a classic case of spotting an opportunity where the government has failed? That is certainly true Indian entrepreneurship.

 

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