As Aster DM Healthcare enters its 33rd year on December 11, Chairman Dr Azad Moopen prepares to hand over the reins to Deputy Managing Director Alisha Moopen by end 2022. Is the company on track to ramp up India revenues to at least one fourth of the business by 2025? And where does Ayushaman Bharat figure in their plans? By Viveka Roychowdhury
From a single clinic in Dubai, UAE in 1987, to 25 hospitals, 116 clinics and 238 pharmacies in 32 years, across nine countries in the GCC region and India, the Aster DM Healthcare group is today one of the largest private healthcare service providers operating in multiple GCC states (12 hospitals, 108 clinics, 238 pharmacies). The group’s annual revenues crossed the $1 billion mark (approximately $1.14 billion/ Rs 7,963 crore in FY19).
The group entered India in 2001 and went public in February 2018. It is emerging as a significant player in India’s healthcare market as well, with 13 hospitals and eight clinics. This October, the group announced the launch of its diagnostics labs business in India as well, re-affirming its aggressive growth strategy in the sub-continent.
According to a presentation made at an investor and analyst meet on August 22 this year, the GCC accounted for the lion’s share (approximately $953 million) of Aster DM’s FY19 revenues. Of the three revenue streams, hospitals accounted for 49 per cent, pharmacies 27 per cent and clinics 24 per cent. (See Figure 1: Aster DM Healthcare – At a glance)
India revenues in FY19 were around 17 per cent, (approximately $188 million). Recipient of India’s fourth highest civilian award the Padma Shri, Dr Azad Moopen, Chairman, Aster DM Healthcare has plans to ramp this up to at least 25 per cent by 2025. And he is putting the team in place to do just that. (See Figure 2: Aster DM Healthcare – Revenue and EBITDA – FY19)
The recent quarterly figures were reassuring. In Q2FY20, Aster DM Healthcare’s revenue from operations improved by 14 per cent to Rs 2,087 crore compared to Rs 1,837 crore in the same quarter last year. EBITDA (excluding other income and before Ind AS 116) increased by 39 per cent Y-o-Y to Rs 174 crore compared to Rs125 crore in Q2FY19. EBITDA post Ind AS 116 impact for Q2FY20 is Rs 245 crore.
As the group enters its 33rd year on December 11, Dr Moopen’s target is that by end 2022, he will have delegated businesses to Alisha in a phased manner. Dr Moopen will remain involved with three critical areas: strategy, innovation and CSR. Other senior management too are part of this succession planning process, with each business head tasked with identifying and training a successor within the next one year. The process has been completed for 60 per cent of senior management and will reach 100 per cent in the next year.
Two region play
Since Aster DM straddles two very diverse healthcare markets, the company evolved different but complementary strategies for each region, based on existing health systems. As Dr Moopen pointed out, the GCC region has almost 100 per cent health insurance coverage whereas this is not the case in India.
Secondly, the group adopted the asset light model in the GCC region from the beginning, taking existing facilities on long leases. This allowed them to clock an enviable return on capital employed (ROCE) and better profit margins than their counterparts in India, where most hospital promoters had to take the greenfield route.
Thirdly, in the GCC region, Aster operates primary care clinics, pharmacies and hospitals for secondary and tertiary care. The clinics serve as the initial touch-points in the patient’s journey, while pharmacies and hospitals continue the care. Dr Moopen pointed out that the level and range of treatment is much higher in the group’s hospitals in India, as the facilities provide tertiary to quaternary care, including organ transplant procedures at the flagship hospitals.
Today, while profits in the group’s GCC hospitals are much higher thanks to insurance coverage and an asset light model, growth prospects are much better in India. Thus while the GCC region was the first growth driver, India is being built up as Aster DM Healthcare’s second growth engine.
The India revenues also smooth out seasonality variation which is unique to GCC businesses. The summer months see a decline in volumes across Aster’s hospitals, pharmacies and segments in the GCC countries as expats who form a major proportion of the GCC population, as well as some doctors, travel back to their home countries during this period.
Deputy Managing Director, Alisha Moopen explained how the healthcare ecosystem builds on common touch points between the two geographies. Patients from the GCC region, not just those already under treatment with the group, from countries like the UAE, Oman, and Saudi Arabia, who need more advanced care are transferred to the group’s tertiary care facilities in India, thus completing the circle of care. Likewise, patients from the GCC region are an important revenue stream in terms of medical tourism for the India facilities.
It’s not just patients who move between the two geographies. Alisha explained that the group offers career advancement opportunities to staff, to move between the group’s two regions. Nurses from India could move for a couple of years to the GCC region while doctors visit once a month for surgeries and consultation, offering wider exposure and skill development opportunities while serving patient needs. Similarly, staff from the GCC region travel to the India facilities for training at the tertiary and quarternary care level. This is a significant talent attraction strategy, which would no doubt help the group attract and retain the best staff in a sector staggering under the lack of doctors and nurses.
While Aster DM’s first three hospitals in India were built from scratch, like their peers in the country, Dr Moopen said the group switched to the long lease model in India in the last five years, once they found the assets they were looking for.
The asset light strategy gives Aster DM two key benefits. One, it relieves them of the burden of investing in building infrastructure, because as he reasons, that’s about 50 per cent of the total capital required in the hospital business. This is a huge drain on capital, reducing the ROCE. Secondly, it also reduces the time taken for a facility to become operational and break even. The asset light model thus allows Aster DM to expand at a fast clip, as fast as they can find the right partners.
The choice for this strategy becomes even more crucial as Aster DM is targeting large hospitals in Tier 1 cities and metros, where land is very scarce and therefore a very expensive commodity. A recent example is Aster signing a 25-year lease deed agreement with Karnataka Lingayat Education (KLE) Society for its fourth hospital, in Karnataka’s Bengaluru city. Aster KLE Hospital will be a 600-bedded multi-specialty quaternary care facility.
In the same city, when Narayana Hrudayalaya announced that it would move out of its Whitefield facility by this December, Aster took over the lease. Looking ahead, Dr Moopen indicated that their expansion strategy for India would be a mix of both organic and inorganic ventures. Even when it is organic, the group would not build the infrastructure but operate and manage an existing facility. The group’s hospitals in India are located primarily in the southern states of Kerala, Karnataka, Telangana and Andhra Pradesh as well as more recently in Maharashtra. (See figure 3: Geographical Footprint of Aster India).
The group has evidently decided to consolidate in the south and west regions, but is reportedly looking to expand in other regions as well. (See figure 4: Pipeline projects).
Aster and Ayushman Bharat
Build around the brand promise ‘We’ll Treat You Well’ and the ethos of providing accessible, high-quality healthcare, Aster DM Healthcare operates under three sub brands; Medcare (premium), Aster for the middle-income and Access for the low-income strata of the population. All the group’s 13 multi speciality hospitals in India operate under the Aster brand while the GCC region has all three sub brands.
India could see the group’s budget sub brand, Access, soon make a debut, as the group’s participation in India’s health assurance initiative, Ayushman Bharat (AB). Dr Moopen felt that the Government of India’s scheme AB is “One of the most visionary projects launched by any government anywhere in the world. If properly executed, it will be a game changer in India’s healthcare sector. We have seen people in the lower income groups suffer as they do not have access to healthcare. Any scheme that covers nearly 400 million people is something monumental. I hope and pray that the initial teething issues are solved and that the scheme stabilises in the next five years.”
Talking about the involvement of the private sector, he commented that the major issue is that there is a lack of healthcare providers in the tier II and III areas to provide the care required. Doctors are reluctant to go to these areas as it disrupts their children’s education etc. Therefore his advice is that the government should focus on capacity building in the tier II and III areas.
Like a few of the bigger private players, the group had taken a few initial steps to participate in this scheme. For instance, Aster’s medical college hospital in Wayanad is already part of the AB scheme and Dr Moopen informed that they treat a large number of AB patients at this tertiary care facility.
Dr Moopen also revealed that the group is looking at how the group can expand their involvement with the AB scheme to other locations. In city-based hospitals with the space, the Group is “seriously looking at building another block for AB patients.” This block will have a slightly different ambience from the Aster brand, with more patient wards than rooms etc., but Dr Moopen reasoned that with the same doctors and nursing staff from the existing hospital available to treat these patients, the level of clinical care will be the same.
He is also looking at bringing the Access sub brand for lower income group patients to India, as “this really can fit into the AB model” as it gives that same level of care at a more affordable cost.
As part of the succession planning and transition process, which was plotted out in consultation with one of the external investors, Dr Moopen suggested that the organisation should look externally for a professional CEO to head Aster DM. But after deliberations, the directors as well as the staff and external investors on the board, felt that “she was the best bet.”
According to the plan, each year, Dr Moopen will hand over a section of the business, with the related functions, to Alisha. The target is that by end 2022, all businesses will transition to Alisha. Dr Moopen will remain involved with three critical areas: strategy, innovation and CSR.
Looking ahead to the next few years, Dr Moopen feels that, “What I have done is the past and present. What Alisha brings is the future.” He finds her to be “forward looking”, be it operating plans, innovations, to defining the group’s moonshots.
Alisha’s training for this role started way before she joined Aster. Dr Moopen had insisted that she had to first prove her worth outside the group and get her professional qualifications before joining the family concern. Thus after she graduated from the University of Michigan, Ann Arbor with distinction in finance and accounting, she consulted at EY. She also became a Chartered Accountant from the Institute of Chartered Accountants of Scotland (ICAS).
Balancing the promoter-professional equation
Investors and professionals in all sectors have traditionally been wary of promoter-driven organisations, as promoters tend to override professional managers. Is it any different at Aster DM Healthcare?
In response, Dr Moopen narrated how every employee at Aster, including Alisha, has to go through an appraisal process, with all increments etc., based on a KPI-based assessment. Senior management is subjected to an externally conducted 360 degree assessment as well. The external investors, may not have a veto power now, but they too are very supportive of Alisha, according to Dr Moopen. His point was that though the group is family driven, the systems and processes followed are professionally run, with strict protocols.
Alisha is the only family member other than Dr Moopen involved in the group. While one daughter runs a chain of schools, the youngest recently graduated from medical school and is currently exploring the idea of impact investing.
Making the same argument, Alisha pointed out that she refers to her father as ‘Chairman’, just like all her 20,000+ fellow Asterians. Like all Asterians, Alisha looks up to Dr Moopen as the founding father of the organisation, and emphasised that she thinks of herself as a “professional CEO who happens to be the Chairman’s daughter.” When she came into the Group as a Director in 2013, she took her time to understand the healthcare sector. One of the things she’s been focussed on in these past seven years is institutionalising some of the Chairman’s founding principles across all employees in nine countries, to ensure that it goes down to the last person on the line. Her role today includes overseeing the strategic direction and development of the company, and spearheading the expansion of the group into new markets. She was also key to defining the moonshots of the company which flow from her philosophy that “healthcare has to move from doing sick care to ‘health’care.” (See Box: Aster DM Healthcare’s Moonshots)
She was also entrusted with the execution of some of the businesses, where like any other employee, she had to work with teams and earn the trust and respect by her performance.
Bringing in resilience and diversity
One of the changes that Alisha worked on was making the group more resilient. The issues she tackled included bringing in best practices from other sectors and increasing the diversity in the employee pool by recruiting across nationalities.
For instance, when she joined Aster DM, she was struck by the fact that she was the only woman on the leadership team, even though 50 per cent of the healthcare workforce are women. She was determined to change that and thus launched the Women in Leadership programme at Aster DM Healthcare.
The programme empowers talented and capable female employees with training and growth opportunities, to shape them for leadership roles. Hopefully, her initiatives will go a long way towards breaking the glass ceiling for women in the healthcare space.
Those dialogues did throw up opposition to change but there were enough people willing to embrace the change, led by the Chairman, once he was convinced of the logic and that it would be good to the organisation.
Incidentally, Alisha’s husband works at Microsoft in the education sector and she mentioned how it is always inspiring to see how companies like Microsoft enable technology to enhance adoption and subsequent empowerment for customers.
“We, at Aster, want to allow our patients to be more educated about their health, more engaged in their care management and thus result in more effective health coaching to live a better
and healthy life.”
How Alisha found her ikigai
While Alisha was at EY, her son Noah had an unfortunate accident that affected his eye. He had to undergo four surgeries and seven years of eye patching. Recalling those harrowing years, Alisha said, “That was a wake up call. The way it shook our little world made me realise that I wanted to be in healthcare. It reminded me why I wanted to be a doctor as a kid. It reminded me of my father’s mission and the intention to create a force of goodness that takes care of people when their health is compromised; with compassion and kindness being at the core along with clinical excellence.”
Noah’s accident made Alisha realise that her job in consulting did not fulfill her need for purpose, meaning and impact and finding ikigai (Japanese for reason for being, the realisation of hopes and expectations).
While growing up, Alisha observed her father work 15-18 hours a day but the family never felt that he was not there for them because he found a way to compensate. Tuesdays were reserved as a family day out and Alisha concurs that this practice anchored their growing years.
Also, the three daughters always knew that if they needed help on a school project, all they had to do was leave a note and the required material for their father and it’d be done by next morning, never mind what time he returned from his rounds at the clinic or hospitals.
Alisha was all set to become a doctor and follow in her father’s footsteps. But her mother refused, citing his long working hours. Today, as a mother of three young children (12-year-old Noah, eight-year-old Iman and 11-month-old Alif) Alisha’s relationship with her children has evolved around the same pragmatism. “Time management, prioritising tasks, setting expectations and role balancing are very important,” she says, relating how while she cannot be there to drop off or pick up her kids from school each day, she makes it a point to attend all parent teacher meetings and important occasions. Alisha underlines the importance of a very supportive network, comprising her husband, her in-laws, her sisters etc.
Likewise, Alisha has also set expectations at the office, where the staff know that Alisha will leave well before 7 pm to have dinner with her family. But they also know that once the children are asleep, she will catch up with work for a couple of hours.
Growing from her interests in yoga and healthy eating, Alisha had set up a yoga centre and a restaurant focussed on health eating. But over the years, as her role in Aster grew, she realised that these were just “distractions as I did not have the time to allocate to it, I could not do justice to it.” She decided to re-prioritise her life and focus on Aster and her family, and therefore removed herself from those businesses.
For Aster DM, the fourth decade will be about balancing profit margins from the more mature GCC region and investing in India’s healthcare growth story. With insurance players becoming more vigilant about reimbursements, the GCC business could see a drag, with margins shrinking. Until insurance coverage in India catches up, Aster DM, as well as other corporate hospitals, will have it easier on this front. Hence the two regions complement each other.
This could explain why the projects in the pipeline in India, in terms of the number of beds to be added, exceed those in the GCC region (See figure 4: Pipeline Projects). The focus will be long-term lease or an O&M model to enable better ROCEs. Building up flagship units in tier 1 cities and metros will remain the way forward for the group.
The group is also focussed on increasing medical value travel of patients between Aster’s locations. This business will grow into a sizable revenue stream, given India’s strategic location with the GCC states, MENA region and South- East Asia. This strategy will also leverage India’s deep clinical talent pool for tertiary and quaternary care services at the group’s hospitals.
For Dr Moopen, the profession is gradually ceding way to the philanthropist. He currently spends around 20 per cent of his time on initiatives funded both from his family’s private resources as well as the group’s CSR allocation.
Ten years down the line, Dr Moopen see his future with the group’s CSR initiative, Aster Volunteers which was launched in 2017 on the organisation’s 30th anniversary. According to him, the initiative now has more than 18000 people, half from Aster and the other half from outside, who have signed up as volunteers. While Dr Moopen needed to give more time to the Aster group in the initial stages of setting up operations, he is able to give more time to the family and CSR now, as Alisha takes over more responsibilities.
He now has ample time to spend with his five grandchildren. On a lighter note, he says, “The major advantage of grandchildren is that you have all the rights, but not the responsibilities! So I can spoil them as much as I want. I don’t have to be bothered about their studies or future. Whereas with my children, I had to be responsible about these things.”
As Alisha prepares to take over the reins from her father, she hopes to achieve the same work-life balance that her father achieved. Signing off, she said, “It’s about goal balancing and setting expectations, both at work and with the family.”
ASTER DM HEALTHCARE’S Moonshots
Key focus areas identified by Aster DM Healthcare
- the ageing population that require extended care because of their longer age span
- the explosion of health data available and how to utilise it for better patient care
- the changing preferences for more accessible care at the comfort of people’s homes rather than going to hospitals
- more rampant issues around mental health in today’s 24-7 connected world and
- creating solutions to overcome the shortage of health workers to reach the majority of people across the globe that have limited or no care.