The questions I ask before a hospital is built or bought

My first question about any city is where its patients go when they leave it. We study a district's outward referrals by speciality, using our own diagnostics data, ambulance records and conversations with general practitioners, and then ask how many full-time specialists each missing service needs to cover nights and holidays without exhausting them. That sequence led us to a format of 140 to 160 beds built around cardiac care, cancer day-care, dialysis, orthopaedics and trauma, and mothers and newborns, linked to our larger hospitals at Nagpur and Raipur for neurosurgery, transplants and complex surgery. Chandrapur opened in 2022, Yavatmal in 2023 and Durg in 2024. The format is not a formula. Each hospital's mix differs with its catchment, and after a delayed head-injury transfer in 2023 we added neurosurgical stabilisation at Chandrapur. I would rather a board approve a hospital whose gaps are named than one whose gaps are found by patients.

In a hospital acquisition the building, the licences and the equipment transfer with the deal; the doctors and their referrals do not. My diligence therefore begins with three registers: revenue by consultant and the terms on which each one works, referral sources by doctor, town and payer, and receivables by payer and age. Only then do we look at occupancy and margins, and the regulatory file: registration under the applicable state law, fire safety approval for every block, atomic energy regulator licences for imaging and cath-lab equipment, ultrasound registration under the PCPNDT Act, and biomedical waste authorisation. Integration planning starts before signing. At Bhopal in 2023 we agreed employed contracts and a three-year retention plan with the senior consultants before we agreed the price, and fourteen of its sixteen senior consultants are still with us. In Indore in 2022 the same work persuaded me to recommend that we walk away.

Our hospitals are paid by individual patients, private insurers through third-party administrators, corporate employers, and central and state government schemes, of which Ayushman Bharat PM-JAY is the largest; it covers up to ₹5 lakh of hospital care per family each year at package rates set by the scheme. In our smaller-city hospitals scheme patients account for 31 per cent of bed-days and 19 per cent of revenue. I treat payer mix as a strategic choice, not an outcome to be reported. We redesigned clinical pathways and claims processes for scheme packages, cut scheme receivable days from 112 to 64, and report each payer's contribution to the board separately. Price regulation shapes the plan as well: coronary stents and knee implants have carried ceiling prices set by India's National Pharmaceutical Pricing Authority since 2017, so our cardiac and orthopaedic economics rest on throughput and length of stay rather than on the margin on devices.

Pathology looks like a simple adjunct to a hospital and behaves like a different business. A reference laboratory earns its margin on volume, logistics and accreditation; a hospital laboratory earns it on turnaround time for inpatients. Our subsidiary combined both badly when I reviewed it in 2023: 74 collection centres lost money, wellness packages were discounted to the point of loss, and hospital testing was priced inside the group in ways nobody could defend. We separated hospital laboratories into the hospital business, closed the loss-making centres, ended deep discounting and brought every hospital laboratory under NABL accreditation. Revenue grew from ₹410 crore to ₹580 crore between 2022–23 and 2025–26, and EBITDA margin from 14 to 21 per cent. The network also earns a strategic return the accounts do not show: test volumes by town tell us where the next hospital should be, and they now put Gondia at the top of our list.

Many smaller Indian cities have a charitable hospital that has served them for decades and can no longer fund its own renewal. Such hospitals usually cannot be sold, because their trust deeds and charitable objects do not allow it, and they should not be. An operation and management agreement lets a private group bring capital, systems and doctors while the trust keeps its property, its objects and its say over charitable care. Our agreement in Sagar, signed in 2024, runs for fifteen years: we invested ₹85 crore in a cath lab, intensive care and theatres, earn a fee of 6 per cent of revenue and a share of any surplus above an agreed level, and the trust keeps a fifth of the beds for free or concessional care. The difficult parts are governance and people: who appoints clinicians, who answers for an adverse event, and how two pay scales coexist on one ward. Those terms deserve as much negotiation as the fee.

A strategy function earns a board's trust by reporting what its earlier recommendations actually produced. Since 2021 every acquisition and new hospital above ₹100 crore returns to the board two and four years after commissioning with its original case, its actual results and an explanation of the difference. The first review was of our Bilaspur hospital, which I had supported in 2018 and which opened in 2019 with a multi-speciality plan we could not staff. It showed a return of 6 per cent against a 15 per cent hurdle, and it changed how we plan every hospital since. I write board papers so that the recommendation, the strongest alternative and the evidence that decided between them sit on the same two pages, and I attach the dissent of any executive who disagreed. Directors can then challenge the judgement rather than reconstruct it.