Game of volume works in healthcare: Thyrocare CMD Dr A Velumani at FPJ health conference

Years of experience has taught Thyrocare, CMD, Dr A Velumani, that volume can work wonders. He claims this volume game will be key for Ayushman Bharat too, while speaking at The Free Press Journal’s conference.

Edited Excerpts:

When I obtained a degree no one would give me a job in Coimbatore, so I came over to Mumbai in 1982. I got employed at the Bhabha Atomic Research Centre and deployed at the Tata Memorial Hospital, where my job was to test thyroid functions.

After around 15 years of a government job at 37, I decide to do something else.When I gave up my government job, my wife was unhappy, she also gave up her job at the State Bank of India on the same day giving me a title for my story – romance with risk.

I knew only about thyroid and being a mathematician, I focused not on disease but on disorder. Laboratories have machines which work only for an hour or two per day. A standing machine is a liability – a running machine is an asset. To improve utilisation, I started a B2B service, running machines for other small laboratories.

In this industry, a chemical produced for Rs 5 is packaged at Rs 50 as a reagent, and then sold for Rs 500 to the customer as a service. That is a huge margin. In any industry, once you know the COGS (cost of goods sold) of the COGS– namely your inputs – you have disruptive capacity. So I had the idea of pricing my services low, wherein I was universally termed as an idiot. If everyone terms you an idiot, you may be a nerd.

I generated good volumes and got business across India. My focus was narrow – biochemistry, disorders, preventive care. Today Thyrocare is a listed company with market cap of USD 0.5 billion. My thinking is that profits are everywhere, it is pricing that is the philosophy – affordable, accessible, reliable.

Worldwide India is among the cheapest in healthcare and within India we are the cheapest, and yet my balance sheet has 40 per cent profitability, because of operational efficiency where hundreds of machines run 24/7. Low pricing addresses the middle of the pyramid and when you go lower, you are addressing the vast base of the pyramid which we have done.

Audience interacts with speakers
Audience interacts with speakers

I have 3,000 collection centers across the country. In radiology, we have a high-tech setup with Rs 200 crore invested. Our country has 200 scanners which have a daily capacity of 40 scans but which do an average of five scans priced at Rs 25,000. I have priced my services at Rs 10,000 and we do an average of 12 scans per machine per day.

Volume is what works in healthcare. India today is made up of two countries – the top 10 per cent is one country and the remaining is another where people still cannot afford healthcare by and large and struggle for three meals a day. Today our per capita income is USD 2,000 and once it crosses USD 3,000 it will be a big market.

India is very young, 27 is the mean age, and unfortunately people do not see health as a risk at that age – whatever happens, will happen to the neighbour. Both my diabetes and my wife’s grade IV pancreatic cancer were diagnosed late because we did not go for tests. Post her diagnosis she lived for barely four months.

Insurance companies should identify which technologies and tests are useful. Once the right tests are chosen, right packages made, options given, they can approach good pathology brands and negotiate rates, because we also are hungry for more volumes.

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