Fortis kicks off measures to reap global synergies

Written by Soma Das | New Delhi | Updated: Aug 16 2012, 07:15am hrs
Giving shape to its plan to build a global healthcare empire, the Malvinder and Shivinder Singh-promoted Fortis Healthcare has embarked on a series of steps replicating models of one geography in another, setting up a global supply chain organisation and a global shared service platform to harvest synergies between various arms of its domestic and global businesses.

Fortis has identified four healthcare verticals hospitals, primary healthcare, diagnostics and day care facilities. The company, which currently operates in each of these business in one or two areas, will consider expanding across these verticals in multiple geographies where it has some presence. The idea is to learn the tricks of the trade of a single business domain in one region and adapt that model in other areas at a suitable time. However, this transfer of training may not happen all at once in the immediate future.

To be present in all four verticals across geographies that we operate in, is an aspiration. But we are weighing opportunities cautiously, gradually building on this vision by mapping specific demands of the markets concerned, Vishal Bali, group chief executive, Fortis Healthcare, told FE.

Fortis acquired Hong Kongs largest primary healthcare network Quality Healthcare to enter that market. Bali points out that since then, the firm has branched out to radiology and pathology in this special administrative region of China and has started participating in a tendering process to enter the hospitals business.

In Singapore, Fortis started out with a cancer hospital business but also ventured into diagnostics, buying out diagnostic firm RadLink-Asia, which also had a play in GP clinics. Since then, the Indian player is strengthening its foothold in hospitals, diagnostics and daycare in Singapore. In India, it has built up considerable presence in two of the four verticals Fortis Hospitals and SRL Diagnostic and also offers some level of day care services. But it would not be indiscriminate expansion, says Bali. For instance, in Australia, where we acquired Dental Corp, we have no such plans of expansion right now, simply because we do not think it would unlock any significant value in patient care today, Bali said.

Secondly, as part of its cross-leveraging strategy, the firm has established a global supply chain structure headquartered in Singapore. This will be headed by Gagan Bedi, formerly senior director with Phillips Healthcare in the Netherlands. Bedi became a preferred choice for Fortis despite not having hospital business experience because thanks to his expertise in Ariba technology. Ariba, a US-based firm provides technology used by several global conglomerates (over 90 of the Fortune 100 companies use it), which helps firms improve procurement by moving away from a paper-based, labour-intensive procurement system to an internet-based system. This helps firms reduce spending to achieve cost savings and business process efficiency in procurements.

This Singapore-based supply chain organization will have several verticals such as consumables, medical technologies and pharmaceuticals. This division, among its other functions, will try to take advantage of economies of scale to negotiate pricing for consumables and other bulk buys for the organisation. For our business across verticals and across geographies, some consumables remain common. For instance, gloves and syringes will be needed across businesses across geographies. Similarly in medical technology, cathlabs is something we will need across geographies. By procuring at one point on a global scale, we can negotiate for much bigger discounts and make the processes much more uniform and efficient, Bali said.

Currently, the top management is hiring business vertical heads for consumables, medical technologies and pharmaceuticals. Though Bali did not reveal any names, they are likely to drawn mostly from non-hospital sectors such as medical technology and pharmaceutical sectors. Fortis hopes save at least 15-20% on the same heads by putting in place this arm which looks at benefits that may accrue to its Indian and overseas business because of its size and interdependence.

Thirdly, it has set up a shared services platform at Bangalore by tying up with Infosys, which would integrate all its back-end functions of its multiple businesses across geographies related to finance, HR, technology among other things.

Fortis is also moving its management and clinical talent across geographies to cross-pollinate. Allowing clinical competence of Indian medical team help their counterparts in Vietnam and facilitating similar knowledge transfer in Singapore diagnostic business, Fortis management claims Ebitda is already showing improvement on a quarter-on-quarter basis.

Currently, Fortis operates its healthcare delivery network in 10 markets Australia, Canada, Dubai, Hong Kong, India, Mauritius, New Zealand, Singapore, Sri Lanka and Vietnam with 75 hospitals, over 12,000 beds, over 600 primary care centres, 191 day care speciality centres, over 210 diagnostic centres and a talent pool of over 23,000 people, according to a company statement.

On Tuesday, Fortis announced its April-June earnings registering a consolidated net loss of Rs 60.4 crore against a profit of Rs 16 crore during the same period last year. Consolidated revenue during the period increased 192% to Rs 1,395.6 crore from Rs 478.3 crore last year. The company attributed the losses to higher interest payment and adverse currency fluctuations.