New medical center concept

I’m deciding what type of clinic should I open in a very competitive environment.

Fantasy Group of Medical companies consists of a chain of upscale family dental clinics, a dental equipment distribution company and a small (~10.000 sq.feet) pediatric outpatient clinic. It’s the only JCI accredited ambulatory care organization in Russia.

Pediatric clinic was founded in the 2015. It provides various of ambulatory care pediatric services such as neurology, allergology, ophthalmology, ENT, orthopaedics, psychology etc. Since opening Fantasy Childrens Clinic has has earned the trust of parents through patient experience, commitment to evidence-based medicine and affordable prices. They mainly pay for services from their own pockets. Patients come to the clinic for treatment of uncomplicated diseases, observation in the first year of life. The clinic has established links with a number of public hospitals, where patients are sent to diagnose and treat more complex problems.

Many patients (48%) are dissatisfied with the organization of care in public clinics. Conditions there are uncomfortable, staff’s communication skills are weak, there are many stupid rules, and the system itself is difficult to call a patient-centered. Patients go there because there is no alternative (especially in the in-patient unit) and it is free of charge.

The company is considering renting a building in a very good district of Moscow with an area of 43,000 square feet. The management is faced with the question of what specializations to choose for the new clinic. There is confidence only about the outpatient department. However, the economics of the diagnostic department (CT, MRI, endoscopy) and the hospital does not look so attractive. The reason for this is the high level of investment combined with the high level of competition with free public clinics. Obviously, there would be a need for medical care, for which patients traditionally go to other countries with a more advanced level of health care (Israel, Germany). But, as a rule, these are high-risk conditions, such as oncology or neurosurgery.

The second question is to what extent to provide medical services to the adult population. The idea of making an adult department is supported by the desire of experienced doctors of a number of specializations (neurologists, allergists, ENT, etc.) to treat both children and adults. There are also a number of specializations where patients are used to paying out of their pockets (plastic surgery, phlebology, orthopaedics, etc.) and this has proven to be commercially viable.



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Participant comments on New medical center concept

  1. If you start from the specialisations where patients are used to paying out of their pockets: the three you mention: plastic surgery, phleboloby and orthopaedics; and you add ENT and ophtalmology. For all surgeries, except for cataract (which is usually done under local anesthesia), select children or adult patients with low ASA score. Then I think you can create value for the patients and for the company.

  2. A conservative approach may the best business plan given the identified risks. Perhaps strong/ profitable current services within pediatrics should be evaluated for the expansion into the adult care market. Leveraging experience and expertise from the current ambulatory care pediatric services would make the most sense for such new market entrance. It also appears that there is a desire from your experienced doctors to treat both children and adults. Using their enthusiasm and specializations would seem to be a natural starting place, rather than experimenting with new specialties for this venture.

  3. My personal input in this situation is that I don’t agree with the expansion of the services to the adults, I believe in the vertical integration in this scenario, it is a success story as a pediatric clinic as I can see here, I would expand the same model in a another areas and region instead of expanding the segment of end users to adults.

  4. I would re-visit the economics of imaging and diagnostics. There might be ways to lease CT Scan/MRI machines or arrive at a pay per use arrangement with the equipment vendors, if initial capex is a challenge. If there is a better experience and easier/faster access, I am sure you should find enough patients wanting to pay for their diagnostics. Besides Radiology, I would also do GI scopies, sleep studies and consider a large pathology referral lab. Not only can you be a complementary referral lab to several smaller private hospitals or health centers, but you could also open satellite collection centers and expand big way into Lab medicine.

    43,000 sq. ft is a lot of space and you will be left with plenty even after doing all the above. As you say that (a) the location is in a very good district of Moscow, (b) you already have an experience with pediatrics and (c) there are people wanting to pay for plastic surgeries in that region (thus indicating they are willing to pay for personal experience and luxury) I would consider doing a very premium mother and child hospital with luxury birthing, a NICU and some pediatric care.

  5. Since you have had great success with your initial private healthcare enterprise with children and public services have poor quality and satisfaction in your country, I definitely think your new enterprise has great chance to thrive if well designed and developed. In the scenario described, I also think there is great potential for the adult population as well. In developing countries like the BRICS, many people are underserved by good quality services and giving it to this population frequently brings trust and fidelity. There is no lack of money, since people are travelling abroad to search for healthcare.

    However, I find more prudent to start small, with outpatient clinics and low-medium complexity procedures, such as clinical analysis lab tests, ultrassound, mammograms and bone densitometry. This means that a lower initial investment would be needed and and management would also be more simple. Good physician selection is obviously an important cornerstone of the business. If the initial enterprise goes well and thrives, this could be a good scenario to attract other investors such as private equity funds, that could then scale it and make it bigger (with more complex diagnostics and medical procedures as you have mentioned).

    I recommend you benchmark healthcare enterprises in Brazil that were developed to serve the lower and medium class, which are underserved by poor public services, such as “Dr. Consulta”. I will leave you two links that I found below:

    Wish you very good luck!

  6. I’m wondering if there would be a role for outpatient therapies like physical or occupational therapy. Seems there is a lot of space and these require decent amounts of space.

    It seems staying with in known areas would be safer.

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