New Delhi: Private equity ownership does not have to compromise the social purpose of a healthcare organisation if investors understand the sector’s long-term nature and management sets realistic expectations from the outset, said Dilip Jose, Managing Director and CEO, Manipal Hospitals.
Speaking during the session, “Managing the Social Sector Imperative in a PE-Owned Healthcare Enterprise”, at the 6th edition of ETHealthWorld’s Healthcare Leaders Summit, Jose told moderator Vikas Dandekar, Editor-Pharma & Healthcare, The Economic Times Group, that the perceived conflict between capital returns and patient care is often overstated.
“There is no duality” between the social objective of healthcare and the need for an organisation to remain sustainable, he said.
Investor alignment matters more than ownership structure
Jose said hospitals can come under pressure when expectations around growth and returns are not clearly established before an investor enters the business. The focus, therefore, should be on choosing capital that understands how healthcare enterprises develop.
“Healthcare requires time,” he said. “A lot of the changes that an organisation needs to make are transformational changes. They would not happen overnight.”
For management teams, this means selecting investors based on alignment rather than simply accepting the highest valuation.
“I don’t think we should be chasing somebody just because someone offered a higher valuation,” Jose said. Investors, he added, should understand the organisation, its potential and the realistic timeframe required to deliver results.
Financial performance should remain an outcome
Whether a hospital is closely held, private equity-backed or publicly listed, Jose argued that its fundamental performance measures should remain unchanged: clinical outcomes, the procedures it can offer, operational efficiency and the number of patients it serves.“You are there to service the need of the patient. You are in the social sector. You are dealing with vulnerable customers,” he said.
He cautioned against allowing financial metrics to become the starting point for management decisions. “Margin or return are consequent to all these,” Jose said, arguing that stronger clinical processes, service delivery and managerial efficiency should ultimately produce sustainable financial performance.
Expansion beyond metros faces a talent constraint
Jose also highlighted the difficulty of expanding organised healthcare into smaller cities. While hospital infrastructure can be built outside large urban centres, attracting doctors, nurses and managers willing to live and work in such locations remains a significant challenge.The constraint, he said, is “never about the lack of viability” alone, but also the ability to assemble and retain the right healthcare workforce.
For PE-backed healthcare enterprises, Jose’s prescription was straightforward: investors must enter with a realistic understanding of the business, while management must avoid overpromising returns.
“Under-promise and over-deliver,” he said, adding that responsibility for preventing excessive investor pressure rests on both sides of the partnership.
