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Published on: Feb. 20, 2022, 3:32 p.m.
Rainbow rising
  • Rainbow Children Hospitals are vibrant and visually appealing, with bright and congenial interior decorations

By Lancelot Joseph. Executive Editor, Business India

When Dr Ramesh Kancharla, MD Paediatrics, MRCP-UK, gastroenterology, liver diseases and transplants, returned to India after a stint in the UK as a paediatric gastroenterologist, he wanted to utilise his knowledge and expertise to build paediatric specialty care in India. He realised there was an opportunity in Hyderabad for a children’s hospital and was able to set up a 50-bed modern children’s hospital with facilities including ICU services under the name Rainbow Children’s Hospital (RCH). So, along with a few friends who had been trained abroad and agreed with his philosophy of full-time consultant-led services as a team, he led and established one of the largest paediatric hospital chains in the country. 

For Kancharla, children’s health has always been close to his heart. “I came from an agricultural family in a remote village, the fourth of a family of seven children,” he reminisces. “My father wanted me to be a doctor, I pursued medicine.” He developed an interest in becoming a physician and specialised in paediatric gastroenterology. He has worked in some of the most prestigious institutions like Great Ormond Street Children’s Hospital and King’s College Hospital in London, gaining a wealth of experience in tertiary care management in an advanced country. 

Today, Rainbow is a leading multi-specialty paediatrics and obstetrics and gynaecology hospital chain in India. It operates 14 hospitals and three clinics in six cities, with 1,500 beds, as on 30 September, 2021. As per a recent CRISIL report, RCH has the most beds compared to other players in maternity and paediatric healthcare, as on March 2021. 

Creating and maintaining a child-centric atmosphere in its hospitals is one of the biggest differentiators and a key factor of success for RCH. “Our hospitals are vibrant and visually appealing, with bright and congenial interior decorations. Each hospital has a designated child play area, and other entertainment in patient rooms which comforts children who are recovering from their illness,” says Kancharla adding, “a children’s hospital requires focus on psychological and emotional care, which is different from adult hospitals, and we keep this understanding at the forefront while treating children”.

At the same time, Rainbow has managed a doctor-engagement model across its hospitals, which has led to a high degree of full-time-doctor retention (81 per cent for April 2019 to March 2021). Doctors of Rainbow are full-timers; they do not practise anywhere outside the hospital. They are also committed to onsite, overnight cover, thereby providing consistent quality of care for all patients. This is particularly important for children’s emergency, neonatal and paediatric intensive-care. As of September 2021, Rainbow had 602 full-time and 1,686 part-time/visiting doctors. 

“We believe that our full-time-doctor model with a focus on teamwork and a strong middle-grade doctor pool ensures seamless healthcare delivery across all our hospitals, resulting in a high degree of patient satisfaction. A number of our doctors in neonatal, paediatric intensive-care, paediatric sub-specialties, obstetrics and gynaecology are trained in or possess qualifications from the UK or US, Canada and Australia, which provides us with a competitive advantage,” says Kancharla.

Rainbow enters into retainer contracts with newly-hired doctors covering a three-year period, providing them stability and a desirable workplace. It has the proven ability to attract, train and retain high-calibre medical professionals. It has a track record of growth, and operational and financial performance. An experienced senior management team comes with board-level backing, with institutional shareholder support.

  • Kancharla: competitive advantage

    Kancharla: competitive advantage


Today Rainbow is considered a comprehensive perinatal care provider, with synergies between paediatrics, obstetrics and gynaecology. Rainbow follows the hub-and-spoke model, ensuring better care and access for patients. “At our hub hospital, we provide comprehensive in-patient care focusing on tertiary and specialty care; at our spokes, we provide secondary care in paediatrics, obstetrics gynaecology, and emergency services. This model has strengthened our market position in and around Hyderabad through referrals for tertiary and quaternary care to our hub, arising from the spoke hospitals,” says Kancharla.

“We have approached our network expansion with financial prudence and been disciplined in financial decisions regarding capital investments. Our ability to keep capital expenditure at economical levels has been an important factor in driving profitable growth in prior periods,” continues Kancharla who realised the benefits of backward integration of perinatal services when Rainbow started providing obstetrics and perinatal care for high-risk pregnancies in 2007.

“Over time, we built credibility in treating and saving neonates and children, and have become a dependable referral centre for paediatricians. We established robust patient retrieval services in and around Hyderabad for neonates and children from nearby districts to our hub hospital in Hyderabad. We believe our successful delivery of comprehensive paediatric and obstetrics services established us as a trusted and reliable name in perinatal care,” says Kancharla.

Rainbow increased its bed capacity from 1,162 beds in FY19 to 1,500 beds as on 30 September, 2021. A CRISIL report says: “Rainbow had the highest number of beds amongst comparable players in the maternity and paediatric healthcare delivery sector as of March 2021. Occupancy rate has steadily increased from 34 per cent as on March 2021 to 43 per cent as on September 2021. Revenues from operations increased from Rs542.8 crore in FY19 to Rs650.1 crore in FY21. Profits stood at Rs44.5 crore in FY19 and came down in to Rs39.5 crore for FY21.

In terms of operating profit Rainbow ranks first among its peers considered in the CRISIL report, followed by Surya Hospitals and Kids Clinic. Further, the profit after tax margin is 7.7 per cent and 12.4 per cent for Rainbow and Surya, while for the majority of its peers, the PAT margin is negative, as per the CRISIL report. As of the financial year 2020, Rainbow Hospitals has the highest RoCE (29.8 per cent) among its peers (considered by the report), followed by Surya at 24.8 per cent. The rest of the peers compared have either negative or a low RoCE. 

In operational parameters, Rainbow Children’s Medicare scores high among comparable peers and has the most (1,475) beds (311 NICU, 162 PICU) at 14 hospitals and three clinics in Hyderabad, Bengaluru, New Delhi, Vijayawada, Vishakhapatnam and Chennai. Of the peers considered, Rainbow Hospitals and Apollo Health & Lifestyle in FY20 have the highest OPBDIT-to-bed ratio.

According to CRISIL, compared to major listed hospital chains, Rainbow Children’s Medicare had a high average revenue per operating bed of Rs40,900 a day and was in the Top-4 quadrant compared to Rs40,200 for Apollo Hospitals, Rs43,300 for Fortis Healthcare and Rs50,100 for Max Healthcare. In operating income, Rainbow posted a 9.4 per cent CAGR over FY19-FY21 and was in the Top-2 quadrant compared to 10.6 per cent for Krishna Institute of Medical Sciences, the only two in double-digits. 

  • State-of-the-art operation theatre

Rainbow is planning an expansion of its network of hospitals. The firm is making an offer of Rs280 crore through an initial public offering, of which Rs170 crore will be towards capital expenditure, setting up new hospitals and the purchase of medical equipment. Besides, it will also redeem non-convertible debentures worth Rs40 crore as part of the offer. 

Rainbow’s specialty-mix focuses more on paediatric care in niche areas (neurology, nephrology, gastroenterology, oncology and cardiology). Rainbow Children’s Hospital & Birthright, the Banjara Hills, Hyderabad, facility offers a wide range of neurological services (child epilepsy, autism disorders, vascular neurology and intellectual disabilities).

The US model

The healthcare model in the US for children is a benchmark for medical care globally. The US has more than 250 children hospitals accounting for nearly 95 per cent of tertiary care with respect to children. These hospitals also incorporate women care into their specialties given instances such as high-risk pregnancies which make the need for integrated mother- and child-care imperative. The business model of RCH corresponds to dedicated child-care similar to children’s hospitals in the US. 

Kancharla and his team are looking to strengthen tertiary and quaternary paediatrics across the hospital network. Rainbow Children’s Heart Institute is a 110-bed standalone paediatric-cardiac centre that treats children’s cardiac problems. They plan to develop similar capabilities in Bengaluru, Chennai and New Delhi. The group also plans to invest in specialised medical infrastructure (cathlabs, paediatric cardiac OT and echocardiogram machines), enhancing capabilities in treating cardiac patients.

Besides, Rainbow regularly conducts neonatal and advanced paediatric education (NAPE) sessions at tier-2 cities and districts, where it discusses current trends and new treatments in paediatrics. This has deepened relations with paediatricians in those areas, leading to referrals for tertiary and quaternary care. 

Rainbow intends to increase the scope of the NAPE program across all networked hospitals, for further referrals. Doctors from Rainbow Children’s Hospital regularly conduct outreach clinics, improving accessibility of quality multi-specialty care across various regions.

It further looks to grow its comprehensive perinatal services offered under ‘Birthright by Rainbow’. The group plans to offer services including assessment of foetal well-being to guide district patients by partnering with their obstetricians. Rainbow also seeks to further strengthen connections with patients by forming pregnancy-support groups and developing an interactive Birthright mobile application.

Rainbow aspires to grow through its hub-and-spoke networks in key geographic clusters and new locations. It is implementing a similar hub-and-spoke model in Bengaluru through its hospitals at Marathalli, Bannerghatta Road and Hebbal. Plans are afoot for an expansion in the network of spokes in and around Bengaluru. This model will be replicated in Chennai and New Delhi-NCR, where it has hub hospitals. 

  • NICU: a high degree of patient satisfaction

Digital moves

“Ahead, we may seek to expand our hospital network through acquiring brownfield assets or developing greenfield assets, depending on hospital location and timelines to complete projects,” says Kancharla who intends to utilise digital initiatives to address patient convenience and drive operational efficiencies, and expand its reach. 

Rainbow’s digital strategy is focused on enabling the group to provide customised healthcare services for its target customers as well as digitise processes to significantly improve the in-hospital customer experience. “Our ‘Rainbow Children’s Hospital’ mobile application is one of the core aspects of our digital strategy.

The application enables patients to book appointments, make payments, order drugs for home delivery, download investigation reports and receive alerts on essential services. We are in the process of implementing an AI-enabled content management engine to support the application, which will be able to process large amounts of patient data to provide us with insight into patient needs,” says Kancharla.

With all this innovation and the increasing need for healthcare and better paediatric services, Rainbow is on the cusp of scaling new horizons.

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