Neeraj Mishra, group CEO of Alameda Healthcare, on how private sector healthcare is handling the covid crisis: Since the advent of the covid-19 crisis, perhaps no sector has been in the spotlight more than healthcare. Healthcare workers have been on the front line of the fight against the virus, but this has largely been contained to government and state facilities. What about private sector healthcare? What is its role during the current crisis and could that evolve to become? We put these questions to Neeraj Mishra (Linkedin), group CEO of Alameda Healthcare — one of Egypt’s leading private sector hospital groups, which owns brands including As-Salam International and Dar Al Fouad hospitals and whose combined capacity is expected to reach 900 beds by the end of the year. Edited excerpts from our discussion:

Enterprise: How have Alameda's hospitals been impacted by covid-19, on the operational side and financially?

Neeraj Mishra: We have witnessed a drop in outpatient consultations and diagnostics (OPD), and a steep fall in non-critical surgeries, largely due to the lockdown and caution by patients. This indicates that patients are choosing to only visit hospitals in times of emergency, and consequently we are not seeing a drop in the number of emergency visitations. Financially speaking, prior to the crisis we were seeing very handsome growth on the revenue side, which has extended to March, with revenues seeing a strong 20% growth y-o-y in 1Q2020. We are, however, witnessing a drop, which began in mid-March and is expected to continue through April. The second quarter is usually a lean time of the year because of Ramadan. Combined with the impact of covid-19, we expect a 20-25% drop in revenues in 2Q2020. We have a plan in place to correctly deploy our working capital to ensure that staff is paid, with our chairman Fahad Khater announcing that salaries will be paid without delay.

I would like to stress that this does not mean that demand has dropped. Instead, patients have decided to allay these non-critical procedures to a time when it is safer. As such, we are expecting a backlog of visitation, which will surge following the crisis. We expect to see a pick up during 3Q and 4Q, and we expect to see an 8-10% y-o-y increase in revenues in 2020.

E: Private sector hospitals are not currently handling covid-19 cases. What plans do you have in place in case you are called up to treat covid-19 cases?

NM: On 5 April, the Health Ministry issued an advisory to all private hospitals to create isolation wings that could house covid-19 patients, which we’ve done. We have also begun conducting emergency trials and multi-department drills to get our staff prepared. We are also building sanitization tunnels in our hospitals to ensure everyone entering the hospital is fully sanitized to reduce any exposure to hospital staff and patients.

We’ve also raised our overall capacity by fast-tracking construction on our facilities. We are looking to add 235 beds to our overall portfolio, with 100 beds in As-Salam International in Maadi and 135 beds in our newest hospital in the 5th Settlement area, which is also under the As-Salam brand. This should bring the total number of beds in the group’s facilities to around 900 by the year’s end. These resources will be made available to the government if the need should arise.

Prior to receiving the notice from the Health Ministry, we had already begun implementing safety procedures and protocols at our facilities. We ensured that our chest and internal medicine wings were moved away from any OPD areas. We implemented strict infection protocols, which include sanitizing the entire hospital once a week, mandating that all doctors and nurses change their clothes at the hospital, and making sure that everyone walking into the hospital has had their temperatures checked and hands sanitized. All frontline staff (anyone exposed to patients and visitors) were provided with masks and hand sanitizers. Staff have also been put on rotational leave to reduce the number of people working at the facilities at one time. We’ve also revised our visitation policy by restricting visits to one per patient and cutting down visitation hours. These will be entirely eliminated in the event of exposure to covid-19. Furthermore, we launched tele-medicine services and began conducting home visits for those in need. We also created a free hotline to address requests by our patients.

E: Are we seeing shortages in essential medical items and equipment (including masks) in Egypt and are there plans in place to guard against this?

NM: I don’t think there is a shortage nationwide, particularly as the Armed Forces have also been participating in importing essential medical supplies. Alameda has ensured that we are well-stocked for the next 60 days and we are in talks with the Armed Forces for more supplies. We’ve been asked to submit our supply needs for three months, which we did last week.

E: Can Egypt’s healthcare system handle the worst case scenario of widespread community transmission?

NM: I don’t think Egypt will see the same issues we’ve been seeing in countries such as Italy, as the country is well prepared in terms of creating isolation facilities for covid-19 positive cases. The Health Ministry has said that 94 hospitals are being readied, alongside university hospitals. Furthermore, the Armed Forces are working on setting up field hospitals. And this does not include the private sector, which has significant resources to bear if the need should arise.

E: If growth is slow this year, what does 2021 look like for you?

NM: 2021 will be about raising our capacity utilization. Our mature facilities — As-Salam International in Maadi and Dar Al Fouad in 6 October — are operating at 80% utilization. Our new Dar Al Fouad facility in Nasr City is currently operating at 50% and we expect it to reach 75% by the end of 2020.

2021 will also be about consolidating our various brands by integrating our supply chain, clinical systems, operational processes, and IT systems. Our facilities have similar accreditation, which makes it easier and more beneficial to integrate our systems.

E: What is the M&A outlook for Egypt’s healthcare sector in the coming few years?

NM: I don’t think we will see M&A in Egypt’s private healthcare despite the increased interest in the sector by investors globally. Egypt’s private healthcare is fragmented, with few brands operating on a structured model. You might see M&A with one or two players, but it is doubtful that it will be any more than that. What I do see is an increased investment in expansion and expanding capacities, particularly outside of Cairo and Alexandria.

E: Is Alameda still looking to pursue a merger?

NM: We are in talks with another major health group. Once we reach an agreement on a transaction that will be of major benefit to the industry we will announce it. The expected transaction will likely see our chairman Fahed Khater become the largest individual shareholder and become involved on the executive level at Alameda hospitals, as well as having a major non-executive role in the other group of hospitals.

E: Can we expect more IPOs in Egypt’s private sector healthcare?

NM: For sure. Private healthcare brands will be primely positioned to take advantage of the growing interest in healthcare and use that to tap equity markets.

E: Has Egypt’s healthcare system proven its metal as a defensive sector?

NM: All stock markets have been hit by the covid-19 crisis, and we have seen this impact pharma and healthcare stocks in Egypt. But once overall market conditions improve and stocks rally, pharma and healthcare stocks will be the fastest to recover and rise in value. Again, we’re not seeing a decline, but rather a postponement in demand. Once the crisis subsides, we will see patient volumes pick up again and with it, so will the stocks.