A Holistic Strategy for a Healthcare Business in Bangladesh

How to become one of the biggest private healthcare providers in developing countries

T.V. Padma |  2016-04-13

The Labaid Group in Dhaka, Bangladesh, began as a multi-diagnostics center under one roof – a novelty in the late 1980s. Today, it delivers a wide range of health services, from specialty hospitals to pharmacies, reflecting the company’s holistic strategy and the country’s booming private healthcare sector.

Photos: Sebastian Forkarth


Management Summary

Challenge: A quarter of a century ago, there were no comprehensive diagnostic and treatment facilities under one roof in Bangladesh.

 

Solution: The Bangladeshi Labaid Group established a chain of multi-diagnostics centers that offer high-quality services and relieve patients of making tedious, multiple journeys to different labs. Later, the group ventured into tertiary hospital care, pharmaceutical production, and even medical training and agricultural production for its hospitals.

 

Result: With its holistic strategy, Labaid has grown into a major provider in Bangladesh’s booming private health sector, with a turnover of US$100 million and an annual growth rate of 20 percent in 2014.
 


Where the Unimaginable Becomes True
The multistory, shining fiberglass building is one of the signs of rising aspirations in Bangladesh, a country that has long been regarded as underdeveloped but which is now evolving into a middle-income nation. The modern edifice is one of Bangladesh’s earliest corporate hospitals. It belongs to the Labaid Group, which provides a wide range of private healthcare services, and stands aloft amidst the bustling residential and commercial hub of Dhanmondi in Dhaka, the capital. Its clean interior and sophisticated medical equipment are at odds with the medley of rickshaws, cars, two-wheelers, buses, and people outside. A quarter of a century ago, such gleaming hospitals were unimaginable in impoverished Bangladesh.


For Labaid’s founder, Dr. A M Shamim MD, it has been a long journey. His enterprise started as a multi-diagnostics center under one roof, and has since become one of the biggest private healthcare providers in the country. To date, Shamim has set up 20 diagnostics centers nationwide, a cardiac and a multi-specialty hospital, 3 educational institutes, a pharmaceutical company, and 12 pharmacies – making his company one of the fastest growing in Bangladesh, with health services as its core. Its trajectory might also hold lessons for healthcare delivery in other developing countries.

The Quest for Better Health
The starting point of Shamim’s career was in the 1980s, when he was an intern at Dhaka Medical College. It was here that he first experienced patients’ difficulties in receiving an accurate diagnosis. At the time, there were no comprehensive diagnostic and treatment facilities under one roof. “People would need to visit different doctors who would prescribe different tests, and patients would have to visit five or six labs,” Shamim recalls. Things were worse for people from rural areas, who had to stay in Dhaka for extended periods to get their examinations done. This was when the idea of a modern multiple-diagnostics center came to Shamim.


People in Bangladesh, as in other developing countries, aspire to a better quality of life and better health. These aspirations come against a backdrop of funding shortages for the health sector, poorly staffed and equipped public hospitals, and inadequacies in primary health services, especially in rural areas. Shamim sought to fill part of this gap in the healthcare delivery chain. After a stint abroad at the Liverpool School of Tropical Medicine and a period working for the Bangladeshi government’s health service, he founded the Labaid Diagnostic Centre in 1989 using US$1,000 of his father’s pension money. The center provided a range of services, from blood tests and x-rays to histopathology and ultra-sonograms, and thus relieved patients of making tedious, multiple journeys to different labs. 

 

 


“My Vision is Still Not Complete”

Labaid founder Dr. A M Shamim has many future plans, one of the most prominent being a public-private health insurance scheme for Bangladesh.

With 20 diagnostics centers, 2 tertiary hospitals, and a pharmaceutical company, the Labaid Group has grown into one of Bangladesh’s biggest corporate healthcare providers. Despite this, “my vision is still not complete,” says Labaid founder Dr. A M Shamim.

 

One plan is to expand the chain of diagnostic centers to 150 facilities throughout the country over the next five years and thus cater to 50,000 outpatients daily. The expansion will require an estimated US$50 million, US$20 million of which could be funded as an equipment loan through one of the EU development programs. Likewise, Labaid envisions establishing 10,000 pharmacies under the name Labaid Pharmacy Plus and implementing them on a franchise basis. Other plans include four medical colleges, and further tertiary hospitals and secondary care clinics – offering 4,000 beds in total – over the next 10 years. In addition, Shamim hopes to found a consortium of up to 100 associated clinics for which Labaid would provide technical and management services for high-quality healthcare.

 

One of Shamim’s more prominent ideas is to usher in a nationwide health insurance scheme with a minority contribution from the Bangladeshi government. In this scenario, private hospitals would keep 10 to 20 percent of their beds for patients covered by Labaid health insurance. The government would pay 25 percent of the fees for a certain number of patients in Labaid hospitals. However, plans for a public-private-partnership model for healthcare are still in a preliminary stage, and there is no formal agreement with the government as of yet.

 

Altogether, Shamim estimates his group needs future investment of US$400 million to fuel its growth in the next 10 years. While 30 to 35 percent of the investment could come from Labaid profits, a mix of equity capital, initial public offerings, bank loans, and joint ventures will finance the rest.

 


“I try to find the gaps and then offer better services to meet the demand.” Dr. A M Shamim,
Founder of Labaid Group

 

Filling the Gaps One by One
The center was a novelty in Bangladesh in the late 1980s, and it had to face the country’s shortage of trained personnel. “Paramedics, biochemists, and technologists such as radiologists were hardly available,” says Shamim. In 1996, he set up the Bangladesh Institute of Medical and Dental Technology (BIMDT), which offers a three-year diploma course to students who graduate high school. With its recognized quality of education, today’s BIMDT graduates are not only in demand in public and private institutions in Bangladesh, but also abroad, such as in the Middle East, says Shamim. “Bangladesh’s technician problem is now gone,” he adds.


Indeed, a key factor for Labaid’s success over the decades has been its strategy of systematically identifying shortcomings in the healthcare delivery chain. “I try to find the gaps and then offer better services to meet the demand,” explains Shamim. Bangladesh’s changing economic environment benefited his approach, with private healthcare taking off due to government policy support, a steady emergence of entrepreneurs, and the rise of a booming middle class. “About 10 percent of Bangladesh’s population can afford private healthcare, even if it is more expensive than publicly funded care,” says Shamim. Overall, there is a growing need for advanced medical treatment. 

 

Meeting the Growing Needs
One example is cardiac care. Bangladeshi specialists who worked in government hospitals used to run private clinics in the evening to cater to cardiac patients, which meant long waiting times. The better-off patients went abroad, often to neighboring India. In 2003, Shamim’s mother also had a coronary intervention in a private hospital in New Delhi. She spent several thousand U.S. dollars on her treatment and stay.

 
Thus, in 2004, Shamim founded the multistory Labaid Cardiac Hospital in Dhanmondi, which now performs 4,500 angiograms annually. Future plans include incorporating pediatric heart surgery and heart transplants into its services. Similarly, in order to serve patients with other chronic diseases of growing importance in Bangladesh, such as strokes, gastrointestinal disorders, and kidney failure, Shamim opened Labaid Specialized Hospital in 2006. Today it has 250 inpatient beds and is equipped with CT and MRI scanners, 10 operating theatres, and adult and neonatal intensive care units.
 


Bangladesh’s Health System

Although Bangladesh has made impressive gains in population health over the past decades, the country’s healthcare system still struggles with structural deficits and a shortage of funding.

In 2013, Bangladesh’s total expenditure on health was 3.7 percent of its gross domestic product – compared to 4 percent in India, 5.6 percent in China, 11.3 percent in Germany, and 17.1 percent in the US.1

The health system in Bangladesh has undergone several reforms during the past 40 years, and involves the government, the private sector, NGOs, and donors as key actors. Public health services are provided through 53 district hospitals, 425 sub-district health complexes, around 1,500 health and family welfare centers, and over 12,000 community hospitals at ward level.2

Life expectancy in Bangladesh is 71 years, which is the global average. Since 1990, maternal mortality as well as the mortality of children under five has decreased by over two-thirds. During the same period, the immunization rate against diphtheria, pertussis, and tetanus has risen from 70 percent to 97 percent.3

Yet Bangladesh is still a long way from achieving universal health coverage. Although the statutory health system provides free healthcare for all citizens in government-run facilities, many sick people are left untreated every year due to severe shortages in resources, equipment, and trained personnel. Bangladesh has 3 physicians and 4 hospital beds per 10,000 people, compared to a global average of 14 and 29 respectively.4 There is unequal access to health services for urban and rural areas. At the same time, many cannot afford private-sector services.

Infectious diseases are still a major problem in Bangladesh; tuberculosis was the leading cause of death in 2012. However, non-communicable diseases are also a growing burden. Chronic obstructive pulmonary disease, ischemic heart disease, strokes, and diabetes were all among the top ten causes of death in 2012.5
 


An Integrative Approach to Healthcare
Early on, Shamim realized that healthcare could not be viewed in a silo, disconnected from other pillars of development – especially education. There needs to be a more holistic approach in a developing country like Bangladesh. In 2002, his group started the multidisciplinary State University of Bangladesh, which offers courses in science, arts, medicine, and law. “I have a dream: why can’t we become the Harvard of Bangladesh for teaching?” says Shamim. In 2006, Labaid founded the State College of Health Sciences, which was the country’s first private graduate institute for allied health sciences.


To complement its integrative strategy, Labaid even established its own organic agricultural production. The group now produces up to 80,000 liters of unprocessed milk, 550,000 eggs, over 100 tons of chicken, 20 tons of freshwater fish, as well as vegetables and fruits for its hospital patients and employees every year.


Yet another key area of healthcare has attracted Shamim’s attention: the country’s pharmaceutical industry. While catering to an internal market worth US$2.5 billion, many Bangladeshi production facilities are outdated. There is a trend for spending a lot on marketing but only a little on highly purified raw materials and quality packaging, says Shamim. Labaid Pharmaceuticals, which started in 2012, went for the reverse strategy. It did away with marketing extravaganzas and focused on using raw materials with less than 1 percent impurities, which Shamim says conforms to world standards. The group makes 18 different drugs, including antibiotics, hormones, and drug patches, and is now venturing into generic production of blood products and vaccines.

                                                                                                                                                                                        “It’s important not to put all your eggs in one basket.” Dr. A M Shamim,
Founder of Labaid Group

 

Overcoming the Challenges of a Developing Country
To Shamim, the strategy of diversification within an interconnected healthcare sector – from diagnostics, to hospital care, to pharmaceutical production – is a core ingredient of successful growth. “It’s important not to put all your eggs in one basket,” he says. Of course, Labaid encountered its fair share of struggles along the way, such as difficulties in acquiring land for new diagnostic centers and hospitals and in getting leases and approvals, says Shamim. It also faced media criticism, for example over a joint venture with a U.S. company for stem cell therapy and production. Shamim says this has forced the group to abandon the idea for now.

 

Still, with its three main pillars of high-quality diagnostics, tertiary care hospitals, and pharmaceuticals, Labaid has grown into one of the major players in the country’s booming private healthcare sector, achieving a turnover of US$100 million and an annual growth rate of 20 percent in 2014. The group now has around 4,500 staff, and Shamim still has plenty of visions for the future. His credo, as he points out, has always been patient-oriented health services and modern management supported by quality medical training and by pharmaceutical and even agricultural production. This holistic stance has proved valid in the changing economy of Bangladesh. And it offers a possible model for private healthcare delivery in other developing countries.
 


About the Author

T. V. Padma is a Delhi-based journalist who writes about science and technology for leading international publications. She specializes in science, technology, and innovation policy issues in developing countries.



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1World Bank Open Data: http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

2World Health Organization (2015) Bangladesh health system review. Health Systems in Transition, Vol. 5 No. 3 (http://www.wpro.who.int/asia_pacific_observatory/hits/series/bgd/en)

3World Health Organization (2015) Country health profile (http://www.who.int/countries/bgd/en/)

4World Health Organization (2011) World Health Statistics, pp 116-7 (www.who.int/whosis/whostat/EN_WHS2011_Full.pdf

5Ibid. 3

The statements by Siemens’ customers described herein are based on results that were achieved in the customer's unique setting. Since there is no "typical" hospital and many variables exist (e.g., hospital size, case mix, level of IT adoption) there can be no guarantee that other customers will achieve the same results.