An evening with Vikram Uppala

On Friday, Oct 22, we had a fascinating session by Mr Vikram Uppala, Cofounder of NephroPlus. Asia’s largest dialysis services provider. Founded in 2010, NephroPlus is today available in 4 countries, 165 cities and 265 centres. This venture has successfully mobilized four rounds of funding, adding up to $ 70 mn from VCs.

Mr Uppala is a graduate from IIT Kharagpur, an MS (Computer Science) from the University of Illinois and an MBA from the Booth school at University of Chicago. Prior to founding NephroPlus, he was a strategy consultant at McKinsey & Company in their New Jersey office. He also founded an internal management consulting group at Abbott Laboratories helping key management on various strategic and sales force management issues. He is a much sought-after speaker in various forums.

Mr Uppala divided his talk into three parts:

• About NephroPlus
• Ethics and leadership in general
• Ethics and leadership in Healthcare.

Throughout his talk, Mr Uppala spoke with a high degree of candor and authenticity. With a smile on his face, he made very incisive points. He illustrated these points with apt examples.

About NephroPlus

NephroPlus was started in Hyderabad in 2010. After working in the US for about 10 years, Mr Uppala was keen to move back to India and take part in the Indian healthcare sector which looked poised for a major revolution. He wanted to do something about the Diabetes/Hypertension burden Indian society was carrying. When he met his cofounder, Kamal Shah who had been on Dialysis for 13 years (24 years today), he firmed up the idea of setting up dialysis centres. Mr Uppala felt that his venture would have a definite edge as the founders would have a better understanding of diabetes and what the patients were looking for, than any other entrepreneur.

Mr Uppla sensed a big opportunity to redefine the guest (NephroPlus calls its customers guests, not patients. ) experience. As the company’s website mentions, NephroPlus is spearheading a change in the way dialysis is done in India. NephroPlus tries to enable guests lead lives as close to normal as possible. The aim is to ensure that dialysis sessions remain a small part of a guest’s life. Guests are encouraged to do things everyone does – work, travel, have fun.

Mr. Uppala wanted dialysis to be available to people living in smaller cities. With that in mind, he began to expand the network across cities and towns. Setting up more dialysis centers in the big cities would have not only yielded the same revenues and profits as a large number of centers spread across the country but it would even have made management much easier. But driven by the mission to make dialysis accessible to the common man across the country, they set up a distributed network of dialysis centres across the country.

Mr Uppala was aware that for someone living in small towns, travelling to a bigger city for dialysis would involve costs. If that customer decided to relocate, it would mean a disruption to their children’s education, social network, etc. Today, Mr Uppala has a profound sense of satisfaction that his centers are available to guests, even in smaller towns in remote areas like Mahbubnagar and Khammam. So customers in these places can get dialysis done conveniently.

To increase the talent pool, the company has set up a Training Academy called Enpedia, which offers 2-year courses for producing dialysis technicians and nurses.

Ethics and leadership

The world is gravitating towards commercials at any cost. When the primary focus is revenues and profits, something has got to give and that is often ethics. Unhinged capitalism is putting enormous pressure on ethics today. Many companies like Facebook have come under the scanner. We should admit the problem instead of being in a denial mode.

Adherence to ethical standards depends more on the owners that the managers. In board meetings, it is the shareholders, who set the tone for ethics. It is often the case that if the managers are doing things the right way, but the commercial performance is under pressure, the owners do not like it and ask questions. In short, owners often incentivize management to focus on the commercials. In case of startups, the founders set the tone as they have disproportionate voting rights.

We should draw a distinction between being unethical and illegal. There are ways to make unethical acts legal. For example, distributors or agents can be used to pay bribes to government officials. We must introspect and figure out what is our ethics North star rather than being guided only by the law.

Ethics becomes particularly important in grey areas. When the issue is black and white (the right and the wrong are very clear), almost everyone will do the right thing. But it is in the grey zone (choosing between two rights) that judgment becomes important.

How seriously employees in a company are committed to ethics is not determined by mission statements, declarations on the website, or townhall speeches. What really matters are the moments of truth when senior leaders take important decisions. If ethical decisions are taken, the positive feedback loop is amplified. Equally, if it is an unethical decision, the negative feedback loop is amplified. In short, what leaders do matters more than what they say.

When leaders are ethical, people down the line also tend to be ethical. The ethical actions of top leaders have a disproportionate influence on employees down the line. Ethics cannot trickle upwards. It can only trickle downwards.

The world today is plagued by instant gratification. If we want to be ethical, we may have to bear pain in the short term to gain in the long run. This may sound easy on paper but is difficult to practice.

Mr Uppala narrated an interesting example. Some 4 years back, he had a top performing sales executive who was generating a lot of business for NephroPlus. But he was found to be involved in a sexual harassment case, ie asking for sexual favors from a female colleague. Some board members proposed a one-year transition time so that business would not get affected. But Mr Uppala decided to sack the employee immediately. This decision made the employees, especially the women employees in NephroPlus feel very good.

Skills can be taught but ethics cannot. Ethics is either there or not there. In case of unethical people, counselling does not help. It is better to let go of such people. Leaders must regularly clean up the organization, removing unethical employees and bringing in ethical employees. Ethical leadership cannot be measured. It can only be perceived.

Ethics in healthcare

Ethics is particularly important in healthcare as cutting corners can put the lives of patients at risk. NephroPlus does not believe in franchising as franchisees often tend to cut corners to make more money.

Leaders must be stronger and committed in healthcare, compared to other industries. The margin for error is less. A pure focus on commercial gains will be counterproductive. Leaders in healthcare must be driven by their passion. Otherwise, they will face burnout. To ensure that employees behave ethically, the purpose of the organization must be clear and reinforced from time to time.

The purpose of healthcare is to keep people healthy. It is not to provide medication or treatments. When people are in pain, treatments must be provided. But in the desire to expand the business, we should not be hoping that more people will fall ill so that they can be offered treatment. It is unfortunate that treatments and tests are being prescribed even when the patient does not really need it. Fortunately, dialysis can be provided only to people who need it.

Q&A session

On becoming an entrepreneur

In his undergrad days at IIT Kharagpur, Mr Uppala had been passionate about taking up a leadership role. He had been the General Secretary in his hostel and Vice President of the Chemical Engineering Association. In 1999, after his graduation, he wanted to establish a startup. His relatives counselled him to go to the US and study there and pick up some good ideas. While doing his MBA, Mr Uppala chose courses tilted towards entrepreneurship. In Booth School, he took part in a prestigious competition, showcased his idea to investors ( as part of the New Venture Challenge course) , and his venture won the second prize.

After his MBA, Mr Uppala had to work in the US for a few years to pay off his student loan. When he came back to India, he could see several business opportunities: distribution of hypertension/diabetes products, distribution of glucose and BP monitors online, etc. As he travelled across the country, he realized that India was not ready for many of these vestures. After his interaction with Kamal, he decided to set up dialysis centres. In this line of business, between the two of them, they not only had a good business understanding but also what the patients were looking for.

On the market opportunities in India

Dialysis is a $ 500 mn market today growing rapidly at 25-30%. (The global market is worth $110 bn, with about 85% of the revenues being generated in the developed countries). NephroPlus has global ambitions. Currently, its market share even in India is very small. Other adjacent opportunities in India include health tech ($ 10-20 bn), diagnostics ($10bn +), eyecare, oncology, IVF clinics (characterized by dodgy business practices) etc. Hospitals also constitute a good opportunity, but they need scale and are capital intensive.

The healthcare industry is very large and there is potential to create a huge business in any segment. But it is important to be clear about our USP, where we have an edge and how we can make a disproportionate impact. To succeed, we should be clear about the gaps which exist, the revenue model and have the right pricing strategy. A variety of funding is available for entrepreneurs: debt, private equity, including angel, VC, large growth-oriented funding. If we have the choice, we must prepare patient investors who will not put too much pressure for quick profits.

On striking a balance between growth and ethics

NephroPlus normally sets up 4-5 centres every month. About 5 years back, the company was growing rapidly and setting up 6-7 centers per month. But concerns soon emerged about the quality and the service levels. So NephroPlus put off expansion for 6 months. A transition team was set up to move around and check that the new centers were conforming to the quality norms. There was no revenue growth for 6 months and thereafter, the company decided to set up not more than 5 centers per month.

Ultimately, healthcare is not about pumping in capital and growing fast. It is about health protocols, and outcomes. Many healthcare startups who tried to expand recklessly have failed. As Prasad added, growth must be matched by fulfilment even in the online MBA program. It is not just about enrolling students but also ensuring that they complete the program.

The General partners of Private equity firms often look for rapid growth so that they can exit within 5 years. This can put a lot of pressure on firms for short term commercial performance. But in healthcare, a long- term orientation is extremely important. Healthcare leaders who are not invested in the long-term success of the venture will move in the wrong direction.

On ethics in the medical profession

Despite taking the Hippocratic oath, why is ethics missing in the medical profession? The root cause of the problem is the high fees which have to be paid for medical education. Doctors might spend Rs 2 crores on their course and take about 13-14 years to start making money. Naturally, there is pressure on them to recover their investment. In contrast, IT employees start making good money after 4 years of relatively low-cost engineering education.

On pricing

In many cities, NephroPlus has been the first player to enter. So there have been opportunities to keep prices high. But NephroPlus has kept prices reasonable. In Nalgonda, for example, the company could have charged Rs 3000 (as against Rs 2000 in Hyderabad) but it chose to charge Rs 1200.Charging high prices for a medical product which is available in short supply may be legal but is clearly unethical. Many corporate leaders are pushing the envelope when it comes to unethical practices. It is important to be strong, patient and take a long-term view. Trying to make a quick buck is not a wise strategy.

On diagnosis of kidney disease

Many patients are not aware that they have a kidney problem. By the time they are aware, it is often too late. In Tier 3,4, 5 cities, diagnosis of kidney disease is weak. NephroPlus has been hesitant to launch major awareness campaigns because of the costs involved. These costs ultimately have to be passed on to the customers. Already, the prices of many medical consumables are going up. It is important to keep the costs and the prices under check. NephroPlus has been working with the primary healthcare Centers and the ASHA workers to spread awareness. One of the campaigns at the PHCs is called:” Have a heart for your kidneys.” Kidney failure goes though five stages. Early detection (Stages 1, 2) means treatment is possible with oral medication. If detected during later stages, dialysis can be postponed. If detected in the last stage, dialysis becomes mandatory.

On cost efficiency

This is very important for NephroPlus. It is an ongoing process. Costs on account of people and medical consumables must be tightly controlled. Any inefficiency ultimately leads to a burden for the customers. During the second phase of the pandemic, the company had recruited some 125 temporary workers. But after the second wave had subsided, they were not needed. So, they were given one month’s notice and asked to leave. These are tough decisions, but such discipline is required to offer the best value to customers.

Insurance

There is no separate insurance cover for dialysis. People must invest in insurance when they are healthy. Insurance covers typically do not consider a preexisting condition. Possible options for people suffering from kidney problems are Ayushman Bharat, Arogyashri and Group Insurance in companies. But retail insurance on an individual basis is not available for kidney failure. Our private insurance coverage is only in single digits. People must buy insurance ahead of time when they are healthy and use it in the unfortunate event of developing an ailment.

Independent directors and corporate governance

Independent directors are expected to enforce high standards of corporate governance. But the quality of independent directors in the country still leaves a lot to be desired. In listed firms, these directors are more effective, and their salaries are capped. In case of unlisted firms, promoters can incentivize them by providing various inducements like stock options.

Selection of partners

Two factors are critical: complementary skills and chemistry. A group of college friends may have the chemistry but lack the complementary skills. An unknown person may have complementary skills, but the chemistry may not be there. There is no magic sauce to selecting a cofounder. One must meet people, share the purpose and see if they are aligned. Then the idea can be bounced with them. If they get excited, the idea of becoming a partner can be sounded to them. An excellent session by a thoughtful entrepreneur who walks the talk when it comes to ethics. Great moderation by Prasad and Sudhakar.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note