Q&A: Gustavo Fernandez de Loyola, Grupo Torre Médica

How a Mexico City hospital and clinic group is shaking up healthcare business models, to both patients’ and investors’ benefits.

An industrial engineer, Gustavo Fernandez de Loyola (pictured here) now oversees hospitals and clinics in Mexico as CEO of Grupo Torre Médica.
An industrial engineer, Gustavo Fernandez de Loyola now oversees hospitals and clinics in Mexico as CEO of Grupo Torre Médica. Photo courtesy of Grupo Torre Médica

As CEO of Mexico's Grupo Torre Médica, Gustavo Fernandez de Loyola oversees two hospitals and five clinics that provide inpatient clinical services and outpatient primary care. Grupo Torre Médica has a financing arm that provides small loans to its patients, to help ensure access to care even to those who have difficulty coming up with a copay. “Even among people who have insurance, many often cannot afford copayments or they cannot afford to use the insurance,” Loyola says. “We are targeting these people.” The entire company, in fact, is built around finding ways to provide the most affordable service possible to Mexico’s large middle-income and lower-income populations.

 

How did you end up leading a Mexican healthcare group?  

I’m an industrial engineer by training, and I went to Harvard Business School for my Masters degree. After graduating in 2013, two partners and I raised a fund called ARCU Capital that specialized in investing in healthcare in Mexico, specifically on the delivery side such as hospitals, clinics and anything related to patients.

I became CEO of the company that we launched, which became Grupo Torre Médica. We have seven facilities in and around Mexico City, and over the next couple of years we plan to add more hospitals. I am also the chairman of the board of Mexico’s national hospital consortium, Consorcio Mexicano de Hospitales, which is a group of 42 independently owned hospitals all over the country. We get together to buy medical equipment and work with suppliers and insurance companies.

 

How have you been able to leverage your perspective as an engineer?

It’s been helpful. A lot of the issues that need to be solved in hospitals and the healthcare sector are basically system problems, a question of how to put things together to work well. Sometimes it’s a good thing to be an outsider in the healthcare sector, because you think about processes differently than a doctor would. For example, we see all our patients in the primary care clinic, and then we decide whether a patient needs more urgent care at a hospital. If I was a physician and not an engineer, I would probably say, “Send them to the hospital where there are more resources.” But as an engineer, you start analyzing and looking at the whole process.

 

What makes Grupo Torre Médica unique?

First of all, though we are private, we are focused on middle-income and lower-income patients, not on the top economic segment.

Second, we are using a hub and spoke model where we predominately treat patients — about 98 percent of our patients — in the clinics. Only if they have an issue where they need to be sent to the hospital do we send them to the hospital. We see around 150,000 patients a year, and of those only about 3,000 are at a hospital. With this approach, you vastly lower the costs the majority of the patients have to pay.

Third, all our physicians are employees. That is not common in Mexico. Usually, physicians are third-party contractors and see their patients in their medical offices and then choose a hospital to refer patients to. We have more than 300 physicians under contract. They follow quality procedures, so that we have standardized ways to treat pneumonia, for example, and we follow international standards in treating cancer. This gets better outcomes for patients, because we follow up with the same post-treatment procedures. If doctors aren’t doing something correctly, we can train them better than we could if they were independent contractors.

And because all our staff are employees, we can make arrangements with suppliers. Let’s use orthopedics as an example: We can build a relationship with a company that supplies all the hip replacements and knee replacements, and then we can bargain to lower the prices because all our doctors are going to use these supplies. The alternative is that every doctor chooses their own brands and purchases their own equipment.

Fourth, all of our clinics and hospitals are run using electronic medical records. This is not common in Mexico, because many doctors don’t like using EMR, and if the doctor is a third-party contractor, they just end up not using it. But when doctors are employees, they have to follow all those instructions. That enables us to have high usage of our EMR system. We can access the same patient record across multiple touch points in the care system, so that when a patient goes to the clinic, or when she goes to the hospital, we have all her information.

The fifth and probably the most important feature that makes us different from other healthcare chains in Mexico is our financing arm. Because we are in the lower- and middle-income segment, those people sometimes don’t have enough cash to pay for services in the private sector. For example, let’s say that a patient has an insurance policy through his employer, but he doesn’t have enough cash to pay for the co-payment. The end result is that basically he’s not covered. What we do is provide small loans through a financial company. He can pay the copayment, so that now he can use his insurance.

With these small loans, patients spread the cost of care out over time. Many of our clients use pawn shops for their financing — 45 percent of people go there because they have a healthcare-related issue. So borrowing money for healthcare is nothing new, but hospitals typically don’t do that stuff. They basically just treat patients and they don’t think about how to broach this means of payment.

 

How are you able to focus on low- and middle-income patients in a sustainable way?

It’s true, most of the private hospitals try to target the top segment of the market, the 5 percent of Mexico’s population that has medical insurance. But frankly, even among people who have insurance, many often cannot afford copayments. We are targeting these people and the segment below that, the people who pay out of pocket.

Why is this our model? It’s because in all economic conditions, we have enough patients. During downturns, people from the top market segment cannot afford go to the most expensive hospitals, so they come to ours. And in good economic times, people from the lower segment, who usually seek treatment in the public sector, will try to go to the private side. They use their public insurance for catastrophic issues, such as cancer or cardiac arrest, but they’ll go to the private sector for smaller things, like a bladder removal. And they do it because the private sector tends to be faster and have better-run systems. If you’re going through the public sector, your surgery might be scheduled six months out. In the private sector, you can get your issues resolved more quickly.

But we have to make a lot of tradeoffs to be in this segment. For example, 80 percent of our equipment is used. If I buy new equipment, I have to charge my patients more. But if you’re not in the top segment, nobody cares whether your equipment is brand new. We also don’t do very specialized care. We don’t do neurosurgery, or open heart surgery, because if we did these, we’d have to charge more for every single patient. We chose not to offer those catastrophic things that some hospitals specialize in, and we focus only on services that will be useful for the majority of people.

We also make arrangements with insurance companies as a company, and we contract with third-party payers who will send all their employees, students or insured people to our hospitals.

 

You mentioned that you’re chairman of a national hospital association in Mexico. Tell us what that group does.

The association, Consorcio Mexicano de Hospitales, was started about 10 years ago, with 13 hospitals across Mexico. Now we are at 42. The association has one hospital per city, which is by design, so that no hospital is in competition with another and we can share in the benefits of collective negotiations. Generally we are focusing on two sides: on the cost side, by purchasing things together and training people together, and on the revenue side, with commercial offerings. One of the biggest drivers to join the association is that the hospital gets that purchasing power of 42 hospitals together. Without that, it’s much harder for individual hospitals to compete.

Soon after we got started, though, we realized that an association presented other opportunities. We could train our employees together. About six years ago, we coordinated training for 6,000 nurses from 42 cities via an online platform. About five years ago, we began to focus on how to incorporate the best quality-assurance practices from each hospital, and we designed some processes to spur improvements in operations that had to be implemented in every hospital.

Then around three years ago, we realized that we could offer a unique commercial option to our clients — insurance companies or the government or private companies that have presences in multiple cities. Let’s say a large company has facilities in 15 Mexican cities. As a single hospital, I couldn’t have an agreement with this big company. But as an association, we can offer a single organization, so that the big company doesn’t have to go to 15 separate hospitals to strike deals. These deals can include accident treatment of the company’s employees, managing check-ups, or whatever else is needed.

I’m the chairman of this association, but I have to give credit to the president, Javier Potes, for the day-to-day operations.

 

— Ali Greatsinger

Ali Greatsinger is the senior editor at GHCi.

 

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