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Healthcare Industry 2010 Project

Healthcare Industry 2010 Project

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05/20/2012

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Project

Business Policy & Strategy Management
on

Healthcare Industry
(In Private Sector)

By Sanjay Sinha Jaipuria Institute of Management Lucknow

Table of Content Introduction Present Scenario Nature of Demand Government Incentives Medical Infrastructure Development Real Estate players Big Players Already in the industry Industrial Setting Trends and Drivers SWOT Analysis of the sector Strategic Needs Future Potential Concluding Thoughts 02 03 04 07 08 09 10 15 15 18 21 23 25

the healthcare industry diagnoses. since 1991. This kind of scenario proved to be the perfect setting for the development of this industry especially in the private sector. the Indian public is generally demanding world class facilities and quality and has the ability and the willingness to pay for it.capita income of the fast increasing urban middle class (over . is also remarkably resilient through the global meltdown. in the last decade. there has been a growth in the per. treats. Also.from newborns to the terminally ill.Healthcare Industry (In Private Sector) Introduction One industry that has grown in leaps and bounds sector. and administers care around the clock. The Indian economy being highly diversified. when the process of globalization started is the health-care Combining medical technology and the human touch. The healthcare industry includes establishments ranging from small-town private practices of physicians who employ only one medical assistant to busy inner-city hospitals that provide thousands of diverse jobs. responding to the needs of millions of people . At present.

it now clocks Rs. high technology or basic hospital services. a strategic advisory that has just brought out a hospital CEO survey.000 crore and is projected to reach Rs 3.02. Due to the ever growing population.1.000 crore by 2012. MD of Accelerator Group. outdated machines and endless delays. especially in the lower income class there is increasing pressure on the free government medical facilities and hence the middle and the upper income group have to fend for themselves and they have to seek different options. the healthcare market is on an unprecedented growth at about 16% each year.600 crore in 2005.200 million) which now has different perception of health care. Present Scenario India is one of the largest healthcare markets in the world. Whether it is in diagnostics. 2. .00. From Rs.00. urban India will no longer put up with shabby wards. Various surveys and research studies have been conducted in the recent past to understand and tap the unprecedented growth in this sector. The growth in this sector is also fuelled by the fact that there is deterioration in the standards of pubic health facilities. According to Seema Chaturvedi.

India spends only 1% of its GDP on health. which also present a vast opportunity. With the demand for . Good healthcare in India is in extreme short supply. translating into $35 per capita. India¶s huge population of a billion people represents a big opportunity. The middle income group in this vast base is also a large 300 million. Since healthcare is dependent on the people served.Nature of Demand : There are some economic factors which make India such an exciting market. Hospitals in India are running at 80-90 per cent occupancy. There are various gaps in the Indian healthcare market.

Yet another survey by KPMG. There is a shift in disease profiles from infectious to lifestyle-related diseases. claims that infrastructure spend on this sector is expected to reach Rs. What adds more muscle to the industry is the increase of medical insurance to more people and the amount of investment that private equity investors are willing to put into expanding hospital numbers.2009. It may not be as celebrated as our telecom. The rise in incomes and growing literacy is driving higher per capita expenditures on healthcare. It is these number that are leading a new wave in India¶s healthcare sector. In some of the major metros. 2009) reports that the industry employs over four million people. more and more middle income and affluent Indians are suffering with life style diseases.healthcare far exceeding supply there is a lot of scope for new entrants. There is also an increasing awareness that due to changes in eating habits. Lifestylerelated diseases are typically more expensive to treat than infectious ones. A new study by ASSOCHAM and Yes Bank (Healthcare Services in India. which is expected to raise expenditures per treatment. processed foods and lack of physical activity. .900 crore in 2013 nearly double the present value. software or automobile industries. it is growing at the rate of 16 cent per annum.000 people. making it one of the largest service industries in the economy. but according to a recent study.63. India is close to the global benchmark of 35 beds per 10.

it is contributing a great deal to the economy and the GDP of India. went to the developed countries to get themselves treated. The health care industry in India earns revenues accounting for 5. Around two decades back India health care industry had not much to speak about. It consists of the following: y y y y y y y Doctors and Dentists Hospitals Protective care and nursing Pharmacies Allied medical. In the year 2010.2% GDP is expected. who could afford it. An increase in the gross domestic product to 6. No foreigner would ever dream of coming to India for their treatment. The present era is likely to be dominated by expansion of demands in the market. . Indians. but even foreigners are flocking to India to take the advantage of cost effective quality treatment. Such changes will trigger a change in the health care industry scenario for the better. things are absolutely different.2% of gross domestic product. increasing prices and increasing awareness among the customers.The health care industry in India is not only restricted to doctor and patient. health services Research and Development Medical Insurance As there are a number of related services included in this sector. No longer are Indians going abroad for their treatment.

Max etc. Tier II and Tier III cities y India's National Health Policy declares that treatment of foreign patients is legally an "export" and deemed eligible for all fiscal incentives extended to export earnings.Due to the above reasons.03 as against an . a number of private players have invested in this sector. Apollo Hospitals. Government Incentives As per the Investment Commission. It is due to these big player and the competition generated by them. the current bed per thousand population ratio for India stands at 1. are just a few of them. the policy adopted is: y 100% FDI is permitted for all health-related services under the automatic route y Infrastructure status has been accorded to hospitals y Lower tariffs and higher depreciation on medical equipment. that a lot of new players have joined in. Due to the attractiveness of this Industry and seeing its vast potential. the Indian Government is giving the health ±care industry a number of sops as mentioned below. Government of India. y Income tax exemption for 5 years to hospitals in rural areas. Manipal Group. Fortis Healthcare. As per industry estimates. Medical Infrastructure Development Medical infrastructure forms the largest portion of the healthcare sector. Wockhardt Hospitals.

y Joint ventures. and banks to explore investment opportunities across a wide range of segments.222. y FDI. y FII.average 4.000 Crores. There is also growing interest among domestic and international financial institutions. and the huge investment needs in the healthcare sector. tieups. venture capitalists. the bed to thousand population ratio would be far from comparison with other similar developing countries. in the private sector is envisaged. over the next 6 years. in recent years. the emergence of reputed private players. by the year 2012. y Acquisitions. there has been growing interest among foreign players and non resident Indians to enter the Indian healthcare market. Though it is a Annual Growth Rate) various forms : y Private equity. Given the growing demand. Growth in private investment in generated is expected to be growing at a CAGR(Compound . y IPOs capital intensive industry the revenues of 15%. Despite this investment.3 of comparable countries like China. y NRI investment. Korea and Thailand. y Venture Capital. an investment of approximately RS. private equity funds. To reach a ratio of 2 beds per thousand.

Some examples of leading reality investors in this sector are: . seeing the potential and the profitability real estate developers. hospital chains and health insurance. Real Estate Players : Leading Real estate players are looking at new business areas such as hospital properties to maximize amenities in their integrated townships. Till the last decade the health care industry was ruled by leading specialist doctors .Segments attracting investment include diagnostic chains. leading business houses and corporate and multi-national companies are investing in this sector. but now. medical device manufactures.

Big Players Already in the industry : Apollo Hospitals Enterprise Ltd y Manages a network of 50 specialty hospitals and clinics with a bed capacity of over 9. the realty arm of Dubai World. at an investment of around US$ 1. y Employs more than 62. ARDL had formed a joint venture ² Neotia Elbit Hospital Venture Ltd ² with the Elbit Group of Israel. y Fortis¶s Lucknow MediCity. y Hinduja Group and Limitless LLC. y Has tied up with insurers like BUPA (UK). is being set up in Ansal¶s 1. Vanbreda (Belgium) and Mondial (France) to direct inflow of foreign .000 people. The JV plans to set up a chain of 200-450 bed hospitals in 31 cities in India within three to five years.500 acre upcoming mega township.1 billion in their 51:49 JV to build hospitals and medicare cities y Ambuja Realty Development Ltd (ARDL) plans to develop a couple of feeder hospitals in Siliguri (North Bengal) and Bardhaman (South Bengal) for its proposed multi-specialty hospital in Kolkata. are putting in about US$ 1.y DLF inking a 26:74 joint venture with Fortis Healthcare for setting up hospitals in its 200 acre plus integrated townships across the country.5 billion.000 across the country and abroad.

Mohali. Fortis Healthcare y Has a chain of 62 hospitals with an installed bed capacity of about 10. y Presently has a bed capacity of about 1. y Latest Project Is LAVASA Hill city Pune.5 billion y Owns a pharmacy chain by the name of Fortis Health world and plans to open 250 outlets with an investment of US$ 195 million all over India Wockhardt Hospitals y Wockhardt Hospitals currently has a chain of 7 hospitals commissioned at located at Nagpur. Noida. . y Has tied up with Indian Oil Corporation (IOC) to set up its pharmacies at the latter¶s petrol stations.Delhi.390. Faridabad.000 Beds. Joint venture with Singapore-based Parkway Group Healthcare Pte Ltd. y Operations across North India . Rajkot. Raipur and Srinagar. Amritsar. y Has a joint venture with Real Estate player DLF to set up hospitals across the country with an investment of about US$ 1. Surat. y Is moving into smaller towns. health education research and multi-speciality services. Nashik. Vashi and Goa with 4 new hospitals being South Mumbai. Bhavnagar.patients to India. Patna and Jabalpur. which has the state of the art integrated healthcare facility and wellness centre which would provide world-class facilities for rejuvenation. y Has expanded through mergers and acquisitions. Bhopal.

set up by the Asia Heart Foundation (AHF) y Capability to perform 25 major heart surgeries and over 20 cardiac catheterisations a day . Bupa: U. y It also has an agreement with Blue Cross and Blue Shield: USA. as well as in setting up and developing hospitals of excellence throughout the world. Bangalore y Joint venture with Pantaloon Retail for comprehensive retail healthcare foray plan to invest over US$ 195 million in healthcare business in the next five years. other Medicare services. y MHS is building another 600-bed multi specialty hospital in Devanahalli..y Has tie-ups and association with Harvard Medical International: USA whereby Wockhardt has access to Harvard¶s expertise and experience in the fields of surgery. y Public-Private Partnership with the Government of Gujarat to manage the 275-bed Palanpur Civil General Hospital in Gujarat Manipal Health Systems Chain consists of: y 9 primary centres at 7 rural locations y 8 secondary hospitals at urban and semi urban locations y 3 tertiary hospitals at urban and semi-urban locations. AEA International: Singapore and others. Narayana Hrudayalaya y First-of-its-kind cardiac care hospital in Bangalore. y Plans to build 15 new multi speciality hospitals in Tier-II cities in the country.K.

Karnataka Health Systems and ISRO y A 5. nursing.97.y Hub for telecardiology networks with a Joint Venture between the Governments of seven hill states and West Bengal.36 . which will comprise of 10 hospitals Max Healthcare y MHC operates 8 healthcare centres in the National Capital Region (NCR) y Bed capacity of around 765 beds and is expected to increase to 1. Bangalore.500 -1. to collaborate on a number of initiatives for creating a medical Institute of world-class standards . paramedical research and training y Plans to raise US$ 85.000-bed Health City is coming up at. 85 million to set up more hospitals in Bangalore y Tied-up with GE.600 beds in the next few years y Collaborated with Singapore General Hospital in the areas of medical practices.56 million to expand its hospital chain Columbia Asia y First healthcare provider to enter through the FDI route y Opened the first community healthcare multi-specialty facility at Bangalore y Planning to invest US$ 15.

000 crores Rs 330 crores Rs. we don¶t have a single place that¶s at the cutting edge not just of technology and treatment but of education and research too´ . to set up a 300 -bed transplantation and tertiary care centre in Kolkata y Planning to establish a US$ 240 million µhealth city¶ in Chennai on the 46-acre hospital site Some of the Mega Project due for completion in the year 2010 are: Investment Rs 1.58 million to set up µBGS Global Hospital¶ in Bangalore y Tied up with the Sureka Group.200 crores Rs.250 crores Rs.300 crore Rs. health and wellness . Medicity is a new model where application and knowledge. . According to Dr. The latest trend coming up in this industry are the concept of Medicity.100 crores Name SevenHills Health City Tata Medical Centre Apollo Hospital Fortis Hospital People Internatio nal Hospital Narayana Hrudayalaya Health City Place Mumbai Kolkata Bhubaneswar Delhi Bhopal Source India Today: April 12th. " Even now. 2010 Most of the above projects coming up are multispeciality in category.Naresh Trehan. work and leisure.Global Hospitals y The US$ 9. cure and prevention. East and West can combine.75 million facility functions from 2 locations in Hyderabad y Invested US$ 36. the pioneer of getting world-class treatment to India.

y Indian hospitals are gaining reputation globally as ³quality´ service providers y Many Indian hospitals have secured accreditation from the British Standards Institute and Joint Commission on Accreditation of Healthcare Organisations y NHS. literacy rates and patient preferences in healthcare decisions is growing. With an improvement in the quality of living and health insurance this segment wants µ3 star to 5 star hospital. Hospitals have started witnessing a number of patients who visit for health check-ups as a preventive measure. General awareness. The .Industrial Setting y The industry is fragmented with a large number of independent. y Private sector corporate entities have aggressive expansion plans. As medical reimbursements are one of the important perquisites provided in the private sector. privately run hospital and healthcare centres. Increase in the population of the Middle income group. UK has indicated India to be a preferred destination for surgery. Private sector covering the health care requirements of their employees and their dependents. Trends and Drivers A. and change in their demand pattern There is favourable increase in percentage of working class population from 32% in 2006 to 36% in year 2016. B.

liver profile. ECG. C. general examination. but now there is a growing awareness in the western world about the quality of treatment in our private healthcare industry. asthma and cancer have become the most important segments. and renal profile. common people healthcare.various health check-up packages offered include a combination of CBC. digital chest XRay. The rate of successful surgeries in India is the best In the world. Not only are the patients of developing countries come to India for treatment . blood group. lipid profile. This trend has further led to newer avenues for companies involved in carrying out diagnostic tests. urine. and in-patient spending is expected to represent nearly 50 per cent of total healthcare expenditure. D. blood sugar. Cost is not the only factor weighing in India¶s favour. cholesterol. blood sugar. stool. Based on demographic trends and disease profiles. . lifestyle diseases cardiovascular. Increase in the number of patients suffering with lifestyleIncreasing health consciousness among has created avenues for preventive related diseases. cholesterol. proteins. Reputation of India¶s success in medical care is gaining in momentum outside India. Around 70 per cent of treatment decisions in the country are based on lab results.

as many of their insurance companies have entered into tie-ups with private Indian hospital chains. particularly the National Health Service (NHS) in the UK. with even the insured having to pay dearly for treatment. But now due to the rise in demand there is an . In the US the healthcare crisis has a different dimension. Around 50 million citizens are uninsured. Patients from the US are now regularly beating a path to India. the shortage of paramedical professionals such as nurses has aggravated the situation. if someone needed medical treatment like bypass surgeries. which has a long list of patients waiting for over a year for surgery. kidney transplant or for cancer patients. Growing demand in smaller cities in India Till very recently. Further. the Metros were the only recourse. F. Lack of adequate Health infrastructure & high costs in the West The healthcare systems in Europe and the United States are under severe pressure.Success rate of Cardic bypass E.

Life expectancy. y India has a top-rated education system which leads to some of the support staff. In the domestic market.6 years in 2005-09. y World class medical facilities using the latest technologies. which averaged 65. G.. Although the rate of ageing in India is slower than the developed world. the large population makes any increase significant in terms of absolute numbers. is expected to increase to 66 years in 2006-10 . There is a growing need for improved healthcare infrastructure in tier II & III cities. SWOT Analysis of the sector Strengths: A detailed study and analysis of the industry reveals certain strengths of the Indian Healthcare sector . health spending will be sustained by two demographic trends: increased life expectancy and an ageing population. and therefore also in terms of market potential. .Increasing focus on unexplored regions of India in terms of healthcare. most competent doctors and hospital y Medical cost is lowest in India 20% of average expenses incurred in US and other western countries. Increase in domestic demand overall due to increased life expectancy and an ageing population.

y Mainly catering to the higher-middle and higher income group. y Cut. y The Government is providing a lot of benefits to give an impetus to the industry. airports etc.000 heart operations every year where the death rate of 0. of hygiene conditions required and y Not much focus on research and development.Throat competition among the private players. Lack of transportation. y As per a report. y The support staff is absolutely ignorant about the standards expected.8% is less than half the rate at most major hospitals in US and Canada. y Lack of post operative care. Opportunities y Government incentives as mentioned earlier. Escorts Heart Institute & Research Centre in Delhi performs 15.y India has one of the largest pharmaceutical industries in the world and it is self sufficient in drug manufacturing and exports drugs to more than 180 countries. . y Lack of highly qualified and experienced doctors. Weakness y Excessive amount of privatisation y Newcomers in the business y Under developed infrastructure.

y The health care industry in India has capitalized on its rich cultural resource and glorious past of medicinal inventions. Unani herbs and modern advanced surgical techniques make India the most important destination in the field of medical tourism.y Government spending on infrastructure development is increasing. Therapeutic Massage. y Many multi-national companies are setting up bases in India and they are having tie-ups with the healthcare industries y Compensation to US and UK overpriced Healthcare y Partnership with Insurance Companies. and problems of efficiency. a lot of y Lower attractiveness of India as an investment destination due to perceptions of red-tape. Meditation. . lack of policy clarity. Threats y As there is a continuous research. ancient alternative therapies such as Yoga. y Cost of living is much less as compared to to developed nations hence the cost of treatment is much less in India. y The international slowdown of the economy is having a reverse impact on brain drain. development and innovation in this sector internationally investment is required for updation. lack of transparency. The combination of traditional Ayurvedic treatment.

y The role of the sales force often becomes more important at this stage. are as under:Differentiation y When a segment of the health care industry and an organisation are both in a stage of growth. with a number of emerging organisations offering the same kind of services. the major need of the organization is for differentiation from its competitors. Their key goal is to control the channels of distribution/referrals. convenience and weak infrastructure push customers away Strategic Needs Strategies which I can suggest according to the need of this growing sector. y Difficulties in establishing and maintaining joint ventures y Competing destinations for health care tourism from countries like Thailand. y Requirement of localized and in-depth knowledge of host country market. y The most common way for health care services to achieve differentiation is through distribution .y Number of potential players who could invest is limited especially as an individual investor. South Africa . Costa Rica y Lack of transportation.

Distribution y In order to distinguish its offering from that of competitors. y Pull: will become more important as people take control over their own health care choices. advertisement. Accessibility / convenience 4. infrastructure or website visit. performance. Example Apollo Hospitals. y Pull: get patients to choose a hospital independently for various reasons. an organization should consider: 1. Upset the Apple Cart²Quietly y Any useful strategy must include a means of upsetting the competitive equilibrium and reestablishing it again on a more favorable basis. y Push: The healthcare industry being at the nascent stage the push strategy would work better initially. including word-of-mouth. nurses. Cost effectiveness y The best form of differentiation may be to have a number of sites with one brand name. y Many physicians consider health care organizations members of a medical fraternity. Number of locations 3. and therapists to refer patients. Push and Pull y Push: get doctors. . Hours/days of availability 2.

nurses and technicians. Future Potential High-growth in the domestic market arising from: y Increasing health awareness: share in total private consumption expected to increase by 10%. forms processing and claims adjudication. y Health insurance: less than 10% of the population is covered by health insurance. y High-growth in medical tourism.y As a result.8 billion by 2012. y Training: large opportunity for training doctors. but they would rather avoid the use of overt and aggressive competitive strategy. y Cost of comparable treatment is on an average 1/8th to 1/5th of those in western countries. y Diagnostics services: imaging and pathology labs. . managers. The medical insurance premium income is expected to grow to US$3. secondary and tertiary care. y Increasing penetration of health insurance. physicians or hospitals may compete with one another. y Service providers: curative and preventive in primary. y Rapid growth in private sector companies owning and managing hospitals. disease coding. y Healthcare BPO: medical billing.

4 billion in the healthcare sector by 2025. y Fluent English speaking staff. y Its exotic tourist destination. and support staff ensuring individualized care+ JCI Accredited Hospitals. y Indian corporate hospitals have a large pool of doctors. India needs an investment of US$ 14. y Can easily be combined with a holiday/business trip. . Yoga and Meditation. nurses.y Most competitive charges for treatment. y India is renowned for ancient alternative therapies such as Ayurveda. y No waiting list. to increase its bed density to at least two per thousand population. y Adds a FICCI-Ernst and Young report. and Therapeutic Massage.

investment in human capital. pending legislation. Most importantly. we need to look beyond investment-specific and capital market policies to the larger ecosystem and make it supportive for investors. we need health to be a core focus of Government policy. Even a realistic targets of 1.85 beds per thousand population by 2012 needs an investment of US$ 77. Private sector must also look at healthcare from more than a commercial perspective. Policy framework needs to recognize spinoffs from a facilitative investment environment in terms of improving access to healthcare. the government and private players need to focus on their core competencies/ responsibilities and work together to reduce inefficiencies and complement each other¶s effort.Concluding Thoughts If we want both organic (doctors. exploiting domestic and global opportunities in emerging segments and synergies across segments. medical staff and nurses) and inorganic (equipments. Our analysis points towards the need for stronger partnerships in healthcare. There should be transparent regulatory frameworks and better institutional governance. accreditation.9 Billion. . machines and infrastructure) investments in the healthcare sector. setting up national councils/regulatory bodies. insurance etc. Some vital issues to address are standards. between the government and private sector.

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