35304432-Opportunities-Challenges-in-Healthcare-Sector | Joint Commission | Public Health

2010

INDIA’S HEALTHCARE SECTOR:
Opportunities and Challenges

Group Members Arghya Mandal Jayesh Nagarsekar Milind Yadav Rajneesh Saxena Sachith Varma

PGPM-609 Business Environment 4/15/2010

INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
1. Overview of the Indian Healthcare Sector 2. Segments in Healthcare Sector 3. Medical Infrastructurea. Current state b. Special Economic Zone c. Manpower Statistics d. Medical Education 4. Policy Initiative

Index

8. Health Cities: The Evolving Concept of Healthcare in India 9. Hospotels-An Emerging Novel Concept 10. Health Insurance: Current and Future Scenario 11. Path labs 12. Impelling Technology 13. Biotechnology 14. Reverse in Brain Drain 15. Mergers and Acquisitions 16. Key Players in the Sector 17. New Entrants/Key Foreign Players 18. Medical Infrastructure Development 19. Status of Private Investment in India’s Healthcare Sector 20. Telemedicine 21. Medical equipment 22. Insurance 23. Medical value Travel 24. Hospitals Planning and Controlling 25. Medical Textiles and Clinical Trials 26 .Healthcare Outsourcing 27. Challenges to Private Investors 28. Challenges : External & Domestic 29. Concluding Thoughts

7. Quality Driven approach: Accreditations a. International Accreditation Bodies Present in India b. Accreditation bodies of India- NABH

6. Holistic well being - Blend of Modern and Traditional Medicine a. Wellness centers - As centre of Holistic well being b. Services Offered in Wellness Centers

5. Key trends and Drivers a. Shift to lifestyle related disease to drive higher healthcare spends b. Growing Middle class and Patient Preferences c. Awareness towards Preventive healthcare d. Increased life expectancy and an aging population e. Overburdened health infrastructure & high costs in the west f. India’s value proposition goes far beyond cost; quality second to none

20% of deaths of children worldwide under the age of 5 occur in India.9 billion in 2004 and is expected to rise to 5. served. private equity funds. in hospitals. Clinical trials etc. Medical equipment.5% of GDP or US $60. India spends only 1% of its GDP on health. to reach $38 billion by 2012. however. and even falls below the standards existing in comparable developing countries. higher than Cambodia.. There are various supply. due to rise in complex in-patient ailments such as heart diseases and cancer.000 women. India’s healthcare sector. The largest in the world. Health insurance. The middle income group in this vast base is poverty line and those who have only the public health system to rely on.7% living below the 453 deaths per 100.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats The Indian healthcare delivery market is estimated at US$ 18. Good healthcare in India is in extreme short 1. in recent years. there has been interest among domestic and international financial institutions. Bolivia and Botswana. government also a large 300 million. There are some economic factors which make India such an exciting market. This study examines the status and the major brands in the key segments of the healthcare sector. A significant portion of the population receives inadequate or no health care. Total national healthcare spending reached 5. which also present a vast opportunity. and the huge investment needs in the healthcare sector. India’s huge population of a billion people represents a big opportunity.7 billion and employs over four million people. Segments in Health Sector Share of tertiary care in the total healthcare market is around 15-20%. India’s healthcare industry is expected to grow by around 15 per cent a year for the next six years. With the demand for healthcare far exceeding supply. falls well below international benchmarks for physical infrastructure and manpower. This includes the pharmaceuticals market. It comprises of many segments like: -Medical infrastructure. Overview of the Indian Healthcare Sector the largest service sectors in the economy today. making it one of and private spending. Market for tertiary care expected to grow at a faster Telemedicine.4% and Japan 8%. National Family Health Survey for 2005-06 estimates deaths. It also analyses the implications for the overall healthcare system. Since healthcare is dependent on the people gaps in the Indian healthcare market. France spends 10.9 billion by 2009.Given the growing demand.e. rate. India accounts for 20% of the world's maternal private healthcare sector in India accounts for over 75 percent of total healthcare expenditure in the country and is one of the emergence of reputed private players. specifically 25. Private segment constitutes bulk and growing rapidly. with a woman dying every five minutes. translating into $35 per capita. venture capitalists. June 2007 . at 15 per cent per year over the next four to five years. i. Training and education. The industry has grown at about 13 per cent annually in recent years and is expected to grow Source: The Business World. There is also growing 2. the growing interest among foreign players and non resident Indians to enter the Indian healthcare market. Ernst & Young Survey. and banks to explore investment opportunities across a wide range of segments.2% of GDP. or US $34. Hospitals in India are running at 80-90 per cent occupancy.

.121 Number of Doctors . Policy Initiative The National Health Policy 2002 focuses on the need for enhanced funding and organisational restructuring of the national public health initiatives in order to facilitate more equitable access to health facilities. the total number of formally approved SEZ is now at 395.801 136 medical schools admit more than 6. Medical infrastructure • A. 154 have been C.1.000 PG trainees in their programs 229 recognized medical colleges of which 106 were established through the private route 25.371.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 3. Current state • • • Current Hospital beds per 1000 population stands at 1. given by an inter-ministerial Board of Approval. Malaria and Blindness from the category of historical diseases and HIV/AIDS from the category of newly emerging diseases. For a sector specific zone. Medical Education • • Number of Nurses . Manpower Statistics • D.000 medical graduates pass out each year 4. a hospital with minimum bed strength of 25 is stipulated and this goes up to 100 beds for a multi product SEZ. in terms of both laboratory facilities and technical expertise. Identification of specific programmes targeted at women’s health and strengthening of food and drug administration.11 Most private hospitals operate as a proprietorship or partnership business Corporate Hospitals account for approximately 10% of the total private ownership Use of technologically advanced diagnostic equipments and excellent infrastructure are making India a medical value travel hub B.660. Special Economic Zones notified by the Law ministry. With the latest approvals. • • Under the SEZ Act 2005 “Healthcare” has been defined as an approved service. of which. National Health Policy-2002 • • • • The focus is on those diseases that are principally contributing to the disease burden -TB. Greater contribution from the Central Budget for the delivery of public health services at the state level.

general examination. This would drive a 13.) was US$ 658 compared to US$ 91 for infectious diseases.04 billion in 2008. ECG. Source: Ernst & Young Analysis. and renal profile.4 per cent CAGR in the inpatient cardiac care market from US$ 1. National Health Policy.5 million to 1. In the inpatient market. the share 5. The spend share of inpatient cardiac treatment is estimated to grow to 19 per cent of the total in related treatments in India is expected to grow from 1. the average inpatient cost for lifestyle-related diseases India’s disease profile is expected to follow the same pattern as in developed economies. asthma and cancer have become the most important segments. cholesterol. Growing Middle Class and Patient Preferences There is favourable increase in percentage of working class population from 32% in 2006 to 36% in year 2016. Shift to lifestyle-related diseases to drive higher healthcare spends While rising incomes and growing literacy are likely to drive higher per capita expenditures on healthcare. blood sugar.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 5. urine. Hospitals have started witnessing a number of patients who visit for health check-ups as a preventive measure. The number of cardiac-diseaseother disease segments. cholesterol. offered include a combination of CBC. Awareness towards Preventive healthcare group. Lifestyle-related diseases (cardiac problems. which would constitute in 2004 to US$ 2. disease profiles. Around 70 per cent of treatment decisions in the country are based on lab results. Based on demographic trends and patient spending is expected to represent nearly 50 per cent of total healthcare expenditure. the shift in disease profiles from infectious to lifestyle-related diseases are expected to raise expenditures per treatment.9 million per year over 2004-08. digital chest X-Ray. blood sugar. 2002 has laid strong emphasis on the policy goal of better engaging patients in their healthcare decisions. liver profile. Business Line: 2007 B. C. lifestyle diseases -cardiovascular. The average realization per inpatient for cardiac related treatment is much higher than for Hospitalisation Cases. and inof infectious diseases is expected to decline from 19 per cent in 2004 to 16 percent in 2008. 2008 from 16 per cent in 2004. The various health check-up packages . proteins. lipid profile. digestive issues etc. blood Increasing health consciousness among common people has created avenues for preventive healthcare. stool. literacy rates and patient preferences in healthcare decisions is growing.2 billion are typically more expensive to treat than infectious ones.1 per cent of all treatments. Key Trends and Drivers A. 2006 . This trend has further led to newer avenues for companies involved in carrying out diagnostic tests. General awareness. In 2001.

Overburdened health infrastructure & high costs in the West chains. Further. for instance. Patients from the US are now The healthcare systems in Europe and the United States are under severe pressure. Around 50 million citizens are uninsured. Tieconventional system. quality second to none study by the New York State Health Department. population. the large population makes any increase significant in terms of absolute numbers. different dimension. is one of the only handful treatment facilities worldwide that specialize in robotic surgery. In the US the healthcare crisis has a regularly beating a path to India. which has a long list of patients waiting for over a year for surgery.3 per cent in 2005 and 5. as opposed to only 97. Although the rate of ageing in India is slower than the developed E. Escorts Hospital. Visakhapatnam.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats D. Increased life expectancy and an ageing population In the domestic market. contrast. Nagpur Increasing focus on unexplored regions of India in terms of healthcare Growing need for improved healthcare infrastructure in tier II & III cities 6. By G.7 per cent in India. which averaged 63.1 years in 2005-09 and to 66 years in 2006-10. The overall success rate of cardiac bypasses is 98. India’s value proposition goes far beyond cost.8 per cent. health spending will be sustained by two demographic trends: increased life expectancy and an ageing world. and therefore also in terms of market potential.35 per cent.5 per cent in the United States. the 1999 death rate for the same procedure at New York-Presbyterian Hospital was 2. and will increase from 4. Healthcare Players Now Targeting Smaller Cities • • • Hospitals and wellness centres are now looking at a comprehensive and holistic approach towards treating their patients. as many of their insurance companies have entered into tie-ups with private Indian hospital F.g.3 years in 2000-04. the shortage of paramedical professionals such as nurses has aggravated the situation. Holistic Wellbeing -Blend of Modern and Traditional medicine ups of hospitals with holistic health centres have helped combine traditional healthcare knowledge and practices with the . according to a 2002 Cost is not the only factor weighing in India’s favour. Life expectancy.7 per cent in 2000 to 5.8 per cent in 2010. is expected to increase to 65. The proportion of the population aged 65 years and over is also on the rise. The death rate of coronary bypass patients at Escorts is 0. particularly the National Health Service (NHS) in the UK. Better access owing to development of new national/international airports e. with even the insured having to pay dearly for treatment.

Accreditation Bodies in India –NABH Fortis Healthcare. Quality Driven Approach: Accreditations A. Wellness Centres-As Centres of Holistic Well Being • • • The Golden Palms Spa and Resort Bangalore The Ananda Spa in Rishikesh Soukya in Bangalore The Ayurvedgram in Bangalore • B. Currently JCI surveys nearly 20. NABH is a constituent board of Quality Council of India. Services Offered in Wellness Centres • • • • Diet and Nutrition Gym and Fitness Yoga Herbal Medicine Acupuncture Humour therapy • The Vedic Village: Spa And wellness Centre in Kolkata • • • • Healing touch therapy • Pranic and Crystal Healing Stress Management including Relaxation. Mumbai • • • Launched in 2005. International Accreditation Bodies Present in India JCI Launched in 1999.000 health care programs through a voluntary accreditation process (Joint Commission International) • • The World Health Organization (WHO) designated the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and Joint Commission International as its Collaborating Centre for Patient Safety in 2005. major aspects being . Mumbai Wockhardt Hospital. Mohali programme for healthcare organizations in India. QCI (Quality Council of India) operates the national accreditation structure and obtains international recognition for its accreditation schemes. In India. JCI Accredited Organizations Apollo Hospital. It has standards specific to the Indian healthcare setting. • 7. set up to establish and operate the accreditation B. Delhi Asian Heart Institute. Mumbai Shroff Eye Hospital. Hyderabad • • • Indraprastha Apollo Hospital.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats A. Chennai Apollo Hospital. and Meditation It has become an imperative for healthcare institutions in India to guarantee quality healthcare to all.

New Delhi B.2 million MediCity project in Ludhiana MIOT hospitals.Speciality Hospital. Health Cities: The Evolving Concept of Healthcare in India Indian cities. Ludhiana has initiated a US$ 12. Thiruvananthapuram • • Blood Banks Diagnostic Centres Dental Hospitals/Clinics 8. Calicut Max Devki Devi Heart and Vascular Institute. New Delhi MIMS Hospital. and recreational facilities of spa. gym and Other Health City Plans in the Pipeline • • • CMCH. assessment. Kolkata Kerala Institute of Medical Sciences. New Delhi Moolchand Medcity.the assurance of uniform access.M. Chennai have plans to set up a multispecialty medical city Reliance ADAG has expressed interest in building a 60 acre health city in Kolkata . residential facilities. care of patients and protection of patient’s rights. INDIA’S HEALTHCARE SECTOR: Opportunities & Threats NABH accredited Hospitals • • • • • NABH: Accreditations to be launched • • Max Super. research and development. Health Cities are looking at even golf courses. Greater emphasis is on education. Major corporate hospital groups in India are making significant investments in setting up state-of-the-art Health Cities in major catering to larger populations by offering facilities such as hotels. Around 15-20 Health Cities are expected to come up in India in the next 5 years. Birla Heart Research Centre.

and CGHS are 4. 11. Several large hospitals • • • Revenue attributable to insurance or Third Party Administrators (TPAs) has grown from 2% in Domestic health policy premiums have shown a 47% increase in the first quarter of 2006. Hospotels-An Emerging Novel Concept actively getting into opening food outlets at hospitals. It currently has 13 and foraying into the international markets as well. cardiac and other surgeries for the rural poor in India Teleradiology being used to leverage the time difference advantage with other developed Nations 12.400. SRL Ranbaxy.8 billion by 2012. Metropolis Health Services too plans to increase its collection centres and franchisee systems. The Group with 17 labs. Lal’s Pathlabs.631. Thyrocare. many focused players are in the process of developing national networks -such as Dr. 550 collection centres distributed in 350 towns laboratories in India and plan to open at least another 9 labs by the end of next year. Health Insurance: Current and Future Scenario • Total credit billing has increased to 32% in 2005-06 and it is further likely to increase to 50% by 1.000 and Over 80 % of private health insurance is concentrated with four leading players • • • Voluntary health insurance market. For instance. Bajaj Allianz. and Nicholas Piramal. 8. SRL Ranbaxy Ltd has signed outsourcing contracts with across the country and seven franchisee labs is looking for both franchisees and acquisitions in all the major cities of the • • • Life cycles of high end medical equipments becoming shorter due to high level of innovation Telemedicine being used by major healthcare providers to provide quality care especially in eye. — ICICI Lombard. ESIS. Medical centres want to provide 9. 2011-2012. is growing fast. Royal Sundaram and Iffco Tokio 2001-02 to 16% in 2005-06. estimated at US$ 86. Presently. Total medical insurance premium income to grow to US$ 3.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats There is an increasing trend of hotels being included within the hospital campus.534. Impelling Technology . Believing that diagnostics is a several UK hospitals to provide pathological services. Most renowned path labs are expanding regionally country. 10. Hotel and restaurant chains are Food Majors Looking at Hospitals for their Outlets comprehensive services to their visitors and patients’ attendants in addition to basic health services. now also have tie-ups with leading star hotels and airlines for their international patients. The number of policies issued as Mediclaims.000 respectively. Pathology labs high-margin and asset intensive business. the lab testing market is largely serviced by small unorganised players and hospitals.040.3 million currently. Metropolis.

• • Singapore-based Parkway Group Healthcare PTE Ltd. Biotechnology global and domestic diagnostics market.32 million for expansion activities and is actively exploring acquisition targets outside Mumbai 15. has firmed up plans of acquiring tertiary care hospital projects in Class A and B cities of India. 14. GlaxoSmithKline Biologicals has plans to launch a number of vaccines like new-generation DTP. Mumbai plans to invest US$ 7. and talented and cost-competitive destination for biotechnology research. almost at par with the west Increase in medical value travel to India M&A route allows healthcare providers with immediate brand recognition and an aggressive scale up in new geographies.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats • • IT Driven Tools and Services in Healthcare Telemedicine and electronic record generation Decision support systems that improve diagnosis and treatment Hospital management systems cervical cancer for its global portfolio. a small biotech diagnostic kit-maker has made its presence felt in the pharmacy majors are looking at India for contracting research and manufacturing of biologic generics. Mergers and Acquisitions M&A. Avesthagen has won a US patent for multiple use genetic modification technology. Merger of smaller hospitals and . Similarly. Xcyton. Several biotech medicines are due to come off patent in the next few years. toxicity studies and clinical trials The reversal of trend is encouraging. new standards in healthcare services have been ushered in by large corporate hospitals. India is becoming a approving generic medicine. product development. Reverse in Brain Drain Factors for Top Medicos to Return • • • • Growing restrictions on licensing and practicing in the UK and other EU countries Significantly improved international grade healthcare infrastructure in India Improved salary levels. rotavirus and 13. With nursing homes with larger healthcare entities has led to better healthcare service delivery. and has positioned itself to take advantage of moves by governments in the US and Europe to create a regulatory framework for Indian companies are driven to innovative research and are establishing their own niche areas: Reliance Life Sciences is planning to launch genetically engineered skin. working in other nations are willing to come back and settle in India. Medical professionals of Indian origin. especially in the South with one operational in Hyderabad The Asian Heart Institute.

Key Players in the sector Apollo Hospitals Enterprise Ltd • • • abroad.5 billion Has announced the signing of a definitive agreement (the “pre-IPO”) for allotment of 670. Noida. of which 5 are owned Total bed size of the group is 1. Mohali. Blue Cross and Blue Shield: USA. Bupa: U.000 equity shares to VASCO Inc. Public-Private Partnership with the Government of Gujarat to manage the 275-bed Palanpur Civil General Hospital in Gujarat Company plans an IPO by the end of this year 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 • • • • • • . Raipur and Srinagar Has tied up with insurers like BUPA (UK).000 across the country and Besides the recently launched Health City in Hyderabad.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 16.6 million 8 hospitals across India.790 beds Expansion plans through mergers and acquisitions Operations across North India -Delhi. AEA International: Singapore and others. Amritsar.K.390 Has tie-ups and association with Harvard Medical International: USA. Has a chain of hospitals with an installed bed capacity of about 1. Vanbreda (Belgium) and Mondial (France) to direct inflow of foreign patients • • Has a joint venture with Real Estate player DLF to set up hospitals across the country with an investment of about US$ 1. for an investment amount of US$ 2. Faridabad. Manages a network of 41 specialty hospitals and clinics with a bed capacity of over 9. plans to launch similar facilities pan India Joint venture with Singapore-based Parkway Group Healthcare PTE Ltd. Plans to build 15 new multi speciality hospitals in Tier-II cities in the country.. • • to India Fortis Healthcare • • • Has tied up with Indian Oil Corporation (IOC) to set up its pharmacies at the latter’s petrol stations.

Bangalore. Bangalore Joint venture with Pantaloon Retail for comprehensive retail healthcare foray • First-of-its-kind cardiac care hospital in Bangalore.600 beds in the next few years Global Hospitals • • • • The US$ 9.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats Manipal Health Systems Chain consists of: • • • • 9 primary centres at 7 rural locations • • 8 secondary hospitals at urban and semi urban locations 3 tertiary hospitals at urban and semi-urban locations.75 million facility functions from 2 locations in Hyderabad Tied-up with GE. Karnataka Health Systems and ISRO Columbia Asia • • • Collaborated with Singapore General Hospital in the areas of medical practices. set up by the Asia Heart Foundation (AHF) Capability to perform 25 major heart surgeries and over 20 cardiac catheterisations a day A 5.36 . to collaborate on a number of initiatives for creating a medical Institute of world-class standards Invested US$ 36. to set up a 300-bed transplantation and tertiary care centre in Kolkata 17. Narayana Hrudayalaya • • Plan to invest over US$ 195 million in healthcare business in the next five years. which will comprise of 10 hospitals Max Healthcare • • • • • • Hub for telecardiology networks with a Joint Venture between the Governments of seven hill states and West Bengal.500 -1.56 million to expand its hospital chain First healthcare provider to enter through the FDI route Opened the first community healthcare multi-specialty facility at Bangalore Planning to invest US$ 15. MHS is building another 600-bed multi specialty hospital in Devanahalli. New Entrants/Key Foreign Players Artemis Health Institute • • • Delhi-based Apollo Tyres has made a foray with the launch of its US$ 48.000-bed Health City is coming up at. paramedical research and training Plans to raise US$ 85. nursing.97.78 million project.58 million to set up ‘BGS Global Hospital’ in Bangalore Planning to establish a US$ 240 million ‘health city’ in Chennai on the 46-acre hospital site Tied up with the Sureka Group. Artemis Health Institute in Gurgaon First hospital in entire northern India to offer Image Guided Radiation Therapy (IGRT) to its patients Artemis plans to grow into a 10-hospital chain by 2012 . 85 million to set up more hospitals in Bangalore MHC operates 8 healthcare centres in the National Capital Region (NCR) Bed capacity of around 765 beds and is expected to increase to 1.

a ratio of 2 by 2012.3 of comparable countries like China. Medical Infrastructure Development stands at 1.03 as against an average 4. However. the bed to thousand population ratio would be far from comparison with other similar developing countries Leading Real estate players are looking at new business areas such as hospital properties to maximize amenities in their integrated townships.000 Crores) over the next six years. Despite this investment. Mumbai and Bangalore for possible acquisitions and joint ventures Harvard Medical International and Cleveland Clinic have entered the country through joint ventures Pacific Healthcare Holding has opened their first hospital in Hyderabad Parkway Group from Singapore. Dr Naresh Trehan. Beds in excess of 1 million need to be added to reach a ratio of 1. Korea and Thailand.85 per a CAGR of 15%. Our analysis points out that in 222.85 and in a best-case scenario. has begun talks with leading private hospitals in Delhi. we are likely to reach a bed to thousand-population ratio of 1. 161.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats Naresh Trehan’s MediCity • • • Aditya Birla Memorial Hospital • Apollo would examine the possibility of investing in the proposed MediCity and merger of the MediCity with Apollo Group may also considered in the future A multi-speciality hospital located at Pimpri-Chinchwad in Maharashtra A 700 bed facility in Mumbai inaugurated in 2007 Has been envisioned as a multi-disciplinary high-tech medical institute spread over 43 acres in Gurgaon Reputed medical professional. since the spite of the phenomenal growth in the healthcare infrastructure.9 Billion (Rs. Out of the total about 896.7 Billion US$ (Rs Real Estate Players in Healthcare .440 Crores) growing at thousand. revenues generated by private hospitals in the year 2012 will be to the tune of US$ 35.500 beds will be added by the private sector with a total investment of 69. The current bed per thousand population ratio for India 18. the gains are commensurate in this capital intensive industry. Emaar from the Middle East and Prexeus Health Partners from the US have announced plans Medical infrastructure forms the largest portion of the healthcare pie. is promoting a US$ 250 million world-class integrated healthcare facility known as ‘MediCity’ • Reliance ADAG Healthcare • • The quaternary healthcare centre with 500 bed facility is spread over 16 acres Foreign Players • • • Planning a pan India chain of hospitals.

40 crore • • • Joint ventures and tie-ups between leading Indian hospitals and domestic/overseas companies/institutions Harvard Medical International and Cleveland Clinic have entered the country through joint ventures Sale of 25 percent stake by Narayana Hrudayalaya Pvt. Ltd to the private equity arms of American International Group Inc. 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. (AIG) and JPMorgan for $100 million Parkway Group from Singapore. tie-ups. Hinduja Group and Limitless LLC. at an investment of around US$ 1. FDI. IPOs Examples of recent or proposed healthcare investments (By Corporate) • • • • • • • ICICI Venture making multiple healthcare investments: Rs 40 crore in RG Stone Hospital Rs 140 crore in Pune's Sahyadri Hospital Rs 96 crore in Mysore’s Vikram Hospital Rs 65 crore in Kolkata's Medica Synergie. FII. Venture Capital.1 billion in their 51:49 JV • • Growth in private investment in various forms • – 19.15 million George Soros’ fund Quantum and Blue Ridge bought 10 % in Fortis Healthcare equity from IDFC Private Equity Fund equity Fund Manipal Health Systems Private Limited has risen over US$ 20 million of equity from IDFC Private Bangalore-based HealthCare Global Enterprises Limited (HCG) has risen over US$ 10 million in • Metropolis Health Services Ltd. with the Elbit Group of Israel. medical device manufactures.5 billion. Status of Private Investment in India’s Healthcare Sector • Segments attracting private investment include diagnostic chains. • Apax Partners which picked up 12 per cent stake in Apollo Hospitals Enterprise Ltd for Rs 426. Fortis’s Lucknow MediCity. . (Metropolis). and hospital chains Significant growth in Private Equity (PE) investments in India’s healthcare sector Over $448 million in PE investment in 2008. Emaar from the Middle East and Prexeus Health Partners from the US have announced plans Funding By Private Equity • • Recent PE Funding Deals in Healthcare • • Warburg Pincus’ total investment in Max Healthcare stands at US$ 34. Expected investments of $5 billion between 2008 and 2011 Private equity. are putting in about US$ 1. joint ventures. ARDL had formed a joint venture — Neotia Elbit Hospital Venture Ltd. acquisitions. India’s leading corporate diagnostics chain. is being set up in Ansal’s 1. the realty arm of Dubai World. NRI investment. raised over US$ 8 million in equity from India Advantage Fund-I managed by ICICI Venture Capital. INDIA’S HEALTHCARE SECTOR: Opportunities & Threats • to build hospitals and medicare cities 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.• • • DLF inking a 26:74 joint venture with Fortis Healthcare for setting up hospitals in its 200 acre plus integrated townships across the country.

healthcare administrators • • Medical equipment forms another promising opportunity within healthcare.000 doctors by 2012 Private players could invest in establishment of medical colleges and training institutes Opportunities due to shortage of trained personnel-doctors. technicians. and Siemens) Outsourcing engineering design and skilled services for medical equipment manufacturing and testing to Indian companies Joint ventures and licensing agreements between Indian and foreign companies (Wipro-GE) . and enable cost effective delivery Investment opportunities for setting up telemedicine centres within hospitals. Our analysis pegs the medical equipment industry growing domestic market makes India an ideal manufacturing base.5 doctors (allopathic) per thousand persons in India compared to world average of 1.97 billion (Rs 22. 21. create networks of hospitals and clinics in different parts of the country Medical education. nurses. opportunities for: • Engineering excellence. training.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 20.790 Cr) in 2006 growing at 15% per year and will reach US$ 4. Telemedicine • • • • • Opportunities to integrate telemedicine into healthcare to increase patient base. research 1. GE.9 nurses per thousand persons compared to world average of 1. • • Currently over 65% of the medical equipments are imported and thus is a key area for forging partnerships across borders. productivity.27 doctors (all kinds) and 0.17 billion (Rs 9.5 (2006) 0. cost-effective labour. Medical equipment at US$ 2. increasing emphasis on intellectual property rights and most importantly a fast Foreign companies to set up manufacturing base (Philips.2 (2006) Possible shortage of over 450.396 Cr) by 2012 As bulk of medical equipment is currently imported in India.

including banks are being used to -Privatization in 2000 ending the monopoly of the public sector. The main focus will be on X-ray systems and it will also undertake all global R&D activities for this product segment in this unit. 23. Multiple channels. The company has recently completed 40 per cent capacity expansion at its Goa unit and is in the process of receiving regulatory approval from the US FDA and European authorities. India was able to attract approximately 150. The Goa facility earlier used to work as a component manufacturing unit and the products were integrated in Germany from where they were exported.1 million for it in India. -Third. Medical Value Travel • • • Medical value travel is one of the most lucrative segments of the healthcare sector and is expected to grow into a US$1. The Goa plant will now operate as a global production hub. The company’s medical solutions division currently generates sales of about US$ 111. Government of India has further enhanced the Mvisa and MXvisa (Medical Visa) by extending it to three years from 6 months Potential to contribute US$ 1.4 billion additional revenue for upmarket tertiary hospitals by 2012. which are established medical care hubs that attract millions of medical tourists a year The Ministry of Tourism (MOT).2 -2. sell group and individual health insurance policies. • Introduction of Crisis Cover by insurance companies. More number of insurers are promoting insurance policies that provide comprehensive health coverage.5 billion industry by 2010 • In 2006-07. Three factors have changed the face of the medical insurance market: 22. New Products in Health Insurance • ICICI Prudential is looking at introducing a policy where the premium will remain the same year after year irrespective of the age of the policyholder. German electrical engineering major Siemens plans to source medical equipment from the Goa facility in India for the regulated markets. Growing demand for high quality health care has led to growing demand for health insurance. The sector is Potentially large as penetration is less than 12% of the population but growing.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats Siemens success story in India While the global orders will be placed through Siemens.000 patients to the country. India is already inching closer to Singapore and Thailand. and will account for 3-5% of the total healthcare delivery market • . up from 10. made the medical insurance segment more attractive through provision of cashless hospitalisation facility. 2007 has also been a growth booster for the industry. Health insurance -Introduction of Third Party Administrators (TPAs) by the Insurance Regulatory and Development Authority in 2002 has Insurance companies are in consultation with NABH to identify hospitals and diagnostic centres that will be allowed to process cashless claims. Siemens currently exports four models from India and will increase the product portfolio to 8-10 models by the end of next fiscal. it will be serviced out of India once the regulatory approvals are in place. which provides for payment on detection of any of the 35 diseases covered.000 patients about five years ago With an annual growth rate of 30 percent. the ‘detariffing’ of general insurance from January 1. The facility will export products to about 30 countries and is targeting export growth of about 45-50 per cent.

Mumbai Ace Vision Health Consultant Pvt. new and emerging players prefer to work on few specialised areas Key Hospital Planning Consulting Firms In India • • • Hosmac. Chennai Total Hospital Solutions. Ltd. Major hospital chains are now hiring hospital planning consultancy firms for a better and faster scale up of their facilities Need for a statutory body to monitor hospital planning firms • Established firms provide services ranging from a one stop solution. New Delhi H-PAMCO. Kamle’s Prescription Professional Health Planners. New Delhi Medicontrivers India Pvt. Growth in medical 25. New Delhi Apollo Hospital Enterprise Ltd.388 Cr) industry by 2012 from the current US$ 405 Million (Rs 1822 Cr). One such important industry is medical Clinical Trials • Indian clinical trials market in 2006 was US$ 140 million and is growing at a CAGR of 40 % for the last 3 years Several hospitals are setting up clinical trial centres . Mumbai Hospic. India’s market for medical textiles is growing at 10–12%. Medical Textiles and Clinical Trials infrastructure will be accompanied by demand for associated products and services. • Indian market for medical textiles is worth US$ 500 million. Hospital Planning and Consulting • • • Special skill sets required for orchestrating a hospital projects from ideation to implementation. Jaipur KSA Technopak. Ltd.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 24. Jaipur textiles. New Delhi Dr. Mumbai • • • • • • • • NOUS Hospital Consultancy (P) Ltd. global market is worth US$ 8. which shall almost double to a US$ 753 Million (Rs 3.2 billion.

longer term. Findings on foreign investment in Indian hospitals Primary study conducted in 2007 (funded by WHO and Ministry of Health) on “Foreign Investment in Hospitals: Status and Implications” illustrates a range of challenges affecting organic investments in the Indian hospitals segment. India’s large pool of skilled IT manpower and 26. Healthcare Outsourcing Factors making India the preferred destination for Healthcare outsourcing • • • HIPAA-compliant processes AAPC trained medical coders • • Healthcare BPO Services A college-educated. including government regulations Software applications to streamline workflow Medical Coding Medical Billing Patient Demographics Charge Entry Payment entry or Cash posting Claims Processing Accounts Receivable Tele-radiology Medical Transcription Patient Record Management and EMR (Electronic Medical Record) 27. infrastructural. forthcoming as PE. IPO. foreign individuals. Challenges to Private Investors • • • Although private investments growing in various segments of healthcare sector. trained and experienced operations team • • • • • • • • • • Thorough understanding of US medical coding and billing procedures and processes. with certain conditions . foreign corporate can register as sub account and invest via FII subject to 10% and 5% limits Foreign venture capital investments also allowed FIIs and private equity funding permitted under FDI. Indian service providers accounted for US$ 115 million worth of outsourcing and off shoring services during 2005-2006.• • A Clinical Research in Cancer (TMC) is one of the avowed objectives of the Tata Memorial Centre and Department of Atomic Energy (DAE) funded cancer centres (DAEFCC) National Centre for Clinical Trials has been established at Tata Memorial Hospital INDIA’S HEALTHCARE SECTOR: Opportunities & Threats the fast growing broadband connectivity and secure networks provide robust infrastructure for IT-enabled healthcare services India has an estimated share of 65 % in the global IT services off shoring segment and around 46 % of the global BPO market. and other constraints are affecting direct investments. VC based investments. • Regulatory environment very liberal for foreign investment in hospitals • • • • • • – Since January 2000 up to 100 percent FDI allowed under automatic route in hospitals in India Regulatory environment for other forms of foreign financing quite liberal FIIs and private equity funds can individually purchase up to 10% and collectively up to 24% of paid up share capital of company via open offers or private placement or through stock exchange Proprietary funds. direct investment not as Regulatory. human-resource. Medical services outsourcing from the US has seen a CAGR of 150% in the last two years.

and problems of efficiency Domestic constraints • • Initial and post establishment related operational issues adversely affect returns to investment in hospitals in India Features of investment make it unattractive for foreign investment Land & Equipment Long gestation period of such investment Profits of 13% or less after several years Depreciation of assets High interest costs of debt financing High cost of setting up hospitals and capital intensity Relatively low returns on such investment • • • • • • • Low asset turnover (below 1 or 2 for major hospitals) • • Margins squeezed by very high operating costs . Difficulties in setting up individually as an overseas investor Difficulties in establishing and maintaining joint ventures • • • • • Lower attractiveness of India as an investment destination due to perceptions of red-tape. Challenges External constraints • • Healthcare undergoing reform and internal problems in overseas economies.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats Status of other forms of investment • • • • Non-debt based foreign financing present via: Private equity (funds) with stakes of 15-26% Development agencies Investment arms of foreign government Around 50% of financing via long term domestic borrowing 28. Number of potential players who could invest is limited. lack of policy clarity. lack of transparency. Competing destinations Requirement of localized and in-depth knowledge of host country market.

9 Billion. Most importantly.85 beds per thousand population by 2012 needs an investment of US$ 77. Even complement each other’s effort. pending legislation. investment in human capital.INDIA’S HEALTHCARE SECTOR: Opportunities & Threats 29. the government and frameworks and better institutional governance. We need transparent regulatory If we want both organic and inorganic investments in the healthcare sector. a realistic targets of 1. we need health to be a core focus of government policy. Policy framework needs to recognize spinoffs from a facilitative private players need to focus on their core competencies/ responsibilities and work together to reduce inefficiencies and . Some vital issues to address are standards. accreditation. setting up national councils/regulatory bodies. between the government and private sector. we need to look beyond investment-specific and investment environment in terms of improving access to healthcare. Private sector must also look at healthcare from more than a commercial perspective. Concluding Thoughts capital market policies to the larger ecosystem and make it supportive for investors. exploiting domestic and global opportunities in emerging segments and synergies across segments. Our analysis points towards the need for stronger partnerships in healthcare. insurance etc.

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