New Horizons in Indian Healthcare

Trends in healthcare sector investment

T HE PARTHENON G ROUP
Boston • London • Mumbai • San Francisco

Agenda
 Parthenon Global Healthcare Practice
 Worldwide healthcare trends and investment implications  India’s healthcare market

T HE P ARTHENON G ROUP

 The Indian urban healthcare consumer  New business models and investment opportunities

2

The Parthenon Group Global Coverage T HE P ARTHENON G ROUP = On The Ground Projects Completed 3 .

mergers and acquisitions • • Suppliers  Laboratory equipment Life Sciences  Pharmaceuticals  Drug distribution  Nutritional supplements Providers  Hospitals  Primary care  Specialist treatment centers Payers  Managed care  Other health insurance Government  Healthcare funding  Health policy and strategy  Informatics  Medical publishing and education  Pharmacy benefit managers  Leveraged procurement  Revenue cycle management  Outsourced clinical research  Diagnostics and imaging  Stop loss  Discount cards  Public health  Temporary staffing  Medical devices  Surgical implants  Home health care  Cosmetic surgery  Dentistry 4 . policy and systems design.Global Healthcare Practice Deep Understanding of Healthcare Value Chain  Parthenon’s Global Healthcare Practice: T HE P ARTHENON G ROUP • Built up from over 10 years of project experience Covering all major sectors of health care Advising on corporate and business unit strategies. performance improvement.

Agenda  Parthenon Global Healthcare Practice  Worldwide healthcare trends and investment implications  India’s healthcare market T HE P ARTHENON G ROUP  The Indian urban healthcare consumer  New business models and investment opportunities 5 .

000 Denmark Canada France Austria Germany Netherlands Australia Sweden Greece Ireland New Zealand Italy UK Israel Japan Finland Portugal Spain Argentina Qatar Singapore UAE Kuwait Brunei 5% Hungary S. 2006) 10% 6. GDP per capita. OECD. Korea Brazil Slovakia Poland Estonia 1.000 GDP per capita (PPP Int. $) Source: WHO.000 Switzerland Norway 4. $.000 30.000 70.000 60. IMF 6 .000 40.000 Luxembourg 5.Healthcare expenditure threatens to reach unsustainable levels in many developed countries Healthcare Expenditure vs. 2006 7.000 Turkey Latvia China Mexico Saudi India Russia Arabia 0 0 10.000 2.000 3.000 50.000 USA T HE P ARTHENON G ROUP 15% Total Health Expenditure per capita (PPP Int.000 20. Africa Lithuania S.

Policy trends are changing the healthcare landscape to try to bend the cost curve  Current Model Current Model  Performance T HE P ARTHENON G ROUP  Sustainable Model Sustainable Model  Value  Activity  Treatment  Inpatient  Capital  Outcomes  Prevention  Outpatient  Information  Specialty Focused  Physician  Patient Pathway  Basic Health Professionals 7 .

methods.This is driving a shift in investment patterns and opportunities T HE P ARTHENON G ROUP Divest Hold Invest  General and multispecialty hospitals  Long term residential care  Durable medical equipment and devices  Branded pharma  Diagnostic imaging  Retail medicine / pharmacies  Clinical labs  Generic pharma  Biotech  Outsourced pharma services • Contract research • Contract manufacture  Single speciality hospitals  Medical Tourism  Mental Health  Homecare  Care extenders (location. protocols) • TeleHealth  Wellness and prevention • Obesity • Smoking cessation  Healthcare IT • Decision support • Revenue cycle management  Outsourced Provider Services Note: The segments in bold are of particular interest to the Indian market 8 .

Agenda  Parthenon Global Healthcare Practice  Worldwide healthcare trends and investment implications  India’s healthcare market T HE P ARTHENON G ROUP  The Indian urban healthcare consumer  New business models and investment opportunities 9 .

000B Rs.231B Public 13% Rs.3% 4.2.000B Rs.0% 4.1.729B Rs.9% 5.9% 4.0B 2000 2001 2002 2003 2004 2005 2006 2007 2008 % of GDP 4.1. Primary Research 10 . 2000-2008 Rs.8% 4.000B Total Expenditure on Healthcare (Rs.027B Private 15% Rs.6% 4.2.1.9% Source: World Health Report 2009.1.893B Rs.India’s healthcare spending is growing well ahead of GDP T HE P ARTHENON G ROUP Healthcare Spending in India.281B Rs.3.155B Rs.574B Rs.1.1.486B Rs.943B Rs. B) CAGR 00-08 14% Rs.8% 4.2.9% 4.1.

Sources Total = Rs.1.574B 100% Rs.1.597B Rs.203B Public 80% Provider 60% Private Private 40% Private 20% Private 0% Primary Private Secondary & Tertiary Pharma & Biotech CRO Other Medical Equipment& Devices Private Public Private Source: World Health Report 2009.168B PMI & Other Pvt.617B Rs.78B Rs.57B Rs.24B Rs. Analyst Reports. Parthenon Analysis. IBEF Healthcare Report 2009.2. Primary Research 11 .574B Payer Public NGO & Social Security Contrib.Out of pocket payment and private provision dominate India’s healthcare system Rs.623B Rs.732B T HE P ARTHENON G ROUP Rs.2. Out of Pocket Rs.49B Total = Rs.

Reddy Manipal Wockhardt Apollo Fortis Sun Pharma Piramal Healthcare GSK Cipla New India 0% Ranbaxy Primary Care Secondary & Tertiary Care Pharma & Biotech CRO Medical Other Devices & Equipment 0% PMI Market Share Source: Assocham Healthcare Report 2009.720B Rs.The private market is highly fragmented and focused on acute care and pharmaceuticals T HE P ARTHENON G ROUP India Private Healthcare Service Provision by Segment. Primary Research 12 .1. IBEF Healthcare Report 2009. Analyst Reports.27B Rs.556B Rs.1.43B PMI 2009 100% Rs.22B 100% Rs.003B Rs. 2009 Total = Rs.66B Other IFFCO TOKIO Cholamandalam Reliance Bajaj Allianz 80% 80% Oriental Star Health 60% Other 40% 60% Other Vimta Advinus Sai Advantium GVK Zydus Cadila healthcare Aurobindo pharma National United India 40% Piramal Veeda Jubilant Biocon Siro Clinpharm 20% ICICI Lombard 20% Dr.70B Rs. Health Insurance India.

Acute care provision is highly concentrated at the high income end of Tier I cities T HE P ARTHENON G ROUP Hospital Beds per 10.000 Members of The Population Vis-a-Vis WHO Benchmarks. and Bangalore Source: WHO. New Delhi. Primary Research . All-India and Tier I Cities 50 45 Hospital Beds Per 10K Population 40 WHO recommended 30 20 15 10 10 7 18 0 All-India Tier I Low Income Tier I Lower Tier I Upper Middle Middle Income Income Tier I High Income Price Point Single Room - <Rs 1K Rs1-2K Rs 2-4K >Rs 4K 13 Note: Tier I is the average of Mumbai.

0X High Income Low Income Income Level Source: Fiscal Studies.0X Healthcare Expenditure Index 1.5X 1.5X UK India . Indicus Analytics.0X Health Expenditure 0. ONS 14 . Top Income Segment =1 2.Urban 0. National Bureau of Statistics of the Peoples Republic of China.Healthcare expenditure in India has many of the characteristics of a luxury good T HE P ARTHENON G ROUP Healthcare Expenditure by Income Segment Indexed.

Agenda  Parthenon Global Healthcare Practice  Worldwide healthcare trends and investment implications  India’s healthcare market T HE P ARTHENON G ROUP  The Indian urban healthcare consumer  New business models and investment opportunities 15 .

. Parthenon Analysis. Tier I. Tier II & Tier III City Household Distribution By Annual Household Income Segments. II or III are sampled Source: Primary Research. the highest income segment accounts for les than 5% of households.. Indicus Analytics 16 . 2008 100% 13M >1000K 500-1000K T HE P ARTHENON G ROUP 9M >1000K 6M >1000K Total = 28M * 500-1000K 300-500K 500-1000K 300-500K 80% Percent of Households 300-500K 60% 40% <300K 20% <300K <300K 0% Tier I Tier II Tier III Note: *48 districts out of 135 districts in Tier I.In urban India.

...5K Tier 1 Tier 2 Tier 3 Note: Income is annual disposable household income Source: Primary Research and Analysis. 2008 100% Average Spend Per Household 80% >1000K >1000K >1000K Rs.4K 20% <300K 0% <300K <300K Rs. Tier II & Tier III City Healthcare Spending Distribution By Annual Household Income Segments.18K 300-500K 300-500K Rs.4.6.but more than 40% of all healthcare spending T HE P ARTHENON G ROUP Tier I.69K 60% 500-1000K 40% 500-1000K 500-1000K 300-500K Rs. Indicus Analytics 17 .

Growth in spending is shifting to smaller cities and lower income categories T HE P ARTHENON G ROUP Tier I. Indicus Analytics 18 . Tier II & Tier III City Healthcare Spending Distribution By Annual Household Income Segments. 2008 100% 80% >1000K >1000K >1000K Population Growth ~0% 0-10% 60% 500-1000K 40% 500-1000K 500-1000K 10-20% >20% 300-500K 300-500K 300-500K 20% <300K <300K <300K 0% Tier 1 Tier 2 Tier 3 Note: Income is annual disposable household income Source: Primary Research and Analysis.

Urban consumers purchase a wide range of healthcare services Percent of Respondents Who Spent Money on Different Healthcare Categories 80% 74% T HE P ARTHENON G ROUP 62% Percent of Respondents 60% Percent Spent Money 51% 51% 48% 44% 40% 25% 22% 20% 21% 14% 10% 0% Blood/ Urine Test X-ray/ Specialist Antibiotics Ayurdevic Vaccination Small Hospital Ultrasound Visit Medicine Surgical Stay for Procedure Infection GP Visit Planned Emergency Large Large Surgical Surgical Procedure Procedure Q: Have you or your family spent money in the last three years on the following healthcare categories? Source: Parthenon Healthcare Survey (n=105) 19 .

how satisfied were you with your hospital stay? Source: Percent lower than 4. Parthenon Healthcare Survey (n=105) 20 .Dissatisfaction levels with hospital care are high. particularly with smaller and government hospitals T HE P ARTHENON G ROUP Percent Dissatisfied with Hospital Experience by Hospital Type 50% 45% 40% Percent of Respondents 50% 30% Percent Unsatisfied 20% 24% 21% 10% 0% Government Hospital Private Small Hospital (<200 Beds) Private Large Hospital (>200 Beds) Corporate/Trust Hospital Q: On a scale of 1-7 where 1 = Not at all satisfied and 7 = Extremely satisfied.

Process n=10 Quality of the Food Price of the Room per Night 80% Billing and Admin. Process Waiting Times Waiting Times 20% Quality of the Nursing Staff 0% Government Hospital Private Small Hospital (<200 beds) Quality of the Nursing Staff Hygiene in the Hospital Hygiene in the Hospital Quality of the Physician Private Large Hospital (>200 beds) Corporate/ Trust Hospital Q: What were the three most important reasons for not being satisfied with your hospital stay? Source: Parthenon Healthcare Survey (n=105) 21 . pricing and admin at the high end T HE P ARTHENON G ROUP Most Important Reasons for Not Being Satisfied by Hospital Type 100% n=6 Waiting Times n=19 Quality of the Food Price of the Room per Night n=20 Other Quality of the Food Price of the Room per Night Billing and Admin. Process Waiting Times 60% Hygiene in the Hospital 40% Hygiene in the Hospital Billing and Admin.Hygiene and staff quality dominate concerns at the low end.

provides ~2.2X market opportunity also allowing a move away from highly competitive Tier 1 dynamics Source: Parthenon Analysis 22 .Tier 2 and middle income markets offer attractive opportunities alongside the traditional high end focus Opportunity Attractiveness High Low T HE P ARTHENON G ROUP Tier 1 Tier II Tier III High Income Middle Income Lower Income Expanding from High Income Tier 1 provision and to include Middle Income across other major urban areas.

Agenda  Parthenon Global Healthcare Practice  Worldwide healthcare trends and investment implications  India’s healthcare market T HE P ARTHENON G ROUP  The Indian urban healthcare consumer  New business models and investment opportunities 23 .

24 .Several business models offer attractive growth and lower capital intensity Business Model Investment Thesis T HE P ARTHENON G ROUP India Examples  Specialist hospitals  Lower capital and operating costs than general hospital models  Superior outcomes due to experience curve effects  Patient acquisition can be an issue in Indian context  Day surgeries  Lower capital and operating costs than general hospital models  Superior outcomes due to patient selection and lower risk for hospital acquired infection  Financial model can be designed to create superior incentives for all stakeholders  Hub & Spoke  Potential for better leverage of CapEx and “star physicians” by effectively extending the catchment area of the hospital In addition referrals pattern to hub is locked in  Satellite hospitals have a lower CapEx structure.

Several business models offer attractive growth and lower capital intensity Business Model Investment Thesis T HE P ARTHENON G ROUP India Examples  Diagnostic clinics  Potential for consolidation for highly fragmented market with top 5 organized chains constituting between 7-10% of the market  Chains are growing at 3x the pace of the rest of market through acquisitive expansion  Patient acquisition can be an issue in Indian context  Primary care networks  Broader offering and potential for cross-selling through integration of primary care. pharmacy and wellness services  Potential for franchise model resulting in a lower capital base and leveraging existing referral networks  Global CRO services  Low cost trial capacity  Cross-country capacity  Access to patients and speed of recruitment  High quality physicians and administrators  Strong regulatory capabilities 25 . diagnostic.

competition there is becoming more fierce  In Tier II / III. driven strongly by increases in disposable income  While its traditional focus has been on the high income segment in the metro areas. improved CapEx leverage. greater operating efficiency and / or addressing untapped markets are potential new horizons for attractive healthcare investments 26 .Conclusion  India healthcare is an attractive growth market T HE P ARTHENON G ROUP  It shares many of the characteristics of a luxury good. high end and mid market offer attractive potential but challenges around scale / price points make traditional high capital solutions difficult  Business models providing lower cost.

Sign up to vote on this title
UsefulNot useful