Service Sector Management

HEALTH CARE SECTOR

CONTENT
• What is healthcare?
• Characteristics of healthcare services
• 8 P’s of healthcare
• SWOT Analysis
• Public hospitals v/s Private
• Recent development
• Healthcare in India
• Conclusion
WHAT IS HEALTHCARE?
• Health care is the prevention, treatment,
and management of illness and the
preservation of mental and physical well-
being through the services offered by the
medical, nursing, and allied health
professionals
 BEFORE INDEPENDENCE

• HEALTHCARE HAS BEEN BASED ON VOLUNTARY

WORK

• MEDICINAL PROPERTIES OF PLANT AND HERBS

WAS PASSED FROM ONE GENERATION TO
ANOTHER
 AFTER INDEPENDENCE
• GOVERNMENT OF INDIA LAID DOWN A STRESS ON
PRIMARY HEALTH CARE.

• GOVERNMENT INITIATIVE WAS NOT ENOUGH TO

MEET THE DEMAND.

• ALTERNATE SOURCES OF FINANCE WERE

CRITICAL FOR SUSTAINABILITY OF THE HEALTH
SECTOR.
 ENTRY OF PRIVATE SECTOR
• GOVERNMENT ON ITS OWN WOULD NOT BE ABLE
TO PROVIDE MORE FACILITIES FOR HEALTH CARE.

• GOVERNMENT ALLOWED THE ENTRY OF PRIVATE

SECTOR TO REDUCE THE GAP BETWEEN THE
SUPPLY AND DEMAND FOR HEALTH CARE.
 AND NOW……
• ONE OF THE LARGEST AND FAST GROWING
SERVICE SECTOR.
• REVENUE ACCOUNTS TO 5.2% GDP
• EMPLOYS OVER 4 MILLON PEOPLE
• BY 2012 REVENUE CAN REACH 6.5 TO 7.2%
OF GDP
• INDIA IS THE MOST PREFERED DISTINATION
FOR HEALTH CARE AMONG THE DEVELOPING
COUNTRIES
HOSPITALS
NURSING HOMES
FITNESS CENTERS
AMBULATORY SERVICES
MEDICAL EQUIPMENT
MANUFACTURERES
PHARMACEUTICALS
CHARACTERISTICS
OF HEALTHCARE
SERVICES
 Intangibility of the Service
Consultancy and medical advice are always
intangible in nature barring a few like

• 1. Clinical results
• 2. Medicines
• 3. Other physical environment

To reduce the intangibility of service, and the

uncertainty caused by it, services like nursing and
care, regular checkups by medical practitioner,
etc should be maximized to make the consumer
feel the physical aspect of the service provided.
 Perishability

• Clinical results are valid only at that point of

time when it was taken. After a certain
period, the results of previous test taken
are rendered invalid.
• Counseling sessions are delivered at a
point of time, and such services cannot be
stored for later use.
 Inseparability

• Production and Consumption of the

service occurs one inseparably. A
consulting session cannot occur
unless a patient is present with a
consulting personnel.
 Variability

• In the healthcare industry the same

service are unlikely to give the same
result at a different time, or different
customer. A particular therapy that works
for a patient may not work for another
patient with the same requirements.

• We should try to reduce this perceived

risk due to variability as much as
possible, for variability increases cost of
service.
The Service Marketing Triangle

HOSPITAL

DOCTOR PATIENT
8 P’s of Hospital Services
 PRODUCT

Types of services

Line services Auxiliary services

Supportive services
 Product

 Line services:

1. Emergency services
2. Out-patient department (OPD)
3. In-patient services
5. Operation theaters (OT)
 Product

• Supportive services:
1. Official laundry
2. Hospital medication
3. Blood bank
4. Pathology
5. Radiology
 Product
• Auxiliary services:
1. Temple & mediitation
2. 24 hr chemist
3. Security arrangement
4. SEWA
 Price

Differential pricing strategy

Externally Internally
 Price
• Innovative pricing strategy:

Day care procedure

Delivering value
 Place

• Avoid inconveniences

• Adequate transport & communication facilities

• Avoid congestion & atmospheric pollution

 Promotion

Personal

Promotion
techniques
Impersonal
 Promotion
Personal promotion i.e. word of mouth
 Promotion
• Impersonal promotion:
1. Press release
Promotion

2. Bill boards
 Promotion
3. Check-ups through campaign
People
The objective of providing quality service to
patients can be achieved by:
• Motivating employees to be efficient,
dedicated and loyal to the
organization.
• Providing regular on-the-job training
of employees to ensure continuous
improvement in health care
• Utilizing services of professionally
competent medical consultants.
• Use of the latest technology.
 Process
 Two different type of process for:

 Outpatient.

 Inpatient
Outpatient

Meeting doctor at
appointed time

Diagnosis

Treatment.

Simple medication
 Inpatient.

The arrival of patient.

Joining phase
Registration.

Diagnosis.
The intensive consumption
phase Treatment.

Information about future

action

Discharge of patient
Detachment phase &
payment
 Physical Evidence

Physical evidence is the environment in which

the service is delivered with physical or
tangible commodities and where the hospital
and the customer interacts.
Hospital Counter
Common Ward
Single Room
Emergency Room
Common Room
Dress Code
Certificates and Awards
PRODUCTIVITY
• Fitch projects 15% growth for
healthcare sector
SWOT ANALYSIS
 STRENGTHS

• Low cost of production

• Specialization

• Infrastructure and Efficient technologies

• Large pool of skilled doctors

• Low pricing in public hospitals

 WEAKNESS

• Highly fragmented leading to Price

competition
• Competition for small healthcare centers
• Cost of treatment is not affordable
• Imitated Drugs
• Rural Healthcare – A cause of concern
• Low share of India in World
Pharmaceutical Production (1.2% of world
production but having 16.1% of world's
population).
 OPPORTUNITIES

• Largely untapped market.

• Switching over from process
patent to product patent.
• Growing incomes and
Growing attention for health.
• Global outsourcing hub for
pharmaceutical products.
 THREATS

• Containment of rising health-care

cost

• Threats from other low cost

countries like China and Israel exist.

• The short-term threat for the

pharmacy industry is the
uncertainty regarding the
implementation of VAT.
 Public Hospitals vs. Private Hospitals
PUBLIC PRIVATE
1. Owned by private people.
1. Fully funded by govt.
2. Profit oriented
2. Service oriented
3. Huge promotion
3. They don’t do much
4. Are quite costly
promotion
5. Infrastructure is well
4. Charge low fees maintained
5. Lacks good infrastructure 6. Comparatively easy
6. Process of admission to process
discharge is difficult. 7. Very good care of
7. No personal or proper care patients
of patients 8. People i.e. doctors are
8. People i.e. doctors are experienced
highly qualified as well
they staff interns
 Government’s Initiative

• Union Budget 2009: India Spent $4.35 Billion on

Healthcare
• To encourage investment in the health care
sector, government of India has allowed 100% FDI
under the automatic route
• Reduction in custom tariffs on medical equipment
• Government has also announced tax holiday for
five years for the hospitals in rural areas
• Universal Health Insurance Scheme
 RECENT DEVELOPMENTS

• Huge investments in R&D

• Constant focus by Government
• Medical Tourism
• The benefits of health Insurance is availed by just 30-40
million Indians which is expected to rise to 160 million
by 2012
• Healthcare BPO is also growing fast. The services
include medical billing, disease coding, forms
processing and claims adjudication
• Increasing urbanization, rising health conscious
attitude, higher life expectancy
 INDIA …
Healthcare Destination to the World
 Healthcare in India

The Indian Healthcare Scenario

Current Scenario
Major Players
Future Outlook
 INDIAN HEALTHCARE CAPABILITY

 Over 60,000 cardiac surgeries

done per year with outcomes at
par with international
standards

 Multi organ transplants like

Renal, Liver, Heart, Bone
Marrow Transplants, are
successfully performed at one
tenth the cost.

 Patients from over 55 countries

treated at Indian Hospitals.
HIGH QUALITY HEALTHCARE AT A
SIGNIFICANT COST ADVANTAGE

 Centres of excellence providing specialty high quality

treatments.

Some areas are:

 Cardiology & Cardiac Surgery

 Joint Replacement

 Minimally Invasive Surgery & Therapeutic Endoscopy

 Oncology

 Pathology
INDIAN HOSPITALS CAN OFFER MEDICAL SERVICES
AT A FRACTION OF THE US / EUROPEAN COST

PROCEDURE COST (US$)

US THAILAND INDIA UK

Heart Surgery 40,000 7,500 6,000 23,000

Bone Marrow Transplant 2,50,000 ------- 26,000 1,50,000

Liver Transplant 3,00,000 ------- 69,000 2,00,000

Knee Replacement 20,000 8,000 6,000 12,000

Cosmetic Surgery 20,000 3,500 2,000 10,000

 India has the opportunity to provide the best of the
Western & Eastern healthcare systems

India’s Gift to the World

 Ayurveda recognized as an official
healthcare system in Hungary.
Ayurveda
 Doctors in the west are increasingly
prescribing Indian Systems of Yoga
Medicine
Siddha
 More than 70% of the American
population prefer a natural approach
to health

 Americans are said to spend

around $ 25bn on non-traditional
medical therapies and products *

Source : Los Angeles Times

* Economic times dated 25th July 2003

Escorts Heart Institute & Research Centre Ltd, New Delhi, INDIA
 Afghanistan

Pakistan Nepal

1.5 billion
Bangladesh

Sri Lanka

India has strong health infrastructure catering to 1.5 billion people

PATIENTS FLOW IN INDIA FROM ACROSS THE WORLD

USA, Australia,
New Zealand
UK
Canada
Middle South East
East Asia

East CIS
Africa

SAARC &
Neighbouring
Countries
 Medical Tourism
Medical Tourism

• A recent CII-McKinsey study on healthcare says Medical Tourism

alone can contribute Rs. 5,000-10,000 crores additional revenue for
tertiary hospitals by 2012, and will account for 3-5 per cent of the
total healthcare delivery market.

• What India needs to do is to strengthen basic infrastructure like

Airports, Power, Roads etc. to support these initiatives.

Escorts Heart Institute & Research Centre Ltd, New Delhi, INDIA
 INVESTMENT REQUIRED TO BRIDGE THE
GAP IN NEXT 10 YEARS
US $ in billions ESTIMATES

0.5-0.7 0.5-1 22-30

7-9 0.5-0.7

Medical equipment
could account for 20-
13-20 30% of investment in
Beds (Rs.20,000 to
40,000 crore)

Investment Investment Investment Investment Investment Total

in secondary in tertiary in medical in nursing for other investment
beds beds colleges* schools health professionalsrequired
(e.g., pharmacists,
technicians,
administrators)
* Excludes investment in bed capacity to avoid double count with investment in secondary/tertiary beds

(Source: CII-McKinsey & Company Report 2002)

The Indian Healthcare Market

India Spends US $ 22.7 Billion* On Healthcare

Source: National Accounts Statistics 2001; McKinsey analysis

Healthcare Market (2005 vs 2025)

Healthcare is the third largest growth

* segment in India

Source: National Accounts Statistics 2001; McKinsey analysis

 Global Healthcare Infrastructure
Beds Physicians Nurses
Countries Per ’000 population Per ’000 population Per ’000 population

Distribution is skewed towards

Urban/ Metro Areas
0.9
1.5 1.2
India

1.6
Low income 1.5 1.0
(e.g., sub-Saharan Africa)

4.3 1.8 1.9

Middle income
(e.g., China, Brazil)

High income 7.4 1.8 7.5

(e.g., US, Western Europe)

World average 3.3 1.5 3.3

Total expenditure in India as percentage of GDP : 5.0 (2004)

 Sectorwise Distribution
Sector Direct employment Revenues/GDP
Million, 2000-2001 Per cent, 2000-2001

Healthcare
4.0 5.2

Education 5.3 4.8

Healthcare is the
Retail banking 1.0 3.5 largest service
industry in
Power
1.2 3.0 terms of
revenues and
Railways
1.6 1.8 the second
largest after
Telecom 0.8 1.4 education in
terms of
Hotels, restaurants 1.7 0.9 employment
IT 0.4 1.7

By 2012, the Healthcare sector could account

for 7- 8% of GDP and provide direct and indirect employment to 9 million

Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis
India Prefers Private Providers

Private expenditure as % of total expenditure on health : 82.7 (2004)

Source: CII-McKinsey Report, 2002

 Public and Private Sector

India will have the largest number of diabetics in the world in next 3 years

Source: NSSO, 52nd Round

Drivers of Growth

Health Insurance penetration

Increasing disease burden – lifestyle diseases

Awareness of healthcare and preventive care

Employer provided healthcare

Community based health plans

Increasing health awareness, Increasing spends on health

Healthcare – Urban Vs Rural

Healthcare services one of the fastest growing segment in India

Major Players
Clinics & Nursing Homes Charitable Trusts
Single doctor or family of Multispeciality hospitals run by
doctors religious or social groups
Good local network and word of Standard of care is driven by
mouth clientele individual doctors
Limited range of services and Subsidised pricing offset by
facilities donations
Sub-optimal facilities

Government Hospitals Organised Sector

ill equipped to provide efficient Very few players in this sector
healthcare Regional in focus, usually
Unavailability of appointed offshoots of tertiary players
doctors and hospital staff Most current players are Urban
Not favoured by semi-urban Centric
populations
Standard of care is abysmal

Healthcare services is highly unorganised segment in India

Healthcare Services Growth

Healthcare services – expected CAGR of 11 to 13%

 The Market Opportunity

The Indian Healthcare Delivery market is estimated at

US$ 18.7 billion. Nearly 65 % of the healthcare services
market has been captured by the private sector.

The industry is growing at about 13 % annually and is

expected to grow at 15 % over the next four to five years.

A recent CII - McKinsey & Co. study forecasts growth

from US$ 18.7 billion to around US$ 45 billion –
equivalent to 8.5 % of GDP by 2012. Private healthcare is
expected to account for 75 % of this spending

McKinsey : Rural healthcare will account for half of the total consumption
 Investment in India (Estimates)

Healthcare
23-32

Investment
needs of the
healthcare
Power 99-131 sector are
comparable to
other
infrastructure
sectors
Telecom
41-53

Roads 25-35

Healthcare in India will grow at 10.8% annually to reach USD 190 billion
Indian Healthcare Sector
• Estimated to be a US$ 30 billion market.
• Includes pharmaceuticals, healthcare,
medical and diagnostic equipment and
surgical equipment and supplies.
• Accounts for 5.2 per cent of the GDP.
• It employs over 4 million people.
• Private spending accounts for almost
80 per cent of total healthcare
expenditure.
 Major Players In Indian
HealthCare Services
 Government Sector
 Apollo Group
 Fortis
 Max
 Wockhardt
 Piramal
 Duncan
 Ispat
 Escorts
 Ranbaxy Group Company
Healthcare Infrastructure…..In
Summation
 India needs at least 750,000 extra beds to meet the demand for inpatient
treatment by 2012- opportunity in tertiary healthcare facilities.
 India needs at least 1 million more qualified nurses and 500,000 more
doctors by 2012 as compared to existing number.- opportunity in medical
education.
 To raise this infrastructure, total additional investment to the tune of US$
25-30 billion is needed by 2012.
 Government and international agencies will only be able to gear up US$ 7
billion and the rest of investment has to come from private sector.
 CONCLUSION

Fast growing sector

Health conscious society

Huge investments made

Reduction in duties by Government

Bright Future

Health is Wealth
 THANK YOU
PRESENTED BY:
HIMANSHU
SHWETA