Professional Documents
Culture Documents
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
Index
1. Overview of the Indian Healthcare Sector
2. Segments in Healthcare Sector
3. Medical Infrastructure-
a. Current state
b. Special Economic Zone
c. Manpower Statistics
d. Medical Education
4. Policy Initiative
There are some economic factors which make India such an exciting market. Since healthcare is dependent on the people
served, 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. India spends only 1% of its GDP on health, translating into $35 per capita. France spends 10.4% and
Japan 8%. A significant portion of the population receives inadequate or no health care, specifically 25.7% living below the
poverty line and those who have only the public health system to rely on. National Family Health Survey for 2005-06 estimates
453 deaths per 100,000 women; higher than Cambodia, Bolivia and Botswana. India accounts for 20% of the world's maternal
deaths, with a woman dying every five minutes. 20% of deaths of children worldwide under the age of 5 occur in India. The
private healthcare sector in India accounts for over 75 percent of total healthcare expenditure in the country and is one of the
largest in the world. India’s healthcare sector, however, falls well below international benchmarks for physical infrastructure
and manpower, and even falls below the standards existing in comparable developing countries.Given the growing demand, the
emergence of reputed private players, and the huge investment needs in the healthcare sector, in recent years, there has been
growing interest among foreign players and non resident Indians to enter the Indian healthcare market. There is also growing
interest among domestic and international financial institutions, private equity funds, venture capitalists, and banks to explore
investment opportunities across a wide range of segments. This study examines the status and the major brands in the key
segments of the healthcare sector, i.e., in hospitals. It also analyses the implications for the overall healthcare system.
Share of tertiary care in the total healthcare market is around 15-20%. Market for tertiary care expected to grow at a faster
rate, due to rise in complex in-patient ailments such as heart diseases and cancer.
Source: The Business World, Ernst & Young Survey; June 2007
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
3. Medical infrastructure
A. Current state
• Current Hospital beds per 1000 population stands at 1.11
• 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
Under the SEZ Act 2005 “Healthcare” has been defined as an approved service. For a sector specific zone, a hospital with
minimum bed strength of 25 is stipulated and this goes up to 100 beds for a multi product SEZ. With the latest approvals, given
by an inter-ministerial Board of Approval, the total number of formally approved SEZ is now at 395, of which, 154 have been
notified by the Law ministry.
C. Manpower Statistics
• Number of Doctors - 660,801
• Number of Nurses - 1,371,121
D. Medical Education
• 229 recognized medical colleges of which 106 were established through the private route
• 25,000 medical graduates pass out each year
• 136 medical schools admit more than 6,000 PG trainees in their programs
4. Policy Initiative
• The focus is on those diseases that are principally contributing to the disease burden -TB, Malaria and
Blindness from the category of historical diseases and HIV/AIDS from the category of newly emerging
diseases.
• Identification of specific programmes targeted at women’s health and strengthening of food and drug
administration, in terms of both laboratory facilities and technical expertise.
• Greater contribution from the Central Budget for the delivery of public health services at the state level.
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
While rising incomes and growing literacy are likely to drive higher per capita expenditures on healthcare, the shift in disease
profiles from infectious to lifestyle-related diseases are expected to raise expenditures per treatment. Lifestyle-related diseases
are typically more expensive to treat than infectious ones. In 2001, the average inpatient cost for lifestyle-related diseases
(cardiac problems, digestive issues etc.) was US$ 658 compared to US$ 91 for infectious diseases.
India’s disease profile is expected to follow the same pattern as in developed economies. Based on demographic trends and
disease profiles, lifestyle diseases -cardiovascular, asthma and cancer have become the most important segments, and in-
patient spending is expected to represent nearly 50 per cent of total healthcare expenditure. In the inpatient market, the share
of infectious diseases is expected to decline from 19 per cent in 2004 to 16 percent in 2008. The number of cardiac-disease-
related treatments in India is expected to grow from 1.5 million to 1.9 million per year over 2004-08, which would constitute
5.1 per cent of all treatments, The spend share of inpatient cardiac treatment is estimated to grow to 19 per cent of the total in
2008 from 16 per cent in 2004. This would drive a 13.4 per cent CAGR in the inpatient cardiac care market from US$ 1.2 billion
in 2004 to US$ 2.04 billion in 2008. The average realization per inpatient for cardiac related treatment is much higher than for
other disease segments.
Hospitalisation Cases, 2006 , Source: Ernst & Young Analysis, Business Line: 2007
There is favourable increase in percentage of working class population from 32% in 2006 to 36% in year 2016. General
awareness, literacy rates and patient preferences in healthcare decisions is growing. National Health Policy, 2002 has laid
strong emphasis on the policy goal of better engaging patients in their healthcare decisions.
Increasing health consciousness among common people has created avenues for preventive healthcare. Hospitals have started
witnessing a number of patients who visit for health check-ups as a preventive measure. The various health check-up packages
offered include a combination of CBC, blood sugar, cholesterol, urine, stool, digital chest X-Ray, ECG, general examination, blood
group, blood sugar, liver profile, proteins, lipid profile, cholesterol, and renal profile. Around 70 per cent of treatment decisions
in the country are based on lab results. This trend has further led to newer avenues for companies involved in carrying out
diagnostic tests.
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
In the domestic market, health spending will be sustained by two demographic trends: increased life expectancy and an ageing
population. Life expectancy, which averaged 63.3 years in 2000-04, is expected to increase to 65.1 years in 2005-09 and to 66
years in 2006-10. The proportion of the population aged 65 years and over is also on the rise, and will increase from 4.7 per
cent in 2000 to 5.3 per cent in 2005 and 5.8 per cent in 2010. 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, and therefore also in terms of market
potential.
The healthcare systems in Europe and the United States are under severe pressure; particularly the National Health Service
(NHS) in the UK, which has a long list of patients waiting for over a year for surgery. In the US the healthcare crisis has a
different dimension. Around 50 million citizens are uninsured, with even the insured having to pay dearly for treatment.
Further, the shortage of paramedical professionals such as nurses has aggravated the situation. Patients from the US are now
regularly beating a path to India, as many of their insurance companies have entered into tie-ups with private Indian hospital
chains.
F. India’s value proposition goes far beyond cost; quality second to none
Cost is not the only factor weighing in India’s favour. Escorts Hospital, for instance, is one of the only handful treatment
facilities worldwide that specialize in robotic surgery. The death rate of coronary bypass patients at Escorts is 0.8 per cent. By
contrast, the 1999 death rate for the same procedure at New York-Presbyterian Hospital was 2.35 per cent, according to a 2002
study by the New York State Health Department. The overall success rate of cardiac bypasses is 98.7 per cent in India, as
opposed to only 97.5 per cent in the United States.
• Launched in 1999, Currently JCI surveys nearly 20,000 health care programs through a
voluntary accreditation process
• 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.
Launched in 2005, NABH is a constituent board of Quality Council of India, set up to establish and operate the accreditation
programme for healthcare organizations in India. It has standards specific to the Indian healthcare setting, major aspects being
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
the assurance of uniform access, assessment, care of patients and protection of patient’s rights.
• Blood Banks
• Diagnostic Centres
• Dental Hospitals/Clinics
Major corporate hospital groups in India are making significant investments in setting up state-of-the-art Health Cities in major
Indian cities. Around 15-20 Health Cities are expected to come up in India in the next 5 years. Health Cities are looking at
catering to larger populations by offering facilities such as hotels, residential facilities, and recreational facilities of spa, gym and
even golf courses. Greater emphasis is on education, research and development.
• 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, cardiac and other surgeries for the rural poor in India
• Teleradiology being used to leverage the time difference advantage with other developed
Nations
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
13. Biotechnology
Indian companies are driven to innovative research and are establishing their own niche areas: Reliance Life Sciences is
planning to launch genetically engineered skin; Avesthagen has won a US patent for multiple use genetic modification
technology; GlaxoSmithKline Biologicals has plans to launch a number of vaccines like new-generation DTP, rotavirus and
cervical cancer for its global portfolio. Similarly, Xcyton, a small biotech diagnostic kit-maker has made its presence felt in the
global and domestic diagnostics market. Several biotech medicines are due to come off patent in the next few years, and
pharmacy majors are looking at India for contracting research and manufacturing of biologic generics. India is becoming a
talented and cost-competitive destination for biotechnology research, product development, toxicity studies and clinical trials
and has positioned itself to take advantage of moves by governments in the US and Europe to create a regulatory framework for
approving generic medicine.
The reversal of trend is encouraging. Medical professionals of Indian origin, working in other nations are willing to come back
and settle in India.
• Singapore-based Parkway Group Healthcare PTE Ltd. has firmed up plans of acquiring tertiary care hospital
projects in Class A and B cities of India, especially in the South with one operational in Hyderabad
• The Asian Heart Institute, Mumbai plans to invest US$ 7.32 million for expansion activities and is actively
exploring acquisition targets outside Mumbai
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
Fortis Healthcare
• Has a chain of hospitals with an installed bed capacity of about 1,790 beds
• Operations across North India -Delhi, Noida, Mohali, Amritsar, Faridabad, Raipur and Srinagar
• Expansion plans through mergers and acquisitions
• Has a joint venture with Real Estate player DLF to set up hospitals across the country with an investment of about US$
1.5 billion
• 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
• Has announced the signing of a definitive agreement (the “pre-IPO”) for allotment of 670,000 equity shares to VASCO
Inc. for an investment amount of US$ 2.6 million
Wockhardt Hospitals
Narayana Hrudayalaya
• First-of-its-kind cardiac care hospital in Bangalore, set up by the Asia Heart Foundation (AHF)
• Capability to perform 25 major heart surgeries and over 20 cardiac catheterisations a day
• Hub for telecardiology networks with a Joint Venture between the Governments of seven hill states
and West Bengal, Karnataka Health Systems and ISRO
• A 5,000-bed Health City is coming up at, Bangalore, which will comprise of 10 hospitals
Max Healthcare
Columbia Asia
• First healthcare provider to enter through the FDI route
• Opened the first community healthcare multi-specialty facility at Bangalore
• Planning to invest US$ 15. 85 million to set up more hospitals in Bangalore
• Tied-up with GE, to collaborate on a number of initiatives for creating a medical Institute of world-class standards
Global Hospitals
• The US$ 9.75 million facility functions from 2 locations in Hyderabad
• Invested US$ 36.58 million to set up ‘BGS Global Hospital’ in Bangalore
• Tied up with the Sureka Group, to set up a 300-bed transplantation and tertiary care centre in Kolkata
• Planning to establish a US$ 240 million ‘health city’ in Chennai on the 46-acre hospital site
• Has been envisioned as a multi-disciplinary high-tech medical institute spread over 43 acres in
Gurgaon
• 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
Foreign Players
• 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, Emaar from the Middle East and Prexeus Health Partners from the
US have announced plans
• Fortis’s Lucknow MediCity, is being set up in Ansal’s 1,500 acre upcoming mega township.
• Hinduja Group and Limitless LLC, the realty arm of Dubai World, are putting in about US$ 1.1 billion in their 51:49 JV
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. ARDL had formed a joint venture —
Neotia Elbit Hospital Venture Ltd, with the Elbit Group of Israel.
– Private equity, acquisitions, FDI, FII, NRI investment, joint ventures, tie-ups, Venture Capital, IPOs
• Segments attracting private investment include diagnostic chains, medical device manufactures, and hospital chains
• Significant growth in Private Equity (PE) investments in India’s healthcare sector
• Sale of 25 percent stake by Narayana Hrudayalaya Pvt. Ltd to the private equity arms of American International Group
Inc. (AIG) and JPMorgan for $100 million
• Joint ventures and tie-ups between leading Indian hospitals and domestic/overseas companies/institutions
• Harvard Medical International and Cleveland Clinic have entered the country through joint ventures
• Parkway Group from Singapore, Emaar from the Middle East and Prexeus Health Partners from the US have
announced plans
• Warburg Pincus’ total investment in Max Healthcare stands at US$ 34.15 million
• George Soros’ fund Quantum and Blue Ridge bought 10 % in Fortis Healthcare
• Manipal Health Systems Private Limited has risen over US$ 20 million of equity from IDFC Private
equity Fund
• Bangalore-based HealthCare Global Enterprises Limited (HCG) has risen over US$ 10 million in
equity from IDFC Private Equity Fund
• Metropolis Health Services Ltd. (Metropolis), India’s leading corporate diagnostics chain, raised
over US$ 8 million in equity from India Advantage Fund-I managed by ICICI Venture Capital.
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
20. Telemedicine
• Opportunities to integrate telemedicine into healthcare to increase patient base, productivity, and enable cost effective
delivery
• Investment opportunities for setting up telemedicine centres within hospitals, create networks of hospitals and clinics
in different parts of the country Medical education, training, research
• 1.27 doctors (all kinds) and 0.5 doctors (allopathic) per thousand persons in India compared to world average of 1.5
(2006)
• 0.9 nurses per thousand persons compared to world average of 1.2 (2006)
• Private players could invest in establishment of medical colleges and training institutes
While the global orders will be placed through Siemens, it will be serviced out of India once the regulatory approvals are in
place. The Goa plant will now operate as a global production hub. The facility will export products to about 30 countries and is
targeting export growth of about 45-50 per cent. Siemens currently exports four models from India and will increase the
product portfolio to 8-10 models by the end of next fiscal. 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. The company’s medical solutions division currently generates sales
of about US$ 111.1 million for it in India.
-Introduction of Third Party Administrators (TPAs) by the Insurance Regulatory and Development Authority in 2002 has
made the medical insurance segment more attractive through provision of cashless hospitalisation facility.
-Third, the ‘detariffing’ of general insurance from January 1, 2007 has also been a growth booster for the industry.
Insurance companies are in consultation with NABH to identify hospitals and diagnostic centres that will be allowed to process
cashless claims. The sector is Potentially large as penetration is less than 12% of the population but growing.
• 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.
• Introduction of Crisis Cover by insurance companies, which provides for payment on detection of any of the 35
diseases covered.
• Medical value travel is one of the most lucrative segments of the healthcare sector and is expected to grow into a
US$1.5 billion industry by 2010
• Potential to contribute US$ 1.2 -2.4 billion additional revenue for upmarket tertiary hospitals by 2012, and will account
for 3-5% of the total healthcare delivery market
• In 2006-07, India was able to attract approximately 150,000 patients to the country, up from 10,000 patients about five
years ago
• With an annual growth rate of 30 percent, India is already inching closer to Singapore and Thailand, which are
established medical care hubs that attract millions of medical tourists a year
• The Ministry of Tourism (MOT), Government of India has further enhanced the Mvisa and MXvisa (Medical Visa) by
extending it to three years from 6 months
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
• Special skill sets required for orchestrating a hospital projects from ideation to implementation.
• Major hospital chains are now hiring hospital planning consultancy firms for a better and faster scale up of their
facilities
• Established firms provide services ranging from a one stop solution; new and emerging players prefer to work on few
specialised areas
• Hosmac, Mumbai
• Medicontrivers India Pvt. Ltd, Mumbai
• Ace Vision Health Consultant Pvt. Ltd, Jaipur
• Professional Health Planners, New Delhi
• Hospic, Mumbai
• H-PAMCO, New Delhi
• KSA Technopak, New Delhi
• NOUS Hospital Consultancy (P) Ltd, New Delhi
• Apollo Hospital Enterprise Ltd, Chennai
• Total Hospital Solutions, Jaipur
• Dr. Kamle’s Prescription
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
INDIA’S HEALTHCARE SECTOR: Opportunities & Threats
• National Centre for Clinical Trials has been established at Tata Memorial Hospital
• 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)
• Although private investments growing in various segments of healthcare sector, longer term, direct investment not as
forthcoming as PE, IPO, VC based investments.
• Regulatory, infrastructural, human-resource, and other constraints are affecting direct investments.
• 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.
– 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 funding permitted under FDI, with certain conditions
•
• 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, foreign individuals, foreign corporate can register as sub account and invest via
FII subject to 10% and 5% limits
28. Challenges
External constraints
Domestic constraints
• Initial and post establishment related operational issues adversely affect returns to investment in hospitals in India
• Depreciation of assets
If we want both organic and inorganic investments in the healthcare sector, we need to look beyond investment-specific and
capital market policies to the larger ecosystem and make it supportive for investors. We need transparent regulatory
frameworks and better institutional governance. Most importantly, we need health to be a core focus of government policy.
Some vital issues to address are standards, pending legislation, investment in human capital, setting up national
councils/regulatory bodies, accreditation, insurance etc. Policy framework needs to recognize spinoffs from a facilitative
investment environment in terms of improving access to healthcare, exploiting domestic and global opportunities in emerging
segments and synergies across segments. Private sector must also look at healthcare from more than a commercial perspective.
Our analysis points towards the need for stronger partnerships in healthcare, between the government and private sector. Even
a realistic targets of 1.85 beds per thousand population by 2012 needs an investment of US$ 77.9 Billion, 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.