Healthcare Sector in India

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HEALTHCARE SECTOR IN INDIA
Challenges and Opportunities

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

HEALTHCARE SECTOR IN INDIA
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Health administration in India is governed by the Ministry of Health and Family Welfare The central administration provides co-ordination and direction to a network of state health ministries for actual implementation The healthcare sector constitutes
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Medical care providers Diagnostic service centres and pathological labs Medical equipment manufacturers Contract research organizations Pharmaceutical manufacturers Third party support service providers

HEALTH INFRASTRUCTURE A COMPARISON
Countries
Beds Per ’000 population Physicians Per ’000 population Nurses Per ’000 population

cIndia

1.5

1.2

0.9

cLow income (e.g., sub-

Saharan Africa)
cMiddle income (e.g., China,

1.5

1.0

1.6

Brazil)

4.3

1.8

1.9

cHigh income (e.g., US,

Western Europe)
cWorld average 3.3

7.4

1.8

7.5 3.3

1.5

HEALTHCARE - INFRASTRUCTURE
Investment in Major States
200 150
USD Million

189 157 111

100 50 0 Maharashtra Delhi States Karnataka

94

Meghalaya

HEALTHCARE–REGISTERED DOCTORS
Availability of Doctors in Major States

120,000 100,000
No. of Doctors registered

95,299 72,725 64,492 53,456

80,000 60,000 40,000 20,000 0

Maharashtra Tamil Nadu States

Karnataka

West Bengal

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

CURRENT SCENARIO

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The healthcare industry is estimated at USD 22 billion Estimated growth at 13 per cent annually assures a return of 15-20 per cent for the healthcare providers Healthcare sector at present employs 4 million people directly and indirectly Private healthcare market currently estimated at Rs 690 billion (USD 14.8 billion)

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CURRENT SCENARIO
85 per cent private sector establishments have less than 25 beds Speciality and super speciality hospitals account for 2 per cent of total institutes Corporate hospitals constitute less than 1 per cent of all institutes Private sector accounts for 82 per cent of all outpatient visits Private sector hospitalization accounts for 52 per cent of all

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CURRENT SCENARIO

Current Healthcare Infrastructure
Healthcare Indicators: India Vs World
India at 1951 1990 India Today Developing Countries Developed Countries

Hospitals Public

15,393 4,049 11,344 875,000 592,215 737,000 80,000 170 350,000 18,000

Life expectancy at birth 63 37 65

78

Private Hospital beds Doctors

Infant mortality 146 70

56 6

Nurses Dentists Medical Colleges Retail chemist outlets New doctors every year

There is a big scope for improvement, hence vast investment opportunities…

STATUS OF HEALTHCARE SECTOR
Sector Direct employment Million, 2000-2001 Revenues/GDP Per cent, 2000-2001

Healthcare

4.0 5.3 1.0 1.2 1.6 0.8 1.7 0.4
1.8 1.4 0.9 1.7 3.5 3.0

5.2 4.8
Healthcare is the largest service industry in terms of revenues and the second largest after education in terms of employment

Education

Retail banking Power

Railways

Telecom

Hotels, restaurants

IT

By 2012, the sector could account for 6 to 8 per cent of GDP and provide direct and indirect employment of 8 million

HEALTHCARE ISSUES & CONCERNS

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Small hospitals – 80 per cent < 25 beds Specialised services available in only 2 per cent hospitals Good healthcare available only in metros Lack of infrastructure Mismanaged Public hospitals Inadequate remuneration for public hospital staff Lack of commitment

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

GROWTH DRIVERS
“Physicians, Nurses, Medical Technicians and Other Scientific Occupations will Become Growth Industries to Rival the IT Sector within the Next Decade” - India Vision 2020 Report

GROWTH DRIVERS
Private Healthcare Spending

45 40 35 30 25 20 15 10 5 0

42
if health insurance cover is available to the rich and the middle class it would rise to this level

USD Billion

8.4 bn

14.8

33.6 bn

2007 Year

2012

Private healthcare expected to grow to Rs 1,560 billion (USD 33.6 billion) in 2012

GROWTH DRIVERS
Total Healthcare Sector
This would account for around 6.2 to 8.5% of GDP by 2012
80 70 60

52-69

USD Billion

50 40 30 20 10 0 2007

Currently 5.2% of GDP
22.2

2012 Year

Total Healthcare market including Pharma to account for 6.2 to 8.5% of GDP in 2012

GROWTH DRIVERS
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Corporates are sensing a huge untapped opportunity in delivery of quality healthcare to the Indian masses Policies and budgetary considerations towards pharmaceutical as well as biotech organizations are now favorable De-regulation of health insurance has paved the way for the entry of foreign health insurance companies Medical equipment industry too being opened to foreign collaboration for manufacturing high and middle-level technology medical equipment Global Private Equity players and Venture Capital companies also actively exploring opportunities

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GROWTH DRIVERS
INDIA – COST ADVANTAGE
PROCEDURE
US US Heart Surgery Bone Marrow Transplant Liver Transplant Knee Replacement Cosmetic Surgery 40,000 2,50,000 3,00,000 20,000 20,000 THAILAND THAILAND

COST (US$)
INDIA UK

7,500 ------------8,000 3,500

6,000 26,000 69,000 6,000 2,000

23,000 1,50,000 2,00,000 12,000 10,000

GROWTH DRIVERS
HEALTHCARE SNAPSHOTS
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0.5 million major surgeries carried out Over a million surgical procedures carried out Cardiac bypass success rate – 98.7 per cent Bone marrow transplant – 80 per cent success rate Renal transplant – 95 per cent success rate

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INTERNATIONAL RECOGNITION
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As per NHS of UK - India is a favored destination for surgeries British Standards Institute has accredited Delhi-based Escorts Hospital Wockhardt Hospital has an exclusive association with Harvard Medical International, global arm of Harvard Medical School US-based Joint Commission on Accreditation of Healthcare Organisations has certified:
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Indraprastha Apollo Hospital (New Delhi) Apollo Hospital (Chennai) Apollo Hospital (Hyderabad) Wockhardt Hospital (Mumbai) Shroff Eye Hospital (Mumbai)

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public & Private Sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

HEALTHCARE - PRIVATE & PUBLIC

Private sector offers tertiary-level, preventive and diagnostic healthcare
Public/Private share of Non Hospitalization Public/Private share of Hospitalization
90 70 60 40 30 10 0 Rural Urban

70 80 60

78

81

58

62

50 50 40

42
22

38
19

30 20 20 10 0

Public

Private

Rural

Urban

Public

Private

ROLE OF PUBLIC SECTOR

Public sector focus is on prevention and elimination of infectious diseases and accessibility of basic healthcare facilities to the rural and urban masses

PRIVATE SECTOR INITIATIVES

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At Rs 690 billion, private spending accounts for 80 per cent of the health care market 61 per cent is spent on outpatient care Over 50 per cent of outpatient spend is on acute infectious diseases

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Over 80 per cent of inpatient spend is in five areas: cardio, cancer, accidents, acute infections and maternity Urban Indians and rich account for a disproportionate spend

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HEALTHCARE EXPENDITURE
Public & Private Sector Initiatives
138 bn

552 bn
Private Spending Govt Spending

Out of Rs 690 billion, (USD17 billion) the private sector accounts for 80 per cent or Rs 552 billion of the spending

PRIVATE EQUITY IN HEALTHCARE

Private equity deals in Healthcare in India, 2006 (USD Million)

Hospitals, 82.33

Diagnostic chains, 8

Pharmaceutic als, 377.56

PRIVATE EQUITY IN HEALTHCARE

MAJOR HEALTHCARE DEALS
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George Soros’ fund Quantum and Blue Ridge bought 10 per cent in Fortis Healthcare Manipal Health Systems Private Limited raised over USD 20 million of equity from IDFC Private Equity Fund Bangalore-based HealthCare Global Enterprises Limited (HCG) raised over USD 10 million in equity from IDFC Private Equity Fund Metropolis Health Services Ltd. India’s leading Corporate Diagnostics Chain raised over USD 8 million in equity from India Advantage Fund-I managed by ICICI Ventures

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

HEALTHCARE VALUE CHAIN
Business Objectives Expected Changes
•Changing diseases pattern

Business Opportunities

Patient

•Quality services • Value for money • Minimum co-pay • Minimization of the cost • Wealth maximization • Increase value per patient • Operational efficiency • Wealth maximization • Minimum annual pay put

•Changing socio economic profile •Changing life style patterns •Demand for quality healthcare •Corporatization of Indian healthcare • Increasing penetration of private health insurance •Foreign alliances •Information technology in healthcare

• Health insurance • Medical tourism • Preventive healthcare • Healthcare BPO • Telemedicine • Laboratory and diagnostic services • Medical devices • Health IT • Consulting

Hospital

Insurance

Investment opportunities exist in multiple segments along the value chain

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

GOVERNMENT POLICIES & INCENTIVES
Infrastructure status conferred on healthcare industry Budgetary allocation to healthcare – Rs 62 billion (USD 1.51 billion) 40 per cent depreciation limit on medical equipment imports Income tax exemption for the first 5 years, to 100 bed hospitals set up in rural areas Reduced duties (between 5–8 per cent) on certain medical equipment and devices Customs duty exemption on specific personal medical aids like crutches, wheel-chairs, walking frames, artificial limbs Customs duty, excise duty and CVD exemption on specific medical devices such as talking books, Braille computer terminals, etc.

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OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

GOVERNMENT INSTITUTIONS
Major Government institutions in healthcare
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All India Institute of Medical Sciences (AIIMS), New Delhi (Central Government) Armed Forces Medical College (AFMC), Pune (Ministry of Defence) JIPMER, Pondicherry (Central Government) Madras Medical College (MMC), Chennai (State Government) Maulana Azad Medical College (MAMC), Delhi (State Government) Stanley Medical College, Chennai (State Government) Grant Medical College, Mumbai

MAJOR PRIVATE HOSPITAL CHAINS
Hospital Apollo Hospitals Speciality Open heart surgery, angio plastic surgery and renal transplants Services 130 retail pharmacies across India Size 40 hospitals with 6,000 beds Middle East Global Forays
cExisting overseas facilities in Colombo and cPlans to set up hospitals in Mauritius and

Fiji cBidding for a diagnostic facility in the UK cApollo-Gleneagles Hospitals, a joint venture between Apollo Hospitals and Parkway Group of Singapore, plans 2 more hospitals in India, after the first set up at Kolkata cBusiness opportunities in West Asia and North Africa cPartnership with Yemen’s Hayel Saeed Anam Group to provide advisory services for its hospital project cWill provide consultancy to set up a 160bed super specialty hospital at Taiz, Yemen. Product and services formulations, nutritional products, vaccines, pharmaceutical ingredients, bio pharmaceuticals Super speciality hospital 10 hospitals with 1500 beds
•Eyeing markets in Europe, particularly UK •Building tie-ups with leading healthcare

Wockhard t Hospitals

Tertiary level heart centre

insurance providers in the US, UK and Singapore

Fortis Healthcar e

Provides the latest medical care to patients

12 hospitals with 1,900 beds

N.A Cont… .

MAJOR PRIVATE HOSPITAL CHAINS
Hospital Specialty Services Size Global Forays

Max Healthcare

Focusing on becoming the largest healthcare player in India

3-tier business model for delivering healthcare services

7 hospitals with 800 beds

cTrying to enter the US, UK and far-east

markets. cExpanding operations in neighbouring countries like Bangladesh and Afghanistan. cMax Healthcare and Singapore General Hospital (SGH) have entered into collaboration for medical practice, research, training and education in healthcare services.

Aravind Hospitals

Single largest provider of eye surgery in the world

Operates an international research foundation and a resource and training centre

5 hospitals and a manufacturi ng center for ophthalmic products

N.A.

*Escorts Group

World class treatments for heart ailments

Diagnostic services, treatment services, Preventive cardiology and Rehabilitation services and Pediatric heart care

20 hospitals and 8 facilitation centres

N.A.

*Escorts group has been taken over by Fortis Healthcare (Ranbaxy Group)

PRIVATE SECTOR INFRASTRUCTURE

Leading Hospital Chains Group No of beds

Apollo Manipal Fortis Max Healthcare Wockhardt

2,164 3,858 1,790 750 700

FOREIGN COLLABORATIONS
Global real estate major Emaar Properties and its Indian partner MGF group to set up 50 hospitals across India Pacific Healthcare Holdings, Singapore – Vitae Healthcare Pvt Ltd for setting up medical centre in Hyderabad (Andhra Pradesh) Parkway Group, Singapore – Apollo Hospitals set up a 325-bed super-speciality Apollo Geneagles Hospital, Kolkata Prexus Health USA’s through its Indian subsidiary is planning state-of-art hospitals around Delhi

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OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

FUTURE GROWTH
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By 2012, revenues estimated to reach USD 52-69 billion, 6.2 to 8.5 per cent of GDP; employment will double The pattern of healthcare spending will also change
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The share of outpatient spend will decrease from 61 per cent to 53 per cent Lifestyle diseases will drive the growth of outpatient spend Cancer and heart diseases will drive most of the growth of inpatient spend

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80,000 additional hospital beds required every year for the next 3 to 4 years to meet growing demands

INVESTMENTS IN HEALTHCARE

90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

77,962

USD Million

38,824

7,828 2006 2009
Year

2012

Investment in healthcare to grow nearly 11 times to touch USD 77 billion in 2012

OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

CHALLENGES
The growing demand for the quality healthcare and the absence of matching delivery mechanisms pose a challenge and certainly a great opportunity Several barriers need to overcome to attract sizeable private investment in healthcare…
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Unwillingness of lending institutions to finance healthcare projects due to failures in early ’90s Capital intensive industry with long gestation period Poor availability of doctors, nurses and paramedic personnel Inability to lower prices to attract required number of patients because of fixed cost of setting up a facility Low availability of qualified practitioners in rural areas

CHALLENGES

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No clarity within various government departments ministries about issues faced by the healthcare industry

and

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Low consumer awareness about differences in quality of care across different provider types By 2010, 4,53,785 doctors and 1,290,174 more nurses will be required by the Indian Healthcare Industry, which is both a big challenge and an opportunity

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OUTLINE
Healthcare Sector in India Current Scenario Growth Drivers Public vs Private sector Healthcare Value Chain Government Policies and Incentives Major Players Future Growth Challenges Business Opportunities

HEALTH–COMPARATIVE STRENGTHS
Key Outsourcing Areas in focus
¾ ¾ ¾ ¾ ¾ Medical Tourism Healthcare Customer care Network support Healthcare BPO outbound Healthcare analytics

Key Competencies
¾ ¾ ¾ ¾ ¾ ¾ High Quality Talent pool Proven Track record Favorable Governmental Policies for healthcare Cost savings Conventional Medicinal Facilities like Ayurveda High Quality infrastructure

India

Philippines

¾ Cost Benefits ¾ The US accent Talent pool ¾ The cultural affinity with US

¾ Healthcare Customer Care

China

¾ Bigger talent pool at a lower cost ¾ High end medical facilities ¾ Conventional Chinese medicine

¾ Healthcare Customer Care ¾ Network Support ¾ Traditional medical facilities

Eastern Europe

¾ Quick deployment ¾ High Quality output and Facilities ¾ Cost savings

¾ Oral and Surgical facilities especially in Ophthalmology ¾ Healthcare Customer service ¾ Healthcare BPO outbound

Thailand

¾ Service oriented culture ¾ High Quality facilities at low prices

¾ Medical Tourism

BUSINESS OPPORTUNITIES
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India needs an investment of USD 203 billion to meet the ‘Health for All’ target by 2010 Significant requirement in increase in number of beds per 1000 population – from 3 beds per 1000 population to 5 beds per 1000 population by 2010 (in both private and public) This translates to an addition of 2.2 million beds requiring investment of USD 77.9 billion, majority of which will come from the private participation Increasing preference for private medical care amongst the urban population High growth domestic market arising from increasing health awareness
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Rapid growth in private sector companies owning and managing hospitals Cost of advanced surgeries in India is about 10 per cent of that in USA Service Providers: Curative and preventive in primary, secondary and tertiary care

BUSINESS OPPORTUNITIES
Medical Equipment
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Market size estimated at USD 2 billion in 2006 Growing at a rate of 15 per cent, expected to touch USD 4.9 billion in 2012 65 per cent of equipment is imported Major suppliers include Siemens, GE, Philips, Toshiba, Hitachi, Boston Scientific Cardiology equipment - 20 per cent of total market Imaging systems - 15 per cent of total market Driving forces
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Investments in specialty hospitals and diagnostic centres Competition Up gradation of equipment Favorable government policies- reduction in import duties Expanding market boundaries

BUSINESS OPPORTUNITIES

Medical Equipment Market Size

6,000.00 5,000.00
USD Million
4,977.98

Rising 15 % per year

4,000.00 3,000.00 2,000.00 1,000.00 0.00 2006
2,176.68

3,275.42

2009 Year

2012

Medical equipment requirement to touch USD4.9 billion in 2012

BUSINESS OPPORTUNITIES

Medical Equipment: Market Distribution

19%

3%

26%

52%

Medical furnitures

Equipment

Consumable

Orthopaedic products

BUSINESS OPPORTUNITIES

Medical Equipment Imports, 2006-07
Radiology and testing kits 15% Reagents and testing kits 20% Others 11%

Physical/ chemical analysis equipment 14%

Instruments, appliances and disposables 40%

BUSINESS OPPORTUNITIES

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Health Insurance
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Health insurance market is estimated at USD 2.8 billion More than 80 per cent of the expenditure on healthcare is out of pocket Only 3 per cent of country's population is covered by insurance Expected growth rate of 13 per cent per annum Private and public players registered a growth of 77 per cent and 25 per cent over 2004-05 Swiss Re estimates a potential of USD 7,700 million in health insurance premium by 2015

BUSINESS OPPORTUNITIES

Health Insurance Market
9 8 7 6 5 4 3 2 1 0

7.7 bn

USD Billion

Only 3% of country's population is covered by insurance
2.8 bn

2007

2015

Health insurance market at USD 2.8 billion - Only 3 per cent of country's population covered by insurance - a potential of USD 7,700 million in health insurance premium by 2015

BUSINESS OPPORTUNITIES
Affluent middle-class population willing to pay for higher standards of healthcare Foreign Direct Investment (FDI) limit in health insurance may be raised from 26 per cent to 49 per cent Third Party business has also witnessed Private players in Health Administrators insurance growth
Cholamandalam Royal Sundaram 4% 9% Tata AIG 6%
Reliance 2%
Iffco Tokyo 10%

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HDFC Chubb 1% Bajaj Alliance 18%

ICICI Lombard 50%

BUSINESS OPPORTUNITIES

Medical Tourism
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Healthcare tourism market, currently at USD 450 million, expected to bring in over USD 1.5 billion revenues by 2012 Attracts patients from South East Asia, East, UK and US Africa, Middle

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Number of tourists visiting India increased from 10,000 in 2001 to 150,000 in 2005

BUSINESS OPPORTUNITIES

Medical Tourism
2000
USD Million

1500 1000 500 0 2006 450

1480

CAGR-22%

2012

Medical Tourism market to grow at a Compound Annual Growth Rate of 22 per cent to touch USD 1.48 billion in 2012.

BUSINESS OPPORTUNITIES
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Clinical Research
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Present market size around Rs 1 billion (USD 25 million) Expected to grow to Rs 50 billion (USD 1.25 billion) by 2010 50 per cent Contract Research Organisations in India at present

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Laboratory & Diagnostic Services
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India becoming a competitive outsourcing destination for highend laboratory and diagnostic testing Dr Lal's Pathlabs, Metropolis Health Services, SRL Ranbaxy – some diagnostics chains catering to the high-end services for hospitals in the UK, the US and West Asia

BUSINESS OPPORTUNITIES
Healthcare BPO and IT
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Healthcare industry under pressure due to regulations and the need for cutting costs Huge potential for Indian IT companies to tap this market BPO opportunities in more advanced sectors such as imaging, disease management and claims processing Need for transformation into paperless and film-less environment by corporate hospitals and big trust hospitals

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BUSINESS OPPORTUNITIES
Radiology Outsourcing
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Indian corporate hospitals are in talks with hospitals in US and UK, who are interested in outsourcing radiology work Radiology images can be transferred to Indian hospitals through a dedicated line, which can be analysed by the Indian doctors and sent back Radiology outsourcing to Indian hospitals can cut down cost by 50 per cent or less The 12 hour time difference with India enables the hospitals in the US to work 24x7

BUSINESS OPPORTUNITIES
Total Healthcare Outsourcing
Growing at 11% Per annum

8000 7000 6000 5000 4000 3000 2000 1000 0

7400

USD Million

3700

2006

2012

Year

UPCOMING PROJECTS
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Naresh Trehan’s Medicity
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Rs 12 billion project in Gurgaon (near Delhi), spread over 93 acres Will consist of 1600 beds, with a complete biotechnology backup and R&D facility Will have major institutions for cardiology, oncology, bone and joint, neurosciences, regenerative medicine and trauma care

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Fortis Medicity
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Rs 12 billion project in Gurgaon, having 2 campuses Hospital campus will have high end multi speciality hospital and research centre College campus will have a medical college, a dental college, nursing college and facility for primary and applied research in medicine along with a 600-800 bed hospital

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Madras Institute of Orthopaedics and Traumatology (MIOT) Medical City
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MIOT Hospitals plans to set up a multi speciality medical city near Chennai

UPCOMING PROJECTS

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Apollo Health City
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Rs 10 billion project in Hyderabad, spread over 33 acres Has a postgraduate college for doctors, a nursing school and college, college of physiotherapy, institute of hospital administration, institute of medical informatics, institute for emergency medicine and institute for paramedics Has 500 beds and 200 more will be added in next 6 months Reliance Anil Dhirubhai Ambani Group interested in building a 60 acre health city in Kolkata Rs 500 million medicity project in Ludhiana by the Christian Medical College and Hospital Will have a general and a speciality hospital and an education institute

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Dhirubhai Ambani Health City
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CMC Ajit Singh Lottery Medicity
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INVESTMENTS PLANNED

New Entrants New Hospital Artemis Prexus Health, USA Emaar MGF Pacific Healthcare Parkway group Columbia Asia Investment Proposed
(Rs million)

5000 2500 30,000 750 2000 6600

DRIVERS OF M&A
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Proactive government policies – Infrastructure status to healthcare, financial incentives etc. Demand for quality healthcare in India Health insurance leading to higher spends on health Synergies between Indian and foreign firms Need for benchmarked foreign technology Investment opportunities for global PE and VC firms Medical equipment industry open to foreign collaboration

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EXPANDING INDIAN MARKET

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Healthcare industry will grow at 13 percent per annum Assured return of 15-20 per cent annually Annual Demand for 80,000 beds Private sector accounts for 52 per cent of all hospitalization

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VALUE PROPOSITION
Some options for investment are ¾Medical Infrastructure ¾Clinical Research ¾Healthcare BPO
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Indian medical institutions can commit assured supply of manpower - doctors, nurses, paramedics Conduct joint research in medical delivery, clinical trials etc – Ability to generate large volumes and an easier regulatory regime Access Indian capability in IT in the medical arena Set up medical equipment manufacturing base in India Leverage cost advantage for Medical Value Travel

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