forecasts for indian healthcare - express healthcare

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orecasts for Indian Healthcare - Express Healthcare

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Forecasts for Indian Healthcare

As we gear up for 2012, Mur a l i Rao, Associate Vice President, Healthcare, Technopak

gives an overview of the Indian healthcare sector and charts it future growth path

Indias economic growth and rapid urbanisation is bringing with it anexpected health transition in terms of shifting demographics, increasingability to afford quality healthcare, changes in morbidity pattern withgrowing degenerative and lifestyle diseases, and increasing penetration ofhealth insurance.

By 2021, over 143 million population in the country will be above 60 years of age; closeto 16 million households will fall in the category of high-income (annual income more

than Rs 5,00,000); towns with million plus population will increase from 35 to 65; heartdiseases, diabetes, and cancer will show a combined average decadal growth of 47 percent; health insurance market will grow at an average 42 per cent CAGR. Such factorshave caught the interest and attention of investors, big and small; and havenecessitated our healthcare landscape to constantly evolve and mature.

Riding on this wave, the Indian healthcare industry is poised to double from $ 60 billionto $ 120 billion by 2015, growing at a 15 per cent CAGR. While public spend in thesector is likely to be limited to ~ 20 per cent of the annual healthcare spend, most of thexpansion would be propelled by organised private players, especially hospitals. Whatmakes this growth story patients and investors eye is the unprecedented growth thatallied sectors like pharma, wellness, medical technology, medical tourism, medicaleducation, and health insurance, will witness in the coming decade. This would be largefuelled by frugal innovation in technology and delivery mechanisms.

However, successfully meeting the expected level of infrastructure and manpowerrequirements is going to be a daunting task. So far, the industry has largely beenshaped by market forces instead of a planned growth based on an inclusive approachIndias total health spending at 4.2 per cent of the GDP is way below most developed,and some developing countries. Over 80 per cent of healthcare spend is in the privatesector. Less than 16 per cent of Indian population has any form of health insurance atpresent. Bed to population ratio (1:1) is still short in developing economies, with anadditional requirement of 1.1 million hospital beds. The country has an additionalrequirement of 0.8 million doctors and 1.7 million nurses, apart from facing a significanshortage of paramedics. 45 per cent of the population travels more than 100 km toaccess tertiary level of medical care. Poor accessibility, accountability, affordability, andavailability of healthcare services are key constraints that make the idea of Health forall a seemingly impossible accomplishment.

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Besides, the sector is largely dominated by unorganised private players, mostlycomprising clinics and nursing homes. These facilities offer limited range of services andoperate with minimal standards of quality. Moreover, the public sector focus is mainly oprimary care with a programme-based approach. Other issues restricting the growth ofthe sector are high capital expenditure, high dependence on imported medicalequipment, long gestation period for the business to turn profitable, archaic norms formedical education, and absence of any central governing authority for paramedicaleducation.

Overcoming such mammoth challenges calls for an integrated effort and investmentacross the entire value-chain. Three broad components of this spectrum are healthcaredelivery, pharma products, and medical equipment. Healthcare delivery, comprisingprimary, secondary and tertiary care facilities, constitutes a major chunk i.e. 77 per cenof the total market. Pharma and medical equipment segments constitute 14 per cent anfive per cent of the total market, respectively. While sustained expansion of healthcaredelivery facilities like neighbourhood clinics, day-care surgery centres, single and multi-speciality hospitals etc. is expected, it is also vital that support sectors and sub-sectorslike pharma retail, wellness, medical technology, medical tourism, medical education an

health insurance grow alongside and with equal vigour.

Though the role of private sector is going to get extremely crucial, governmentscontribution towards achieving the above mentioned expected growth in the healthcaresector cannot be undermined. The government's focus on healthcare has seen a positivupswing in the last few years, and this momentum is likely to sustain in the comingdecade, with the implementation of a slew of measures proposed. Work is alreadyunderway in the setting-up of six world-class institutes of medical education, trainingand healthcare delivery along the lines of All India Institute of Medical Sciences (AIIMS)Delhi. Also, a total of nine under-graduate and post-graduate medical colleges and

hospitals are being established by the Employee State Insurance Corporation (ESIC) noonly in metros, but many tier-II and III towns of the country. These two measures willgreatly improve accessibility and affordability of healthcare services in non-metro citiesapart from providing quality medical education to doctors and paramedics.

Even at present, governments role in the area of medical education is commendable.Government-run medical, nursing and dental colleges provide excellent academiclearning, practical exposure and hands-on training at an extremely subsidised fee.Healthcare professionals who graduate from these colleges are highly skilled and intremendous demand, not only in India but across the world. Many of these doctors have

pioneered innovative, path-breaking research and treatment programmes in the past,and continue to do so.

However, despite investing heavily in medical education and producing the maximumnumber of specialist and super-specialist doctors in the country, government is finding increasingly difficult to retain them in the public healthcare delivery system. This isprimarily because of the lucrative remuneration packages and better work environmentand facilities offered by private corporate hospitals. These hospitals, though aggressivegrowing on the delivery side of healthcare supply chain, have, so far, shied away from



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entering the field of medical education. With the government relaxing the rules andregulations guiding the setting up of medical colleges, this space offers good businessopportunities for private players and more activity is expected from them in the comingyears. Nonetheless, government would continue to provide the country some of its besthealthcare experts.

Another area which needs the governments urgent attention is R&Dwhich should includareas like diagnostics, therapeutics, vaccines, medical devices, regenerative medicine,

public engagement, education and the application of research in improving patient careFor significant breakthroughs to emerge in this field, it is essential that the governmentprovide researchers, the resources and freedom they need to pursue their studies, andalso suitably reward institutes like ICMR for promoting research activities. Suchencouragement will pave the way for development of innovative, low-cost, high qualitytechnology and models of delivery that are specifically suitable to India.'s needs. Inorder to effectively address the issues of poor access, high cost it is imperative that thegovernment pay due attention to the above measures.

Upcoming Trends

Traditionally, surgery has required the healthcare provider to meet inpatientrequirements. However, inpatient facilities are expensive, inconvenient, and less thansavoury to most patients.

Technological advancements over the last two decades have helped address this gap. Alarge number of surgeries, called day-care surgeries, can now be performed without thepatient having to be admitted at all. This has become a global trend and is expandingthroughout the world. By 2020, 75 per cent of all surgical operations will be carried out

in ambulatory surgery centers/units. The cost advantage of day surgery is best achievein free-standing centers or totally free-functioning units within hospitals.

At present, in the UK, 55 per cent of elective surgery is carried out in an ambulatorysetting. In US, there are 5000 such centers, with AmSurg Corp being the leading playerand it has over 150 centres in operation. In India, the concept is currently in its infancywith only 20 per cent of all surgical procedures being done on an out-patient basis. 27per cent of these procedures fall under ophthalmology, 23 per cent undergastroenterology, and 10 per cent under orthopaedics, followed by gynaecology, plasticsurgery, general surgery, podiatry, and dentistry. However, India is fast catching up wi

the trend, and ambulatory surgical care market is expected to reach $ six billion in 201growing at a CAGR of 20 per cent. Such day care surgery centres, offer better ambienceconvenient scheduling, more organised and friendlier staff as well as more convenientlocation and parking to the consumer, while making good business sense to theproviders. For the healthcare provider, such centres translate into lower investment ininfrastructure, manpower and inventory holding, higher operating margins, lesserincidence of hospital acquired infections, and higher turnover rate due to a morestreamlined approach to the surgical episode.

Ideally, treatment in these centers should cost about 47 per cent less than that in



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hospitals, thereby making them an economically better option. However, this cost-advantage is yet to be proven in the Indian market. Insurance firms are also increasingrecognising the importance of this treatment and around 650-700 day-care procedureslike cataract, lithotripsy, arthroscopy, haemorrhoidectomy, chemotherapy, dialysis etc.are already being included in the ambit of medical reimbursement. The good news isthat this list is only going to grow in future.

Secondary Care Hospitals

In the last decade, most corporate healthcare models were developed with the metromarkets in mind. But now, metros with developed healthcare infrastructure and risingcompetition have reached a saturation level serving a certain socio-economic segment othe population. The healthcare providers have now started realising that they cannotserve all segments of population with high-cost structures. To serve different consumersegments such as lower-middle income, urban poor and rural population, they need todevelop low capital-intensive models.

One such relatively low-cost model is that of secondary care hospitals. These are mid-sized (100-150 bedded) hospitals offering upgraded secondary care and basic diagnostiand pharmacy facilities. Such hospitals are rightly positioned to cater to primary careand can be upgraded to incorporate some elements of tertiary care. They generally focuon specialities like general medicine, general surgery, OBG, paediatrics, orthopaedicsand trauma, ophthalmology, ENT, dental surgery, endocrinology, and critical care. Highend services like oncology, cardiology, neurology, gastroenterology, nephrology,cosmetology, etc. might be present to a small extent, but are not their key focus areas.

Typical area per bed is around 1000 sq ft, ~ three days, average revenue per bed ~ Rs

12,000, and more than 25 per cent patients are insured. Such hospitals are easilyreplicable, scalable, flexible, and more affordable. Capital and overhead costs are lowerthan typical multi-speciality hospitals, workflows are standardised, operationalmanagement is easier, and outreach, penetration and patient loyalty higher. In somecases, these centres also function as feeders to the tertiary care hospitals of the samecorporate group. The total market for secondary care services in India currently standsat Rs 42,000 crore, and is expected to reach Rs 261,000 crore by 2020. One of the maidriving forces for this market is the fact that 80 per cent of ailments can be catered bysecondary care. India is likely to see aggressive activity and investment in this marketby corporate groups, especially in tier II and tier III cities.


forecasts for indian healthcare - express healthcare

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