November 30, -0001
New Delhi: The Indian healthcare industry is expanding even as it is being transformed by the growing demand for quality healthcare from the increasingly affluent middleclass, the entry of large private groups, the use of advanced the technology and equipment and the availability of insurance.
India spends 5.1 per cent of its GDP on health. India’s per capita health expenditure in absolute terms is considerably lower in comparison to countries such as China, Brazil, Malaysia, Russia, UK and the US. However, if the yardstick used is per capita healthcare expenditure (ie., as a percentage of per capita income) the picture is slightly better.
|India's low healthcare spend (2004)|
|Country||Per capita income ($)||Per capita health expenditure ($)||Per capita health expenditure as % of per capita income|
|Source: World Bank|
The existing healthcare infrastructure consists of 23,000 primary health centres at the primary level; 2,935 community health centres; 4,400 district hospitals; 1,200 state owned hospitals at the secondary level; and 117 medical colleges and hospitals at the tertiary level. A majority of the private facilities is small — 84 per cent have fewer than 30 beds and only 6 per cent have more than 100 beds.
The Indian healthcare industry is expanding rapidly. The demand for healthcare services in the country has grown from $4.8 billion in 1991 to $22.8 billion in 2001-02, indicating a compounded annual growth rate of 16 per cent.
According to a report prepared by ICRA, the current healthcare market is estimated at Rs 1,408 billion ($30 billion), and includes pharmaceuticals, healthcare, medical and diagnostic equipment and supplies. The share of the private sector in healthcare spending is as high as 80 per cent.
The healthcare industry is being transformed radically as it tries to cater to the Indian middle class which, with its rising affluence and purchasing power, is now willing to pay for quality healthcare. Certain transformational trends are clearly discernible: the emergence of a network of high quality corporate hospitals as the private sector becomes more involved in owning and running hospitals, use of new and innovative technology in treatment and reliance on advanced equipment; and the increased availability of private health insurance.
Corporatisation of healthcare
Private hospitals have always been involved in healthcare, but they were earlier usually run by trusts. What has changed is the emergence of corporate hospitals, a concept pioneered by the Dr Pratap Reddy-promoted Apollo Hospitals group. Sensing a vast untapped opportunity in delivery of healthcare services, leading corporates have set up a chain of hospitals across the country.
The Apollo Hospitals has a chain of 41 hospitals across India and abroad, the Ranbaxy-promoted Fortis Healthcare has 12 across northern India, while the Analjit Singh-promoted Max Healthcare runs eight hospitals in and around Delhi. Wockhardt Hospitals, promoted by the pharma major of the same name, has 10 hospitals, and the Manipal Group has three tertiary and eight secondary hospitals.
The future is here
Apollo Hospitals Group
Promoted by Dr Prathap C Reddy, Apollo Hospitals is the group that pioneered the concept of corporate healthcare delivery in India. Apollo Hospitals Enterprises (AHEL) was incorporated as a public limited company in 1979 and is listed on the Bombay Stock Exchange. The group has emerged as India’s largest private sector healthcare provider and owns and manages a network of 41 specialty hospitals and clinics and a chain of 130 pharmacy retail outlets across the country.
Fortis Healthcare Limited
Fortis Healthcare Limited (FHL), a Ranbaxy promoter group company, was incorporated in 1996 and founded on the vision of creating an integrated healthcare delivery system. FHL, which acquired Escorts Heart Institute and Research Centre Limited in September 2005, has grown into India's second largest healthcare chain. FHL has a network of 12 hospitals with an installed bed capacity of about 1,790 beds and performed more than 5,000 open heart surgeries, 5,000 angioplasties and 15,000 angiographies in 2006-07. Its operations are spread across North India — Delhi, Noida, Mohali (Chandigarh), Amritsar, Faridabad, Raipur and Srinagar.
Max Healthcare (MHC), a subsidiary of Analjit Singh-promoted Max India Limited, is one of India’s leading providers of integrated healthcare services. MHC operates eight healthcare centres in the National Capital Region (NCR), offering services in over 30 medical disciplines with super speciality services in cardiac care, neurosciences, orthopaedics, paediatrics, and obstetrics and gynaecology. It has over 400 leading doctors, 280 corporate clients and a patient base in excess of 170,000.
MHC has embarked upon the next phase of its expansion, which will involve addition of three new hospitals, two in the NCR and one in Dehradun. These expansion plans are expected to be completed by mid-2009 and are expected to add 450 additional patient beds, taking the overall number of patient beds under MHC’s management to over 1,200. MHC has secured approval from the International Finance Corporation (IFC Washington) to fund its Phase II expansion.
The foundation for the clinical pathways and processes followed at Max Healthcare were laid down in collaboration with the world renowned Harvard Medical International, an arm of the Harvard Medical School, USA. Max Healthcare is now in medical collaboration with Singapore General Hospital for clinical practice, research and training.
Wockhardt Hospitals Group has established a chain of state-of-the-art super speciality hospitals at Mumbai, Bangalore, Hyderabad, Kolkata and Nagpur, equipped with multi-disciplinary capability.
Recently, the group, which plans to double its chain of hospitals by 2012, has opened its second hospital at Bangalore — a new 400-bed multispeciality hospital that offers the whole range of cardiac, orthopaedic, neurosciences, minimal access Surgery and women and child services.
Wockhardt Ltd. has associated with Harvard Medical International, USA. As associate hospitals of Harvard Medical in India, Wockhardt hospitals benefit from the extensive learning and experience of Harvard Medical School and its affiliated institutions world-wide.
Manipal Health Systems
Manipal Health Systems, a part of the Manipal Group, provides healthcare, to over 400,000 in-patients and 1.5 million out-patients every year. The chain consists of nine primary centres at seven rural locations (beds: 59), eight secondary hospitals at urban and semi-urban locations (beds: 882) and three tertiary hospitals at urban and semi-urban locations (beds: 2,917) that include the internationally-renowned hospitals — the Manipal Hospital in Bangalore and Kasturba Hospital in Manipal.
While Fortis Healthcare has successfully completed its initial public offering this year, Max Healthcare and MIOT Hospitals are expected to follow suit. The burgeoning healthcare business is attracting more business groups. Delhi-based Apollo Tyres has plunged in with the launch of its Rs 200 crore project, Artemis Health Institute in Gurgaon.
The 500-bed multi-specialty tertiary level hospital is likely to be commissioned in the middle of 2007. The hospital will focus on three main specialties — cardiology, oncology (medical, surgical and radiation) and orthopaedics. Artemis plans to grow into a 10-hospital chain by 2012.
The Paras group has just launched Paras Hospitals, a state-of-the-art 250-bed, multi-specialty tertiary care facility with super specialty in neuro-surgery, trauma, orthopaedics, and mother and child care, in Gurgaon. The seven-storey complex is spread over 250,000 sq ft and is estimated to cost over Rs 100 crore. The hospital is equipped with six state-of-the-art operation theatres, 48 critical care beds, special ICUs and NICUs, sophisticated diagnostics including a 1.5 Tesla MRI.
|New hospital||Investment proposed (Rs crore)|
|Prexus Health, USA||250|
|Source: News reports|
The surgeon turned entrepreneur, Dr Naresh Trehan, is promoting a $250 million world-class integrated healthcare facility known as ‘MediCity’. MediCity, which has been envisioned as a multi-disciplinary high-tech medical institute spread over 43 acres in Gurgaon, and is clinically modelled on global centres of excellence such as Johns Hopkins and Mayo Clinic in the US, is expected to be operational by 2009.
Under a MoU signed with GE India, the two will collaborate in a number of initiatives to create a medical institute of world-class standards, specifically in the areas of high-end medical diagnostics, clinical research and development, utility services like power generation and distribution, lighting, water treatment and other environmentally friendly solutions.
This is GE’s first such collaborative venture worldwide and is also the first instance in Asia, where a leading technology provider has entered into a partnership with a centre of excellence in healthcare services and research.
“The vision for Medi City is of a campus that is the epicenter for cutting edge medical research and innovation in Asia. With the state-of-the-art facilities we have planned and the coming together of the finest medical intelligentsia, we will bring to the people of India global healthcare delivery standards at affordable prices,” says Dr Naresh Trehan.
Several foreign companies have also entered the Indian market. Leading healthcare providers such as Harvard Medical International and Cleveland Clinic have entered the country through joint ventures. Pacific Healthcare Holding and Parkway (both from Singapore), Emaar from the Middle East, Prexus Health Partners from the US and Columbia Asia from Malaysia have all announced plans.
|Leading Hospital Chains|
|Group||No of beds|
|Source: Company reports|
While Prexeus is planning three facilities in Delhi and its neighbourhood, Columbai Asia has planned three compact 100-bed hospitals in Mumbai, Delhi and Calcutta.
A similar wave of corporatisation can be seen in the case of diagnostic services. Six players have emerged – SRL Ranbaxy, Lal’s Pathlabs, Thyrocare, Pathnet, Metropolis and Nicholas Piramal.
Use of technology
An important development has been the increased use of technology for upgrading the delivery of healthcare services and improving all-round efficiency. The tools and services which have improved the quality of healthcare services include hospital management systems, decision support systems that improve diagnosis and treatment, telemedicine and electronic record generator.
Hospitals are investing heavily on IT architecture, particularly the integration of fragmented and disparate systems. Chennai-based Shankar Nethralaya, for example, has signed an agreement with Tata Consultancy Services (TCS) — India’s largest information technology company — for outsourcing its entire IT requirements. TCS will provide a complete hospital management package.
Aravind Eye Hospital, which has emerged as the single largest provider of eye surgery in the world, with an astonishingly low cost per operation, uses telemedicine to provide quality eyecare for thousands of residents of rural villages in India.
This new technology, based on “Wi-Fi” wireless networks and developed by researchers at the University of California, Berkeley, and at Intel Corporation, allows eye specialists at Aravind Eye Hospital at Theni in Tamil Nadu to interview and examine patients in five remote clinics via a high-quality video conference.
The pilot project has proved so successful that the partners are expanding the project in the state to include five hospitals that will be linked to 50 clinics that are expected to serve half a million patients each year. Chennai-based MIOT Hospitals, a leader in the field of joint replacement surgery, orthopaedics and trauma orthopaedics, has pioneered keyhole and pinhole surgery.
Increased reliance on advanced equipment
The entry of private hospitals has raised the bar on the use of advanced equipment. The conferring of infrastructure status on the healthcare industry allows private hospitals to raise cheaper long term loans, and the reduction of import duty on most medical equipment has allowed the specialty hospitals being set up to install some of the best equipment in the world.
Apollo has invested in a 3 Tesla MRI scanner, while Paras has installed a 1.5 Tesla. Max Healthcare has acquired the Brain Suite, an intra operator MRI system – the first of its kind in Asia. Delhi-based Escorts Heart Institute and Research Centre has the Da Vinci robotic system for minimally invasive cardiac surgery.
According to a recent study by professional services firm Ernst & Young, the size of the Indian medical equipment industry was $2.16 billion in 2006 and is growing at 15 per cent and is expected to reach $3.2 billion by 2009 and $4.5 billion by 2012. As a result of a conspicuous absence of the domestic manufacture of medical devices, currently more than 65 per cent of the equipment is imported — and mostly from the US, Japan and Germany.
Most Indian healthcare institutes use foreign medical equipment for the purpose of surgery, diagnosis of cancer and medical imaging. Imported equipment includes cancer diagnostic, medical imaging, ultrasonic scanning, plastic surgery equipment — ECG and EEG monitors; DC defibrillators; patient monitoring systems; radiography equipment; therapy equipment; surgical diathermy units; apnea/respiratory monitors; color Doppler ultrasound scanners; CT and MRI systems; digital subtraction angiography systems; laser and fiber optic devices such as endoscopes, colonoscopies, laparoscopes, laser lithotripters; linear accelerators; X-ray equipment, including dental and general purpose mobile C-Arm; ophthalmological equipment; radiotherapy equipment; simulators and treatment planning systems.
Not surprisingly, the market for medical supplies and disposables is dominated by the domestic manufacturers, whereas foreign suppliers dominate the high-end medical equipments. Among the leading providers of advanced equipment are Siemens, GE, Philips Medical Systems, Toshiba, Hitachi and Boston Scientific.
Foreign suppliers typically arrange joint ventures or licensing agreements to manufacture their products locally or employ local agents to distribute them. One of the most successful tie-ups is between General Electric Medical Systems (US) and Wipro. GE is not only a leading supplier to the Indian equipment market, but is using India as a low-cost manufacturing base to export its Indian-made products to the rest of South Asia.
Increased availability of insurance
The growing demand for high-quality health care is encouraging more and more insurers to push for health insurance policies that provide comprehensive coverage. Multiple channels, including banks, are being used to sell group and individual health insurance. Three factors have changed the face of the medical insurance market.
First, the insurance market was opened to private players in 2000. Second, the introduction of third-party administrators (TPAs) by the Insurance Regulatory and Development Authority in 2002 has made medical insurance more attractive through the facility of cashless hospitalisation. Third, the ‘detariffing’ of general insurance from January 1, 2007 has been a boon for the industry.
Health insurance grew by nearly 44 per cent in 2006-07. By end-March 2007, private non-life companies accounted for 38 per cent of health insurance in India, up from 24 per cent in March 2006. Over 80 per cent of private health insurance is concentrated in four companies — ICICI Lombard (the largest of the general insurance players), Bajaj Allianz, Royal Sundaram and Iffco Tokio. Reliance General Insurance, a later entrant, is turning into a strong contender.
Ernst & Young expects the total medical insurance premium income in India to grow to $3.8 billion by 2012. McKinsey-CII estimates the number of potential insurable lives at 315 million. The growing market is attracting the world’s top health insurers. Apollo Hospital is setting up a standalone health insurance company in association with DKV, a leading European health insurer. US-based Aetna and Cigna Healthcare and UK-based Bupa Healthcare are also looking to enter the market.
According to CII-Mckinsey, 750,000 additional beds need to be added to the existing infrastructure. This would require investment in the range of Rs 100,000 - 140,000 crore in secondary and tertiary hospitals, medical colleges and nursing schools. Most of the investment will have to come from the private sector.