Opportunities in Health Care "Destination India"

Executive Summary

The India economic boom has been characterized by a few sectors which have been front-runners and a few which have benefited from it. One such sector is Healthcare. The striking feature about the Indian Healthcare sector is that it has the potential to grow at a much faster rate in the foreseeable future and shall present new ‘pockets of opportunity’ within healthcare which shall emerge as growth drivers.

Areas of Opportunity

Our analysis here tries to highlight various ‘pockets of opportunity’ within Indian healthcare sector. The key areas of opportunity are as follows:

• Medical Infrastructure
  
• Telemedicine
  
• Medical Equipment
  
• Medical textiles
  
• Health Insurance
  
• Clinical Trials
  
• Health services outsourcing
  
• Medical value travel
  
• Training and Education
  

Medical infrastructure forms the largest portion of the healthcare pie. As per our analysis the current (2006) bed per thousand population ratio for India stands at 1.03 as against an average 4.3 of comparable countries (like China, Korea and Thailand-2002). Our analysis points out that in spite of the phenomenal growth in the healthcare infrastructure, we are likely to reach a bed to thousand population ratio of 1.85 and in a best case scenario, a ratio of 2 by 2012. Beds in excess of 1 million need to be added to reach a ratio of 1.85 per thousand. Of the total number of beds, about 896,500 beds will be added by the private sector which shall need a total investment of US$ 69.7 Billion (Rs. 222,000 Crores) from the private sector over the next six years. However, the gains are commensurate in this capital intensive industry, since the revenues generated by private hospitals in the year 2012 will t a CAGR of 15%. Despite this investment, the bed to thousand population ratio would be far from satisfactory when compared to other similar developing countries.

Telemedicine is another exciting opportunity, which allows even the interiors to access quality healthcare and at the same time, according to the model proposed by us, significantly improves the productivity of medical personnel. In a county of over 1.1 Billion people, the Healthcare system will have to innovate to double utilization from existing resources just to reach a level that comparable developing countries had attained in 2002. Telemedicine in our opinion is one such innovative technology. If used effectively can double the utilization of scarce human resources. We believe that it is difficult to make standalone telemedicine models feasible but if telemedicine models are integrated in a Healthcare model, such models can become viable. One important reason is that Telemedicine shall increase the patient base, which in turn will increase occupancy rates of hospitals in the integrated telemedicine model.

The biggest challenge for the healthcare industry today is an acute shortage of trained personnel, ranging from doctors, nurses, technicians and even healthcare administrators. Such challenges present an opportunity for both domestic and foreign players in the form of ‘training & education’. Foreign players can enter the market to take a two-fold advantage. One, they also get a share of the booming education sector and two, they can source some of the talent for their own countries as human resources shortages in healthcare will be a global phenomenon.

Medical equipment forms another promising opportunity within healthcare. Our analysis pegs the medical equipment industry at US$ 2.17 billion (Rs 9,790 Cr) in 2006 growing at 15% per year. It is estimated to reach US$ 4.97 billion (Rs 22,396 Cr) by 2012. Currently over 65% of the medical equipments are imported and therefore this is a key area for forging partnerships across borders. Engineering excellence, cost-effective labor, increasing emphasis on intellectual property rights and most importantly a fast growing domestic market makes India an ideal manufacturing base.

Growth in medical infrastructure will be accompanied by demand for associated products and services. One such important industry is medical textiles which shall almost double to a US$ 753 Million (Rs 3,388 Cr) by 2012, from the current US$ 405 Million (Rs 1822 Cr). Medical value travel has finally come of age and is poised to grow at 22% annually. With hospitals moving in for quality accreditations like JCI, NABH & ISO and tie-ups between insurance players and hospitals, this sector has the potential to be a latent growth driver. A percentage of high end beds will provide treatment to medical tourists and the estimated value of the industry will reach US$ 1.48 billion (Rs 6,678 Cr) by 2012 growing at 22% per year from the current size of US$ 450 Million (Rs 2025 Cr).

As per our analysis Health insurance has the potential to show fantastic top line growth. Premiums grew at 133% for private players and at 47% for the industry as a whole in Q1 of 2006. The Health insurance sector will grow to a US$ 3.8 billion (Rs 17,100 Cr) in collected premiums by 2012 from the current annual premium collected of US$ 711 Million (Rs 3,199 Cr) in 2006.

Clinical trials has the potential of becoming close to a US$ 1 billion (Rs 4,500 Cr) industry by 2010. Even though the advantages of conducting trials in India are well known the industry needs a boost in terms of effective government policies and a proactive strategy (including effective utilization of established government infrastructure).

The Health services outsourcing sector has real potential as most of the key components needed for success are present in India. Moreover, India has demonstrated potential in outsourcing. As per our analysis the total size of the industry is set to grow to US$ 7.4 Billion (Rs 33,300 Cr) by 2012,at a CAGR of 11%.

Our analysis points towards the need for stronger partnerships between government and private sector in healthcare. Even a realistic target of 1.85 beds per thousand population by 2012 needs and investment of US$ 77.9 Billion, the government and private players need to focus on their core competencies/responsibilities, work together to reduce inefficiencies and complement each others efforts.