Hospital & Health Care Industry in India
Hospital and Healthcare Industry Abstract Health care may be defined as “The prevention, treatment, management of illness and the preservation of mental and physical well-being through the services offered by the medical and allied health professionals. ”From the ages of self medication, Indian health care industry has come of ages during the recent times. Indian health care industry has emerged as one of the most challenging as well as largest service sector industry in the country. With the 2nd largest population in the world & 70% of it living in villages, it has become a challenge to provide medical services to one and all.
On the other side it also gives both public as well as private players a huge market to play. The role of Indian government in providing medical facilities is very important as every individual can’t afford the huge bills of private hospitals. Government has been helping below poverty line people by providing free medical facilities time & again. In India an individual can chose amongst various alternatives of medication like Allopathic, homeopathy, Ayurvedic etc. Allopathic currently leads all other forms of medication.
India provides various world class multi specialty hospitals and is attracting both patients & specialists from the world over. Here in our project, we are learning the business model of any of the key players in the hospital industry. We are trying to analyze the subject by doing an in-depth industry analysis, which includes industry lucrativeness, overall growth and profitability of the industry. A comparative analysis of Indian hospitals industry Vis-a- via global hospital industry has been done to gain a perspective on various options an Indian consumer has with respect to their foreign counter part.
We have also performed following analysis pertaining to the HOSPITAL INDUSTRY: 1. POTER’s five force 2. PEST Analysis. In order to analyze & comprehend any business model specific to a player we also need to do in depth study of the company as a whole. We have decided to analyze the business model of APOLLO HOSPITALS, other business areas APOLLO is into, revenue growth of APOLLO, its competitors, path breaking developments at APOLLO & expertise of APOLLO. We also need to understand and analyze the weaknesses, strengths, opportunities & threats to APOLLO HOSPITALS.
Along with this we have to study the strategies applied by APOLLO hospitals since its inception & changes made by them as & when required. INTRODUCTION Industry Overview Globally, India contributes 20 per cent to the global disease burden, ranks 171 in a list of 175 countries on public health spending, and is popularly known as the cardiac and the diabetes capital of the world. This shows that there is a high need of medical facilities in India. The healthcare industry has matured into a big sector in India with a contribution to the GDP of 5. % making it the third largest sector. The sector is also least affected by recession due to constant demand. Currently the in India the bed ratio is 1 per 1000 and lags behind the WHO norms of 1 per 300, this shows that there is huge potential in the industry of about 75000 to 1000000 more beds. With a CAGR (compound annual growth rate) of 15-17% in this sector the industry is lucrative with 1, 80,000 Crore of projections by year 2012. It is a social sector with state and central government providing subsidies and grants.
It includes hospitals, health insurance, medical software, health equipments and pharmacy. The hospital industry accounts for half the healthcare sector’s revenues and is estimated to be worth USD $22 billion and expected to grow to USD $32 billion by 2011. With average household consumption expected to increase by more than seven per cent per annum, the annual healthcare expenditure is projected to grow at 10 per cent and also the number of insured is likely to jump from 100 million to 220 million. The number of players in the industry have increased many folds with presence in every sector i. . hospitals, medicine retail, clinics, diagnostics and research. The government with the help of private players is going to make investments of USD 1-2 billion and make this industry as one of the top five in terms of healthcare worldwide. India Health Infrastructure Number of Hospitals in different zones in India Share of private expenditure as a percentage of total expenditure on healthcare has grown to nearly 80 per cent over the last decade and it is further expected to increase more than $40 billion by 2012.
With the potential to return 30-40 percent margins and decreasing public sector investments, the hospital segment will be dominated by the private hospitals. It is estimated that nearly 75 per cent of all hospitals and 40 per cent of hospital beds in the country are in the private sector. The private sector provides 60 per cent of all outpatient care in India and as much as 40 per cent of all in-patient care. Private vs. Government Spending in India THREAT OF NEW ENTRANT ANALYSIS * Is quite high * As the profit in this industry is high new competitors are attracted towards the industry. Also many specialized hospitals (comparative low investment) are opened which are curbing the patient from multi specialty hospitals. Porter’s Five Forces THREAT OF SUBSTITUTE BUYER POWER SUPPLIER POWER * Threat of substitute is low to moderate. * As in case of non emergency cases people prefer homeopathy or naturopathy. * Buyer’s power is moderate to high. * And also there is threat of substitution. * Ex Shifting to other medicine like ayurveda or natural care. COMPETITIVE RIVALRY IS HIGH * Is moderate * There are surgical instruments which are developed by only few players n which case the supplier power is high. * But there are some common instruments which are manufactured by many players in which case supplier power is low. PEST ANALYSIS 1) Political Analysis: * A part of the budget is allocated for the development of healthcare facilities. * To encourage investment in the health care sector, government of India has allowed 100% FDI under the automatic route. * Government has also accorded the infrastructure status to the hospitals and has announced Lower tariffs (between 5–8 per cent) on medical equipment and devices. Tax benefit is now available to hospitals which are constructed and have started or would start functioning at any time during the period beginning the 1st day of April, 2008 and ending on the 31st day of March, 2013. * Customs duty exemption on specific personal medical aids like crutches, wheel-chairs, walking frames and artificial limbs. 2) Economic Analysis: * Strong GDP growth rate of India over the past few years (8%) * Growth in GDP from the sector is expected to increase from 5. 5% in 2009 to 7% in 2012. Government has made loans easily available and thus people with limited means could avail better/specialized treatment 3) Socio- Cultural Environment Analysis: * Increasing disposable income of the people. * More number of people approaching the age of 60. * Medical facilities have increased since there is more awareness of healthcare among the population * Certain percentages of beds have to be kept for people below poverty line for e. g. in Mumbai, 20% of beds has to be kept reserved for poor people. * Taking care of the needs of BPL people in both rural and urban India. These hospitals provide open counseling and relief centers; teach hygiene, sanitation to the masses. 4) Technological Environment Analysis: * Breakthrough innovation in the field of specialized equipment for e. g. test tube baby. * Communication has managed to bridge the gap between places located at long distance. * Mobility of medical services has improved the health conditions in rural parts. * Mobile phones, credit cards (for payment purposes) etc have made doctors and medical facilities easily available. * Increasing complexity of hospital care
Key Drivers of the Hospital Industry 1. Growing population and economy- One driver of growth in the healthcare sector is India’s booming population which is currently 1. 1 billion and increasing at a 2% annual rate. By 2030, India is expected to surpass China as the world’s most populous nation. By 2050, the population is projected to reach 1. 6 billion. This population increase is due in part to a decline in infant mortality and the result of better healthcare facilities. By 2025, an estimated 189 million Indians will be at least 60 years of age—triple the number in 2004.
The growing elderly population will place an enormous burden on India’s healthcare infrastructure. The Indian economy, estimated at roughly $1 trillion, is growing in tandem with the population. Goldman Sachs predicts that the Indian economy will expand by at least 5% annually for the next 45 years and that it will be the only emerging economy to maintain such a robust pace of growth. 2. Expanding middle class India traditionally has been a rural, agrarian economy. Nearly three quarters of the population still lives in rural areas, and as of 2004, an estimated 27. 5% of Indians were living below the national poverty line.
Some 300 million people in India live on less than a dollar a day, and more than 50% of all children are malnourished. India’s thriving economy is driving urbanization and creating an expanding middle class, with more disposable income to spend on healthcare. While per capita income was $620 in 2005, over 150 million. Indians have annual incomes of more than $1,000, and many who work in the business services sector earn as much as $20,000 a year. 3. Rise of diseases- Another factor driving the growth of India’s healthcare sector is at a rise in both infectious and chronic degenerative diseases.
In addition to battling infectious diseases, India is struggling with the emergence of diseases such as AIDS as well as food- and water-borne illnesses. Moreover as Indians live more affluent lives and adopt unhealthy western diets that are high in fat and sugar, the country is experiencing a rise in lifestyle diseases such as hypertension, cancer, and diabetes, which is reaching epidemic proportions. Over the next 5-10 years, lifestyle diseases are expected to grow at a faster rate than infectious diseases in India, and to result in an increase in cost per treatment. . Medical tourism- Medical tourism is one of the major external drivers of growth of the Indian healthcare sector as a whole. The emergence of India as a destination for medical tourism leverages the country’s well educated, English-speaking medical staff, state-of-the art private hospitals and diagnostic facilities, and relatively low cost to address the spiraling healthcare costs of the western world. India provides best-in-class treatment, in some cases at less than one-tenth the cost incurred in the US.
India’s private hospitals excel in fields such as cardiology, joint replacement, orthopaedic surgery, gastroenterology, ophthalmology, transplants and urology. 5. Emerging health insurance market- In recent years, there has been a liberalization of the Indian healthcare sector to allow for a much-needed private insurance market to emerge. Due to liberalization and a growing middle class with increased spending power, there has been an increase in the number of insurance policies issued in the country. In 2001-02, 7. 5 million policies were sold. By 2003-4, the number of policies issued had increased by 37%, to 10. million. The Insurance Regulatory and Development Authority (IRDA) eliminated tariffs on general insurance as of January 1, 2007, and this move drove additional growth of private insurance products. Market Share of Key Players in Health Insurance Companies (2008) Best Practices Followed in the Industry * Consolidation, from fragmented systems transition into large multispecialty groups and truly integrated systems. * Greater vertical and horizontal integration of care and the employment of uniform, data-based quality standards that will reduce wide regional variation in care patterns. Accelerated use of cutting-edge outsourcing strategies to reduce costs and improve healthcare value. * Obtaining International certifications for standards so as to get recognized internationally and attract people from all over the world. * Following SOPs (Standard Operating Protocols). * Having a detailed formulary of medicines. * Superior planning and execution of product/services launches. * Strategic Alliances. Example Manipal Cure and Care invested US$ 82 million in a tie-up with Aditya Birla Group and Jubilant Retail for building over 100 health outlets across India by 2012. Usage of Innovative technologies. Major Challenges * India’s hospital industry faces significant shortage of qualified manpower in all categories of doctors, nurses and paramedical staff. * Additionally, building hospitals without a mandatory ‘needs analysis’ in light of catchment area requirements will lead to an uneven development of healthcare delivery infrastructure and hamper optimal utilization of scarce resources. * Affordability of the high cost of technology by consumers of healthcare in India will necessitate significant adaptations to technology in the context of Indian markets.
This is especially important in light of the escalating costs of material and equipment. * Hospitals also face limitations due to significant bureaucratic hurdles in obtaining clearances for setting up new facilities. The other Governmental policies that will hinder growth are lack of a consistent policy on accreditation of healthcare delivery institutions, existence of arcane rules that inhibit participation of private sector in owning and operating medical and paramedical educational institutions, lack of availability of health statistics which could promote proper planning of facilities and low overnment budget allocation to healthcare as an industry. * Rural health care is one of the biggest concerns as more than 60% of our population still lives in rural areas ; there is requirement of proper hospitals all across the rural India * Rising competition, due to the onset of private and foreign players, on one hand improves quality but on the other hand has made holy organization like hospitals a money making machine. * More opportunities abroad are making our young doctors and aspirants to shift to countries like U. S.
A, Canada, and U. K * Government hospital’s pitiable condition ; infrastructure are making the poor either to go to high cost private hospital s or ignore the illness, thereby making the conditions worse. Major Players in the Industry * Public Hospitals like AIIMS, PGI * Apollo * Fortis * Wockhardt(Recently taken over by Fortis) * Max Health Care * Global Hospitals * Manipal Health Systems(MHS) * Narayana Hrudayalaya * Care Hospitals * Aditya Birla Memorial Hospital Company Chosen- Apollo Hospitals Enterprise Limited (AHEL) Company Overview
Incorporated in 1979 as a public company, Apollo hospitals enterprise limited (AHEL) is one of the leading healthcare providers in India and Asia. It is being promoted by Dr. Prathap C Reddy who gave up his practice in the US and came to India to setup a world class infrastructure. It operates at various levels of hospitals and has wide network of 43 hospitals across the country and the world. The company has entered into diagnostic clinics, retail chain for medicines, medical BPO, medical insurance and clinical research. The group is planning to invest Rs 2000 crore, to build around 15 new hospitals, n India, Sri Lanka, Nepal and Malaysia. It maintains the best figures in the healthcare industry of 7. 4 million treated patients and 98. 5 % success rate in 45,000 cardiac surgeries. The group has ramped up its IT infrastructure with the implementation of Hospital Information System (HIS) in its hospitals. Bibliography * India Hospital Report May 2010 by NorthBridge Capital * Healthcare In India- emerging Market Report * Hospital Industry Insight by Cygnus Business Consulting ; Research Pvt. Ltd. * Health Insurance In India. (n. d. ). Retrieved from http://www. healthinsuranceindia. blogspot. com/. * IBEF * CRIS