Healthcare
4 September 2008India’s healthcare sector has been growing rapidly and estimated to be worth US$ 40 billion by 2012, according to Pricewaterhouse Coopers in its report, ‘Healthcare in India: Emerging market report 2007′. Revenues from the healthcare sector account for 5.2 per cent of the GDP, making it the third largest growth segment in India.
The sector’s growth will be driven by the country’s growing middle class, which can afford quality healthcare. Over 150 million Indians have annual incomes of more than US$ 1,000, and many who work in the business services sector earn as much as US$ 20,000 a year. Today at least 50 million Indians can afford to buy Western medicines-a market only 20 per cent smaller than that of the UK.
The growing purchasing power of Indian patients is revealed in the increased business of air ambulance services. Around 365 airliftings worth several millions of rupees happen in Delhi in a year on average.
If the economy continues to grow faster than the economies of the developed world, and the literacy rate keeps rising, much of western and southern India will be middle class by 2020.
To meet this demand, the country needs US$ 50 billion annually for the next 20 years, says a CII study. India needs to add 2 million beds to the existing 1.1 million by 2027, and requires immediate investments of US$ 82 billion.
Funds in the sector have been largely private. In fact, it is believed that 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. It is estimated that nearly 70 per cent of all hospitals and 40 per cent of hospital beds in the country are in the private sector, says PWC.
Investments
The opportunities presented by the healthcare sector have made it a major draw for potential investors. The healthcare sector attracted US$ 379 million in 2006 - 6.3 per cent of the total private equity (PE) investment of US$ 5.93 billion. The PE deals that the sector attracted in 2006 were as large as inputs into the automotive sector.
- Medical care services provider Apollo Hospitals group will invest about US$ 235.69 million in the next 18 months to set up 15 hospitals in tier-II and tier-III cities in India.
- The Indian government plans to invest US$ 177.22 million across the golden quadrilateral (GQ) project, to develop nearly 140 trauma care centres on the 6,500 km long north-south and east-west corridors.
- Competitor Fortis Healthcare Ltd will add 28 hospitals to its 12-hospital chain by 2012.
- George Soros’s fund Quantum and BlueRidge bought 10 per cent in Fortis Healthcare.
- Manipal Health Systems raised over US$ 20 million equity from IDFC Private Equity Fund.
- Bangalore-based HealthCare Global Enterprises raised over US$ 10 million in equity from IDFC.
- Metropolis Health Services, a diagnostic chain, raised over US$ 8 million in equity from ICICI Venture.
- Investment firms Apax Partners, IFC and Trinity Capital have invested over US$ 200 million in hospital firms.
Private healthcare
- With private healthcare driving a large chunk of healthcare in India, the stage is set for private healthcare players to take wing.
- Global Hospitals in Hyderabad, which had a modest beginning as a 150-bed facility dedicated to multi-organ transplantation in Hyderabad, is set to invest close to US$ 178 million in a couple of years to set up hospitals in other metropolitan cities.
- Mumbai-based healthcare firm Wockhardt Hospitals is planning to set up 14 super-speciality hospitals across the country over the next two years, which could entail an investment of up to US$ 152 million.
- Apollo Hospitals, Asia’s largest healthcare group, is planning to expand its operations by setting up 50 hospitals across the country, including many in tier-II cities. It will invest US$ 5-9 million in each of the facilities.
Health insurance
With less than 10 per cent of the population having some sort of health insurance, the potential market for health insurance is huge. Indian health insurance business is fast growing at 50 per cent and is expected to continue growing at this pace. The sector is projected to grow to US$ 5.75 billion by 2010, according to a study by the New Delhi-based PHD Chamber of Commerce and Industry.
According to the report by McKinsey on the Indian pharmaceutical healthcare, one-fifth of India’s population is likely to have a medical insurance by 2015, leading to an estimated increase in consumer spending on healthcare from US$ 2,054 per household in 2005 to US$ 3514 per household by 2015.
In some cases, the Government is partnering with the private sector to provide coverage at a low cost. For instance, the Yashaswini Insurance scheme, launched in 2002 in Karnataka by a public-private partnership, provides coverage for major surgical operations, including those pertaining to pre-existing conditions, to Indian farmers who previously had no access to insurance.
The Insurance Regulatory and Development Authority (IRDA) has eliminated tariffs on general insurance as of January 1, 2007. This move is expected to drive additional growth of private insurance products.
Medical equipment and IT
With the potential of the healthcare sector being what it is, ancillary industries such as healthcare equipment and information technology in healthcare are also witnessing a spurt.
The soaring growth projections have prompted foreign medical equipment makers to float Indian subsidiaries — 30 of them received import clearances in 2007 alone. Boston Scientific, Abbott, Becton Dickinson, Guidant, Medtronic, B Braun, Johnson & Johnson, DePuy, Advanced Medical Optics and Stryker are among the leading firms, whose Indian subsidiaries received approvals to import medical devices during the year.
Investments into the medical and surgical instruments segment amount to US$ 115.29 million over the period August 1991 to April 2007. A recent FICCI-Ernst & Young study has predicted 15-20 per cent growth for the Indian medical equipment market and estimated market size to be about US$ 5 billion by 2012.
Hospitals have realised that information technology (IT) can be an effective tool towards efficient systems. According to a report by Springboard Research, India has the fastest growing healthcare IT market in Asia, with an expected growth rate of 22 per cent, followed closely by China and Vietnam. In fact, the Indian healthcare technology market is poised to be worth more than US$ 254 million by 2012.
Medical Tourism
The attraction of high quality healthcare facilities at competitive costs has been instrumental in a large number of foreign arrivals to access healthcare services in India. Going by the current pace with which this segment has been growing, the CII-McKinsey study estimates that revenues from this segment could touch US$ 2.2 billion by 2012 (from the current figure of US$ 333 million).
Indian hospitals are fast becoming the first choice for an increasing number of foreign tourists. Over 150000 medical tourists travelled to India in 2002 alone, bringing in earnings of US$ 300 million. India’s growing reputation as a major medical tourism destination is attracting more and more visitors from Gulf countries with many travel agents now offering packages combining treatment with a vacation.
Beyond cost advantage
However, the Indian healthcare story is not about cost advantage only. It has a high success rate and a growing credibility.
- Indian specialists have performed over 500,000 major surgeries and over a million other surgical procedures including cardio-thoracic, neurological and cancer surgeries, with success rates at par with international standards.
- The success rate of cardiac bypass in India is 98.7 per cent against 97.5 per cent in the U.S.
- India’s success in 110 bone marrow transplants is 80 per cent.
- The success rate in 6,000 renal transplants is 95 per cent.
The Government has also been proactive in encouraging prospects in this sector with a number of initiatives:
- A new category of visa “Medical Visa” (’M'-Visa) has been introduced which can be given for a specific purpose to foreign tourists coming into India.
- Guidelines have been formulated by Department of AYUSH prescribing minimum requirements for Ayurveda and Panchkarma Centres.
Consequently, easy access to visa facilities coupled with the best emerging medical infrastructure in large and tertiary towns will lead to an increase in foreign exchange earning through medical tourism. Annual earnings from medical tourism is estimated to rise from the current US$ 815.32 million to US$ 1.87 billion by 2012.
Ratings
In recognition of the quality of healthcare delivery services in India, a number of Indian hospitals have received accreditation from international agencies worldwide.
- Five hospitals in India — Indraprastha Apollo Hospital (New Delhi), Apollo Hospital (Chennai), Apollo Hospital (Hyderabad), Wockhardt Hospital (Mumbai) and Shroff Eye Hospital (Mumbai) — have been accredited to the leading healthcare accreditation agency in the United States, Joint Commission International (JCI).
- NHS of the UK has indicated that India is a favoured destination for surgeries.
- The British Standards Institute has now accredited the Delhi-based Escorts Hospital.
- India’s independent credit rating agency CRISIL has assigned a grade ‘A’ rating to super specialty hospitals like Escorts and multi specialty hospitals like Apollo.
- Wockhardt Hospital has an exclusive association with Harvard Medical International, the global arm of Harvard Medical School, the world’s leading medical institution.
- Max Healthcare, in collaboration with Singapore General Hospital, is into clinical practice, research and training.
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