Changing Healthcare Landscape 040111

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Changing healthcare landscape A case of Jaipur city in India

Contents

2

A Overview of Indian Healthcare Market

B Jaipur - From Pink City to Medi-city?

Implications for healthcare providersC

Source: Enam, 2007

Healthcare delivery market accounts for fifty percent of the total Healthcare sector in India

3

15%

10%

25%

50%

Healthcare delivery PharmaDiagnostic Insurance & Medical equipment

100% = US $30 billion

• Indian healthcare industry, which comprises of hospitals and allied sectors, is projected to grow 23 per cent per annum to touch US$ 77 billion by 2012.

• The sector has registered a growth of 9.3 per cent between 2000-2009, comparable to the growth rate of other emerging economies such as China, Brazil and Mexico.

Size of healthcare market in India, $ billion, percent

Source: Enam, Kanvic research

Healthcare market can be segmented into four major categories

4

Key feature Financing Major players

Primary• Mainly at the grass root level• Minimal involvement of

private players in this segment

• Majority of it financed through Govt. spending

Tertiary - Multi-

speciality

• Higher equipment costs and fixed staff costs result in higher gestation periods

• More margins and higher volumes

• Major projects driven through large private players

Tertiary - Super speciality

• Low gestation periods• Can follow a strategy to

initially start off as multi speciality and move towards super speciality

• Major projects driven through large private players

Secondary

• Primarily includes nursing homes and recovery rooms

• Investment in such centres to reduce ALOS of tertiary care centres.

• Majority of it financed through Govt. spending

Key segments of Healthcare market

Note: ALOS - Average Length of Stay

Source: ibef

Indian healthcare market is evolving to provide cure for complex diseases and high quality of services

5

Complexity of disease

Qu

ality

of

Serv

ices

Low High

Low

High

Local nursing homes

Community hospitals

Multi-speciality hospitals

Super speciality

Health City

Type of healthcare providers

Source: Kanvic research

Favourable demographics and improving income levels are driving the growth of healthcare market

6

Favourable demographics

Improving income levels

Increasing preference for

private treatment

Availability of quality healthcare

India’s growing population is augmenting the growth of healthcare delivery market

Population growth and increased disposable incomes are expected to result in better healthcare awareness and higher expenditure on healthcare

India has 0.5 million doctors, 0.9 million nurses and about 1 million beds.

In India, private healthcare accounts for nearly 80 % of the country’s total healthcare expenditure.

Drivers of healthcare growth in India

Note: Figures are rounded to the nearest integer and may not add up to 100. OPD- Outpatient, IPD- Inpatient

Source: MGI, Crisil, NSSO

Increasing healthcare spend and growth in inpatients will further drive the growth

7

1995 2005E 2010F 2015F

Food, beverages & tobacco ApparelHousing & Utilities Household productPersonal product Transportation Communication EducationHealthcare

1 34

11

4 2

14

5

56

42

6

12

38

17

57

3425

5

12

39

19

6

913

9

6

20

113

10

5

32

100% = 60 82 140 248

2006 2011E 2016E

2312

1268

637 1329

903

617

OPD IPD

CAGR 11.6%

CAGR 10.9%

Share of average household consumption, Rs. ‘000, %

Revenue from outpatients and inpatients, Rs. billion

Contents

8


B Jaipur - From Pink City to Medicity ?



Jaipur’s healthcare market has evolved over the years

9

1947 2000s

1971

SMS Medical college is set up by the Government

First private hospital Santokba Durlabhji Memorial Hospital (SDMH), run by a trust, is inaugurated

Institute based hospitals are set up after privatisation of medical education in the state

Narayana Hrudayalaya, a leading Cardiac care hospital in India, opens in Jaipur

Soni hospital starts operations with 20 beds

1986

2004

S K Soni Hospital begins operations with super specialities in cardiology, cancer, nephrology and neurosurgery

100 bedded Tagore hospital begins its operations

Fortis Escorts, the first corporate hospital in Jaipur, opens its doors to the public

2006

2007

2010

Evolution of healthcare market in Jaipur

Note: NCR- National Capital Region


Healthcare market in Jaipur is growing based on sustainable growth drivers

10

Tourism driven economy creating a demand for medical tourism

State capital and major city in Rajasthan, the eighth largest state in India by population

Government initiatives and policies to promote healthcare

Major players in healthcare sector expanding into Tier II and Tier III cities in India

Proximity to Delhi NCR region

Healthcare growth drivers

for Jaipur

1

2

34

5

Growth drivers of healthcare in Jaipur

Note: NABH is a constituent board of Quality Council of India was set up in 2005 to establish and operate accreditation programme for healthcare organizations in India. NABH has standards specific to the Indian healthcare setting, major aspects being the assurance of uniform access, assessment, care of patients and protection of patient’s rights.

Source: NABH

Hospitals in Jaipur are going for quality accreditation

11

Hospital

Fortis Hospital

Apex Hospital

Monilek Hospital

SDMH

BMCHRC

Tagore Hospital

S.K. Soni Hospital

Status of Application

Got Accreditation

In process

Documents received

Documents received

In process

In process

In process

Jaipur Hospitals going for NABH accreditation

0

27.5

55

82.5

110

0 3750 7500 11250 15000

Note: The list of hospitals is not exhaustive


However, there are some hospitals where doctor to patient ratio is not adequate

12

Number of patients

Num

ber

of d

octo

rs

Distribution of doctors and patients for hospitals in Jaipur

Coping zones

Source: Press clippings, Kanvic research

New hospitals will increase supply of beds in the market

13

Hospital Speciality No. of beds Proposed

investment (Rs. Crores)

Reliance Medicare Super Speciality 800 200

Bombay Hospital Multi Speciality 650 150

Dr. Rakesh Keedawat Hospital Multi Speciality 100 27

International Oncology cancer Hospital Super Speciality 100 54

Sea Rock Hospital - 200 50

Eternal Heart Hospital Super Speciality 150 60

Artemis Hospital Super Speciality NA NA

B M Birla Heart Research Centre - NA 300

Ojjus Medicare - 850 NA

Proposed new hospitals in Jaipur

Note: 1 Demand for beds is based on WHO standard of 35 beds for a population of 10,000.


While the demand for healthcare services will still be more than supply in near future, the market space may become ‘crowded’ for top end hospitals

14

Total Demand for beds1

Existing supply

Proposed addition

Gap in demand

and supply

11,240

6,000

2,700

2,540

Demand supply situation in Jaipur, number of beds

Contents

15


B Jaipur - From Pink City to Medi-city?


Source: Kanvic

Healthcare providers will need to look at five major factors in the changed scenario

16

Private Equity will help finance growth of hospitals

New business models will emerge

Quality of non-clinical services will have considerable influence on patient satisfaction

Hospitals will increasingly use mass media to reach out to their markets

Key factors for healthcare providers

Healthcare economics will become important

Key factors for healthcare providers

1

2

3

5

4

Note: EBIDTA- Earnings before Interest Depreciation Tax and Amortisation; SG&A - Sales, General and Administration

Source: Enam, Kanvic analysis

With increasing competition, a clear focus and strategy will lead to favourable economics for hospitals

17

EBIDTA margin%

Revenue

Inpatient

Outpatient

Costs

Rentals

Diagnostics

Diagnostics

Consumables

Consultancy

Consultancy

Diagnostics

Consumables

Personnel

SG&A

• Disease type• Doctor’s reputation• Hospital brand

• Type of investigation

• Location• Facilities

• Disease type• Doctor’s reputation• Hospital brand

• Type of investigation

• Doctor’s profile• Full time vs.

consultation payment

Economics of a healthcare provider

1

Source: Morgan Stanley, Company reports

Awareness of EBIDTA and cash break even will help hospitals in better planning

18

3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

59

7383

10290

106

141

155167

174

191

-23

-2

-6

0

2017

20 1921

EBIDTA margin Revenues

Revenue and EBIDTA margin build up of Fortis Escorts, Jaipur, Rs. Mn, percent

1

Break even

New business models are emerging in healthcare delivery

19

Single Speciality Hospital

Day Care Hospital

1.

• Single speciality hospitals (SSHs) provide care in one major speciality where they can offer end to end services. They are a relatively new and rapidly growing segment in India.

• The margins in SSH are high as they are mostly surgery driven. A SSH also needs less manpower, equipment, and infrastructure.

• Maternity care is receiving a much-needed fillip with corporate hospitals launching dedicated standalone birthing centres. Although Apollo's Cradle and Fortis Healthcare's La Femme may be the known names for maternity care, they are not the only ones interested in cashing in on this emerging market.

• New boutique hospitals catering to mother and child care are coming up in Goa and Southern India.

• Day care hospital model is attracting healthcare players in India. In day-care hospitals, patients are not required to stay overnight. They are provided healthcare services and discharged the same day.

• Recently, Nova Medical Centers has launched day care hospital chain based on similar models in the UK and USA. The company plans to set up 25 such hospitals across the country with an investment of Rs. 10 Crore per hospital.

• This model can bring down the cost of treatment for patients as a result of reduced investment in building and land.

2.

Emerging business models in healthcare delivery

2

Hospitals are also combining hospitality and retail to generate new revenue streams

20

Hospotels

Retail Store in Hospital

• Clinical activities are not the only source of income. For instance, the business of Cradle also come from retail stores that offer services for kids (baby clothes and kids' toys, apart from baby accessories, foods and hygiene products), for mothers (maternity wear), visitors (cards, gifts, books, magazines and confectionary), a well-stocked 24-hour pharmacy and a café for visitors.

• Large hospital chains are now turning into 'hospotels' -- a concept that combines the services of a hospital and a hotel. Already, Indraprastha Apollo Hospital has roped in fast food major Nathu's, Max Healthcare has a Cafe Coffee Day outlet.

3.

4.

Franchisee Model

• Considering the huge investment needed for establishing the necessary healthcare infrastructure in the country, franchising is emerging as a viable option for hospitals to expand to newer geographic areas.

• Apollo Hospitals is one among the pioneers to have sought franchisee model for its clinics. Apollo Hospitals unveiled 'Cradle,' a boutique hospital dedicated to woman healthcare through franchisee route.

5.

Emerging business models in healthcare delivery

2

Source: VCCedge, Kanvic research

Healthcare sector has attracted the attention of Private Equity

21

2005 2006 2007 2008 2009 2010

385

121

554

403

290

367

• Private equity and Venture capital are taking interest in Healthcare industry. They are becoming increasingly interested in regional hospitals. For example, Jaipur based Soni Group of Hospitals has attracted PE funding and is planning to expand into different regions.

• Two more hospitals in Jaipur- Narayana Hrudayalaya and Eternal Heart Hospital have attracted interest of PE firms.

• On a national level, Fortis la Femme is a JV with Sunrise Group while Spring Healthcare has made an investment in Oyster and Pearl Hospital.

PE investment in healthcare sector in India, $ Mn

3


Non clinical factors are contributing significantly in creating a hospital’s brand image

22

Reception services play an important role in patient satisfaction. While not as important as clinic services, they can create a negative perception even if the clinical services are excellent.

Care from doctors and nurses is a key factor in determining satisfaction level of patient.

Quality of Infrastructure is also a major non clinical aspect in assessing a hospital’s image.

Reception

Care from doctors and nurses

Infrastructure

35%

65%

Clinical Non clinical

Distribution of clinical and non-clinical processes in a hospital

1

2

3

4

Hospitals can use mass media for a number of functions

23

Inform about products and services

Create distinct identity in patient’s mind

Educate customers

Launch a new hospitalReview existing services

Reach out to larger markets

Communicate core value

Use of Mass media

Key functions of mass media for hospitals

5

The inclination to use mass media by hospitals has increased in recent years

24

Moolchand Hospital has been successfully advertising their Emergency services on radio. Fortis has been talking about the Maternity services at Fortis La Femme.

The use of print media is very common in hospital sector in the form of brochures, leaflets, pamphlets for disseminating information. Hospitals have been increasingly using newspapers to communicate about their services to the target population.

Technology based marketing includes increased contact with patients (former, existing and future) via email, newsletters and online forums.

Wockhardt Hospitals, India's leading hospital chain launched India's first "Interactive Occupational Health Screening Campaign" for employees across all industries in the country.

Radio

Print

Out of Home (OOH)

Internet marketing

Examples of mass media use by hospitals

5

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