14 December, 2010 Pankaj Vaish [email protected]
Seminar on FOSTERING HEALTH FOR ALL
Panel Discussion II: Evolving Innovative Investment Ecosystems in Healthcare
Agenda
The Healthcare Provider Ecosystem
Indian Healthcare Sector: Challenges or Opportunity
Financing in Healthcare Sector
Solutions and Resolutions
Medical Technology/
Equipment
Land/ Building
Information Technology
OPEX
Talent/ Medical
Consumable/ Marketing
Healthcare Provider Ecosystem
2
INDIAN HEALTHCARE SECTOR CHALLENGES OR OPPORTUNITY
Indian Healthcare Sector: Challenges or Opportunity
Physical Infrastructure • At 5.1 % of GDP spend Indian healthcare spending is the lowest globally
• 0.86 beds/1,000 population against a world average of 2.61 and WHO norm of 3.9 beds/ 1,000 population
• 1 mn deaths / year due to lack of adequate healthcare establishments
• The share of healthcare spend by private sector is 80% and that of the public sector is 20%
Health Insurance • 80% expenditure borne by the patients
• Health insurance a mere 3%; State bears 12%
Medical Personnel • 2.1 doctors and nurses/ 1,000 population against a world average of 4.8
1.2 physician against world average of 1.5 (out of 1.2 only 0.6 are allopathic physicians)
0.9 Nurses against world average of 3.3
Unequal Distribution – the urban versus rural divide • Over 700 mn people have no access to specialists care
• 80% of the specialists live and work in urban areas
4
PWC Healthcare Report 2007
Indian Healthcare Sector: Challenges or Opportunity
As per the Government of India’s (GOI) National Rural Health Mission (NHRM) Document (2005)
• Only 10% of Indians have some form of health insurance and mostly this is inadequate
• Around 40% of Indians have to borrow money or sell their assets to meet their healthcare expenses
• Nearly 25% of Indians slip below the poverty line because of hospitalization due to a single bout of illness
5
Indian Healthcare Sector: Challenges or Opportunity
Exponential growth potential • Same as what the software industry has seen in the past decade
• Indian healthcare currently at $ 38 bn is expected to cross $77 bn by 2013 and touch $ 310 bn by 2023 – CAGR of 15% for the next 15 years
• Will generate over 9 mn jobs by 2012
• India needs to add 3.1 mn beds by 2018 against the existing 1.1 million and that alone means an immediate injection of $82 bn
Drivers for Growth • Growing population – @ 2% growth will reach 1.6 bn and cross China by 2050
• Increase in income level – today over 200 mn Indians have a PPP adjusted income of over $ 100,000/ annum
• Rise in Diseases – come back of diseases like TB, Dengue, Hepatitis, Malaria, Tuberculosis; High lifestyle diseases – Obesity, Diabetes, Hypertension, Cancer
Medical Tourism • Becoming a high quality low cost medical destination
• Likely to grow at 30% to touch 2 bn by 2012
6
Technopak Advisors; VVC Circle; Indian Brand Equity Foundation 2009 Study
Indian Healthcare Sector: Uniquely Positioned
The IT Perspective
Four Megatrends that will drive Indian IT
• Growth of Asian economies will contribute 20% of global GDP by 2020 (up from 10% today)
• Reduced working population in North America, Europe, China and Japan will push IT to India
• Healthcare will present one of the biggest business opportunities because of the rising aging population in the developed nations
• 80% of the growth will come from BRIC and new industry segments namely Healthcare, Public, Utility and Media
Using mobile technology to bridge the socio-economic and health divide
• Tele-medicine, tele-traiage, tele-assessments
• Preventive and informative care, remote monitoring, wellness education
7
NASSCOM 2020 Perspective Report
INDIAN HEALTHCARE SECTOR FINANCING OPTIONS
Means of Financing
External Commercial Borrowing
Long Term Bank Loan
Individuals (NRI)
Taxation
Private Equity Funds: Growing Business
Venture Capitalist: Seed Investments
Foreign Direct Investment (FDI)
IPO
• Healthcare despite of increased funds has attracted very few investors • FDI: Very few investments made in spite of government’s policy for
allowing 100 percent FDI in hospitals • PE Funds: Investing in emerging markets like Wellness, Biotech, Medical
Devices, Clinical Research Organization and Diagnostics • Pharmaceutical sector enjoys about $0 % of deals • Hospitals accounts for 24 % • 58 domestic PE Funds with $6 bn consider healthcare as an area of Interest • 22 deals in 2009 with a total announced value of $ 237 mn
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Investor Perspective: Issues and Challenges
Deficient Government Regulations, Governance Structure and Protocols
Capital Intensive – Longer gestation period with breakeven period of 5-6 years for a new hospital
Low Health Insurance Coverage
Shortage of Manpower and Medical Talent
Accountability Issues
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INDIAN HEALTHCARE SECTOR SOLUTION AND RESOLUTION RECOMMENDATIONS
Healthcare Ecosystem
• Affordable for small and mid level hospitals
• Pay per use Model: SaaS Model, Subscription Model, Smart Cards that carry patient history
• Offer better career options to retain work force
• Stop talent drain to the west • Improve Training Infrastructure • Consumable Group Purchase
• Public Private Partnership • Lease/ Auctions • Higher Floor Space Index/
Floor Area Ratio
• Group Purchase for High Technology Cost
• OEMs adopt Pay per use Models to reduces patient bill
• Implement PPP model Medical
Technology/
Equipment
Land/ Building
Information Technology
OPEX
Talent/ Medical
Consumables/ Marketing
ROI
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How to Attract Investors
Rationalize Project Cost • Project Set-Up Costs have the following cost mix:
Land 10 -15 %
Building 25 %
Medical Equipment 40 %
Other (IT, Staff) 20 %
• Look at innovative low cost models
• A careful medical technology purchase as it constitute about 30-40 % of the CAPEX
Opex Cost • Better management and a close monitoring of the functioning of the hospital
• Better process management techniques and more accountability
• A better ROI
More investment should go into R&D in order to reduce technology cost
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Improving the Delivery System: Summary
Reducing Costs
Cost reduction across the eco system (Land, Building, Equipment, OPEX)
PPP Model
Shift from curative to preventive healthcare
Manpower Training
Investments in Technology R&D: Indigenous
Empowering the Patient
Affordability: Insurance Schemes for low socio-economic groups
Accessibility: To Private and Public Systems
Reach: Penetrate into tier II and Tier III cities and rural parts of the country
14
Thank You