Indian Healthcare Industry 2016

July 2016

A perspective on Healthcare Infrastructure

1. Introduction to Indian Healthcare Industry ……………… ..1

2. Market view of Indian healthcare sector ……………...…….2

3. Growth Drivers of Indian healthcare sector…………………3

4. Healthcare Infrastructure in India ……………………...……..7

5. Key Players in the Private Healthcare Segment……………10

Contents

Section 1

Introduction to Indian

Healthcare Industry

The Healthcare sector, in India, has become one of India's largest sectors - both in terms

of revenue and employment. The industry comprises hospitals, medical devices,

Pharmaceuticals, clinical trials, outsourcing, telemedicine, medical tourism, health

insurance and medical equipment. The Indian healthcare industry is growing at a

tremendous pace due to its strengthening coverage, services and increasing expenditure

by public as well private players.

The Indian healthcare delivery system is categorized into two major components - public

and private. The Government i.e. public healthcare system comprises limited secondary

and tertiary care institutions in key cities and focuses on providing basic healthcare

facilities in the form of primary healthcare centres (PHCs) in rural areas. The private

sector provides majority of secondary, tertiary and quaternary care institutions with a

major concentration in metros, tier I and tier II cities.

The Indian healthcare industry is projected to continue its rapid expansion, with an

estimated market value of USD 280 billion by 2020, fuelled by increased population

growth in India's low income communities. Large investments by private sector players

are likely to contribute significantly to the development of India's hospital industry and the

sector is poised to grow to USD 280 billion by 2020.

Rising incomes, greater health awareness, lifestyle diseases, and increasing insurance

penetration will contribute to growth. Healthcare spending in India accounts for over 4.2

per cent of the country's GDP, of which the public spending is around 1 per cent of GDP.

The presence of public health care is not only weak but also under-utilized and

inefficient.

Healthcare delivery and pharmaceuticals account for nearly 75% of the total healthcare

market. India has only 0.7 beds per 1,000 people, far below the global average of

2.6.India needs to add 2 million beds to the existing 1.1 million by 2027, and requires

immediate investments of USD.

Introduction

1

The Indian healthcare industry is seen to be growing at a much rapid pace of 17% CAGR

and is expected to become a USD 280 billion by 2020 from USD 68.4 billion in 2011. A

break-up of the sector of 2012 is provided in Figure.

Indian Healthcare Industry (Revenues USD Bn) Healthcare Industry Breakup (%)

Market view of Indian healthcare sector

70%

20%

10%

HealthcareDelivery

Pharma

Medicaltechnologies &Other

45.0 51.7 59.5 68.4 72.8 81.3

160.0

2008 2009 2010 2011 2012 2014 2017F

Source: Frost & Sullivan, LSI Financial Services, Deloitte, TechSci Research

India – Underpenetrated Healthcare Market

Demand for healthcare services in India is expected to rise owning to favourable

demographics and radical shift in the disease patterns of its populace. India’s healthcare

spending is lowest both (as % to GDP and Per capita spending) when compared to

developed countries suggest tremendous potential for growth.

As % of GDP

India’s healthcare spend is significantly low when compared to the global, developed and

other similar emerging economies. India’s healthcare expenditure as % of GDP was 3.8

% (in which government spends 1.2 %) as compared to global average of 8.6%

(government spends 5.0%).

Per capita healthcare spending

Also per capita healthcare spending of USD 196 is lowest compared to USD 8,845 in the

US, USD 3,235 in the UK and USD 578 in China.

As per Disease Load

India’s share in global disease burden is 20%, while its share of healthcare infrastructure

Source: Frost & Sullivan

2

India Healthcare Spending (% of

GDP)

India - Per Capita Healthcare Spending

(USD)

17.0

11.6 10.9 10.3 9.3

5.43.8

8.6

Source: WHO – World Health Statistics 2015

8845

4610 42133632 3235

894 630 578 273 196

Source: WHO – World Health Statistics 2015

Demand for healthcare services in India is expected to rise owning to favorable

demographics and radical shift in the disease patterns of its populace. The key factors

attribute to growth in healthcare sector are:

Increasing health awareness and disposable incomes

Rising per capita income in India has improved affordability of healthcare and

significantly expanded the addressable market for private healthcare providers. This has

led to an increase in the standards of consumer awareness and patients are now

demanding and willing to pay for better infrastructure, improved diagnostic facilities,

latest technology and best-in-class medical care. Even though healthcare is considered

as a non-discretionary expense, considering that an estimated 59 per cent of households

is much lower with only 6% of global hospital beds and 8% of share of doctors and

nursing staff.

in India had an annual income of less

than 2 lakh in 2013-14, affordability of

quality healthcare facilities remains a

major constraint.

Growth in household, and

consequently, disposable incomes, is,

therefore, critical to the overall growth

Rising Disposable Incomes

1.8 3.220.4

107.292.1

5.6 10.9

81.8102.8

61.7

GLOBALS (UPPER CLASS)

STRIVERS (MIDDLE CLASS)

SEEKERS (MIDDLE CLASS)

ASPIRERS DEPRIVED

Source: CRISIL Research

3

Growth drivers of Indian healthcare sector

Increasing penetration of health insurance

The insurance penetration level in India is very low when compared with the global

average. Low Health insurance penetration is one of the major impediments to the

growth of the healthcare delivery industry in India as affordability of quality healthcare

facilities by the lower income groups continues to remain an issue. As per the Insurance

Regulatory and Development Authority (IRDA data, less than 15 per cent of the Indian

population is covered through health insurance).

in demand for healthcare delivery services in India. The immense opportunity in the

industry can be gauged from the fact that the share of households in the 2-5 lakh per

annum income bracket is expected to go up to 38 per cent in 2017-18 from 28 per cent in

2013-14.

Rising Penetration of Health Insurance (%)

1.031.30

2.42

2.79 2.85 2.90

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Source: IRDA LSI Financial Services, TechSciResearch, World Bank

Increasing healthcare cost and burden of

new diseases along with low government

funding is raising demand for health

insurance coverage. Many companies

offer health insurance coverage to

employees, driving market penetration of

insurance players.

By 2015, spending through health

insurance will reach 8.4 per cent of total

health insurance is poised to grow exponentially in the coming years. The share of

population having medical insurance is likely to rise to 20 per cent by 2015.

Rising incidence of lifestyle-related diseases

Demand for lifestyle diseases-related healthcare services in India is expected to grow

over the next 5 years. Life-related illnesses or non-communicable diseases (NCDs) have

been increasing rapidly in India over the last few years. Statistics show that these

illnesses accounted for nearly 56 per cent of all deaths in India in 2008. CRISIL

4

Research believes that these illnesses exhibit a tendency to increase in tandem with

rising income levels. With the share of households earning above 5 lakh per annum is

Rising Lifestyle Related Diseases

201115.0

29.0

509

274

79

1030

519

163

CARDIAC ONCOLOGY DIABETES

Source: CRISIL Research

expected to go up to 20 per cent in 2017-18

from 13 per cent in 2013-14, the share of NCDs

as a major cause of deaths in India will rise.

Consequently, demand for healthcare services

associated with lifestyle diseases such as

cardiac ailments, oncology, diabetes, etc. is also

forecast to increase.

Increasing ageing of Indian population

India is the second most populated country in the world and is expected to surpass

China to become the world’s most populated nation by 2025. While it is considered as a

country with a large proportion of population below the age of 30, India is also expected

to have a significant population of middle-aged and older adults, leading to a

corresponding increase in demand for healthcare delivery systems and services. Nearly

8 per cent of the Indian population was above the age of 60 years in 2011. This

proportion is expected to climb to 12.5 per cent by 2026, but there is no documented

knowledge base on the healthcare needs of the elderly (aged 60 years or more).

As per the ‘Report on the status of elderly

in select states of India, 2011’ published by

the United Nations Population Fund

(UNFPA) in November 2012, chronic

ailments like arthritis, hypertension,

diabetes, asthma and heart diseases were

common place among the elderly. Nearly

Indian Demographic Shift

66 per cent of the elderly reported at least one of these. Hence with more and more

people being added to this age group, the demand for healthcare infrastructure in

India will only increase in the future.

5

Government initiative to boost diagnostic infrastructure through PPP model

The Govt. of India has proposed national strategy for providing essential diagnostics

facilities free for all under National Health Mission. The Scheme is aimed at providing

free diagnostic tests, including several blood tests, x-rays and advanced CT scans, for

those visiting public health facilities. It also aims to rope in Private Service providers

wherever required.

Government is taking initiatives in boosting up the healthcare sector by entering into

Public-Private-Partnership (PPP) and attracting inflows of foreign direct investment in

diagnostic sector. Healthcare is one of the most significant social sectors in India and

government expenditure on this sector is expected to rise further. Entering into

partnership with government at various levels can help private diagnostic players to enter

difficult rural market and in fact expand at larger scale.

Growth in Medical Tourism

India was one of the first countries to recognize the potential of medical tourism and

currently it is leading destination for global medical tourists. Advantages for medical

tourists include reduced costs, the availability of latest medical technologies and growing

compliance to global standards. Moreover foreigners are less like to face a language

barrier in India.Indian Medical Tourist Arrivals (Mn)

0.9

3.2

2011 2014E

Source: ASSOCHAM

A key competitive advantage India has in

medical tourism, in comparison to other

countries, lies in the cost effectiveness it

has to offer to its patients. A person

coming to India for his/her medical

treatment can have savings anywhere in

the range of 30 to 70 per cent. As medical treatment cost in western world balloon,

westerners are finding the prospects of international medical care increasingly appealing

and India is the popular destination of choice among them.

6

Healthcare Infrastructure in India

Healthcare is one of the key parameters in which a country’s development and stature

are measured. It is an important indicator to understand the healthcare delivery

provisions and mechanisms in a country. It also signifies the investments and priority

accorded to creating the infrastructure in public and private sectors. Health Infrastructure

indicators are subdivided into two categories viz. educational infrastructure and service

infrastructure.

Educational Infrastructure: Educational infrastructure provides details of medical

colleges, students admitted to M.B.B.S. course, post graduate degree/diploma in

medical and dental colleges, admissions to BDS and MDS courses, AYUSH

institutes, nursing courses and para-medical courses. Medical education

infrastructures in the country have shown rapid growth during the last 20 years.

The country has 381 medical colleges, 301 Colleges for BDS courses and 140

colleges conduct MDS courses with total admission of 43,576 (in 381 Medical

Colleges), 25,320 in BDS respectively during 2013-14.

There are 2670 institution for General Nurse Midwives with admission capacity

of 109224 and 686 colleges for Pharmacy (diploma) with an intake capacity of

40898 as on 31st March, 2013

Service Infrastructure: Service infrastructure in health include details of allopathic

hospitals, hospital beds, Indian System of Medicine and Homeopathy hospitals, sub

centers, primary health centres (PHCs), community health centres (CHC), blood

banks, mental hospitals and cancer hospitals.

There are 19,817 hospitals having 6, 28,708 beds in the country, of these

15,398 hospitals are in rural area with 1, 96,182 beds and 4,419 hospitals are

in urban area with 4, 32,526 beds.

Source: Shodhgandha Report, National Health Profile 2013, Government of India 7

There are 1,51,684 Sub Centers, 24,448 Primary Health Centers and 5,187

Community Health Centers in India as on March 2013.

There were 2760 licensed blood banks in the country as on February 2015.

CGHS has health facilities in 25 cities having 260 allopathic dispensaries and

90 Ayush dispensaries in the country with 9,82,461 registered cards/ families

Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH): A

separate Department of Indian Systems of Medicine and Homoeopathy (ISM&H) was

set up in 1995 to ensure the optimal development and propagation of AYUSH systems

of health care. The Department of ISM&H was renamed as the Department of AYUSH

(an acronym for – Ayurveda, Yoga and Naturopathy, Unani, Siddha, Homoeopathy) in

November 2003.

The Department of AYUSH under the Ministry of Health and Family Welfare, promotes

and propagates Indian systems of Medicine and Homoeopathy, and is committed to

infuse the wisdom of traditional medicine with the methodologies of modern science,

scientifically validating the systems and presenting them in the scientific idiom, relating

their efficacy to modern life styles. The Department has, over the years, developed a

broad institutional framework to carry out its activities.

Medical care facilities under AYUSH by management status i.e. dispensaries

and hospitals are 26,107 & 3,167 respectively as on 1.4.2013.

Country

Rural Hospital

(Govt.)

Urban Hospital

(Govt.)

Total Hospitals

(Govt.)

Provisiona

l/Projected

population

(in 000)

Average

Populati

on

served

per

Govt.

Hospital

Average

Populatio

n served

per Govt.

Hospital

BedNo. Beds No. Beds No. Beds

India 15398 196182 4419 432526 19817 628708 1223581 61744 1946

Source: Shodhgandha Report, National Health Profile 2013, Government of India 8

Private Healthcare infrastructure

The Indian healthcare delivery system is categorized into two major components - public

and private. The government's share in the healthcare delivery market is 20% while 80%

is with the private sector. The Government i.e. public healthcare system comprises

limited secondary and tertiary care institutions in key cities and focuses on providing

basic healthcare facilities in the form of primary healthcare centers (PHCs) in rural areas.

A major portion of secondary, tertiary and quaternary healthcare institutions comes from

private sector with a concentration in metros, tier II and tier I cities.

While India did have a private hospital sector at the time of Independence, it is only

recently that it has grown and diversified over the years. As per report from Sehgal and

Sood, the private hospital market in India is estimated at USD 54 billion at end-of 2014

from USD 22 bn in 2009. Increase in number of hospitals in Tier-II and Tier-III cities has

fueled the growth of private sector.

Meanwhile, private sector is quite dominant in the healthcare sector. Around 80 percent

of total spending on healthcare in India comes from the private sector. Inadequate public

investment in health infrastructure has given an opportunity to private hospitals to

capture a larger share of the market. In addition the demand for hospital services has

been increasing due to the rise in lifestyle related diseases.

Market size of private hospitals (USD Bn) India - Share of private hospitals (2014)

80%

20%Private Sector

Public Sector

22.0

54.0

2009 2014E

Source: Sehgal and Hooda, ISID

Source: IBEF

9

Key Players in the Private Healthcare Segment:

Private players have made significant investments in setting up state-of-the-art private hospitals in cities

like Mumbai, New Delhi, Chennai, and Hyderabad. The following are the major domestic private

healthcare providers in India:

Apollo Hospitals: Apollo Hospitals has emerged as the single largest private hospital group in South

Asia. It operates hospitals, dispensaries, clinics, and laboratories. It manages a network of

approximately 41 specialty hospitals and clinics with a bed capacity of over 9,000 across the country

and abroad.

The Escorts Group: This has a presence in specialized cardiac treatment and multi-specialty care

hospitals providing a whole gamut of specialized medical services. Escorts operate ten hospitals

across India. The group is also reputed for tertiary care services such as neurology, neurosurgery,

plastic surgery, and urology. Escorts Heart Institute and Research Centre (EHIRC) has a 325 bed

tertiary care institute, with 9 operation theatres, 5 Cath labs, 2 heart command centers and world class

facilities.

Fortis Healthcare: This is a company founded by the promoters of the Indian pharmaceutical major,

Ranbaxy Laboratories, and started operations in 2001. It has approximately 12 hospitals with 1,900

beds. It has operations across North Indian the cities of Delhi, Noida, Mohali, Amritsar, Faridabad,

Raipur, and Srinagar.

Max Healthcare: This is a fully owned subsidiary- of the highly diversified Max Group, with a chain of

clinics and hospitals with a bed capacity of 1200. On =average, Max Healthcare treats 30,000 patients

every month, with 200 new patients visiting the facilities every day. It has collaborated with Singapore

General Hospital in the areas of medical practices, nursing, paramedical research and training.

Wockhardt: This is among India's leading pharmaceutical and healthcare companies. Since inception

in 1989, the Wockhardt Hospital & Heart Institute has become a renowned tertiary level heart center

providing cardiac care to patients of all age groups. It is the first recognized hospital in South Asia on

the worldwide panel of Blue Cross blue Shield, the largest provider of health insurance in USA. It has

approximately 10 hospitals with 1,500 beds. It has entered into Public-Private Partnership with the

Government of Gujarat to manage the 275-bed Palanpur Civil General Hospital in Gujarat

Manipal Health Systems: Its chain consists of approximately 9 primary centres at7 rural locations, 8

secondary hospitals at urban and semi-urban locations and 3tertiary hospitals at urban and semi-urban

locations. It has a joint venture with Pantaloons Retail for comprehensive retail healthcare foray.

10

Feedback & suggestions are welcome

Contact DetailsMr. Irish Pereira

Pharma Market Analyst

Email: irishpereira@gmail.com

Mob: +91-8087068343