Changing healthcare landscape A case of Jaipur city in India


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We have published a report on changing “healthcare landscape in India” with a specific focus on Jaipur. Our key findings from this report are how healthcare industry evolved in India and Jaipur, what are the implication for healthcare players, what are the key growth drivers for India and Jaipur's healthcare industry.

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Changing healthcare landscape A case of Jaipur city in India

  1. 1. Changing healthcare landscape A case of Jaipur city in India This note has been prepared by Kanvic for the exclusive purpose of our Clients. The material contained herein cannot be copied, used, circulated for any other purpose. All rights reserved Kanvic Consulting Private Limited.
  2. 2. Contents A Overview of Indian Healthcare Market B Jaipur - From Pink City to Medi-city? C Implications for healthcare providers 2
  3. 3. Healthcare delivery market accounts for fifty percent of the total Healthcare sector in India Size of healthcare market in India, $ billion, percent 100% = US $30 billion 15% • Indian healthcare industry, which comprises of hospitals and allied sectors, is projected to grow 23 per cent per annum to touch US 10% $ 77 billion by 2012. 50% • The sector has registered a growth of 9.3 per cent between 2000-2009, comparable to the growth rate of other emerging 25% economies such as China, Brazil and Mexico. Healthcare delivery Pharma Diagnostic Insurance & Medical equipment Source: Enam, 2007 3
  4. 4. Healthcare market can be segmented into four major categories Key segments of Healthcare market Key feature Financing Major players • Mainly at the grass root level Primary • Minimal involvement of • Majority of it financed private players in this through Govt. spending segment • Primarily includes nursing homes and recovery rooms • Majority of it financed Secondary • Investment in such centres to through Govt. spending reduce ALOS of tertiary care centres. • Higher equipment costs and Tertiary - fixed staff costs result in • Major projects driven Multi- higher gestation periods through large private speciality • More margins and higher players volumes • Low gestation periods Tertiary - Super • Can follow a strategy to • Major projects driven initially start off as multi through large private speciality speciality and move towards players super speciality Note: ALOS - Average Length of Stay Source: Enam, Kanvic research 4
  5. 5. Indian healthcare market is evolving to provide cure for complex diseases and high quality of services Type of healthcare providers High Health City Quality of Services Super speciality Multi-speciality hospitals Community hospitals Local nursing homes Low Low Complexity of disease High Source: ibef 5
  6. 6. Favourable demographics and improving income levels are driving the growth of healthcare market Drivers of healthcare growth in India Increasing preference for private treatment Availability of quality healthcare In India, private healthcare accounts for Improving nearly 80 % of the country’s total healthcare income levels expenditure. India has 0.5 million doctors, 0.9 Population growth million nurses and Favourable about 1 million and increased demographics disposable incomes beds. are expected to result in better healthcare awareness and higher expenditure India’s growing on healthcare population is augmenting the growth of healthcare delivery market Source: Kanvic research 6
  7. 7. Increasing healthcare spend and growth in inpatients will further drive the growth Share of average household consumption, Rs. Revenue from outpatients and inpatients, Rs. ‘000, % billion 100% = 60 82 140 248 4 7 9 3 13 1 5 11 2 6 3 9 2312 4 CAGR 2 17 10.9% 6 19 14 8 20 5 3 9 12 3 CAGR 11 11.6% 1268 6 12 3 56 5 10 5 637 1329 42 34 903 25 617 1995 2005E 2010F 2015F 2006 2011E 2016E Food, beverages & tobacco Apparel OPD IPD Housing & Utilities Household product Personal product Transportation Communication Education Healthcare Note: Figures are rounded to the nearest integer and may not add up to 100. OPD- Outpatient, IPD- Inpatient Source: MGI, Crisil, NSSO 7
  8. 8. Contents A Overview of Indian Healthcare Market B Jaipur - From Pink City to Medicity ? C Implications for healthcare providers 8
  9. 9. Jaipur’s healthcare market has evolved over the years Evolution of healthcare market in Jaipur SMS Medical college Soni hospital Institute based 100 bedded Tagore Narayana is set up by the starts hospitals are set up hospital begins its Hrudayalaya, a leading Government operations with after privatisation of operations Cardiac care hospital 20 beds medical education in in India, opens in the state Jaipur 1971 2004 2007 1947 1986 2000s 2006 2010 First private hospital S K Soni Hospital Fortis Escorts, the first Santokba Durlabhji begins operations with corporate hospital in Memorial Hospital super specialities in Jaipur, opens its doors (SDMH), run by a cardiology, cancer, to the public trust, is inaugurated nephrology and neurosurgery Source: Kanvic research 9
  10. 10. Healthcare market in Jaipur is growing based on sustainable growth drivers Growth drivers of healthcare in Jaipur 1 Government initiatives and policies to promote healthcare 5 2 State capital and major Major players in city in Rajasthan, the healthcare sector eighth largest state in Healthcare expanding into Tier II India by population growth drivers and Tier III cities in India for Jaipur 3 4 Tourism driven economy Proximity to creating a demand for Delhi NCR region medical tourism Note: NCR- National Capital Region Source: Kanvic research 10
  11. 11. Hospitals in Jaipur are going for quality accreditation Jaipur Hospitals going for NABH accreditation Hospital Status of Application Fortis Hospital Got Accreditation Apex Hospital In process Monilek Hospital Documents received In process SDMH Documents received BMCHRC Tagore Hospital In process S.K. Soni Hospital In process 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 11
  12. 12. However, there are some hospitals where doctor to patient ratio is not adequate Distribution of doctors and patients for hospitals in Jaipur 110 82.5 Number of doctors 55 Coping zones 27.5 0 0 3750 7500 11250 15000 Number of patients Note: The list of hospitals is not exhaustive Source: Kanvic research 12
  13. 13. New hospitals will increase supply of beds in the market Proposed new hospitals in Jaipur Proposed Hospital Speciality No. of beds 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 Source: Press clippings, Kanvic research 13
  14. 14. 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 Demand supply situation in Jaipur, number of beds 2,540 2,700 11,240 6,000 Existing Proposed Gap in Total supply addition demand Demand and supply for beds1 Note: 1 Demand for beds is based on WHO standard of 35 beds for a population of 10,000. Source: Kanvic research 14
  15. 15. Contents A Overview of Indian Healthcare Market B Jaipur - From Pink City to Medi-city? C Implications for healthcare providers 15
  16. 16. Healthcare providers will need to look at five major factors in the changed scenario Key factors for healthcare providers 1 Healthcare economics will become important Hospitals will increasingly use 5 mass media to reach out to their New business models will 2 markets emerge Key factors for healthcare providers 4 Quality of non-clinical services will have considerable influence on Private Equity will help finance 3 patient satisfaction growth of hospitals Source: Kanvic 16
  17. 17. 1 With increasing competition, a clear focus and strategy will lead to favourable economics for hospitals Economics of a healthcare provider Rentals • Location • Facilities Diagnostics • Type of investigation Inpatient Consumables • Disease type Consultancy • Doctor’s reputation Revenue • Hospital brand • Disease type Consultancy • Doctor’s reputation Outpatient • Hospital brand • Type of Diagnostics investigation EBIDTA margin% Consumables • Doctor’s profile Costs Personnel • Full time vs. consultation payment SG&A Note: EBIDTA- Earnings before Interest Depreciation Tax and Amortisation; SG&A - Sales, General and Administration Source: Enam, Kanvic analysis Diagnostics 17
  18. 18. 1 Awareness of EBIDTA and cash break even will help hospitals in better planning Revenue and EBIDTA margin build up of Fortis Escorts, Jaipur, Rs. Mn, percent 191 Break even 174 167 155 21 20 20 19 141 17 102 106 90 83 0 73 -2 59 -6 -23 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 EBIDTA margin Revenues Source: Morgan Stanley, Company reports 18
  19. 19. 2 New business models are emerging in healthcare delivery Emerging business models in healthcare delivery • 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. 1. Single Speciality Hospital • 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 2. 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. 19
  20. 20. 2 Hospitals are also combining hospitality and retail to generate new revenue streams Emerging business models in healthcare delivery • Large hospital chains are now turning into 'hospotels' -- a 3. Hospotels 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. • 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 Retail Store in 4. Hospital 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. • Considering the huge investment needed for establishing the necessary healthcare infrastructure in the country, franchising is emerging as a viable option for hospitals to 5. expand to newer geographic areas. Franchisee Model • 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. 20
  21. 21. 3 Healthcare sector has attracted the attention of Private Equity PE investment in healthcare sector in India, $ Mn • Private equity and Venture capital are 554 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 403 385 is planning to expand into different 367 regions. 290 • Two more hospitals in Jaipur- Narayana Hrudayalaya and Eternal Heart Hospital have attracted interest of PE firms. 121 • On a national level, Fortis la Femme is a JV with Sunrise Group while Spring Healthcare has made an investment in 2005 2006 2007 2008 2009 2010 Oyster and Pearl Hospital. Source: VCCedge, Kanvic research 21
  22. 22. 4 Non clinical factors are contributing significantly in creating a hospital’s brand image Distribution of clinical and non-clinical processes in a hospital 1 Reception 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. 35% 2 Care from doctors and nurses 65% Care from doctors and nurses is a key factor in determining satisfaction level of patient. Clinical Non clinical 3 Infrastructure Quality of Infrastructure is also a major non clinical aspect in assessing a hospital’s image. Source: Kanvic research 22
  23. 23. 5 Hospitals can use mass media for a number of functions Key functions of mass media for hospitals Communicate core value Create distinct identity in Reach out to larger markets patient’s mind Use of Mass Inform about products and media Educate customers services Review existing services Launch a new hospital 23
  24. 24. 5 The inclination to use mass media by hospitals has increased in recent years Examples of mass media use by hospitals Moolchand Hospital has been successfully advertising Radio 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 Print disseminating information. Hospitals have been increasingly using newspapers to communicate about their services to the target population. Wockhardt Hospitals, India's leading hospital chain Out of launched India's first "Interactive Occupational Health Home Screening Campaign" for employees across all industries (OOH) in the country. Technology based marketing includes increased contact Internet with patients (former, existing and future) via email, marketing newsletters and online forums. 24
  25. 25. About Kanvic Kanvic is a management consulting firm helping businesses develop winning strategies, drive profitable growth and achieve operational excellence to reap long lasting rewards in fast growing Indian economy. We work with C-level executives to develop innovative solutions for business challenges of 21st century India by bringing in leading edge management thinking informed by in-depth research and sound analysis. Contact Jaipur Bangalore London Deepak Sharma Ravindra Beleyur Bharat Vagadia M: +91 99283 77800 M: +91 94481 46963 M: +44 7711 898089 E: E: E: