Evolving Innovative Investment Ecosystems in Healthcare


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Fostering Healthcare for All - Presentation made in Dec 2010 in Gandhinagar at Vibrant Gujarat event

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Evolving Innovative Investment Ecosystems in Healthcare

  1. 1. Seminar on FOSTERING HEALTH FOR ALLPanel Discussion II:Evolving Innovative Investment Ecosystems in Healthcare 14 December, 2010 Pankaj Vaish Pankaj.Vaish@religaretech.com
  2. 2. Agenda The Healthcare Provider Ecosystem Indian Healthcare Sector: Challenges or Opportunity Financing in Healthcare Sector Solutions and Resolutions Medical Technology/ Land/ Building Equipment OPEX Talent/ Information Medical Technology Consumable / Marketing Healthcare Provider Ecosystem 2
  4. 4. 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 PWC Healthcare Report 2007 4
  5. 5. 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
  6. 6. 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 Technopak Advisors; VVC Circle; Indian Brand Equity Foundation 2009 Study 6
  7. 7. 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 NASSCOM 2020 Perspective Report 7
  9. 9. Means of Financing External Commercial Borrowing  Private Equity Funds: Growing Business Long Term Bank Loan  Venture Capitalist: Seed Investments Individuals (NRI)  Foreign Direct Investment (FDI) Taxation  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 9
  10. 10. 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 10
  12. 12. Healthcare Ecosystem• Group Purchase for High • Public Private Partnership Technology Cost • Lease/ Auctions• OEMs adopt Pay per use Models • Higher Floor Space Index/ to reduces patient bill Floor Area Ratio• Implement PPP model Medical Technology/ Land/ Building Equipment ROI OPEX Talent/ Information Medical Technology Consumables/• Offer better career options to Marketing retain work force • Affordable for small and mid level hospitals• Stop talent drain to the west • Pay per use Model: SaaS Model,• Improve Training Infrastructure Subscription Model, Smart Cards• Consumable Group Purchase that carry patient history 12
  13. 13. 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 13
  14. 14. Improving the Delivery System: Summary Reducing Costs Empowering the Patient Cost reduction across the eco  Affordability: Insurance system (Land, Building, Schemes for low socio-economic Equipment, OPEX) groups PPP Model  Accessibility: To Private and Shift from curative to preventive Public Systems healthcare  Reach: Penetrate into tier II and Manpower Training Tier III cities and rural parts of Investments in Technology the country R&D: Indigenous 14
  15. 15. Thank You
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