The Institute of Management Consultants of India

Healthcare Challenges & Opportunities

March 2006

Tilak ShankarManagement Solutions

Healthcare IndustryHealthcare Industry

Largest in the world with revenues over $3 trillionLargest in the world with revenues over $3 trillion

Indian healthcare industry is worth about Rs.100,000 Indian healthcare industry is worth about Rs.100,000 crores, accounting 5% of GDPcrores, accounting 5% of GDP

Fastest growing industry in India with CAGR of about Fastest growing industry in India with CAGR of about 30%30%

Employs about 80 lakh people directly and indirectly – Employs about 80 lakh people directly and indirectly – (IT industry employs only about 5 lakh)(IT industry employs only about 5 lakh)

Total Turnover Rs. 100,000 Cr. p.a.Total Turnover Rs. 100,000 Cr. p.a.

Hospitals & NH

40%

Others7%

Labs &Diagnostics12%

Pharma & Supplies20%

Allopathic Doctors22%

Two thirds of beds in Govt. & local authorities (Total 630,000 beds)

HEALTHCARE – VARIOUS SEGMENTSHEALTHCARE – VARIOUS SEGMENTS

HOSPITALS, NURSING HOMES,

CLINICS, LABS

PHARMA

STATE/ GOI

MEDICAL SOFTWARE INDUSTRY

MEDICAL TOURISM MEDICAL/

HEALTH INSURANCE

NUTRITION INDUSTRY

TRANSPORT

POPULATIONGERAITRIC , PAEDIATRIC

MEDICAL, NURSING,

DENTAL, PHARMA COLLEGES

TPAMEDICAL

EQUIPMENT

Hospitals Hospitals Govt, Corporate, not-for-profit, othersGovt, Corporate, not-for-profit, others

Not-for-profit – Sec 80G, Sec. 35AC, Not-for-profit – Sec 80G, Sec. 35AC, Sec. 35(1)(2) of Income Tax Act, Sec. 35(1)(2) of Income Tax Act,

Section 25 CompanySection 25 Company

Hospital ManagementHospital Management• MarketingMarketing• Strategic PlanningStrategic Planning• Finance & AdministrationFinance & Administration• ITIT• HRHR• MaterialsMaterials• QualityQuality• New Project planning & execution (India & Overseas)New Project planning & execution (India & Overseas)

Emerging trends In HealthcareEmerging trends In Healthcare Secondary & Tertiary Care requires large investment, Secondary & Tertiary Care requires large investment,

viable bed size, technological obsolescenceviable bed size, technological obsolescence Increasing corporatizationIncreasing corporatization Venture capital fundingVenture capital funding Slow, but emerging private health insurance/TPASlow, but emerging private health insurance/TPA Global alliancesGlobal alliances Listing of companiesListing of companies Felt need for professional managementFelt need for professional management ““Sick” hospitalsSick” hospitals ““Marketing” of servicesMarketing” of services M&A, Brand buying, Brand extension, franchising M&A, Brand buying, Brand extension, franchising

Emerging Trends (Contd.)Emerging Trends (Contd.)

Rating of hospitals (CRISIL, ICRA)Rating of hospitals (CRISIL, ICRA) Accreditation by TPAsAccreditation by TPAs Recertification of Doctors (in future)Recertification of Doctors (in future) Spiraling hospitalization costsSpiraling hospitalization costs Epidemiology:Epidemiology:

• 500,000 cancer patients added p.a.500,000 cancer patients added p.a.• 40 million diabetics40 million diabetics• 60 million patients60 million patients• 70-80 million senior citizens70-80 million senior citizens• Obesity, psychiatric patients.Obesity, psychiatric patients.

IRDA, Private InsuranceIRDA, Private Insurance Tele-medicineTele-medicine

Emerging Trends (Contd.)Emerging Trends (Contd.)Quality standards:Quality standards:

Medical audit, accreditation & other standardsMedical audit, accreditation & other standards Waste disposal (State Government)Waste disposal (State Government) ISOISO JCAHO (USA Standard)JCAHO (USA Standard) NABLNABL Blood Banking (GOI standards)Blood Banking (GOI standards) Licensing & inspection (under consideration)Licensing & inspection (under consideration) Protocols for clinical trialsProtocols for clinical trials Consumer protection act (private hospitalsConsumer protection act (private hospitals))

India - an Epidemiological TransitionIndia - an Epidemiological Transition

Geriatric (7 – 8 % of Geriatric (7 – 8 % of population)population)

Cataract, prostate, depression, Cataract, prostate, depression, cardio-vascular, arthritis, adult cardio-vascular, arthritis, adult on-set diabeteson-set diabetes

Life styleLife style Obesity, hypertension, stress, Obesity, hypertension, stress, tooth decay, cardiovasculartooth decay, cardiovascular

EnvironmentalEnvironmental Allergic asthma, water-borne Allergic asthma, water-borne diseases (typhoid, jaundice, diseases (typhoid, jaundice,

Leptospirosis)Leptospirosis)

ElectiveElective Cosmetic surgery, tooth Cosmetic surgery, tooth correction, infertility treatmentcorrection, infertility treatment

Tertiary HospitalTertiary Hospital Capital IntensiveCapital Intensive Long gestation periodLong gestation period Doctor-orientedDoctor-oriented Frequent up-gradation of technologyFrequent up-gradation of technology Service organizationService organization

• Patient focusPatient focus• Employee focusEmployee focus

Location is keyLocation is key Also needs:Also needs:

• Teaching (Post-grad.)Teaching (Post-grad.)• Research & publicationResearch & publication• Community/epidemiology workCommunity/epidemiology work• Global alliancesGlobal alliances

Medical TourismMedical Tourism Emerging opportunityEmerging opportunity

• HospitalsHospitals• Travel agentsTravel agents• AirlinesAirlines• HotelsHotels

Rs. 1500 Cr. Revenue in 2004Rs. 1500 Cr. Revenue in 2004 McKinsey projection – Rs. 5000 to McKinsey projection – Rs. 5000 to 10,000 cr. In 5 years10,000 cr. In 5 years Major CorporatesMajor Corporates

TatasTatas FortisFortisMaxMax WockhardtWockhardtPiramolPiramol Apollo gearing upApollo gearing up

Coordinated program : Airline tie up, pick-up, Coordinated program : Airline tie up, pick-up, visa etc. subsequently general tourismppvisa etc. subsequently general tourismpp

Pharmaceutical IndustryPharmaceutical Industry Bulk drugs, drug intermediates, formulations, generic & Bulk drugs, drug intermediates, formulations, generic &

branded, OTCbranded, OTC Bio-technology, Bio-informatics, neutraceuticalsBio-technology, Bio-informatics, neutraceuticals Annual turnover – Rs. 23,000 cr. (5-6% growth p.a.)Annual turnover – Rs. 23,000 cr. (5-6% growth p.a.) Employment – DirectEmployment – Direct - 50 lakhs- 50 lakhs

Indirect Indirect - 25 lakhs - 25 lakhs 20,000 units (300 in the organized sector)20,000 units (300 in the organized sector) No. of hospitals – 16,000No. of hospitals – 16,000 Retail chemists – 6 lakhsRetail chemists – 6 lakhs 44thth in the world (volume) in the world (volume) 1212thth in the world (value) in the world (value) Significant exports from IndiaSignificant exports from India

Pharma - Key challengesPharma - Key challenges Many drugs off patent ($30-40 billion in the next 5 yrs) Many drugs off patent ($30-40 billion in the next 5 yrs)

strategic marketing alliancesstrategic marketing alliances Good manufacturing practices – qualityGood manufacturing practices – quality Industry – research collaborationIndustry – research collaboration Ayurvedic drugsAyurvedic drugs Bio-technologyBio-technology Only a small number of items under DPCO (40 or so)Only a small number of items under DPCO (40 or so) Spurious drugs in IndiaSpurious drugs in India Global R&D – 18 year patentGlobal R&D – 18 year patent Upto 15 years from molecule to marketingUpto 15 years from molecule to marketing

Medical equipment suppliersMedical equipment suppliers

Expensive capital expenditureExpensive capital expenditure• CT Scan, MRI, Cath lab, Laser, Theatre equipment, CT Scan, MRI, Cath lab, Laser, Theatre equipment,

X-rayX-ray Siemens, Philips, Hitachi etc.Siemens, Philips, Hitachi etc. New hospitals, modernization (technological New hospitals, modernization (technological

obsolescence)obsolescence) Each new bed – total capex Rs. 20-100 lakhsEach new bed – total capex Rs. 20-100 lakhs Equipment sales, AMC, Spare parts, trainingEquipment sales, AMC, Spare parts, training Rs. 8,000 to 9,000 crores p.a.Rs. 8,000 to 9,000 crores p.a.

Health Insurance & TPAHealth Insurance & TPA Public SectorPublic Sector

• General insurance of India &General insurance of India &4 subsidiaries4 subsidiaries

Private SectorPrivate Sector• Royal Sundaram, ICICI-Lombard, Bajaj Alliance etc. Royal Sundaram, ICICI-Lombard, Bajaj Alliance etc. • TPA - TTK, Heritage, Family Health PlanTPA - TTK, Heritage, Family Health Plan

Estimated premium incomeEstimated premium income• About Rs. 5000 croresAbout Rs. 5000 crores• Potential – 25,000 cr in 5-7 yearsPotential – 25,000 cr in 5-7 years

Present coverage – only about 3-4% of the Present coverage – only about 3-4% of the populationpopulation

Govt. likely to allow separate health insurance Govt. likely to allow separate health insurance co (Rs. 25 crores equity)co (Rs. 25 crores equity)

Insurance by NGOs/Community based Insurance by NGOs/Community based health insurancehealth insurance

Members pre-pay a set amount (flat rate)Members pre-pay a set amount (flat rate) Voluntary health insurance (VHS-Chennai)Voluntary health insurance (VHS-Chennai) Co-operative, SEWA, FoundationsCo-operative, SEWA, Foundations Narayana HrudayalaNarayana Hrudayala Universal Health plan of the four Universal Health plan of the four

insurance companiesinsurance companies About 50 million coveredAbout 50 million covered In addition:In addition:

• ESIESI• CGHS (Retired employees)CGHS (Retired employees)• MediclaimMediclaim

IT IndustryIT IndustryHealthcare VerticalHealthcare Vertical

TCS, Wipro, Infosys, Cognizant, iSoft, Covansys etc.

US, Europe, Australia clients, Govts. and private hospitals

Global healthcare spend $5 trillion, US 1.7 trillion (15% of GDP)

USA – IT spend $25-30 billion

Europe 800 billion

Healthcare spend 12% to 15% of GDP (India – about 5-6%)

iSoft – Healthcare 260 million, 4000 employees (950 application specialists)

Cognizant :• $600 million• Of the above, 22% from healthcare and life sciences• 3000 domain & technology experts

IT in Healthcare IT in Healthcare

Medical• Picture Archival & Communication System (PACS)• DICOM (Digital Imaging & Communications in Medicine)• Telemedicine• Electronic Medical Records• Clinical Decision Support Systems• HL7 protocol• Epidemic prevention software

Non-medical• Integrated hospital information system• Web-enabled Appointment Scheduling• Web-enabled applications for relatives to obtain conditions of the

critical patients• Multi-media applications for patient education• Medical equipment management software• Web-enabled CRM applications

IT (Healthcare) ProjectsIT (Healthcare) Projects

Mainframe, client-server based, web-basedMainframe, client-server based, web-based

End to end product linking with provider, payer, patient End to end product linking with provider, payer, patient HIPAA complianceHIPAA compliance

Data warehousing and decision support systemsData warehousing and decision support systems

Electronic Medical RecordsElectronic Medical Records

Healthcare CRMHealthcare CRM

Maintenance of systemsMaintenance of systems

BPOBPO Areas:Areas:

• Medical TranscriptionMedical Transcription• Claims processingClaims processing• Billing by Doctors (on insurance companies)Billing by Doctors (on insurance companies)• Clinical documentationClinical documentation• Clinical trialsClinical trials

Advantages of Indian Companies:Advantages of Indian Companies:• English languageEnglish language• Cost arbitrageCost arbitrage• Time differenceTime difference• High quality (e.g. >99.5%)High quality (e.g. >99.5%)• Multi-disciplinary teamsMulti-disciplinary teams

Clinical Research Organization Clinical Research Organization (CRO)(CRO)

Clinical TrialsClinical Trials Revenue Rs. 300-400 croresRevenue Rs. 300-400 crores CII Projection : CII Projection : Rs. Cr.Rs. Cr.

20072007 800 800

20102010 40004000 Large populationLarge population Medical, Lab manpowerMedical, Lab manpower

Healthcare ConsultingHealthcare Consulting

Major areas:Major areas: Hospital feasibility studiesHospital feasibility studies Funding of new projectsFunding of new projects Efficiency improvementEfficiency improvement Market survey & marketing of servicesMarket survey & marketing of services Organization reviewOrganization review Strategic planningStrategic planning Insurance productsInsurance products IT – ERP, EMR, system integrationIT – ERP, EMR, system integration

Healthcare ConsultingHealthcare Consulting

Clients:Clients: GOI, State Governments.GOI, State Governments. UNICEF, World Bank, ADB, DANIDAUNICEF, World Bank, ADB, DANIDA Corporate & not-for-profit hospitalsCorporate & not-for-profit hospitals Insurance CompanyInsurance Company Strategic investorsStrategic investors IT Companies IT Companies

Challenges Ahead…Challenges Ahead… Structure and financing of healthcare is changing rapidly

Future managers in healthcare sector to be prepared to deal with • evolving integrated healthcare delivery systems• technological innovations• an increasingly complex regulatory environment• restructuring of work• increased focus on preventive care• improving efficiency in healthcare facilities and the quality of the

healthcare provided• managing finances including modernization, expansion plans and brand

extensions• optimizing efficiency of a variety of interrelated services (e.g. those

ranging from inpatient care to outpatient follow-up care)• managing the growing aspirations of doctors (compensation, revenue

sharing, high-end equipment, specialized courses etc.)• High turnover of para medical staff including nurses• Social ‘Marketing’

To sum upTo sum up

Wide ranging career opportunities in India Wide ranging career opportunities in India and elsewhereand elsewhere

Domain expertise healthcare management Domain expertise healthcare management essentialessential

Growing sectorGrowing sector Job satisfactionJob satisfaction Socially relevant jobsSocially relevant jobs