Healthcare Trends & OpportunitiesPwC India Analysis

Dr. Rana Mehta

Partner, Healthcare

PwC India

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Specially prepared for TiE Leapfrog in association with

Health lies at the heart of economic, political, social and environmental prosperity : it matters to society

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Source: 1. World Health Organization, WHO Global Health Expenditure Atlas, (2012); 2. Stewart WF, Ricci JA, Chee E, Morganstein D. Lost productive work time costs from

health conditions in the United States: results from the American productivity audit. J Occup Environ Med. 2003;45(12):1234-1246.; 3. Jamison D.T. et.al Global health 2035: A

world converging within a generation (2013);

Reductions in mortality account for 11% of recent

growth in low and middleincome countries3

4 of the 8 UN Millennium Development Goals (MDG) are

healthcare related. Health is expected to be at the heart of the new set of goals, the

Sustainable Development Goals,when launched in September 2015

Productivity losses related to personal and family health problems cost US employers $1,685 per employee per year, or $225.8 billion annually2

Health represents 12.4% of GDP in OECD countries. In the

US it is close to 18%1

The World Health Organization in its constitution defines health as “a

state of complete and physical, mental and social well-being and

not merely the absence of disease or infirmity”

Significant economic returns and social benefits derive from investingin health

Health and health equity are integral to public policies of all sectors

Health remains a major political issue in the developed and developing countries as evidenced by elections in Brazil, India, Japan, US, Turkey

and UK.

Yet rising costs and access to care pose big challenges

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People that still lack access to healthcare worldwide

Amount OECD and BRIC nations are expected to spend on healthcare infrastructure and services over the next decade

1B $70TSource: 1. Chan M. WHO Director-General Remarks to Global Vaccine and Immunization Research Forum. March 2014 ; 2. 2040 health expenditure projections from “The

Financial Sustainability of Health Systems”, World Economic Forum and GDP data from the OECD (2013), PwC 2010-2020 spending projections

The collision of trends is impacting expenditure on health around the world

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North America• Spending to increase by 4.9%

annually in 2014-18 • US healthcare spending, already the

highest in the world, is likely to reach 17.9 % of GDP by 2018

• Canada is expected to see growth of 4.5% annually over the same period, reaching 11.6% of GDP

• Shift to value from volume care • New wellness players emerging

South America• Spending expected to rise by 4.6% annually

over 2014-18 as Gov’ts try to improve public health systems

• In Mexico the rise will be an annual 8.2% given the commitment to a universal social service in the next 5 years

• In Brazil rising disposable incomes will continue to drive rising healthcare expenditure, with health expected to reach 9.1% of GDP by 2018 (lifestyle diseases on the increase)

• Argentina to experience growth in medical tourism

• Access to care remains a big issue across the region

Middle East & Africa• Population growth and efforts to expand

access to care will see strong growth • The average increase is expected to be 8.7%

over the 2014-18 period • Substantial growth in chronic disease• Regional medical tourism• Whole health system reforms, with a need

for “leapfrog” ideas and solutions

Western Europe• The continued need to reduce fiscal

deficits means healthcare spending is expected to rise just 2.4% annually over 2014-18

• Greece, Italy and Spain will have the tightest budgets whilst the UK, Germany and Sweden will see the strongest growth

• Proportion of population over 65 will be 20% by 2018

• EU Directive on cross-border care• Telemedicine for chronic patients• Regional medical tourism

Asia Pacific• The rollout of public health care reform

programmes combined with growing consumer wealth will boost health expenditure by an average of 8.1% in 2014-18

• Emergence of private provider sector• The strongest growth, at 15.2% per year,

will be in India with China following at 12.5% per year

• Proportion of population over 65 will be 28% by 2018

• Access, quality and training issues

Source: Economist Intelligence Unit; Kennedy Consulting Research Advisory estimates

Disruptive Trends

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Disruptive trends are revolutionising the health industry today

These trends are impacting the delivery and financing of care…

…resulting in:

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Technological advances

Shift in global economic power

Demographic shifts & social change

GlobalisationThe empowered consumer

The emergence of new business models

New entrants expanding and

reshaping the health system

A rebalance of the public and private

sectors in the financing and delivery

of care A greater focus to reward for outcomes instead of volume of

activity

A trend from inpatient care to

outpatient services

The healthcare sector industralising

Ageing populations are increasing the demand for healthcare

Source: UN Population Division, World Population Prospects (2012)

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1 billionexpected increase in the world’s population by 2025

300 millionof that increase is predicted to come from those aged 65 or more

Developing countries are experiencing a rising middle class, leading to lifestyle changes…

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Source: Brookings Institute (2010)

Nearly 65% of

the global population will be middle class by 2030

…promoting a sedentary lifestyle that’s contributing to the rise in obesity and chronic disease

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Chronic diseases are expected to increase to 57% by 2020.

And 60% of this burden will occur in emerging markets

57%

Emerging markets

Source: World Health Organization (2005)

Demographic shifts and societal changes are burdening existing health systems

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Source: World Health Organization (2013)

Projected shortage of healthcare workers

2013

2035

7.2 million 12.9 million

Health worker retirements and demand for care are contributing to a shortage of skilled labour

2030

Shifts in economic power are leading to financial pressures and new markets

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Source: PwC World in 2050 Projections (2013)

We predict that seven of the world’s 12 biggest economies in 2030 will come from emerging markets, the ‘E7’

Competition from different geographies and stakeholders are contributing to new health economies

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As part of its strategy to develop the digital opportunity in the mHealth market, Telefonica Digital, part of telco Telefonica, acquired AxisMed, a chronic care management provider based in Brazil.

South Korea’s largest mobile telecom carrier bought a 49% stake in China’s X’ian Tianlong Science and Technology Co, a producer of medical diagnosis equipment

Walgreens bought 45% of shares in Alliance Boots with plans to acquire the rest to create a “global pharmacy-led health and wellbeing enterprise”

Telefonica

AxisMed

SK telecom

Tianlong

Walgreens

Alliance Boots

Source: telecoms.com. “Telefonica eyes e-health opportunity with Brazilian acquisition”, (4 February 2013); SK Telecom; New York Times, “Walgreen to take stake in Alliance Boots for

$6.7 billion”, 12 June 2012

Technology is becoming a driver of change and a solution, creating greater efficiency & value

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Social Volume Value

2000 2010 2020

Mobile

Analog

Analytics

Cloud

Places Spaces

General Individual

Digital

Institutional ConsumerAgent

New value propositions

New care delivery models

More customised solutions

Greater portability, security, access

More freedom, transparency, choice

Technological advances are also creating new care delivery models – and consumers are responding

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Source: Economist Intelligence Unit, “Emerging mHealth: Paths for growth “ (2012)

49% expect mHealth to change how they manage their overall health

59%say mHealth has changed how they seek information on health issues

Patients are becoming empowered and engaged consumers, taking greater accountability for their care

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36.7%

Have at-home

chemotherapy

Get an MRI at a retail clinic or pharmacy

34.4%

Percent of respondents answering “Very likely” and “Somewhat likely” to consider these alternatives:

Have a wound or pressure

sore treated at a clinic in a

retail store or pharmacy

49.1%

Have stitches or staples removed at a

retail clinic or pharmacy

48.3%

Have a pacemaker

or defibrillator

checked wirelessly

by a physician

42.6%

43.6%Have an electrocardiogram at

home using a device attached

to your phone, with results

wirelessly sent to your

physician

Source: HRI US consumer survey (2013 and 2011)

Consumers are leveraging new technology to self-manage their care

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52% make

healthcare substantially

more convenient

for me

46% substantially reduce my healthcare

costs

48% improve the quality of

healthcare I receive

In the next three years, patients agree mHealth applications/services will: 59%

of patients say that mHealth services have replaced some visits to doctors or nurses

Source: Economist Intelligence Unit, “Emerging mHealth: Paths for growth” (2012)

Globalisation is allowing for greater collaboration, resulting in new care delivery models

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Example:

Europe

EU Directive 2011/24/EU allows:

• European Union patients to access treatment in another EU country and be reimbursed for it

• Cooperation between EU health systems

Impact on healthcare

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New business models are emerging

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Excellence from strength

through execution

Unleashing potential

Driven by client issues

Developmental in all we do

Consumer insight

Value proposition• Customer

experience• Product + service• Brand value

Business model innovation

Value network• Value

network/ecosystem• Revenue & margin

model

Target customer• Buyers & involved

non-buyers• Marketing methods

Source: Making Innovation Work, Davila Epstein, Shelton: Wharton School Publishing (2006)

Patient influence and empowerment are influencing business models and the delivery of services

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Convenient

Reliable

TransparentAffordable

Seamless

High quality

The principles of a consumer-oriented system

Source: PwC Health Research Institute “Money matters: Billing and payment for a New Health Economy” (2015)

Patient engagement will become increasingly important as financial performance is tied to clinical outcomes

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Health systems

Source: HRI Consumer Survey (2012)

When asked if consumers want their feedback tied to healthcare companies’ financial records, almost half said yes

Advances in technology and analytics are exciting tools for stakeholders to become more precise with treatments and predicting patient behaviour

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0

30

60

90

Clinical informatics goal to supportorganisational strategies e.g., new

product dev't, new business models overthe next 2 years

Effectively impact patient behaviour

Formalinformaticsprogram

No formalinformaticsprogram

69%58%

17%7%

Physician benefits

Source: HRI Clinical Informatics Survey (2011)

New entrants are expanding and reshaping the health system

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• Patient-centric health systems opens the door to new market participants

• These commercial entrants are revolutionising healthcare, introducing new products, services and delivery systems

Source: Fortune 50 (2013)

New entrants are helping democratise and decentralise the healthcare industry

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• Apple and Google have announced health and wellness phone apps

• Facebook is exploring the creation of online “support communities” connecting users suffering from similar ailments

• Canada’s 9000 points of care aims to reduce care wait times by shifting 17 million physician visits to pharmacists

• Walmart partnered with DirectHealth.com to offer customers with agents who will help consumers navigate the health exchange

• Orange (formerly French Telecom) uses SMS technology to fight the spread of counterfeit drugs in Kenya

• Swisscom formed a partnership with a software company to help Swiss hospitals process medical and administrative records more effectively

• Nintendo recently revealed plans to redefine itself as a health-oriented entertainment company

Sources: 9000 Points of Care website 9000pointsofcare.ca; “Walmart Works with DirectHealth.com to Introduce Comprehensive Health Insurance Program” press release (6 October

2014); “Apple Unveils iOS 8, the Biggest Release Since the Launch of the App Store” press release (2 June, 2014); Dean Takahashi, “Nintendo CEO outlines plan to move into

health-related entertainment”, VentureBeat, (3 March 2014); PwC, “Bending the Cost Curve: Stellenbosch” (2011) ; “Swisscom continues to expand its healthcare business” press

release (3 September 2013); Christina Farr and Alexei Oreskovic,, “Facebook plots first steps into healthcare”, Reuters, (3 October, 2014)

New entrants regard their unique perspective as an asset to capture and dominate the fragmented sector

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Global reach

Customer insights

Innovation

BrandrecognitionGlobal reach

Commitment to consumer needsand value

Exploit ability to attract and retain new markets

Products/services launched based on

ability to meet outcomes

Leverage existing intellectual property

Perspective

Incumbents face critical decisions about whether to compete or partner with new entrants

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Ford and Medtronic partner to make chronic disease more manageable through mobile

health solutions

?Compete

Partners

UnitedHealth offers Health4me app, allowing users to find health facilities

in their area thus competing with other similar solutions in the marketplace

There is a rebalance of the public and private sectors in the financing and delivery of care

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Government

New healthcare facility and/or clinical services delivered by

private partner

Private sector partner

Contract

Private sector expertise (skills) & investment (capital)

Financial compensation; transfer existing assets; policy vision

Public and private sectors are evolving to reward for better outcomes while providing economic benefits

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University Hospital and Primary Care, Alzira, Valencia, Spain

• Includes infrastructure & clinical services for hospital and primary care clinics

• Performance is contractually demanded

• Alzira has seen 20-30% efficiency gain

• Cost per capita in the Alzira Model is 75% lower than the cost for the UK’s Regional National Health Service

Examples:

The Queen ′Mamohato Memorial Hospital, Maseru, Lesotho

• Includes infrastructure, clinical & non-clinical services for hospital & 3 clinics

• Full patient risk transferred to the private partner with performance standards safeguarded through reward & penalty clauses of clinical and non-clinical indicators

• Death rate decreased by 41%

• On target to deliver financial results

Sources: PwC, “Bending the Cost Curve: Washington, DC” (2011), IFC (2013); PwC, “Bending the Cost Curve: Stellenbosch” (2011)

Rising healthcare costs are prompting healthcare systems to reward for better outcomes, better quality, cost savings and value

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Source: Outcome Based Commissioning Alliance (OBC Alliance) formed of PwC, Wragge & Co, Cobic and Beacon, excerpt from “Beginning with the end in mind: How outcomes-based

commissioning can help unlock the potential of community services”, NHS Confederation’s Community Health Services Forum in collaboration with PwC (September 2014)

As consumers become engaged, there is a shift towards wellness and prevention

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Source: PwC analysis (2014)

Fitness and wellness offers a lucrative market opportunity

$1.49 trilliontotal global ancillary/wellness

market size

$391B

Global nutrition

market

$236.5B

Sporting goods

and apparel

$595B

Weight loss

industry

$8.02B

Mobile

health apps

$114B

Alternative

medicine

$48B

Medical

tourism

$3.1B

Wearable

devices

$113. 4B

Natural &

organic foods

$109.5B

Supplements

$43B

Natural and

organic

personal care &

household products

$125.1B

Functional

foods

$19.4B

RPM/

Telemedicine

$78.4B

Global fitness

industry

There is a trend from inpatient care to outpatient services

3131

Primary Care Centre

Mobile platform to

connect patients to the

care network and enable

continuity of care

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Analytics and its

dissemination with

other care settings to

make effective

decisions thus driving

higher quality care

within the network

2

home

Acu

te C

are

Research Facility Tertiary Care Centre

Standard-of-Care

Medical Learnings and

Discovery

Collaboration platform to facilitate

real-time use of patient data to

enable dynamic triaging and

learning

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Technology via remote monitoring, telemedicine and mobile devices will help usher a move towards home care

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Mobile system gives physicians and caregivers remote access to a patient's vital signs from anywhere within the hospital.

A device lets doctors conduct real time consultations using a revolving robot.

Patch cardiac rhythm monitor provides continuous monitoring for up to 14 days.

Sensor mat is placed under mattresses to monitor a patient's presence, sleep pattern, heart rate and breathing rate.

Sensors on the patient and throughout the home detects falls, wandering, missed medication

Analytics can give insight into patient flows and care pathways, allowing providers to deliver care that’s appropriate for the patient

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Analytics

Personalised healthcare

Measurements/benchmarks

Clinical decision support

Well-being monitoring

There is a general move from fragmented to integrated care across the continuum

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Extension of care

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Healthcare providers have been concentrating here Extension of

care

Healthcare is transforming into a precision-based industry

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PERSONALISED

An understanding of how genetic variation drives individual treatment

• Targeted therapeutics• Personal Health Records

PREDICTIVE

Ability to identify what condition a person might contract in the future and how they will respond to a given treatment, enabling tailored health strategies

• Molecular diagnostics• Genomic sequencing

PREVENTATIVE

Facilitates a proactive approach to health and medicine, shifting focus from illness to wellness

• Nutritional / Functional Foods

• Wellness programs

PARTICIPATORY

Empowers patients to make informed choices and take responsibility for their own health

• Telemedicine• Remote patient monitoring

Process driven advances, standardised procedures and the division of labour can reduce costs and improve quality

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• Quebec Ministry of Health applies Lean management, which has meant a 50% inventory reduction in medication and bed linen1

Lower costs

• Narayana Health System has an average 1.4% mortality rate within 30 days of a coronary artery bypass graft surgery, compared to 1.9% in the US2

Improve quality

• Aravind Health Care System, an eye care provider in India, performs around 2,000 cataract procedures a year, compared to the national average of just 4003

Efficiency

Source: 1. PwC, “Bending the Cost Curve: Amsterdam” (2011), 2. Wall Street Journal “The Henry Ford of Heart Surgery” (25 November, 2009); 3. Aravind Health Care System (2013)

Emerging markets are practicing reverse innovation, introducing creative solutions to help solve pressing problems

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Developed countries Emerging markets

Entrenched, conservative infrastructure

Lack of legacy infrastructure to impede change

Rigid regulations Fewer regulations to hinder progress

Abundant resources and many options for first-class treatment

Lack of access and fewer options drives alternative solutions