parthenon_healthcare seminar_new horizons in indian healthcare_april 22 2010

7/29/2019 Parthenon_Healthcare Seminar_New Horizons in Indian Healthcare_April 22 2010

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THE PARTHENON GROUPBoston London Mumbai San Francisco

New Horizons in

Indian Healthcare

Trends in healthcare sector investment


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Parthenon Global Healthcare Practice

Worldwide healthcare trends and investment implications

Indias healthcare market

The Indian urban healthcare consumer

New business models and investment opportunities

Agenda


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The Parthenon Group

Global Coverage

= On The Ground Projects Completed


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Global Healthcare Practice

Deep Understanding of Healthcare Value Chain

Parthenons Global Healthcare Practice: Built up from over 10 years of project experience

Covering all major sectors of health care

Advising on corporate and business unit strategies; policy and systems design; performance improvement; mergers andacquisitions

Laboratory

equipment

Informatics

Medical publishingand education

Revenue cycle

management

Temporary staffing

Hospitals

Primary care

Specialist treatment

centers

Diagnostics and

imaging

Home health care

Cosmetic surgery

Dentistry

Managed care

Other health

insurance

Pharmacy benefitmanagers

Stop loss

Discount cards

Healthcare funding

Health policy and

strategy

Leveragedprocurement

Public health

Suppliers Life Sciences Providers Payers Government

Pharmaceuticals

Drug distribution

Nutritional

supplements

Outsourced clinical

research

Medical devices

Surgical implants


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Agenda


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Healthcare expenditure threatens to reach

unsustainable levels in many developed countries

Healthcare Expenditure vs. GDP per capita, 2006

5%

10%

15%

Source: WHO, OECD, IMF


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Current Model

Performance

Activity

Treatment

Inpatient

Capital

Specialty Focused

Physician

Policy trends are changing the healthcare

landscape to try to bend the cost curve

Sustainable Model

Value

Outcomes

Prevention

Outpatient

Information

Patient Pathway

Basic Health Professionals

Current Model Sustainable Model


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This is driving a shift in investment patterns and

opportunities

Divest Hold Invest

Retail medicine / pharmacies

Clinical labs

Generic pharma

Biotech

Outsourced pharma services

Contract research

Contract manufacture

Single speciality hospitals

Medical Tourism

Mental Health

Homecare

Care extenders (location,

methods, protocols)

TeleHealth

Wellness and prevention

Obesity

Smoking cessation

Healthcare IT

Decision support

Revenue cycle management

Outsourced Provider Services

General and multispecialty

hospitals

Long term residential care

Durable medical equipment and

devices

Branded pharma

Diagnostic imaging

Note: The segments in bold are of particular interest to the Indian market


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Agenda


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Indias healthcare spending is growing well ahead

of GDP

Rs.0B

Rs.1,000B

Rs.2,000B

Rs.3,000B

2000

Rs.893B

2001

Rs.1,027B

2002

Rs.1,155B

2003

Rs.1,281B

2004

Rs.1,486B

2005

Rs.1,729B

2006

Rs.1,943B

2007

Rs.2,231B

2008

Public

Private

Rs.2,574B

4.3% 4.6% 4.8% 4.8% 4.9% 5.0% 4.9% 4.9% 4.9%

T

otalExpenditure

on

Healthcare

(Rs

.B)

15%

13%

00-0814%

CAGR

% ofGDP

Healthcare Spending in India, 2000-2008

Source: World Health Report 2009, Primary Research


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Provider

Rs.617B Rs.1,732B Rs.168BRs.57B

Private

Payer

Out of pocket payment and private provision

dominate Indias healthcare system

0%

20%

40%

60%

80%

100%

Primary

Public

Private

Rs.203B

Secondary & Tertiary

Public

Private

Rs.1,597B

Pharma & Biotech

Private

Rs.623B

Private

Private

Private

CRO

Rs.24B

MedicalEquipment&

Devices

Rs.78B

Other

Rs.49B

Public Out of Pocket

NGO & Social

Security Contrib.

PMI&

Other

Pvt.Sources

Source: World Health Report 2009, IBEF Healthcare Report 2009, Analyst Reports, Parthenon Analysis, Primary Research

Total = Rs.2,574B

Total = Rs.2,574B


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India Private Healthcare Service Provision by Segment, 2009

0%

20%

40%

60%

80%

100%

PMI MarketShare

OtherIFFCO TOKIO

Cholamandalam

Reliance

Bajaj Allianz

Oriental

StarHealth

National

UnitedIndia

ICICI

Lombard

New India

Rs.66B

PMI 2009

The private market is highly fragmented and

focused on acute care and pharmaceuticals

0%

20%

40%

60%

80%

100%

Other

Rs.1,003B

Other

Piramal Healthcare

GSK

Cipla

Rs.556B

PrimaryCare

Rs.27B

Secondary & Tertiary Care

Manipal

Wockhardt

Apollo

Fortis

Pharma & Biotech

Zydus Cadila healthcare

Aurobindo pharma

Dr. ReddySun Pharma

Ranbaxy

MedicalDevices &

Equipment

Rs.70B

CRO

Vimta

Advinus

SaiAdvantium

GVK

Piramal

Veeda

Jubilant

Biocon

SiroClinpharm

Rs.22B

Other

Rs.43B

Total = Rs.1,720B

Source: Assocham Healthcare Report 2009, Analyst Reports, Health Insurance India, IBEF Healthcare Report 2009, Primary Research


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0

10

20

30

40

50

WHO

recommended

All-India

10

Tier I LowIncome

7

Tier I LowerMiddle

Income

15

Tier I UpperMiddle

Income

18

Tier I HighIncome

45

HospitalBeds

Per10K

Population

Note: Tier I is the average of Mumbai, New Delhi, and BangaloreSource: WHO, Primary Research

Hospital Beds per 10,000 Members of The Population

Vis-a-Vis WHO Benchmarks, All-India and Tier I Cities

Acute care provision is highly concentrated at the

high income end of Tier I cities

Price Point Single Room - Rs 4K


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0.0X

0.5X

1.0X

1.5X

2.0X

High Income Low Income

India - Urban

UK

Healthcare expenditure in India has many of the

characteristics of a luxury good

Healthcare Expenditure byIncome Segment Indexed, Top Income Segment =1

Income Level

Source: Fiscal Studies, Indicus Analytics, National Bureau of Statistics of the Peoples Republic of China, ONS

H

ealthcare

ExpenditureIn

dex

Health Expenditure


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Agenda


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16Note: *48 districts out of 135 districts in Tier I, II or II I are sampledSource: Primary Research, Parthenon Analysis, Indicus Analytics

0%

20%

40%

60%

80%

100%

Tier I

300-500K

1000K

500-1000K

13M

Tier II

300-500K

1000K

9M

Tier III

300-500K

1000K

500-1000K

6M

PercentofHouseholds

500-1000K

Tier I, Tier II & Tier III City Household Distribution

By Annual Household Income Segments, 2008

In urban India, the highest income segment

accounts for les than 5% of households...

Total = 28M *


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17Note: Income is annual disposable household incomeSource: Primary Research and Analysis, Indicus Analytics

Tier I, Tier II & Tier III City Healthcare Spending Distribution

By Annual Household Income Segments, 2008

...but more than 40% of all healthcare spending

0%

20%

40%

60%

80%

100%

Tier 1

300-500K

1000K

500-1000K

Tier 2

300-500K

1000K

500-1000K

Tier 3

300-500K

1000K

500-1000K

Rs.4.5K

Rs.6.4K

Rs.18K

Rs.69K

Average SpendPer Household


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0%

20%

40%

60%

80%

100%

Tier 1

>1000K

500-1000K

300-500K

1000K

500-1000K

300-500K

1000K

500-1000K

300-500K

20%

Populat ion

Growth


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Percent of Respondents Who Spent Money

on Different Healthcare Categories

0%

20%

40%

60%

80%

Blood/UrineTest

Pe

rcentSpentMoney

74%

X-ray/Ultrasound

62%

SpecialistVisit

51%

Antibiotics

51%

AyurdevicMedicine

48%

Vaccination

44%

SmallSurgical

Procedure

25%

HospitalStay for

Infection

22%

GP Visit

21%

PlannedLarge

SurgicalProcedure

14%

EmergencyLarge

SurgicalProcedure

10%

Q: Have you or your family spent money in the last three years on the following healthcare categories?Source: Parthenon Healthcare Survey (n=105)

Urban consumers purchase a wide range of

healthcare services

PercentofRespondents


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Dissatisfaction levels with hospital care are high,

particularly with smaller and government hospitals

Q: On a scale of 1-7 where 1 = Not at all satisfied and 7 = Extremely satisfied; how satisfied were you with your hospital stay?Source: Percent lower than 4, Parthenon Healthcare Survey (n=105)

0%

10%

20%

30%

40%

50%

GovernmentHospital

Percent

Unsatisfied

50%

PrivateSmall Hospital

(200 Beds)

24%

Corporate/TrustHospital

21%

PercentofRespondents

Percent Dissatisfied with Hospital Experience by

Hospital Type


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Hygiene and staff quality dominate concerns at the

low end; pricing and admin at the high end

Q: What were the three most important reasons for not being satisfied with your hospital stay?Source: Parthenon Healthcare Survey (n=105)

0%

20%

40%

60%

80%

100%

Government

Hospital

Waiting Times

Hygiene in the

Hospital

Quality of theNursing Staff

n=6

Private Small

Hospital

(200 beds)

Other

Quality of theFood

Price of the

Room per

Night

Billing and

Admin. Process

Waiting Times

Hygiene in the Hospital

Quality of thePhysician

n=20

Corporate/

Trust Hospital

Quality of the

Food

Price of theRoom per

Night

Billing and

Admin. Process

Waiting Times

Hygiene in the

Hospital

n=10

Most Important Reasons for Not Being Satisfied by Hospital Type


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HighIncome

MiddleIncome

LowerIncome

Source: Parthenon Analysis

Tier II Tier IIITier 1

Opportunity

Attractiveness High Low

Tier 2 and middle income markets offer attractive

opportunities alongside the traditional high end

focus

Expanding from High Income Tier 1 provision and to include Middle Income acrossother major urban areas, provides ~2.2X market opportunity

also allowing a move away from highly competitive Tier 1 dynamics


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Agenda


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Several business models offer attractive growth

and lower capital intensity

Business Model Investment Thesis India Examples

Specialist hospitals Lower capital and operating costs than general

hospital models

Superior outcomes due to experience curve

effects

Patient acquisition can be an issue in Indian

context

Day surgeries Lower capital and operating costs than general

hospital models

Superior outcomes due to patient selection and

lower risk for hospital acquired infection

Financial model can be designed to create

superior incentives for all stakeholders Hub & Spoke Potential for better leverage of CapEx and star

physicians by effectively extending the

catchment area of the hospital

Satellite hospitals have a lower CapEx structure;

In addition referrals pattern to hub is locked in
http://www.novamedicalcenters.com/


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Business Model Investment Thesis India Examples

Diagnostic clinics Potential for consolidation for highly fragmented

market with top 5 organized chains constituting

between 7-10% of the market

Chains are growing at 3x the pace of the rest of

market through acquisitive expansion

Patient acquisition can be an issue in Indian

context

Primary care

networks

Broader offering and potential for cross-selling

through integration of primary care, diagnostic,

pharmacy and wellness services

Potential for franchise model resulting in a lower

capital base and leveraging existing referral

networks

Global CROservices

Low cost trial capacity

Cross-country capacity

Access to patients and speed of recruitment

High quality physicians and administrators

Strong regulatory capabilities

Several business models offer attractive growth

and lower capital intensity
http://www.theapolloclinic.com/home.asphttp://www.veedacr.com/index.asp


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India healthcare is an attractive growth market

It shares many of the characteristics of a luxury good, driven strongly by increases

in disposable income

While its traditional focus has been on the high income segment in the metro areas,

competition there is becoming more fierce

In Tier II / III, high end and mid market offer attractive potential but challenges

around scale / price points make traditional high capital solutions difficult

Business models providing lower cost, improved CapEx leverage, greater operating

efficiency and / or addressing untapped markets are potential new horizons for

attractive healthcare investments

Conclusion

parthenon_healthcare seminar_new horizons in indian healthcare_april 22 2010

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