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

1. Seminar on FOSTERING HEALTH FOR ALL
Panel Discussion II:
Evolving Innovative Investment Ecosystems in Healthcare
14 December, 2010
Pankaj Vaish
Pankaj.Vaish@religaretech.com

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

3. INDIAN HEALTHCARE SECTOR
CHALLENGES OR OPPORTUNITY

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. 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
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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
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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
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8. INDIAN HEALTHCARE SECTOR
FINANCING OPTIONS

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
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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
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11. INDIAN HEALTHCARE SECTOR
SOLUTION AND RESOLUTION RECOMMENDATIONS

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
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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
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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
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15. Thank You