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Healthcare 2.
0: Exploring Synergies between Public and Private Sector 1

2 Healthcare 2.0: Exploring Synergies between Public and Private Sector
TITLE Healthcare 2.0: Exploring Synergies between Public and Private Sector
YEAR August, 2017
AUTHORS YES Global Institute
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Healthcare 2.0: Exploring Synergies between Public and Private Sector 3

FOREWORD
India’s healthcare sector contributes immensely to the with technology acting as a key enabler, to build world class
nation’s socio-economic growth. The sector is one of the healthcare infrastructure across the country, along with
fastest growing and is expected to grow at a CAGR of 23% the required skill sets to meet India’s increasing healthcare
to reach USD 280 billion by 2020. needs.
Further, with the Government’s progressive initiatives I truly believe that implementation of the National Health
such as ‘Digital India’ and ‘Startup India’, a new wave Policy 2017 will usher several structural reforms which will
of opportunity has emerged with innovative technological significantly transform the sector. The private sector will
advancements in healthcare tools and devices, thereby need to evolve new paradigms and collaborate with the
improving accessibility and affordability. Government to develop India’s long term healthcare vision.
Public expenditure spending on healthcare in India is in the I am pleased to present the YES BANK – YES Global Institute
range of 1.1-1.3% of GDP, which is one of the lowest in the Knowledge Report ‘Healthcare 2.0 – Exploring Synergies
world, even in comparison to some of the peers amongst between Public & Private Sector’, which highlights the
emerging economies such as China and Brazil. key growth drivers for India’s healthcare sector and the
measures needed to overcome the challenges faced by
Growing urbanization, a rising middle class with higher
the sector. I am confident that the contents of this report
disposable income and greater awareness about medical
will provide valuable insights for all stakeholders of India’s
care have increased the demand for quality and affordable
healthcare sector.
healthcare. There is now greater need to realign our focus
towards attaining Universal Health Coverage (UHC). While
financial protection is the principal objective of UHC, its Thank you.
implementation also requires the availability of adequate
healthcare infrastructure, a skilled health workforce and Sincerely,
access to affordable drugs and technologies to ensure the
entitled level and quality of care is given to every citizen.
There is immense scope for enhancing healthcare services
penetration in India. Pragmatic policy, with the consumer
at the core, should address the huge gaps in medical
infrastructure which is much required to improve India’s Rana Kapoor
healthcare indicators. While the Government aims to
Managing Director & CEO
increase public spending to 2.5% of GDP, it is imperative
to harmonize efforts of public, private and civil society, Chairman

TABLE OF C ONTE NT S
1. Healthcare Scenario in India 8
2. Growth Drivers and Enablers of Healthcare 12
3. National Health Policy 2017 and

Implications for Private Sector 16
4. Healthcare Infrastructure in India 22
5. Reimagining Healthcare Financing 28
6. Healthcare Reforms 2.0 34
7. Medical Device Industry in India 40
8. Technology Making Healthcare Available 46

and Accessible to all
8 Conclusion 54
9 Way Forward 56
10 Abbreviations 57

1
Healthcare
Scenario in
India
India has shown a very credible
improvement in all economic indicators
over the past 25 years since the
liberalization initiated in 1991. However,
the gains in social indicators of health
and education have been less than
the expectation. This has largely been
attributed to very low level of public
funding especially in healthcare and
an underperforming public healthcare
ecosystem. India lags comparable
countries such as China and Brazil on
healthcare spend in terms of GDP and
households are predicated to very high
out-of-pocket expenditure (Exhibit 2).

and comparable peers among BRICS countries. This
Exhibit 1: OOP Health Expenditure as a % of
is despite the fact that India’s per capita income has
Total Expenditure
grown faster than other BRICS countries except China
(Exhibit 4).
Global Avg. 18.2
Exhibit 3: Key Healthcare Performance Metrics
Brazil 25.5 7.3
China 32.0
3.8
India 62.4 3.3
2.9
2.3
1.9 1.9 1.7 1.9
1.5
Source: World Bank 0.7 0.7
Hospital Beds per Physicians per Nurses per 1000

Exhibit 2: Govt. Expenditure on Health as a 1000 population 1000 population population
% of GDP
6.0 India China Brazil Global Avg.
Source: World Bank

3.8
3.1
Exhibit 4: HDI Scores of Countries
1.4 Russia 0.80
Brazil 0.75
India China Brazil Global Avg.
China 0.74
Source: World Bank
Sri Lanka 0.77
There is a very large gap in key healthcare performance South Africa 0.67
metrics including bed availability, manpower (physicians
and nurses) as compared to peers such as China and India 0.62
Brazil and also global averages (Exhibit 3). An enormous
shortfall in healthcare indicators has led to India’s poor Source: Human Development Index 2016, UNDP
ranking in Human Development Index1 where it is
ranked 131 behind South Asian peers such as Sri Lanka This also implies that without corresponding
investments and focus on social sectors, economic
1
The Human Development Index (HDI) is a composite statistic of growth by itself would not lead to proportionate gains in
life expectancy, education, and per capita income indicators social indicators and quality of life.

Due to consistent under funding and indifferent Exhibit 5: Healthcare Industry Pie
quality of public healthcare over decades, the gap
has been filled by private healthcare which has now Pharma
13%
emerged as the dominant provider of care in the
Health
country. The private sector currently accounts for ~80 Insurance
% of outpatient and ~60% of in-patient care. More 4%
significantly, even where public healthcare is available,
people prefer a private facility over a public healthcare Medical Equip.
facility largely due to easier access, better quality and & Supplies
9%
superior customer service.
Diagnostics
Hospitals
Healthcare Industry 3%
71%
The healthcare sector is expected to advance at a

CAGR of 22.87 per cent during 2015–20 to reach
USD 280 billion by 2020. There is immense scope for
enhancing healthcare services penetration in India,
Source: Aranca Research
thus presenting ample opportunity for development of
the healthcare industry. The sector can be categorized
under Hospitals, Pharmaceutical companies, Medical Within hospitals, the private sector accounts
devices and Equipment manufacturers, Medical for a large chunk of the total healthcare
insurance, Medical tourism and Health-tech. A break-up expenditure (Exhibit 6)
by revenues is depicted in Exhibit 5.
Exhibit 6: Healthcare Spending in India, 2015
Govt. Hospitals
19%
Nursing Homes
30%
Top Tier/High -
Mid Tier end Tertiary
11% Care
40%
Source: RNCOS, ‘Indian Hospital Services Market Outlook’; Grant

Thornton, LSI Financial Services, Industry Sources, OECD

2 Growth Drivers and
Enablers of Healthcare
The hospital and diagnostic centres attracted FDI worth USD
4.34 billion during the period between April 2000 and March
2017 according to the Department of Industrial Policy and
Promotion (DIPP). Some of the key drivers for greater domestic
and foreign investments include the following:
a. Advent of Non-communicable/Lifestyle Diseases: The
growing incidence of NCDs is adding a huge disease burden
on the country and at the same time presents the strongest
growth driver for increasing healthcare provision. This is
reflected in the growth of hospitalised cased for NCDs
Major Non-Communicable Diseases in 2005 2015

India & Number of Patients Suffering
(in millions)
Diabetes 31 46
Cardiovascular 38 64
Cancer 2 2
COPD (Chronic Obstructive Pulmonary 17 22

Disease)
Source: Industry Sources, WHO, Dun & Bradstreet Research

b. Demographics and Increasing Disposable e. Medical Value Travel: India is highly competitive
Incomes: The per capita income has increased at as compared to developed countries and has thus
a CAGR of 5.7% from INR 1130.1 in 2007 to INR emerged as an attractive destination for medical
1861.5 in 2016. Nearly 8% of Indian population value travel. This sector is expected to reach 27%
was above the age of 60 years in 2011 and this is growth rate by 2020 from the current 15%.
expected to grow to 12.5% by 2026.
c. Urban population increased from 286 million to 377 “... even if Indian heart hospitals paid their
million during the past decade (2001-11) and the doctors and staff U.S.3-level salaries, their
proportion of urban population to total population
costs of open-heart surgery would still be one-
increased from 27% to 31%. Further, the share
of urban population is estimated to grow to about fifth of those in the U.S ....”Harvard Business
37% of Indian population i.e., 450 million by 2025. Review
Rapid urbanization and enhancing employment has
resulted in increase of personal disposable income
The Indian medical tourism industry is expected to
which grew at an estimated CAGR of 19% over the
reach USD 8 billion by 2020 from USD 3.9 billion in
period FY 2009-13. Growth in income has gradually
2016. In 2016, India had seen 2,01,333 tourists entering
improved affordability for high end secondary and
on medical visa as compared to 56,129 tourists in
tertiary care in cities.
2013. Availability of skilled doctors/nursing staff, cost
d. Increasing Penetration of Health Insurance: competitiveness to conduct critical treatment, less
Health insurance has emerged as the fastest waiting period and world class facilities developed
growing segment within the general insurance by corporate private hospitals such as Fortis, Max,
sector registering a CAGR of ~24% per annum over Medanta, Apollo, Manipal among others facilitate
the last decade. The premium collection has grown medical tourism growth in the country.
to INR 247.84 billion for FY’16 as compared to 202.56
The Ministry of Tourism has set up the National Medical
billion in FY’15. This growth is expected to grow
and Wellness Tourism Promotion Board for promotion
over many years considering the very low health
of medical & wellness tourism in India and has recently
insurance penetration. Even after the rapid growth of
entrusted the responsibility to draft the Medical &
Government sponsored health insurance schemes,
Wellness Tourism Policy to streamline the niche travel
it is estimated that ~70%2 of the population still has
segment in India. Extension of e-visa to 161 countries
no access to health insurance. The share of private
would also result in increase in the number of foreign
voluntary health insurance remains low at ~4%.
inbound tourism and thus demand for high quality
healthcare infrastructure.
A few key destinations which have evolved in
healthcare as a result of bulging Medical Tourism:
2
Insurance Penetration in India, ASSOCHAM, February 2017 • Chennai – The gateway of South India has already
established itself with the availability of quality,
3
India’s Secret to Low-cost Health Care, Harvard Business
Review; https://hbr.org/2013/10/indias-secret-to-low-cost-health- affordable hospitals and various treatment facilities.
care, October 2013

• Hyderabad – With the announcement of launching f Differentiated Business Models: Private healthcare
Medical Tourism Hub (MT-Hub) on the lines of T-Hub centres are rapidly evolving their business models to
by the Telangana Government, Hyderabad could see cater to the varied needs of the patients. The service
increase in the arrival of medical tourists. of hospitals at a single location is being increasingly
distributed into standalone clinics, pharmacies and
• Mumbai – The financial capital of India is also one diagnostic centres. Exclusive maternity, oncology
of the leading destinations of medical tourism and dialysis centres are being rolled out both from
due to the well connected infrastructure, state-of- corporate chains and standalone care providers. The
the-art health care facilities, well-trained medical existing single specialties in eye care and dental
professionals and low cost of delivery. interventions are also increasing at a fast pace.
• Uttarakhand – Known as the ‘Devbhumi’, it has the The hub-n-spoke model of corporate hospitals with
presence of hot springs which have the potential to large multi speciality hospitals in metros and smaller
be developed into wellness tourism destinations, clinics in sub-urban areas and tier-II, tier-III cities has
complete with high-end spa facilities and yoga and brought a lot of cost and operational efficiency.
meditation retreats. g Favourable Investor and Policy Environment:
• Kerala – Known as God’s Own Country, it is highly Riding on the policy support from the Government,
regarded as the birthplace of Ayurveda and has the in the form of tax incentives, reduced taxes
added advantage of rich biodiversity in the Western and customs duty on life-saving equipments,
Ghats. encouraging policies for FDI, we have witnessed
growing interest from PE and Venture capitalists in
• North East – With increase in connectivity, states the last few years with transaction value increasing
such as Sikkim, Meghalaya and Arunachal Pradesh from USD 94 million (in 2011) to 1,275 million USD
which are home to natural hot springs, lush green (in 2016). Success of IPOs in the sector over last
forests and blissful waterfalls have potential to 15-18 months has further strengthened investor
emerge as leading destinations for world class confidence.
wellness centers.
• Other emerging wellness tourism destinations
include Karnataka, Himachal Pradesh, Uttar Pradesh
and Haryana.
Enhanced thrust on making India a brand in medical
tourism or MVT (Medical Value Travel) through an
integrated marketing effort, on the lines of the
‘Incredible India’ campaign facilitated through all Indian
Embassies shall greatly assist in the growth of medical
value travel in the country.
Another key growth driver could be introducing
separate accreditation standards for AYUSH wellness
units to ensure consistency in service and adherence to
basic quality standards.

National Health Policy
3 2017 and Implications
for Private Sector
The National Health Policy 2017 has the following
foundations:
• To reinforce and rebuild trust in the public healthcare
system by improving quality and perception,
making it ‘predictable’, ‘efficient’, ‘patient centric’,
‘affordable’ and ‘effective’.
• General taxation will remain the predominant
means for financing care
• Government expenditure on healthcare shall be
increased to 2.5% of GDP by 2025 from ~1.2%
currently
• Reduce OOP expenditure and decrease in
households facing catastrophic4 health expenditure
from current levels by 25% by 2025
• Health to be treated in its integrated form with
aspects of cleanliness, pollution, nutrition and
stress included and a strong focus on preventive
and promotive healthcare
4
Catastrophic household health care expenditures is defined as health expenditure
exceeding 10% of its total monthly consumption expenditure or 40% of its
monthly non-food consumption expenditure

The inherent focus of the Government is to
increase provision of public healthcare. The
private sector services are sought to be used
only for ‘gap filling’.
In terms of financing as well, the Government
envisages its role as a single payer even
where ‘strategic’ purchasing from the private
sector is required.
Considering the current state of India’s
healthcare delivery landscape, these policy
thrusts appear ambitious and idealistic.
To actualize this intent, a strong institutional framework
The states policy intentions imply that the needs to be worked with participation from both, the
Government is less enthusiastic on rolling public and private sector, which shall have the powers
a comprehensive health insurance program to oversee the quality metrics in healthcare delivery,
announced earlier which could increase the adherence to treatment guidelines developed by expert
minimum health coverage to INR 1 Lakh panels, and to place all patient outcomes in the public
domain, so as to enable informed choices to the users
with an additional `30,000 coverage for
based on empirical data.
senior citizens and also reflects the continued
dilemma on healthcare financing 2. Re-invigoration of Healthcare PPPs:
“For need based purchasing of secondary and tertiary
care from non-Government sector, multistakeholder
Other Implications of the policy for the institutional mechanisms would be created at Centre
and State levels – in the forms of trusts or registered
private sector societies with institutional autonomy.... the payments
1. Focus on Outcomes and Transparency: will be made by the trust/society on a reimbursement
basis for services provided”
The policy recognizes the need of mandatory
disclosure of treatment and success rates across • The above implies a new life to the forms of
facilities in a transparent manner...”12.1, National public private partnerships in healthcare. More
Health Policy 2017 significantly, Health being a state subject, lack of
clarity on institutional arrangement to implement
Increased transparency, disclosure of patient and manage PPP projects has been one of the key
outcomes and adherence to standard treatment reasons for lack of scaling up healthcare PPPs.
guidelines have been identified as a key enabler
for purchasing of healthcare services from the non-
Government sector.

We propose a State level SPV with joint holding of Government and private entities, to create a corporate like set up
with an empowered and accountable management for achieving specific rural primary health outcomes.
State Level SPV
Overall Managerial Corporate Setup: Joint Holding

Oversight of SC, PHC, CHC of Govt. & Private
Operating Integrated Health

Recruitment Training & Instituting Systems & Processes
Centres, Pharmacies,
of Staff Development of Staff for Standardised Operations
Ambulance Services
However, considering our part experience in PPP, b. A framework for specific PPP endeavours need to be
we should be very selective in our approach. The designed on Cancer, Diabetes, CVD etc
following could be the areas where PPPs can be c. Private sector expertise needs to be leveraged in line
implemented: with the NPCDCS operating guidelines including large
i. PPP model for District Hospitals linked to Medical scale screening of population
Education: Utilisation of district hospitals is highly iii. Introduce National Telemedicine Network linking high
sub-optimal, owing to inadequate specialist staff end public and private hospitals with 500,000 rural
and equipment. It is estimated that 75 % of human health centres
resource for healthcare works in private sector and
this ratio is further skewed in case of specialists 3. Greater participation of private sector in provision
of Primary care in urban areas:
a. Develop PPP models for district hospitals
where the private sector is permitted to use “For achieving the objective of having fully functional
them to set up medical colleges, to enable primary healthcare facilities- especially in urban areas
better dispersion across the country and to reach under-serviced populations and on a fee basis
address regional disparities. for middle class populations, Government would
collaborate with the private sector for operationalizing
ii. Non Communicable Diseases (NCDs): Government
such health and wellness centres to provide a larger
is focusing on only ~7% morbidities through
package of comprehensive primary health care across
National Rural Health Mission (NRHM), preventive
the country. Partnerships that address specific gaps
healthcare and lifestyle disorders are not focus
areas currently in public services: These would inter alia include
diagnostics services, ambulance services, safe blood
a. Nature of NCDs & cost of treatment shall put services, rehabilitative services, palliative services,
colossal burden on total healthcare spend mental healthcare, telemedicine services, managing
in the future, if large scale prevention and of rare and orphan diseases...” 13.6.3, National Health
awareness campaigns are not taken up Policy 2017

This could potentially open new level of interventions It is expected that the public provision of healthcare
of the private sector in the public healthcare delivery. shall increase if the intent of the policy is followed
It is much more feasible to attract private investments through by decisive execution. This may create a
into primary healthcare in urban areas where there semblance of competition for the private sector,
is already a strong private sector presence through however, considering the huge potential for growth
high end tertiary care and single doctor hospital and latent demand of healthcare, the private sector
clinics. The primary healthcare at urban areas can delivery has a long runway for absolute growth
see immense qualitative improvement if managerial ahead of it.
and technical efficiency of the private sector is
harnessed suitably through well drafted policy Though the policy touches upon all the relevant
contracts. aspects of healthcare delivery, increasing funding is
at the core of the Government’s intent to improve
4. Opportunity in Non-Communicable Diseases: healthcare provision.
The policy recommends National Institute of
Chronic Diseases including Trauma, to generate
evidence for adopting cost effective approaches
and to showcase best practices. The growing
incidence and morbidities related to NCDs have
not been adequately addressed by the policy. Most
of the current health programs are focused on
communicable and infectious diseases. In effect,
these programs after all address less than 6% of
morbidities and 25% of communicable disease
burden in India. The national program on NCDs is
a recent addition and as such, the national health
programs have very limited impact on overall
disease burden in the country. As such, it presents
a rapidly growing market opportunity for the private
sector.
The private sector has a large role in identifying
models of care that are efficient, effective and
sustainable, for prevention, early detection and
management
5. Health IT opportunity: The policy emphasizes the
intent to develop an integrated health information
system. This presents a sizeable opportunity to
healthcare IT companies in the country, as the
underlying systems are already in place with the
notification of national electronic healthcare records,
meta data and other standards.

Healthcare
4 Infrastructure
in India
“To have at least two beds per thousand population
distributed in such a way that it is accessible within
golden hour rule…”3.3.2, National Health Policy 2017
Despite stepped up Government spending, the healthcare sector

in the country lags when compared to other developed nations
and even behind most of the developing countries in terms of
healthcare infrastructure, as well as healthcare workers. India has
0.7 Beds against global average of 2.7 beds per 1000 population.
There is acute shortage of doctors and nurses and medical
colleges (doctors and nurses per thousand people is 0.7 and 1.71
respectively against global average of 1.39 and 2.86).
• Inadequate Healthcare Centres: As per Rural Health
statistics of 2014 - 15, there is a shortage of 22% primary
health centres (PHCs) and 32% shortage in community health
centres (CHCs). It is estimated that 50% of patients have to
travel more than 100 km to get access to quality healthcare,
as 70% of country’s quality healthcare infrastructure is
concentrated in top 20 cities only.

Exhibit 7: Shortfall of specialist doctors in CHCs in 2015
83%
Private players or consortium will bid for
83% 82%
81% 30-year lease for a certain block/area of
district hospital buildings to set up a 50 to
76%
100 bed hospital. As per the draft document
Governments will provide Viability Gap
Surgeon Obstetrics Physician Paediatrician Overall Funding (VGF), or one-time seed money, to
and
gynaecology the successful bidder to develop infrastructure
within district hospitals. Ambulance services,
Source: Rural Health statistics of 2014 - 15
Blood banks, and mortuary services will be
Healthcare is a fast evolving sector, and healthcare shared amongst the private players and State
providers have to continuously explore and adapt health departments.
to new business models in the dynamic market.
Government of India, today, has very strong focus on
making healthcare affordable and accessible for all
citizens. To achieve this, Government along with private
healthcare providers have started to innovate and
rework their business models in order to respond to
new trends and meet the growing requirements of the
market. Some of the existing and emerging business
models in hospitals industry are as follows:
• Emergence of public-private partnership (PPP)
models: In order to increase the accessibility and
affordability in healthcare across the country, the
Government has been actively participating with the
private sector, to achieve its health policy goals.
NITI Aayog, along with the health ministry

and World Bank, has drafted a model of PPP
to improve India’s poor record of healthcare
delivery. NITI Aayog has devised a framework
which will allow private players or a
consortium to run the select services (cardiac,
pulmonary, and cancer care) within district
hospitals, on a 30-year lease, primarily in tier
2 and tier 3 cities where Government owns
majority of the health care infrastructure.

There are several PPP models available, with varying degrees of responsibility and risk allocation to choose from,
depending on project complexity and need of the healthcare sector. A summary is provided below:
Operations and Build-Operate-Own/ Design, Build, Finance

Management Transfer (BOT) and Operate (DBFO)
Contractual arrangement SPV structure to raise Variation of BOT model
between private player funds from private player
Private sector to design,
and Government with
Predetermined output build, finance and
public sector facility
purchase by Government operate
ownership
Initial investment Project can be leased
Use of private sector
recovery in moderate back to public sector for
expertise for Service
time period a period of 30 years or
design and delivery,
more
Operations Provision for further
contracting of Example- Medanta
Performance based fees
operational responsibility Hospital, Patna
payable to private player
for management of
services.
Lease Concessions Joint Venture (JV)
Public sector is Private sector is Joint ownership of the

repsonsible for the repsonsible for all the asset
Capital investments Capital investments
Revenue and Expenditure
Private sector is Public Sector governs the sharing
responsible to maintain Price and Service quality
Private sector to bring in
the service quality
Private sector makes technical expertise
standards and collection
payment to public sector
for concession rights

Challenges of Healthcare PPPs well as individual practitioners. To get a larger
share of patient referrals, tertiary healthcare
Even after several initiatives being taken by the providers / hospitals are foraying into primary
Government, there are some challenges that need to healthcare sector by setting up primary clinics.
be addressed to make these PPP models and projects Major hospital groups such as Apollo Hospital,
successful and sustainable on a long term and regular Max Healthcare and Escorts operate primary
basis. These challenges are outlined below: clinics.
o Limited Projects from State Governments o Operating Maintenance Contract Model:
identifying potential areas of partnership Under this model, a hospital chain takes over
o Inadequate Private sector representation in the management and operations of a hospital
PPP governing body owned by a trust. The corporate hospital chain
in turn receives an annual management fee or
o Reluctance of public sector for equity a fixed share of annual profit. All major private
participation or debt infusion at subsidized hospital chains such as Apollo, Fortis, Care
interest rate in the PPP projects Hospital are exploring this route to go asset
light.
o Non availability of tax holidays
• Lease contracts: Hospital sector, in past few years,
o No benchmarks and key success factors are has become capital intensive on account of high real
available for evaluating performance and estate cost, especially in metros and tier-I cities. This
monitoring of PPP projects has led to private players exploring other models
o Non utilization of unspent budget of the such as lease contract. In such type of lease contract,
Ministry of Health in the subsequent year. the land owner develops the hospital building as per
specifications given by the Hospital operator, and
• Shift towards Hub & Spoke Model and Operating then the Hospital operator enters into a long-term
Maintenance Contract Model: Given the high lease agreement with the land owner. All the leading
capital expenditure requirements, increasing real Hospital chains such as Apollo Hospitals, Paras
estate cost and longer pay-back period, companies Healthcare, Medanta, Max etc are actively pursuing
are exploring new business models that require this model.
lower investment and generate optimal returns
sooner. Apart from traditional owner operated • Increased Penetration into Tier II and Tier III
hospitals, Indian hospital sector has witnessed the cities: Hospitals operating in tier I cities tend to
emergence of two new operating business models focus mostly on high end specialized tertiary care,
– Hub & Spoke model and Operating Maintenance requiring higher spend from patients. Such market is
Contract model. highly sought after due to high average revenue per
occupied bed (ARPOB) because of affluent patient
o Hub & Spoke Model: Referrals from primary population. Over the past decade, tertiary hospital
clinics play a major part in the total patient sector in tier I cities have reached a saturation
admittance of tertiary hospitals. Currently, point. Faced with such a scenario, large numbers of
primary clinics (primary healthcare segment) hospital companies are expanding their network to
are dominated by Government sectors as tier II and tier III cities with smaller hospitals (100

to 200 beds), which earlier lacked robust tertiary
healthcare infrastructure. Existing unmet demand
along with the presence of a patient base able to
afford specialized tertiary healthcare services is
expected to sustain this trend. Apollo Hospitals is
one of the largest players to enter tier II and III cities,
through their “Apollo REACH” initiative, a network of
secondary care facilities.
• Emergence of Day Care Surgery Centres: Technical
advancement in surgical procedures over the past
couple of decades has helped reduce the time
patients have spent in inpatient care. Any reduction
in inpatient care frees up the facilities for a hospital
leading to a high patient turnover and consequently
more revenue. Day care surgery centres where
patient admittance, surgery and discharge happen in
the same day came up to address this market. Such
centres are standalone centres or free-functioning
centres within a hospital and have a better cost
advantage as the infrastructure investment required
is low. Day care surgery centres are well established
as a business model in developed countries, but it
is yet to pick up in India. One-day Surgery India and
NOVA Medical Centres are two notable hospital
companies providing day care surgery services in the
country.
• Telemedicine: Telemedicine involves examining,
monitoring and diagnosing (to a certain extent)
patients without the physical presence of doctor
near the patient. Telemedicine uses communication
and information technology tools to delivery basic
healthcare services from a distance. It helps
healthcare providers expand their network without
setting up physical infrastructure, thereby bringing
down cost of expansion. Apollo Telemedicine (by
Apollo Hospitals) is the largest telemedicine provider
in India. Narayana Health, Asia Heart foundation,
Escorts Heart Institute, Arvind Eye Care are few of
the leading telemedicine providers in the country.

5
Reimagining
Healthcare
Financing
The new Health Policy 2017 has a very strong focus
on reducing out-of-pocket expenditure in healthcare.
Towards this end, it proposes the following:
• Increase health expenditure by Government as
a percentage of GDP from the existing 1.15%
to 2.5 % by 2025
• Increase State sector health spending to > 8%
of their budget by 2020
• Decrease in proportion of households facing
catastrophic health expenditure from the
current levels by 25%, by 2025

On the basis of evidence that a bulk of OOP be formulated and evolved, in the form of long
expenditure (72% in rural and 68% in urban5) is term bonds having tenure of 30 years.
accounted for by spend on drugs and devices; the
policy proposes free drugs, free diagnostics and free • Social Health Insurance: The Government
emergency care services in all public hospitals. Some needs to explore mechanisms of leveraging
of this intention is already reflected in Jan Aushadhi the existing taxation pool, expand and
stores for provision of free medicines across several institutionalize the ambit of social health
states. insurance. The Government had announced
a comprehensive health insurance scheme
However, considering the limited funding, new which shall increase the coverage to INR 1
Government initiatives have not been taken up, Lakh and INR 1.3 L for senior citizens. However,
including the National Urban Health Mission, upgrading no budgetary provision has been made for the
medical education infrastructure significantly and same as yet.
additional focus on prevention and management of
Non-communicable diseases. Leveraging Sin Taxes: Another way could be to fund
healthcare by leveraging existing funds being collected
Moreover, considering that the goal to achieve 2.5% through taxation of cigarettes and alcohol, customs
of GDP spend first proposed to be achieved by / excise duties levied on medical goods, sales tax
2017 and has been pushed to 2025 implies that the generated through sale of healthcare goods etc. With
Government’s intent cannot be taken at face value. the exception of Gujarat, Nagaland, Mizoram and
Therefore, a slew of innovative financing measures are Manipur, where liquor is officially prohibited, alcohol
required to bridge the financing gap: revenue takes the second, third or fourth place in terms
of contributions to a State’s coffers. Liquor provides 20
• Long term Financing for Healthcare Sector: per cent of the share of the Government’s own revenue
Healthcare was included in the harmonized in most States. Even if half of this corpus is spent on
master list of Infrastructure sub sectors by the healthcare, it would lead to filling the gigantic gap in
Reserve Bank of India in 2012. This includes healthcare financing.
hospitals, diagnostics and paramedical
facilities. Also, IRDA has included healthcare
facilities under the social infrastructure in the
expanded definition of ‘infrastructure facility’.
Inspite of this, long term financing options are National Institute of Mental Health and
still not available for healthcare providers. Neurological Sciences study in Karnataka a
few years ago found that for every rupee the
As hospitals involve heavy investment and
long gestation, it depresses returns of
Government got off the bottle, it lost more
investors who invest in the whole company. than INR 2 in terms of healthcare expenses
So a separate class of instrument, aimed at and lost productivity.
long term investors in the debt market, has to
5
NSSO Report, ‘Health in India’, data from 71st round conducted
from January to June, 2014

Health Savings Products • The funds earmarked for HSA can only be allowed
use for qualified medical payments, or as a voluntary
Defining the Health Savings Account: HSA are contribution receiving deferred tax breaks if used for
individual savings accounts which can be used only medical purposes.
for spending on medical care of the individual or their
immediate family. Usually, this is clubbed with a high • In the event that the funds are not utilized for
deductible health insurance plan. medical purpose, the savings double up as a
retirement savings instrument and can be partially/
Structuring totally withdrawn after a threshold age (say 65).
• Deposits into these accounts can be structured
like a provident fund that is a defined contribution
receiving tax breaks.
FEATURE BENEFITS
Saving accounts that

can only be utilized for
medical care - Structure Savings akin
individual and family Provident Fund
Financing Health
Low Cost
Infrastructure
Eliminate Medical expenses

Savings can double as
related impoverishment
Retirement Corpus
Avoids adverse Reduce OOP Expenses

selection
Address Elderly Care

Addresses Insurance Financing
moral hazard

Benefits from Policy Perspective boosts sustainability of the system. Overall
• HSA presents an alternative risk pooling mechanism Government spending on public healthcare
for health related expense amounts to only 1.6% of annual GDP.
• Addresses the ‘sunk cost’ phenomenon of health
Bloomberg ranked Singapore’s healthcare
insurance as the unused savings component system as the most efficient in the world in
accumulates over the years 2014.
• Plan performance can be superlative in India which A key feature of the healthcare system in
has a predominant young population and could serve Singapore is that no service is provided free
as a healthcare security net for the population as the of cost, with patients required paying a part of
demographic ‘ageing’ starts over the next decades the cost themselves. The poor is shielded from
• HSA could be a great means to address elderly such expenditure through ‘Medishield’ which
care financing in the country due to the current is a low cost insurance scheme intended for
demographic advantage those whose savings are insufficient to meet
their medical expenses.
• HSA for the poor can be supported by the
Government and linked with the PM Jan Dhan This allows for accountability and
Yojana rationalized use of services instead of over
While IRDAI has allowed general and life insurers to
utilization. Each citizen accumulates funds
offer Health Savings Plans, the regulation needs to that are individually tracked, and such funds
evolve, to allow both Standalone Health Insurance can be pooled within and across an entire
providers and Banks to offer long term Saving linked extended family.
Health Insurance Product. The pre-defined component
of Premium could go under Investment category (like
unit linked Life Insurance product) or a PPF like savings REITs: The infrastructure REITs have seen good
avenue. Regulation needs flexibility to allow various acceptance in the capital markets in recent times.
combinations of savings, investment and insurance Regulation should evolve to include hospitals as social
by the financial institutions with adequate safeguards infrastructure to open avenues for greater financing of
placed by IRDAI and RBI. healthcare infrastructure, especially in metros and tier-I
cities where real estate cost is a major cost component
of hospitals.
Case Study: Singapore Medsave Program PSL Medical Loans: With the current low penetration
of health insurance, users have to resort to loans at
Singapore’s health system is different from
exorbitant rates of interest and unfavourable terms.
everywhere else, as individuals pay for their There is a strong need to curtail financial hardship
own healthcare and save enough to cover created by medical emergencies. Therefore, patient
care in the future, unlike other countries loans should be classified as priority sector lending by
with a “pay as you go” approach. This RBI, as a medium term measure till insurance coverage
catches up.

6 Healthcare
Reforms 2.0
The current Government has sought to bring about a
number of reforms to address the structural challenges
of deficit of human resources and making it more
affordable to the users. These reforms shall have long
term impact in the manner healthcare delivery landscape
is currently structured:
Medical Education: While the country faces acute
shortfall of doctors (India has 0.7 physicians per 1000
population compared to the WHO norm of 2.3), the
complex regulatory mechanism has not geared up to
tackle these challenges. Part of this was sought to be
addressed through the implementation of National
Eligibility Entrance Test (NEET). This was against the
~35 tests for admission to ~410 medical colleges in the
country.
The proposed bill aims to instill a new regulator National
Medical Commission to replace the discredited MCI and
be able to steer medical education as per the needs of
the country.

In addition, the following needs special attention: on healthcare. The National Pharmaceutical Pricing
Authority (NPPA) has reduced the price of some
• The proposal for creation of an All India Cadre – cancer and diabetes drugs by up to 86% and 42%
‘Indian Health Services’ to help improve the respectively. The scope of the NPPA has now been
efficiency and effectiveness of our healthcare extended from essential medicines to medical devices,
delivery system needs to be considered as there such as stents—used in heart surgery. There is now a
are shortfalls in all form of skilled manpower in the move towards prescription of generic drugs instead
healthcare sector. of branded generics by doctors to further reduce the
• There is definitely a need for opening new medical cost of medicine. It is proposed to change the Indian
colleges and nursing schools as well as increase in Medical Council Act to make it mandatory for doctors
number of seats in current colleges. Considering the to prescribe generic medicines.
acute shortfall in healthcare manpower, it presents However, unlike pharmaceuticals, medical devices
a big long term opportunity for the private sector. delivery system is very complex and healthcare
PPP based medical colleges at the district level providers rather than patients decide what their
discussed in previous chapters needs to be seriously objectives are and how they are going to deliver them.
considered for quantum improvement in medical Therefore, price control of medical devices is unlikely
education infrastructure in the country and making it to achieve the desired results; it may lead to different
viable for credible private sector entities to invest in ways and forms of cost passed on to patients while
medical education. There is a need for transparency also damaging the ecosystem for medical device
and accountability in norms and regulations guiding manufactures based in India or those hoping to set up
medical education in order to facilitate expansion of base in the country. Instead of the pricing argument,
education infrastructure. the need is to strengthen the medical technology
assessment authority and enable it make guidelines for
Enhancing Affordability: healthier ecosystem for medical devices.
Increasing Insurance Coverage: The Government of
“Timely revision of National List of Essential India had proposed to launch a new improved health
Medicines (NLEM) along with appropriate care Scheme viz. National Health Protection Scheme
price control mechanisms for generic drugs which envisaged a health cover of up to INR 1.0 Lakh
shall remain a key strategy for decreasing per family for poor and economically weak families.
costs of care for all those patients seeking For senior citizens of aged 60 years and above in this
care in the private sector...” National Health category there is an additional top-up package up to
INR 30,000. The overarching insurance scheme could
Policy 2017 provide a health cover of INR 1 lakh per family for 40-
70% of the population according to various estimates.
True to the intent, the Government has been The scheme was intended to lay a significant
continuously increasing the number of drugs under foundation for national framework for universal
price control in an apparent move to make medicines health coverage. It could also lead to proliferation of
affordable; this is guided by evidence that drugs secondary care hospitals in rural and remote areas as
consist of 70% of the out-of-pocket expenditure a large number of people gain reasonable purchasing

could be the inflection point for quantum improvement
in healthcare infrastructure beyond the top 10 cities of
the country.
Standardization: The significance of standardization
in healthcare cannot be easily grasped by a non-
practitioner. It is quintessential that the allied
ecosystem of treatment guidelines, patient records
and costing of health services is agreed upon by all
stakeholders and implemented across the country.
Accreditation too has to reach beyond the leading
facilities to tier II and tier III facilities for ensuring basic
quality of care in delivery everywhere in the eco-
system. While health is a ‘State’ subject, getting this
allied ecosystem right remains a critical responsibility of
the centre:
• National Electronic Health Records: The standards,
revised and notified by the ministry in January 2017
power to spend on healthcare. As per estimates, as post initial notification in 2013 aim to set uniform
many as 15000-20000 hospitals in India cater mostly norms for capturing, storage, retrieval, exchange,
to Rashtriya Swasthya Bima Yojana (RSBY). However, and analytics of healthcare data and information,
the scheme has not been approved by the Cabinet till including images and clinical codes. It also puts forth
date and no updates have been forthcoming from the guidelines for maintaining privacy and confidentiality
Government. of such information
Infrastructure: NITI Aayog has sought to infuse fresh • National Standard Treatment Guidelines: The
life into PPP in healthcare delivery through a new Government has notified standard treatment
model focused on district hospitals and new norms on guidelines for 21 specialties and 12 National disease
pricing of procedures. The proposal pushes for PPPs control programs. This is expected to enable uniform
focused on cancers, heart conditions and respiratory standard quality of care in secondary and tertiary
tract diseases in non-metros. It would see private care across the delivery system and constrain
healthcare service providers bid for a 30-year contract unnecessary care and diagnosis to the extent
to upgrade and operate these facilities within district possible.
hospitals. It also proposes to make state Governments
more accountable if they default on paying their private However, in the absence of an institutional framework,
partners through a penalty. adherence to STGs shall remain a challenge. Either
an existing quality control authority such as the
While a lot shall depend upon states to implement this NABH (National Accreditation Board for Hospitals
plan, the provisions for making available infrastructure and Healthcare Providers) be given additional powers
of district hospitals to private providers for 30 years to formulate the contours for adherence to STGs or
along with viability gap funding appears that we have a new mechanism be worked out with participation
got the design right for the PPP model. In fact, this

from both public and private sector clinicians for an
integrated control on quality of care through STGs, This exercise once completed and
patient outcomes and accountability of physicians. A
model of Accountability Care Organizations (ACOs) has
implemented could be a key enabler for
been successful in many countries and has helped in experimenting with a number of PPP models
optimising cost of delivery of healthcare. in healthcare delivery and address the
• National Costing Guidelines: The framework friction in reimbursement methodologies
for development of national costing guidelines related issues wherever there are instances
encompassing a standard template for costing
of ‘strategic’ purchasing by the Government
of various procedures and services, and a
comprehensive list of procedures has been from the private sector.
envisioned to embark on a costing exercise for both
public and private hospitals.

Medical Device
7 Industry
in India
The Indian medical device sector is valued at USD 5.5 Billion approx.
and considered to be a high potential sector within the healthcare
industry. The sector had been growing at 13% CAGR in the previous
years; however, with the support of the Government through its Make
in India campaign, it is now well placed to grow at 15% CAGR for at
least another 5 years. With the rise in prevalence of life-style diseases
and other NCDs, rise in preventive care, advancement in diagnostic
and treatment procedures, capability development in healthcare,
strengthening of infrastructure of public and private enterprises and
increase in healthcare coverage have added to the growth of the
industry and the opportunity will keep rising. The present market is not
very big and it is about 1.3 % of the global market.
Exhibit 8: Medical device industry poised to

grow at a CAGR of 15 percent
10
Market Size USD BN ~15% p.a
7
6
~13% p.a
4
3 3
2
2008 2010 2012 2014 2016 2018 2020

Source: BMI research, FICCI medical devices reports

India’s Domestic Manufacturing - An Indian companies are aspiring to climb up the value
Overview ladder and evolve from manufacturing low technology
based products and want to take the next steps. They
The Indian medical device industry is the 4th largest in are also keen to embrace stricter quality regimes such
Asia, but still the import dependency is almost 77-80 as CE marking or adhering to USFDA standards to
percent, and for certain high-end devices it is more than establish their competency and acceptability in the
90 percent. Unlike the pharmaceutical industry, the markets. A favourable policy environment backed with a
medical device industry has just started evolving from proper funding mechanism can go a long way.
a total import dependent phase and the existing Indian
medical devices industry is mostly manufacturing non Industry Segmentation
complex products such as consumables, disposables,
The Indian medical device industry is divided into
etc. which are easy to manufacture and does not
various categories based on its product manufacturing
involve sophisticated or complex technology. Domestic
capability such as equipments and instruments,
firms mostly participate in low priced, high volume
implants, consumables and disposables, etc. The USD
market segments. There are approximately around 800
5.5 Billion medical device industry is highly fragmented
Indian manufacturers in the country and most of them
out of which equipments and instruments followed by
are under small and medium enterprise category. Only
consumables and disposables have the highest share
2% of the medical devices companies in India have
(value-wise), refer below:
a turnover of INR 500 crore (USD 73 Million approx.),
while most of them (about 65 % of the companies) fall
under INR 10 crore (USD 1.5 Million approx.) category. Exhibit 10: Product-wise segmentation of
Indian medical device sector
Exhibit 9: Industry Profile Size (in ` Million) vs
Distribution (%) 13%
Equipments &
2% 7% instruments
5% 3%
Consumables &
0-100 MN disposables
53% Implants
100-500 MN 27%
Patient aids
25% 500-1000 MN
65% 1000-5000 MN
5000+ MN Source: SKP Analysis
a. Equipments and Instruments include surgical

Source: AIMED equipments which are always in high demand due to
advancements in surgery and surgical device designs,
availability of high skilled surgeons trained from abroad,

growing breed of corporate hospitals and advanced manufacturing. Some prominent patient aiding items
surgical facilities such as advanced robotics, minimally include fixation devices, artificial joints and other
invasive surgical techniques and imaging. Increase artificial body parts, which come under the sub -
in prevalence of complex diseases drives the need category of orthopaedics and prosthetics. Hearing
for quick diagnosis which has created a high demand aids, pacemakers, etc. are classified under portable
for diagnostic services and devices such as Cardiac aids category, while other patient aid devices include
imaging, CT scans, X-ray, Molecular Imaging, MRI and defibrillators, ventilators and other life support systems.
Ultrasound-imaging including hand - held devices, etc.
Strengthening Industry with Sound
b. Consumables and Disposables such as syringes,
catheters and needles form the major chunk exceeding
Policy and Road Map to Innovation
USD 1billion market share. Domestic players have FDI as a booster to spur growth: Government is
a large market share in this particular segment as pushing hard to develop the medical device sector
the Indian manufacturers are well poised to meet using its ‘Make in India’ initiative to leapfrog towards
the domestic requirements. The market is becoming a sustainable, accessible and patient safety-compliant
increasingly competitive due to low entry barriers industry. It has enabled 100 percent FDI in order to
(for MillionCs), increasing number of players and an promote world class manufacturing and enhance
expanding consumer base for medical consumables, competency of local manufacturers. Both for brown
disposable medical and electronic probe assemblies field and greenfield projects, FDI is allowed through
for minimally invasive applications, disposable EEG automatic routes to spur R&D, manufacturing, to
sensors/lead wires, disposable SpO2 sensors, panel increase efficiency and bring in innovation for a long
mount receptacles, etc. term growth perspective.
c. Implants have been highly import driven in the past Quality: The Government has also introduced Indian
years; however, few Indian companies have already Certification of Medical Devices (ICMED), a voluntary
started to make a foray in this segment. Globally, USA scheme launched in order to improve quality and
is the largest player and has highly sophisticated range acceptability of medical devices made in India. The
of implants in the market. India is a crucial market for Indian medical device innovation ecosystem is fast
them as some of the leading players have set up local evolving with academic research, venture capital firms,
innovation centres & manufacturing hubs. For e.g.: Government funding, and promising start-ups which are
DePuy Institute for Advanced Education & Research developing products specifically for the Indian market. It
Centre based in Chennai, Orchid Orthopaedics in is the transforming force across the industry to propel
Pune, Stryker, with an R&D centre in Gurgaon, growth, improve value, create sustainable business
etc. Indian companies have also started making a opportunities, and expand “Make in India” drive.
strategic approach with customized designs for Indian
population. Some key products with large market share Ecosystem to Thrive: Considering medical devices to
include dental fixtures, artificial joints, knee and hip be a critical area for boosting healthcare infrastructure
implants, etc. of the country and patient care at its core, the medical
device industry is a highly specialized area and has
d. Patient Aids is also another promising growth specific requirements to have a sustained growth. The
segment of the medical devices industry for sector relies heavily on ancillary industries such as
India. There is a significant potential for domestic design and engineering, electrical components, metals,

plastics and requires other specialized services such as by Government of Andhra Pradesh. Similarly, the
testing labs, sterilization, etc. A sporadic approach may Maharashtra Government is considering a 200 acre
not help the industry, while a cluster based approach park in Mihan, Nagpur, Maharashtra. Government of
has the advantage to provide a complete ecosystem Telangana already opened its 250-acre park dedicated
and prove to be economically viable proposition. to medical devices from June, 2017 onwards in the
outskirts of Sultanpur in Hyderabad with an ecosystem
Medical Device Cluster & Parks: The Government comprising innovation, prototyping, scaling up and
has announced that it would open three medical manufacturing opportunities.
devices parks, to be established in Vishakhapatnam,
Medical Device Manufacturing Clusters in India

Region City/ State Product segment
North Chandigarh, Faridabad, Medical Consumables
Ballabhgarh, Manesar
East Baruipur in South Surgical Equipment
Bengal
West Mumbai, Ahmedabad, Pharmaceutical Machineries
Vapi Industrial Corridor in Gujarat
South Irungattukottai, Chennai International Medical
Electronics Manufacturers
Diverse Bengaluru, Hyderabad, Pune Medical Electronics
Source: IBEF
Overcoming Hurdles in the Medical for exports. The draft policy had also suggested setting
up of an autonomous body, National Medical Device
Device Space
Authority and a single window clearance for the
With constant push from the centre to fast-track industry.
medical device policy will further bring more stability to
a. Single Window to handle approval processes from
the sector. There is an urgent need of a robust policy
multiple agencies could expedite medical device
to realize the full benefits of FDI policy relaxation.
business to a great extent. Approvals are required
The draft National Medical Device Policy, 2015, had
from diverse agencies for different medical devices.
proposed incentives for both new and existing medical
For e.g.: An X-Ray device needs approval from BIS,
devices firms. It had asked for interest subsidy to
Atomic Energy Regulatory Board (AERB) and additional
MSMEs, concessional power tariff, seed capital,
clearances are required from Ministry of Electronics
viability gap funding, tax benefits to the sector,
& IT for support instruments such as monitors and
minimum or zero duty on raw materials and incentives
scanners, etc. Additionally, if the device has some

re-used parts it will require approval of Ministry of Healthcare around the world is undergoing a massive
Environment, Forest & Climate Change. If the device transformation. As the reach of technological innovation
uses radio frequency then the Department of Telecom continues to grow across all sectors, advanced medical
needs to give clearance. A single window for approval technologies are today available, accessible and at a far
process or a bench with all the regulators would make a affordable rate.
lot of difference as medical devices operate in multiple
spaces. Information Technology is playing a key role in almost
all processes in healthcare space - right from patient
b. Re-visit on Regulatory Strategies for streamlining registration to data monitoring, from lab tests to self-
quality with harmonization of medical device rule with care devices. IT has enabled healthcare services to
international standards is essential. Implementation of be taken out of the confines of hospital walls and
medical device rules is crucial for raising the standard integrating them with user-friendly, accessible devices.
of the industry. Also, product segments which have the From medical translation tools to mobile applications
potential for exports should be facilitated by removing that help patients live healthier and better lives,
any export barriers. Free-sales certificates and export Information Technology is giving the healthcare industry
incentives for 5-10 years should also be explored. a much-needed push.
Since raw materials are crucial for the industry,
import duty structure are to be revised so as to have India’s Healthcare IT market, valued at USD 1 billion, is
reduced duty on raw materials which are hi-tech expected to grow 1.5 times by 20206. While the sector
devices not manufactured in India and high duty to be is plagued with challenges such as taking lack of access
levied on low-tech finished goods which can be easily ibility and affordablity of healthcare services for the
manufactured in India and are already available in good majority of the population, there is an imminent need
volumes. for out-of-box, technology-driven, innovative, scalable,
low-cost solutions. The encouraging aspect is that it is
c. Creation of Skilled Manpower and Institutions already happening with healthcare start-ups disrupting
with Focus on R&D is the need of the hour for the way healthcare is delivered.
boosting manufacturing capabilities, especially in the
medium to sophisticated range of devices category.
National Institute for Pharmaceutical Education and
Research (NIPER), Ahmedabad is collaborating with
leading medical devices manufacturers nationally
and internationally to develop skilled manpower for
the industry. It has proposed the Department of
Pharmaceuticals to develop itself as a testing centre
for the medical device industry. Also, initiatives
should be taken to develop institutions with active
collaborations between Government, industry and
academia to identify skill gaps and provide necessary
multidisciplinary training, considering the broader
horizons of the medical device sector.
5
IBEF (April 2016)

Technology Making
8 Healthcare Available and

Accessible to all
Technological advancements are making healthcare affordable, available, and accessible.
Let’s look at how IT adoption has changed the way healthcare service is delivered today:
Hospitals and medical professionals today are far better

equipped in carrying out and increasing the accuracy percentile
Diagnosis and of surgical procedures. Additionally, the use of advanced models
in surgeries, in clinical laboratories and in performing diagnostic
Surgeries
checks, much more accurate results can be obtained as
compared to the traditional manual methods
IT plays a key role in making hospitals and healthcare

professionals more patient centric. Software and hardware that
Patient supports the core medical processes, allows easy access to
Management information at the point of care, and standards, that make the
integration of different systems easier than ever.
Technology has enabled doctors to utilize stored information of

the patients, their medicines, diseases, etc., from anywhere in
a few minutes, which reduces the time and efforts significantly.
IT as an E.g. electronic prescription pads for doctors have the ability to
enabler for check a patient’s record for allergies and also show if a particular
doctors drug is available in the pharmacy. Doctors and patients can
easily access health records through EMR (electronic medical
records), tele-health services, mobile technologies, and
healthcare applications.

IT-enabled Innovations in Healthcare
• Digital and social connectivity: It has
Healthcare is consuming an increasing share of income prompted the emergence of digital chatter
in developed and developing nations alike. However, platforms where medical professionals
innovators have found ways to deliver care effectively
share knowledge and ask for help. There
at significantly lower cost while significantly improving
access and quality. Following are some of the most
are also communication technologies that
widely discussed digital technologies that are being help connect doctors around the world for
used to create healthcare solutions: both a second opinion and training.
• Wearables: Wearables in healthcare space
• M-health: M-health is probably one of the
initially, were devices that could track
largest sectors within digital healthcare.
diet and exercise outcomes. They are now
Mobile applications, especially those
being increasingly used to measure basic
connecting doctors to patients and
health parameters such as heart rate. For
enabling remote consultations, are a
instance, there is a wristwatch that acts
major segment within m-health. E.g. a
as a personal emergency response system
mobile application that offers online
and relays medical and GPS data to a
video consultation and ability to book
remote server.
diagnostic 90,000 doctors. (check with
LSIT on this data point)
While the aforementioned technologies have a
• Remote diagnosis: Low-cost portable relatively concrete foundation in India, some of the
innovations are being developed to technologies that are gaining wider acceptance in the
cater to the needs to reach the ‘have- Indian healthcare industry are discussed below:
nots’. These products help increase
access to healthcare for remote and
rural populations by providing point- • Big Data Analytics: Big data is fast
of- care diagnostics, teleconsultation and gaining prominence in the healthcare
e-prescription capabilities. Example: A landscape. Healthcare players, realizing
wireless health monitor that measures the value of combining consumer insights
blood pressure, oxygen saturation, pulse, and internal company data to inform
body temperature, blood sugar, blood and optimise their product offerings, are
cholesterol and total haemoglobin count accordingly increasing investments in the
with a mobile application on your smart necessary tools.
phone • Electronic Medical Records (EMR):
EMRs are beginning to be adopted by
3
IBEF (April 2016) healthcare providers. This digitisation has
4
IBEF (April 2016)

Start-ups Revolutionizing Healthcare in
paved the way for advanced IT systems,
India
such as health information systems and
cloud computing to increase remote and Advent of technology start-ups in the past half-a-
ubiquitous accessibility to patient data. decade, enabled by India’s strong IT backbone, has
created interesting dynamics in the healthcare sector
• 3-D Printing: Medical researchers are in India. Healthcare start-ups are bridging the gap
harnessing the potential of 3-D printing between healthcare service providers and end-users
technology to vastly improve patient care. through applications, social networks, state-of-the-art
technologies and devices. Ranging from drug delivery,
E.g., A Los Angeles based medical centre
to healthcare software, young innovative start-ups
is perfecting the use of 3-D printers to are slowly but steadily catching the imagination of
produce exact, multidimensional models the sector with differentiated product offerings and
of trouble spots inside patients. Surgeons sustainable business models.
can scrutinize and handle the models, then
simulate a variety of possible procedures
before ever going into the operating room.
• Augmented Reality and Virtual Reality
(AR & VR): AR and VR technologies have
been actively researched for over thirty
years across a number of different areas
(mainly surgical training and simulation).
VR is being used on patients for treating
anxiety and phobias, social cognition
training, rehabilitation and palliative
care, pain management and more. While
immersive VR offers therapeutic benefits
for patients, the technology has not quite
reached consumer-level. The two key
challenges being: AR and VR technology
specialists have limited knowledge and
expertise in healthcare and medical
professionals have limited knowledge and
expertise in the technology.

Areas being targeted by Health-Tech Start-Ups
Ecommerce Online platforms enabling purchase prescription medicine, over-the-counter drugs, personal care
products and medical devices. E.g. Netmeds, 1mg
Marketplaces and aggregators engaged in diagnostic testing. Includes services such as blood Diagnostic
sample, urine sample testing services, among others. E.g. Mapmygenome, eKincare Services
Healthcare Companies providing healthcare services through a third-party provider. It includes companies
Delivery offering telemedicine, home healthcare services and ambulance service. E.g. Lybrate, Portea
Start-ups providing an online platform to healthcare professionals and organizations for Enterprise
improving processes involved in preventive care and healthcare delivery. E.g. Practo, Qikwell
Include start-up marketplaces for discovery and booking of fitness centres, coaches and
Fitness membership pass for various gyms and fitness classes. These also include personal fitness
management mobile applications and wearable fitness tracker applications. E.g. GoOii,
HealthifyMe, CureFit
Online databases and communities dealing with finding and connecting with blood donors. Healthcare
E.g. Zoctr, Medinfi Discovery
Medical Companies engaged in making instrument or any other article to be used for prevention,
Devices screening, investigation, diagnosis, alleviation of medical disorders, etc. E.g. Perfient Healthcare,
Trivitron Healthcare, Forus Health

A number of start-ups are involved in providing online information on drugs, diseases and
Patient
symptoms, medical treatments and other healthcare related topics. These include companies
Education
like CureJoy, Modasta and CureInstant.
These start-ups provide digital solutions to help users prevent, self-diagnose, monitor and treat Personal
(Therapeutics) any medical condition to occur without involvement of any third party. E.g. Maya, Health
Touchkin, Diabeto and Inayo. Management
Preventive
These are start-ups that offer preventive healthcare solutions. E.g. AllizHealth
Healthcare
The companies in this segment provide multiple solutions for the healthcare industry such as
Suite
online consultation, health insurance and e-commerce. E.g. CallHealth, Innov4Sight
Medical
Tourism These companies offer listing, marketplace and concierge services for medical tourists. E.g.
Facilitator LyfBoat and PlanMyMedicalTrip
Healthcare Technology in India – Future to maintenance of medical equipment, there exists a

whole range of opportunities for PPP models to work.
Outlook
The future for health-tech is bright. This health tech
A successful technology-enabled healthcare
boom can play a significant role in revolutionizing the
ecosystem requires a participative ecosystem where
quality of healthcare in India and change Indian mindset
all concerned stakeholders - providers, universities/
towards health. Start-ups will be critical to provide
institutions, medical devices/ technology providers,
healthcare to underserved rural Indians, but there are
health insurance companies, Government and patients
significant funding barriers to overcome which include
play their respective roles and are able to function in
low returns and lack of glamour. Health-tech start-
synergy. From healthcare delivery, diagnostic services,

ups have not yet received a steady stream of funding Anything that makes people’s lives easier will definitely
to support their venture. National as well as state carve a space for itself; which is why people are open
Governments must encourage funding by setting up to embracing technology-based platforms supported
start-up hubs and a healthcare innovation fund. Further, that provide them convenience and seamlessness.
the private sector has the dual responsibility of being These technological innovations are helping people
a guide/mentor as well as the investor for growth and track their health, motivating users to adopt healthy
sustenance of innovative health-tech start-ups in India.” habits and connecting them to doctors in quick time,
among others. Nonetheless, this is just the beginning
as Health-tech in India has miles to go.

9 Conclusion
The private healthcare opportunity is very strongly driven by
demographics, increasing per capita income and limited presence
of the public sector as enumerated in Chapter 2 of the report.
Nonetheless there are challenges emanating out of the presence
of a for-profit sector in a social sector and the absence of adequate
regulation:
Risks to the Private Sector Healthcare Opportunity:
The corporate private sector healthcare delivery system sees itself at
the receiving end of all regulatory measures taken by the Government
towards improving affordability and access of healthcare.
• Healthcare delivery remains an unregulated sector and the
measures taken by the Government are reaction to observed
market aberrations.
• Medical inflation remains high which makes corporate healthcare
providers vulnerable to interventions in containing pricing and
increasing access. The cost of treatment rose at a double-digit pace
of growth, outpacing average inflation in both rural and urban India
over the past decade, according to the recently published results
of a cross-national survey on health conducted by the National
Sample Survey Office (NSSO) in the first half of 2014.
• Most of private healthcare providers are driven by investors
seeking high return, hence there is an apparent conflict between
returns maximization objectives and the social cause associated
with healthcare delivery
• The scope and scale of the private sector delivery in healthcare is
increasing rapidly as public funding of healthcare has not kept pace
with the demand of healthcare
• Inadequate sensitization of stakeholders on the increasing costs
of healthcare faced by the private sector including huge capital
expenditure, cost of land in metropolitan cities and high investment
in medical technology due to technology obsolesce

Way Forward
1. Most of the reforms initiatives driven by the intent of National Health Policy 2017 are works in progress and a lot shall
depend on the government being able to take all stakeholders along –State Governments, private providers of
various hues, charitable providers and various ideological congregations on healthcare reform.
2. Much of the intent in healthcare reform over the years has been constrained by ideological debates including public
vs. private delivery and payer vs. provider role of the government. There is no scope for divergence in the efforts
of public and private sector. This is more so because public expenditure in healthcare has remained in the range of
1.1-1.3% of GDP despite (one of the lowest in the world!) intent statements to increase it to 2.5% of GDP.
3. Pragmatic policy with the consumer at the core should be the best guide to healthcare reform, much required
to improve India’s healthcare indicators.
4. Policymakers must aim for convergence of commercial and social interest to make a large on-ground impact.
Structural moves in healthcare needs to be in sync with the reality that ~70% healthcare delivery is driven by the
private sector and scenarios need to be created which adequately address social as well as economic interests of
ecosystem players. A great example before us is the case of financial inclusion. Earlier inclusion and cheap credit
drives led through public sector banks have led to short term gains but negligible long term impact. However, a
radically different ecosystem through the JAM trinity and digital technologies has made commercial sense for the
industry to take access to finance to the bottom of the pyramid. Financial inclusion has been driving the business
models of scores of start-ups, MFIs, digital savvy banks and others.
5. Convergence of Government Efforts: This shall entail the following:

• Better integration of the efforts of Centre with the States
• Focus on linkages with other ministries which affect healthcare delivery or health of the population (e.g. Water,
Sanitation etc)
• Shifting more ancillary health care related responsibilities from different ministries to the Ministry of Health
and Family Welfare
6. Quality of care and consumables is of utmost significance as it relates to life and well being of citizens.
There are strong considerations on quality of drugs/medical devices, IP protection, patient care and the necessity to
preserve the research focus of the indigenous pharmaceutical industry which needs to be adequately integrated in
the healthcare policy. Efforts towards enhanced affordability should not be at the cost of dilution on patient care and
quality metrics.
To conclude, the reform push of the government has to necessarily build a case for non-state stakeholders to take
access to quality healthcare to people who don’t have access today. The incentives mechanism has to be fine tuned
to enable convergence of the social and commercial objectives. Once the efforts of public, private and civil society
are harmonized, we are certain to see quantum change in achievement of social targets as is being seen in financial
inclusion.

Abbreviations
ACOs - Accountable Care Organizations NABH - National Accrediaton Board for Hospitals
and Healthcare Providers
AERB - Atomic Energy Regulatory Board
NCDs - Non Communicable Diseases
ARPOB - High Average Revenue Per Occupied Bed
NEET - National Eligibility Entrance Test
AYUSH - Ayurveda, Yoga and Naturopathy, Unani,
Siddha and Homoeopathy NIPER - National Institute for Pharmaceutical
Education and Research
BOT - Build-Operate-Own/Transfer
NLEM - Timely revision of National List of Essential
BRICS - Brazil, Russia, India, China and South Africa Medicines
CAGR - Compound Annual Growth Rate NPCDCS - National Programme for Prevention and
CHC - Community Health Centers Control of Cancer, Diabetes, Cardiovascular
Diseases and Stroke
COPD - Chronic Obstructive Pulmonary Disease
NPPA - National Pharmaceutical Pricing Authority
CVD - Cardiovascular Diseases and Stroke
NRHM - National Rural Health Mission
DBFO - Design, Build, Finance and Operate
OOP - Out of Pocket
EMR - Electronic Medical Records
PE - Private Equity
FDI - Foreign Direct Investment
PHC - Primary Health Centres
HAS - Health Savings Account
PPP - Public Private Partnership
HDI - Human Development Index
REIT - Real Estate Investment Trust
ICMED - Indian Certification of Medical Devices
RSBY - Rashtriya Swasthya Bima Yojana
IPO - Initial Public Offering
SPV - Special Purpose Entity
IRDAI - Insurance Regulatory and Development
Authority UNDP - United Nations Development Programme
IRDA - Insurance Regulatory and Development USFDA - U S Food and Drug Administration
Authority VGF - Viability Gap Funding
MCI - Medical Council of India WHO - World Health Organisation
MVT - Medical Value Travel

NOTES


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Healthcare 2.

0: Exploring Synergies between Public and Private Sector 1

YEAR August, 2017

AUTHORS YES Global Institute

YES Global Institute

Healthcare 2.0: Exploring Synergies between Public and Private Sector 3

Healthcare 2.0: Exploring Synergies between Public and Private Sector 5

2. Growth Drivers and Enablers of Healthcare 12

3. National Health Policy 2017 and

4. Healthcare Infrastructure in India 22

5. Reimagining Healthcare Financing 28

6. Healthcare Reforms 2.0 34

7. Medical Device Industry in India 40

8. Technology Making Healthcare Available 46

Healthcare 2.0: Exploring Synergies between Public and Private Sector 7

8 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Hospital Beds per Physicians per Nurses per 1000

Source: World Bank

1.4 Russia 0.80

10 Healthcare 2.0: Exploring Synergies between Public and Private Sector

The healthcare sector is expected to advance at a

Exhibit 6: Healthcare Spending in India, 2015

Source: RNCOS, ‘Indian Hospital Services Market Outlook’; Grant

Healthcare 2.0: Exploring Synergies between Public and Private Sector 11

Major Non-Communicable Diseases in 2005 2015

COPD (Chronic Obstructive Pulmonary 17 22

12 Healthcare 2.0: Exploring Synergies between Public and Private Sector

14 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Healthcare 2.0: Exploring Synergies between Public and Private Sector 15

16 Healthcare 2.0: Exploring Synergies between Public and Private Sector

18 Healthcare 2.0: Exploring Synergies between Public and Private Sector

State Level SPV

Overall Managerial Corporate Setup: Joint Holding

Operating Integrated Health

Healthcare 2.0: Exploring Synergies between Public and Private Sector 19

20 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Despite stepped up Government spending, the healthcare sector

22 Healthcare 2.0: Exploring Synergies between Public and Private Sector

NITI Aayog, along with the health ministry

24 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Operations and Build-Operate-Own/ Design, Build, Finance

Lease Concessions Joint Venture (JV)

Public sector is Private sector is Joint ownership of the

Healthcare 2.0: Exploring Synergies between Public and Private Sector 25

26 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Healthcare 2.0: Exploring Synergies between Public and Private Sector 27

28 Healthcare 2.0: Exploring Synergies between Public and Private Sector

30 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Saving accounts that

Eliminate Medical expenses

Avoids adverse Reduce OOP Expenses

Address Elderly Care

Healthcare 2.0: Exploring Synergies between Public and Private Sector 31

32 Healthcare 2.0: Exploring Synergies between Public and Private Sector

34 Healthcare 2.0: Exploring Synergies between Public and Private Sector

36 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Healthcare 2.0: Exploring Synergies between Public and Private Sector 37

38 Healthcare 2.0: Exploring Synergies between Public and Private Sector

Exhibit 8: Medical device industry poised to

2008 2010 2012 2014 2016 2018 2020

40 Healthcare 2.0: Exploring Synergies between Public and Private Sector

5000+ MN Source: SKP Analysis

a. Equipments and Instruments include surgical