Changing healthcare landscape

A case of Jaipur city in India

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Contents

A Overview of Indian Healthcare Market

B Jaipur - From Pink City to Medi-city?

C Implications for healthcare providers

2
 Healthcare delivery market accounts for fifty percent of the total Healthcare
sector in India

Size of healthcare market in India, $ billion, percent

100% = US $30 billion

15% • Indian healthcare industry, which comprises

of hospitals and allied sectors, is projected
to grow 23 per cent per annum to touch US
10% $ 77 billion by 2012.
50%
• The sector has registered a growth of 9.3
per cent between 2000-2009, comparable
to the growth rate of other emerging
25% economies such as China, Brazil and
Mexico.

Healthcare delivery Pharma

Diagnostic Insurance & Medical equipment

Source: Enam, 2007

3
 Healthcare market can be segmented into four major categories

Key segments of Healthcare market

Key feature Financing Major players

• Mainly at the grass root level

Primary • Minimal involvement of • Majority of it financed
private players in this through Govt. spending
segment

• Primarily includes nursing

homes and recovery rooms
• Majority of it financed
Secondary • Investment in such centres to through Govt. spending
reduce ALOS of tertiary care
centres.

• Higher equipment costs and

Tertiary - fixed staff costs result in • Major projects driven
Multi- higher gestation periods through large private
speciality • More margins and higher players
volumes

• Low gestation periods

Tertiary - Super • Can follow a strategy to • Major projects driven
initially start off as multi through large private
speciality speciality and move towards players
super speciality

Note: ALOS - Average Length of Stay

Source: Enam, Kanvic research

4
 Indian healthcare market is evolving to provide cure for complex diseases and
high quality of services

Type of healthcare providers

High

Health City
Quality of Services

Super speciality

Multi-speciality
hospitals
Community
hospitals

Local
nursing
homes
Low

Low Complexity of disease High

Source: ibef
5
 Favourable demographics and improving income levels are driving the growth
of healthcare market

Drivers of healthcare growth in India

Increasing
preference for
private
treatment

Availability of
quality healthcare

In India, private
healthcare accounts for
Improving nearly 80 % of the
country’s total healthcare
income levels
expenditure.

India has 0.5

million doctors, 0.9
Population growth million nurses and
Favourable about 1 million
and increased
demographics disposable incomes beds.
are expected to
result in better
healthcare
awareness and
higher expenditure
India’s growing
on healthcare
population is
augmenting the
growth of healthcare
delivery market

Source: Kanvic research

6
 Increasing healthcare spend and growth in inpatients will further drive the
growth

Share of average household consumption, Rs. Revenue from outpatients and inpatients, Rs.
‘000, % billion

100% = 60 82 140 248

4 7 9
3 13
1 5
11 2 6
3 9 2312
4 CAGR
2 17 10.9%
6
19
14
8 20
5 3 9
12 3 CAGR
11 11.6% 1268
6 12
3
56 5 10

5 637 1329
42
34
903
25
617

1995 2005E 2010F 2015F 2006 2011E 2016E

Food, beverages & tobacco Apparel

OPD IPD
Housing & Utilities Household product
Personal product Transportation
Communication Education
Healthcare

Note: Figures are rounded to the nearest integer and may not add up to 100. OPD- Outpatient, IPD- Inpatient

Source: MGI, Crisil, NSSO

7
Contents

A Overview of Indian Healthcare Market

B Jaipur - From Pink City to Medicity ?

C Implications for healthcare providers

8
 Jaipur’s healthcare market has evolved over the years

Evolution of healthcare market in Jaipur

SMS Medical college Soni hospital Institute based 100 bedded Tagore Narayana
is set up by the starts hospitals are set up hospital begins its Hrudayalaya, a leading
Government operations with after privatisation of operations Cardiac care hospital
20 beds medical education in in India, opens in
the state Jaipur

1971 2004 2007

1947 1986 2000s 2006 2010

First private hospital S K Soni Hospital Fortis Escorts, the first

Santokba Durlabhji begins operations with corporate hospital in
Memorial Hospital super specialities in Jaipur, opens its doors
(SDMH), run by a cardiology, cancer, to the public
trust, is inaugurated nephrology and
neurosurgery

Source: Kanvic research

9
 Healthcare market in Jaipur is growing based on sustainable growth drivers

Growth drivers of healthcare in Jaipur

1 Government initiatives
and policies to promote
healthcare

5 2
State capital and major Major players in
city in Rajasthan, the healthcare sector
eighth largest state in Healthcare expanding into Tier II
India by population growth drivers and Tier III cities in India
for Jaipur

3
4 Tourism driven economy Proximity to
creating a demand for Delhi NCR region
medical tourism

Note: NCR- National Capital Region

Source: Kanvic research

10
 Hospitals in Jaipur are going for quality accreditation

Jaipur Hospitals going for NABH accreditation

Hospital Status of Application

Fortis Hospital Got Accreditation

Apex Hospital In process

Monilek Hospital Documents received

In process
SDMH

Documents received
BMCHRC

Tagore Hospital In process

S.K. Soni Hospital In process

Note: NABH is a constituent board of Quality Council of India was set up in 2005 to establish and operate accreditation programme for healthcare
organizations in India. NABH has standards specific to the Indian healthcare setting, major aspects being the assurance of uniform access,
assessment, care of patients and protection of patient’s rights.
Source: NABH
11
 However, there are some hospitals where doctor to patient ratio is not
adequate

Distribution of doctors and patients for hospitals in Jaipur

110

82.5
Number of doctors

55

Coping zones
27.5

0
0 3750 7500 11250 15000

Number of patients

Note: The list of hospitals is not exhaustive

Source: Kanvic research

12
 New hospitals will increase supply of beds in the market

Proposed new hospitals in Jaipur

Proposed
Hospital Speciality No. of beds investment (Rs.
Crores)

Reliance Medicare Super Speciality 800 200

Bombay Hospital Multi Speciality 650 150

Dr. Rakesh Keedawat Hospital Multi Speciality 100 27

International Oncology cancer Hospital Super Speciality 100 54

Sea Rock Hospital - 200 50

Eternal Heart Hospital Super Speciality 150 60

Artemis Hospital Super Speciality NA NA

B M Birla Heart Research Centre - NA 300

Ojjus Medicare - 850 NA

Source: Press clippings, Kanvic research

13
 While the demand for healthcare services will still be more than supply in near
future, the market space may become ‘crowded’ for top end hospitals

Demand supply situation in Jaipur, number of beds

2,540

2,700

11,240

6,000

Existing Proposed Gap in Total

supply addition demand Demand
and supply for beds1

Note: 1
Demand for beds is based on WHO standard of 35 beds for a population of 10,000.

Source: Kanvic research

14
Contents

A Overview of Indian Healthcare Market

B Jaipur - From Pink City to Medi-city?

C Implications for healthcare providers

15
 Healthcare providers will need to look at five major factors in the changed
scenario

Key factors for healthcare providers

1 Healthcare economics will become

important

Hospitals will increasingly use

5
mass media to reach out to their New business models will 2
markets emerge

Key factors for

healthcare
providers

4 Quality of non-clinical services will

have considerable influence on Private Equity will help finance 3
patient satisfaction growth of hospitals

Source: Kanvic
16
1
With increasing competition, a clear focus and strategy will lead to favourable
economics for hospitals

Economics of a healthcare provider Rentals

• Location
• Facilities

Diagnostics
• Type of
investigation
Inpatient

Consumables

• Disease type
Consultancy • Doctor’s reputation
Revenue • Hospital brand

• Disease type
Consultancy • Doctor’s reputation
Outpatient
• Hospital brand

• Type of
Diagnostics investigation
EBIDTA
margin%

Consumables

• Doctor’s profile
Costs Personnel • Full time vs.
consultation
payment

SG&A

Note: EBIDTA- Earnings before Interest Depreciation Tax and Amortisation; SG&A - Sales, General and Administration

Source: Enam, Kanvic analysis

Diagnostics
17
1
Awareness of EBIDTA and cash break even will help hospitals in better
planning

Revenue and EBIDTA margin build up of Fortis Escorts, Jaipur, Rs. Mn, percent

191

Break even 174

167
155 21
20 20 19
141 17

102 106
90
83 0
73 -2
59 -6

-23

3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

EBIDTA margin Revenues

Source: Morgan Stanley, Company reports

18
2 New business models are emerging in healthcare delivery

Emerging business models in healthcare delivery

• Single speciality hospitals (SSHs) provide care in one major

speciality where they can offer end to end services. They are a
relatively new and rapidly growing segment in India.
• The margins in SSH are high as they are mostly surgery
driven. A SSH also needs less manpower, equipment, and
infrastructure.
1. Single Speciality
Hospital
• Maternity care is receiving a much-needed fillip with corporate
hospitals launching dedicated standalone birthing centres.
Although Apollo's Cradle and Fortis Healthcare's La Femme
may be the known names for maternity care, they are not the
only ones interested in cashing in on this emerging market.
• New boutique hospitals catering to mother and child care are
coming up in Goa and Southern India.

• Day care hospital model is attracting healthcare players in

India. In day-care hospitals, patients are not required to stay
overnight. They are provided healthcare services and
discharged the same day.
• Recently, Nova Medical Centers has launched day care hospital
2. Day Care Hospital chain based on similar models in the UK and USA. The
company plans to set up 25 such hospitals across the country
with an investment of Rs. 10 Crore per hospital.
• This model can bring down the cost of treatment for patients
as a result of reduced investment in building and land.

19
2
Hospitals are also combining hospitality and retail to generate new revenue
streams

Emerging business models in healthcare delivery

• Large hospital chains are now turning into 'hospotels' -- a

3. Hospotels
concept that combines the services of a hospital and a hotel.
Already, Indraprastha Apollo Hospital has roped in fast food
major Nathu's, Max Healthcare has a Cafe Coffee Day outlet.

• Clinical activities are not the only source of income. For

instance, the business of Cradle also come from retail stores
that offer services for kids (baby clothes and kids' toys, apart
Retail Store in
4. Hospital
from baby accessories, foods and hygiene products), for
mothers (maternity wear), visitors (cards, gifts, books,
magazines and confectionary), a well-stocked 24-hour
pharmacy and a café for visitors.

• Considering the huge investment needed for establishing the

necessary healthcare infrastructure in the country,
franchising is emerging as a viable option for hospitals to

5.
expand to newer geographic areas.
Franchisee Model
• Apollo Hospitals is one among the pioneers to have sought
franchisee model for its clinics. Apollo Hospitals unveiled
'Cradle,' a boutique hospital dedicated to woman healthcare
through franchisee route.

20
3 Healthcare sector has attracted the attention of Private Equity

PE investment in healthcare sector in India, $ Mn

• Private equity and Venture capital are

554 taking interest in Healthcare industry.
They are becoming increasingly
interested in regional hospitals. For
example, Jaipur based Soni Group of
Hospitals has attracted PE funding and
403
385 is planning to expand into different
367
regions.
290
• Two more hospitals in Jaipur-
Narayana Hrudayalaya and Eternal
Heart Hospital have attracted interest
of PE firms.
121
• On a national level, Fortis la Femme is
a JV with Sunrise Group while Spring
Healthcare has made an investment in
2005 2006 2007 2008 2009 2010 Oyster and Pearl Hospital.

Source: VCCedge, Kanvic research

21
4
Non clinical factors are contributing significantly in creating a hospital’s brand
image

Distribution of clinical and non-clinical

processes in a hospital
1 Reception
Reception services play an important
role in patient satisfaction. While not
as important as clinic services, they
can create a negative perception
even if the clinical services are
excellent.
35%

2 Care from doctors and nurses

65% Care from doctors and nurses is a

key factor in determining
satisfaction level of patient.

Clinical Non clinical 3 Infrastructure

Quality of Infrastructure is also a

major non clinical aspect in
assessing a hospital’s image.

Source: Kanvic research

22
5 Hospitals can use mass media for a number of functions

Key functions of mass media for hospitals

Communicate core value

Create distinct identity in

Reach out to larger markets patient’s mind

Use of Mass
Inform about products and
media
Educate customers services

Review existing services Launch a new hospital

23
5 The inclination to use mass media by hospitals has increased in recent years

Examples of mass media use by hospitals

Moolchand Hospital has been successfully advertising

Radio
their Emergency services on radio. Fortis has been
talking about the Maternity services at Fortis La Femme.

The use of print media is very common in hospital

sector in the form of brochures, leaflets, pamphlets for
Print disseminating information. Hospitals have been
increasingly using newspapers to communicate about
their services to the target population.

Wockhardt Hospitals, India's leading hospital chain

Out of launched India's first "Interactive Occupational Health
Home Screening Campaign" for employees across all industries
(OOH) in the country.

Technology based marketing includes increased contact

Internet with patients (former, existing and future) via email,
marketing newsletters and online forums.

24
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