The Institute of Management Consultants of India

Healthcare Challenges & Opportunities March 2006

Tilak Shankar Management Solutions

Healthcare Industry

Largest in the world with revenues over $3 trillion Indian healthcare industry is worth about Rs.100,000 crores, accounting 5% of GDP

Fastest growing industry in India with CAGR of about 30%

Employs about 80 lakh people directly and indirectly (IT industry employs only about 5 lakh)

Total Turnover Rs. 100,000 Cr. p.a.

Others 7% Labs & Diagnostics 12%

Hospitals & NH
Pharma & Supplies 20% 40%

Allopathic Doctors 22%

Two thirds of beds in Govt. & local authorities (Total 630,000 beds)

HEALTHCARE VARIOUS SEGMENTS

STATE/ GOI PHARMA MEDICAL SOFTWARE INDUSTRY MEDICAL/ HEALTH INSURANCE

MEDICAL TOURISM
HOSPITALS, NURSING HOMES, CLINICS, LABS

NUTRITION INDUSTRY MEDICAL EQUIPMENT

TPA

TRANSPORT

MEDICAL, NURSING, DENTAL, PHARMA COLLEGES

POPULATION GERAITRIC , PAEDIATRIC

Hospitals

Govt, Corporate, not-for-profit, others Not-for-profit Sec 80G, Sec. 35AC, Sec. 35(1)(2) of Income Tax Act, Section 25 Company Hospital Management
Marketing Strategic Planning Finance & Administration IT HR Materials Quality New Project planning & execution (India & Overseas)

Emerging trends In Healthcare

Secondary & Tertiary Care requires large investment, viable bed size, technological obsolescence Increasing corporatization Venture capital funding Slow, but emerging private health insurance/TPA Global alliances Listing of companies Felt need for professional management Sick hospitals Marketing of services M&A, Brand buying, Brand extension, franchising

Emerging Trends (Contd.)

Rating of hospitals (CRISIL, ICRA) Accreditation by TPAs Recertification of Doctors (in future) Spiraling hospitalization costs Epidemiology:
500,000 cancer patients added p.a. 40 million diabetics 60 million patients 70-80 million senior citizens Obesity, psychiatric patients.

IRDA, Private Insurance Tele-medicine

Emerging Trends (Contd.)

Quality standards:

Medical audit, accreditation & other standards Waste disposal (State Government) ISO JCAHO (USA Standard) NABL Blood Banking (GOI standards) Licensing & inspection (under consideration) Protocols for clinical trials Consumer protection act (private hospitals)

India - an Epidemiological Transition

Geriatric (7 8 % of population) Cataract, prostate, depression, cardio-vascular, arthritis, adult on-set diabetes Obesity, hypertension, stress, tooth decay, cardiovascular Allergic asthma, water-borne diseases (typhoid, jaundice, Leptospirosis) Cosmetic surgery, tooth correction, infertility treatment

Life style Environmental

Elective

Tertiary Hospital

Capital Intensive Long gestation period Doctor-oriented Frequent up-gradation of technology Service organization
Patient focus Employee focus

Location is key Also needs:

Teaching (Post-grad.) Research & publication Community/epidemiology work Global alliances

Medical Tourism

Emerging opportunity
Hospitals Travel agents Airlines Hotels

Rs. 1500 Cr. Revenue in 2004 McKinsey projection Rs. 5000 to 10,000 cr. In 5 years Major Corporates
Tatas Max Piramol Fortis Wockhardt Apollo gearing up

Coordinated program : Airline tie up, pick-up, visa etc. subsequently general tourismpp

Pharmaceutical Industry

Bulk drugs, drug intermediates, formulations, generic & branded, OTC Bio-technology, Bio-informatics, neutraceuticals Annual turnover Rs. 23,000 cr. (5-6% growth p.a.) Employment Direct - 50 lakhs Indirect - 25 lakhs 20,000 units (300 in the organized sector) No. of hospitals 16,000 Retail chemists 6 lakhs 4th in the world (volume) 12th in the world (value) Significant exports from India

Pharma - Key challenges

Many drugs off patent ($30-40 billion in the next 5 yrs) strategic marketing alliances Good manufacturing practices quality Industry research collaboration Ayurvedic drugs Bio-technology Only a small number of items under DPCO (40 or so) Spurious drugs in India Global R&D 18 year patent Upto 15 years from molecule to marketing

Medical equipment suppliers

Expensive capital expenditure

CT Scan, MRI, Cath lab, Laser, Theatre equipment, X-ray

Siemens, Philips, Hitachi etc. New hospitals, modernization (technological obsolescence) Each new bed total capex Rs. 20-100 lakhs Equipment sales, AMC, Spare parts, training Rs. 8,000 to 9,000 crores p.a.

Health Insurance & TPA

Public Sector
General insurance of India & 4 subsidiaries

Private Sector
Royal Sundaram, ICICI-Lombard, Bajaj Alliance etc. TPA - TTK, Heritage, Family Health Plan

Estimated premium income

About Rs. 5000 crores Potential 25,000 cr in 5-7 years

Present coverage only about 3-4% of the population Govt. likely to allow separate health insurance co (Rs. 25 crores equity)

Insurance by NGOs/Community based health insurance

Members pre-pay a set amount (flat rate) Voluntary health insurance (VHS-Chennai) Co-operative, SEWA, Foundations Narayana Hrudayala Universal Health plan of the four insurance companies About 50 million covered In addition: ESI CGHS (Retired employees) Mediclaim

IT Industry Healthcare Vertical

TCS, Wipro, Infosys, Cognizant, iSoft, Covansys etc. US, Europe, Australia clients, Govts. and private hospitals Global healthcare spend $5 trillion, US 1.7 trillion (15% of GDP) USA IT spend $25-30 billion Europe 800 billion Healthcare spend 12% to 15% of GDP (India about 5-6%) iSoft Healthcare 260 million, 4000 employees (950 application specialists) Cognizant : $600 million Of the above, 22% from healthcare and life sciences 3000 domain & technology experts

IT in Healthcare

Medical
Picture Archival & Communication System (PACS) DICOM (Digital Imaging & Communications in Medicine) Telemedicine Electronic Medical Records Clinical Decision Support Systems HL7 protocol Epidemic prevention software

Non-medical
Integrated hospital information system Web-enabled Appointment Scheduling Web-enabled applications for relatives to obtain conditions of the critical patients Multi-media applications for patient education Medical equipment management software Web-enabled CRM applications

IT (Healthcare) Projects

Mainframe, client-server based, web-based

End to end product linking with provider, payer, patient HIPAA compliance
Data warehousing and decision support systems Electronic Medical Records

Healthcare CRM
Maintenance of systems

BPO

Areas:
Medical Transcription Claims processing Billing by Doctors (on insurance companies) Clinical documentation Clinical trials English language Cost arbitrage Time difference High quality (e.g. >99.5%) Multi-disciplinary teams

Advantages of Indian Companies:

Clinical Research Organization (CRO)

Clinical Trials Revenue Rs. 300-400 crores CII Projection : Rs. Cr. 2007 800 2010 4000 Large population Medical, Lab manpower

Healthcare Consulting Major areas: Hospital feasibility studies Funding of new projects Efficiency improvement Market survey & marketing of services Organization review Strategic planning Insurance products IT ERP, EMR, system integration

Healthcare Consulting Clients: GOI, State Governments. UNICEF, World Bank, ADB, DANIDA Corporate & not-for-profit hospitals Insurance Company Strategic investors IT Companies

Challenges Ahead

Structure and financing of healthcare is changing rapidly Future managers in healthcare sector to be prepared to deal with
evolving integrated healthcare delivery systems technological innovations an increasingly complex regulatory environment restructuring of work increased focus on preventive care improving efficiency in healthcare facilities and the quality of the healthcare provided managing finances including modernization, expansion plans and brand extensions optimizing efficiency of a variety of interrelated services (e.g. those ranging from inpatient care to outpatient follow-up care) managing the growing aspirations of doctors (compensation, revenue sharing, high-end equipment, specialized courses etc.) High turnover of para medical staff including nurses Social Marketing

To sum up

Wide ranging career opportunities in India and elsewhere Domain expertise healthcare management essential Growing sector Job satisfaction Socially relevant jobs