India’s healthcare sector is growing in leaps and bounds. A report released by global investment banking firm Singhi Advisors, titled Health Care Report 2015 reveals the healthcare industry in Asia (specifically India, Japan and China), is projected to continue in an ascendant course. Shalini Gupta finds out more in an interview with Narayan Shetkar, Director, Singhi Advisors and Gopal Agrawal- Patner, Singhi Advisors.
How much is the current global healthcare market? By how much is it growing YoY? Where does India stand? What trends do you see?
Global healthcare industry market size was $ 8.5 trillion in 2010 and is projected to grow to $ 13.7 trillion by 2020 growing at CAGR of approximately five per cent. India is growing at a much faster rate of 15 per cent as compared to other emerging markets. This is because of a greater retail orientation in healthcare which will in turn lead to the evolution of primary healthcare system. Going forward, large corporates will invest in single specialty hospitals, given that technology will play a much larger role in day-to-day interactions in healthcare. Consumers will become more informed of care or cost options and will decide the healthcare spend themselves as the focus on preventive healthcare increases in the future; reducing the need for hospitalisation/tertiary care.
How much do hospitals, diagnostics and pharmacy contribute to healthcare globally? How is this figure for India?
Hospitals contribute 34 per cent of the revenue followed by diagnostics and pharmacy at 20 per cent each globally. Health IT is the fast growing segment. In India, hospitals contribute 68 per cent to the healthcare sector followed by pharma and medical equipment. Diagnostics (three per cent), pharmacy (two per cent), medical insurance (two per cent) and healthcare IT (0.2 per cent) are amongst others.
How much does the Indian middle class contribute to the growth of the sector? By how much has the spending power increased and how much would be ploughed in the sector by the middle class in the next five years?
The percentage of working population is increasing with 36 per cent expected to be in age group of 30 to 60 years by 2017. GDP per capita is expected to increase from $1389 in 2011 to $1875 in 2015. Thus representing increase in disposable income and hence representing higher healthcare expenditure.
Out of the total number of hospitals, how many are in tier II, tier III cities? How successful is this model and how would it be for the future? What does the future look like?
As per data from 2010, ~33 per cent of them are in metro and tier I cities and remaining are in tier II, tier III and rural areas. Healthcare provisions are currently skewed towards metro and tier I cities with rural households constituting 70 per cent of the population. Therefore, despite lower incomes, rural household accounts for 57 per cent of the consumption. In the future, middle tier and smaller cities are expected to emerge as attractive markets due to population numbers and middle class customers.
There is a growing need for improved healthcare infrastructure in tier II and III cities. Moreover, the cost of setting up hospitals per bed is almost 50 per cent lower for tier II cities compare to those in tier I cities. Technologies such as telemedicine (patients can consult doctors located at very distant places through electronic mediums without visiting them) and other internet businesses such as MeraDoctor, Practo, and Medical Second Opinion will help increasing the reach to tier II, III cities and rural areas
Are rural populace travelling to tertiary facilities or are getting the same services somewhere else? What trends do you see?
As stated rural household constitute of 70 per cent of the population, which results in 57 per cent of the consumption. Currently the rural population are utilising the facilities provided by hospitals in the region. But the trend is changing by having access to advanced healthcare facilities by making use of telemedicine provided by large players.
How many single specialty hospitals have come up in the past few years? What does the number stand at today?
Single specialty hospitals are growing rapidly over past few years. The reason being easy scalability due to lower land requirement, lower initial investment of 0.25 million per bed and EBITDA margin of 25-30 per cent with a payback period of upto three years. These are expected to increase in future due to large players establishing specialty hospitals for women and child care, oncology, cardiology, ophthalmology, etc Some examples include: Arvind Eye Care, Eye Q, Cloudnine, Surya Child Care, Axiss Dental, MyDentist, Meditrina, Hosmat Hospital, Vaatsalya, Glocal, Health Spring.
How many day care surgery units do we have, apart from the ones operated by hospitals? What is the reason for their existence?
Day care surgery comprises 40 per cent of the overall surgeries. As per 2010 market size was $ 330 million and it is expected to be $ 840 million by end of 2015 growing at CAGR of 20 percent.
In day care surgeries patient can be discharged on the same day and thus hospitals are freeing up capacity at tertiary hospitals. Also, day care surgery units require lower capex, thus making break-even period shorter.
What is the current status of telemedicine? Any particular trends lately?
Since 80 per cent of specialty healthcare facilities are connected in urban areas with 73 per cent of population residing in rural areas, telemedicine is addressing the specialty healthcare needs in rural areas. Major players like Narayana Hrudayalaya, Apollo Hospital, Asian Heart Foundation, Fortis healthcare and Arvind Eye Care are promoting telemedicine in tier II, tier III cities and rural areas
Home healthcare has only recently taken off in India. What is its share in the healthcare sector? How is this compared to India/Europe? Would this cater to any specific disease areas? By how much is it expected to increase?
India’s home healthcare is worth $2 billion and is growing at the rate of 20 percent annually. It is expected to grow at much faster pace because India will have approximately 200 million people above the age of 65 by 2018. Whereas, in Europe home healthcare is expected to be worth $57.2 billion by 2017. European home healthcare market has experienced rapid growth in past few years due to rising aging population and technology advancement to provide at home. Companies such as Portea, Homital, Healthcare at Home, and Indian Home Health Care are focussing on this segment. Also large hospitals like Apollo, Fortis and Manipal are tying up with home healthcare service providers
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