Future trends in Healthcare Sector "A"

Growing population, increasing affordability, comparative cheaper treatment costs as opposed to the west and medical tourism thereof, increased health insurance penetration, increased patient awareness, out-of-the-box unconventional thinking by the healthcare players for better operations, government opening up its arms to PPP and even providing tax holidays will be the key factors to look out for which would drive the future of healthcare in India, according to Dr Akash S Rajpal, Head, Consultancy Services, HOSMAC India Pvt Ltd According to recent studies conducted, the customer's (patient) aspirations are fast changing. Customers are growing more aware of their health needs, demand quick response, less waiting times, and above all - demand nearness of the healthcare unit to them. Customers though now demand better quality care; they however now do not want to travel much as in earlier days. And if you notice, the billing and pricing though important, is not a very high priority now as insurance reach is getting stronger (to the tune of 40 per cent among patients visiting a urban hospital). If this is the window to the future of healthcare, then it leaves immense opportunity for existing hospitals across the country to revamp and re-organise in order to woo back their immediate local drainage population as the competition would heat up soon. The patients would have a lot to choose from, now being insured. As per various studies including a report by IDFC, and Mc Kinsey, Indian Healthcare industry will be worth $125 billion in the next five years. Public spending is likely to increase beyond 20 per cent, there is room for everyone in the organised private healthcare sector. The entities who have noted this advantage to name among the other few are Apollo and Fortis with its cumulative market cap of around $ five billion and may be considered as a reflection of the healthcare scenario of the present and future of Indian healthcare. India presently has a bed deficit of approximately 30 lakh beds as per the WHO recommendation of four beds per 1000 population. Considering even a 250 bedded hospital on an average, the country would need 12000 hospitals in the near future. As almost 80 per cent of this would be fulfilled by the private players, a huge rise in IPO's and premium commanding players in the arena would flutter bringing in interesting times for the healthcare industry. Recent spurt in Public Private Partnership(PPP) projects, and thrust on quality by the government sector and its demand (& mandate in some areas) on NABH and ISO, a lot of consultancy business is abuzz with the projects galore in the accreditation and QMS field. India to its credit already has one government hospital NABH accredited and many are in the pipeline. With CGHS making NABH mandatory for care and hospitalisation cost reimbursements, there is hectic activity seen in hundreds of hospitals waking up to the long due need for quality healthcare and applying for the coveted quality mark. Challenges High capital costs: Depending on the region and real estate costs, an average hospital requires capital infusion of Rs 40 lakhs to a crore per bed (& even more). Industry estimates suggest that any hospital with capital costs of more than 50 lakhs per bed has high gestation period and even may be unviable. Land and building together account for almost 40 per cent of the total project cost and affects the viability depending on the resulting per bed cost. Medical equipment: Contributing to almost 40 per cent costs in a tertiary setup, the medical equipment though cutting edge at the time of purchase poses the threat of inevitable obsolescence within five to seven years of setup. This problem is compounded by the fact the most of such equipment is imported and very few local reputed manufacturers exist. This will lead to apportioning to higher treatment costs and will further lead to lesser competitive edges and low utilisation rates resulting in an undesired operating margins. Human resources: As Dr Prathap Reddy puts it, "the biggest challenge for him and Apollo is filling the void of human resources". The fast-expanding domestic healthcare industry is the third largest employer, but is severely short of manpower, according to him. As per ministry of health, there is a shortage of approximately half a million doctors, a million nurses and the deficit needs to be filled in the next five years. Such shortage will lead to exponential salary hike demands, and further lead to high patient care costs. With organised sector being the preferred choice now, there will be a huge demand even for the skilled and quailed health administrators to run the show. Considering one skilled and quailed administrator is required for every 50 employees, there would be a requirement of almost 50000 such healthcare professionals in the near future. Highly regulated environment and unrealistic stringent norms and restriction of entry to the private entities in the field of medical education has led to further deficiencies in terms of number of skilled professionals being released for intake by various hospitals. Conventional models of business: Rarely an out-of-the-box idea of running a healthcare business is seen. Recent niche segments of single speciality centres (for eg. - focused on OBGY or other specialities (Cradle etc) )have been very few. Even in the public health sector, millions of square feet of space is left unutilised, expensive equipment ill-maintained and lack of skilled professionals adding to the -woe, still do not find adequate initiatives happening towards outsourcing or even PPP. Opportunities Population: Many would consider that the massive population of India would be a bane. But it has turned out to be an immense business opportunity across industries like telecom, broadcast and healthcare. The 1.17 billion population of 2009 is projected to reach 1.33 billion in the next 10 years. Of which almost 60 per cent of population is in the 15-64 year age group - which is the active earning population and will primarily drive the industry, especially the healthcare insurance industry which will make healthcare accessible over a period of time to majority of the population. Insurance: It is estimated that the penetration of health insurance in India is only 2 per cent of the population. However this figure is expected to rise to a penetration of almost 20 per cent in the next five years keeping in mind the high growth seen in disposable income of the Indian families. Though this figure is the country's average, the percentage of insured visiting urban private setups even now is in the range of 20- 60 per cent of the hospital admissions. With better government health schemes surfacing for the poor, excellent example being the Aryogyshree, National Rural Health Mission and kinds, the upkeep of the poor is also not left behind. Comparative low costs and Medical Tourism: As per industry studies, almost five million foreigners had availed treatment in Indian healthcare setups by 2008. With surgical cost almost one tenth in western worlds, the estimated 15 billion dollar medical tourism industry will only grow further. This has led to the creation of health cities and medical tourism hub. Now with immense support of the Indian tourism ministry and its dedicated medical arm, the medical tourism industry in India will grow leaps and bounds. Budgetary incentives and PPP: With various tax incentives thrown in by the finance ministry for the healthcare sector and various states realising to the fact that PPP is the best way to bring in quality healthcare at no further costs to them, a huge spurt of activity is seen in terms of new hospital projects launched and PPP initiatives concluded across the country. The future Breaking the conventional model of business: The coming years will see a great out-of-the-box thinking by the strategists in the field of healthcare, beginning with the way healthcare is delivered. To begin with, a rise in retail clinics, single speciality, secondary and tertiary care centres are seen coming to the fore including the recent examples of NOVA day care, BEAMS & Apollo clinics. Operations and management contracts are being handed over to outsourced partners and the recent example of FORTIS managing SL Raheja is the best I can cite. There are unheard smaller O&Ms run across the country now which will soon become very popular. The recent trends also show how the hospitals have become quality conscious.Reputed hospitals like Wadia and Masina in central and south Mumbai and others across the country have hired a reputed healthcare consultancy firm to do a quality gap analysis and help them streamline operations and management and suggest ways to bring about better sustainability.