Indian Hospital Industry

The Indian Hospital Industry...on a healthy track...
The Indian healthcare industry is estimated to be valued at Rs2.8tn in size in FY11, growing at a 5-year CAGR of 13.1% p.a. CARE Research estimates healthcare industry has the potential to almost double to Rs5.0trn over the next five years, implying a growth rate of 12% p.a. This will be mainly driven by rise in per capita spending on healthcare, change in demographic profile, transition in disease profile, increase in health insurance penetration, and fast growing medical tourism market.

According to CARE Research estimates, hospital industry accounts for roughly 70% of total healthcare market. The hospital industry is classified into three segments – namely, primary, secondary and tertiary. The Indian hospital industry can be broadly categorized as 1) highly fragmented in nature due to large presence of unorganized players, 2) capital intensive with long gestation period, 3) positive supply demand fundamentals, 4) favorable government policies and 4) attractive business model for long term investors with project IRR of 15-17%.

Indian government targets to increase the share of public expenditure on health to at least 2.0%-2.5% of GDP by the end of 12th five year plan (FY13-17) from the current level of 1.26% of GDP, which is well below the emerging market average of 3.0%. However, CARE Research believes it would be difficult for the govt to achieve the target considering the worsening fiscal deficit scenario. Given limited room for significant increase in public spending and low faith in the public health system, private institutions will be the major beneficiary of the growing healthcare market.

Solo practice clinics and small nursing homes mostly run by entrepreneur doctors (with < 30 beds) forms more than 90% of private healthcare whereas large corporate hospitals (with 100 or more beds) account for the remaining. The large share of unorganized and unregulated players has impacted quality of healthcare services due to presence of inadequate infrastructure, which has resulted in gross geographical inequities. This in turn has forced people in rural and tier 2/3 cities to travel to metro cities to get the quality healthcare treatment. Going ahead, CARE Research believes organized players can target to increase their presence outside metro cities to meet growing demand of quality healthcare.

Hospital cash flow from operations are generally found to be negative in the first 2-3 years of operation due to low operating rate and commitment of high fixed costs by hiring doctors, paramedical staff and administrative team and incurring heavy advertisement expenditure. However, as hospital gains traction by providing quality service and start operating well above breakeven level, ROCE and ROE improves sharply due to benefit of high operating leverage. As a result of negative cash flow in the initial period of operation and high capital intensive nature of the business, the payback period of a hospital ranges from 8-12 years. On the whole, hospital generates 15-17% IRR over the life of the project.

Among the metro cities in India, CARE Research study indicates that Chennai ranks the highest with 4.2 beds per 1,000 population whereas Kolkata ranks the lowest with 2.5 beds. In comparison to global average, hospital beds supply in all the metro cities in India is in-line with the world average of 3 beds per 1,000 persons. Based on capacity expansion plans of large corporate hospital players, we note that Mumbai is expected to witness the highest supply of hospital beds during FY12-FY14 (4,632 beds), followed by Kolkata (3,835 beds), Delhi (1,904 beds) and Chennai (1,790 beds).

Demand supply gap of Sub-Centres (SCs) infrastructure & resources

Demand supply gap of Primary Health Centres (PHCs) infrastructure & resources

Demand supply gap of Community Health Centres (CHCs) infra & resources

Mumbai existing health infrastructure and key hospital expansion plans

Delhi existing health infrastructure and key hospital expansion plans

Kolkata existing health infrastructure and key hospital expansion plans

Chennai existing health infrastructure and key hospital expansion plans

Demand supply gap of doctors/physicians

Requirement of medical colleges

Demand supply gap of nurses

Sub-Centres (SCs)

Primary Health Centres (PHCs)

Community Health Centres (CHCs)

District Hospitals

Rise in public expenditure

Rise in private expenditure

Change in demographic profile

Changing disease profile

Medical/Health Insurance

Medical Tourism

Telemedicine

Communicable diseases (CDs)

Non-communicable diseases (NCDs)

  Cardiovascular diseases

  Diabetes

  Oncology

Capex analysis

Operating parameters analysis

Financial analysis

Investment policy

Fiscal policy

Registration & Regulation

No. of Sub-Centres (SCs) - 6th plan to 11th plan

No. of Primary Health Centres (PHCs) - 6th plan to 11th plan

No. of Community Health Centres (CHCs) - 6th plan to 11th plan

Shortage of rural infrastructure & resources in India - 2010

Current status of metro city health infrastructure

List of key hospital expansion plan in Chennai

List of key hospital expansion plan in Mumbai

List of key hospital expansion plan in Kolkata

List of key hospital expansion plan in Delhi

Doctor’s density per 10,000 populations trend - 2006 to 2011

State-wise concentration of medical colleges in India – 2011

Number of Medical Colleges and admissions in Allopathic, Dental and Ayush programs - FY05-FY10

Nurse density per 10,000 populations trend - 2006 to 2011

Illustrative framework of Indian Healthcare Service Delivery model

Features of primary, secondary and tertiary healthcare services

Service capabilities of primary, secondary and tertiary healthcare services

India health expenditure as a % of GDP in CY09vs vs emerging markets

India’s per capita disposable income – FY05-10

India’s demographic profile comparison with emerging markets and developed countries

Number of cardiac and diabetes cases in India (in millions)

India’s public and private spending on health – CY01 to CY09

Comparison of cost of few elective surgical procedures in India vs developed countries

Medical tourism products demand in India

Source market of medical tourism in India

India’s death burden by type of diseases - 2010

Trends of communicable diseases in India

Death due to occurrence of major communicable diseases – 2010

Death burden of major communicable diseases – 2010

Major communicable disease with high fatality rate – 2010

No. of cardiovascular cases in India – 2000 to 2015

No. of diabetes patients in India – 2000 to 2015

Major cause of cancers to males/females in India

Break-up of initial capital investment

Sensitivity of ROCE to real estate costs

Shelf life of major medical equipments

Illustrative framework of hospital player revenue segments

Key revenue drivers of hospital

Key cost drivers of hospital

Financial model of setting up a new 200-bed tertiary care hospital

Sensitivity analysis of key hospital variables

Comparison of health spending in India vs world – CY00 to CY09

Comparison of health infrastructure & resources in India vs world - CY09

Number of government hospitals and beds in India – CY00 to CY10

State-wise number of government hospitals and beds – CY10

Snapshot of urban healthcare infrastructure

List of key hospital expansion plan in Chennai

List of key hospital expansion plan in Mumbai

List of key hospital expansion plan in Kolkata

List of key hospital expansion plan in Delhi

Number of Medical Colleges in India – FY05 to FY10

State Analysis of MBBS Medical Colleges - FY10

Number of Admissions in Nursing/Para Medical Courses in India – FY05 to FY10

Estimated Birth Rate, Death Rate and Infant Mortality Rate – CY01 to CY09

State wise Birth Rate in India - 2009

State wise Death Rate in India – 2009

Life Expectancy at Birth in India – CY96 to CY06

State wise Life expectancy in India – 2006

State wise Infant Mortality Rate in India – 2009