The Institute of Management Consultants of India
Healthcare Challenges & Opportunities
March 2006
Tilak Shankar
Management Solutions

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Largest in the world with revenues over $3 trillion
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Indian healthcare industry is worth about Rs.100,000 crores, accounting 5% of GDP
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Fastest growing industry in India with CAGR of about
30%
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Employs about 80 lakh people directly and indirectly –
(IT industry employs only about 5 lakh)

Labs &
Diagnostics
12%
Others
7%
Pharma & Supplies
20%
Hospitals & NH
40%
Allopathic Doctors
22%
Two thirds of beds in Govt. & local authorities
(Total 630,000 beds)

HEALTHCARE – VARIOUS SEGMENTS
STATE/ GOI
PHARMA
MEDICAL
TOURISM
NUTRITION
INDUSTRY
MEDICAL
EQUIPMENT
HOSPITALS,
NURSING
HOMES,
CLINICS, LABS
MEDICAL
SOFTWARE
INDUSTRY
MEDICAL/
HEALTH
INSURANCE
TPA
TRANSPORT
MEDICAL,
NURSING,
DENTAL, PHARMA
COLLEGES
POPULATION
GERAITRIC ,
PAEDIATRIC

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

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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

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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

Quality standards:
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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
Life style
Environmental
Elective
Obesity, hypertension, stress, tooth decay, cardiovascular
Allergic asthma, water-borne diseases (typhoid, jaundice,
Leptospirosis)
Cosmetic surgery, tooth correction, infertility treatment

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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

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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

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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
4 th in the world (volume)
12 th in the world (value)
Significant exports from India

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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

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Expensive capital expenditure
• CT Scan, MRI, Cath lab, Laser, Theatre equipment,
X-ray
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Siemens, Philips, Hitachi etc.
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New hospitals, modernization (technological obsolescence)
Each new bed – total capex Rs. 20-100 lakhs
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Equipment sales, AMC, Spare parts, training
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Rs. 8,000 to 9,000 crores p.a.

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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
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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
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TCS, Wipro, Infosys, Cognizant, iSoft, Covansys etc.
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US, Europe, Australia clients, Govts. and private hospitals
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Global healthcare spend $5 trillion, US 1.7 trillion (15% of GDP)
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USA – IT spend $25-30 billion
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Europe 800 billion
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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
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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
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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
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Mainframe, client-server based, web-based
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End to end product linking with provider, payer, patient
HIPAA compliance
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Data warehousing and decision support systems
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Electronic Medical Records
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Healthcare CRM
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Maintenance of systems

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

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

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

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

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Structure and financing of healthcare is changing rapidly
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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’

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