The market comprises healthcare organizations (hospitals, nursing homes, diagnostic centers, dental hospitals, clinics, ayurveda hospitals, etc. , persons (doctors, dentists, nurses, and other caregivers), and health insurance providers. Private companies play a greater role than the public sector in providing healthcare services as this sector is expected to be financially stronger and well managed. With the growth of the Indian middle class segment, shift toward private healthcare services to obtain more value and service is expected.
There is a growing need for improved healthcare infrastructure in tier II& III cities. There is better access now owing to development of new national/international airports like Visakhapatnam, Nagpur. Evolution: The healthcare industry has fluctuated in the last 30 years.
Government agencies were established to promote and embrace the facilities changes as they evolved into more business like organizations. Stages of Healthcare Revolution: There are four stages in which healthcare evolved around the world. The first stage, which occurred in 1950’s, was characterized by having the power in the hands of the providers with the greatest number of assets. The care was determined by the availability of hospital beds. The government was providing aid for hospital construction programs. Government of India laid down a stress on primary health care. Government initiative was not enough to meet the demand. Alternate sources of finance were critical for sustainability of the health sector.
In 1970s, the second stage began, the need was met, but it exceeded the demand. Therefore we saw the birth of “Competing” for market share. Empty beds equalled failure. Marketing the hospital was the new tool. The idea of having hospitals consolidating into corporate chains was the major revolution. Many administrators lost their autonomy and lacked accountability. In the 1980s with the introduction of the perspective payment system, the cost reimbursements by public and private sector employers, in some cases encouraged resource waste. In 1990’s, the health management organizations started talking about providing revenues vital to survival of the hospitals.
Government on its own would not be able to provide more facilities for health care. Government allowed the entry of private sector to reduce the gap between the supply and demand for health care. Post mid-70s, the State provided various incentives like concessional land, tax-breaks and duty exemptions for imports for setting up of private hospitals. The private pharmaceutical industry also received substantial State patronage for its growth through process patent laws, subsidised bulk drugs from public sector companies and protection from MNCs. In the third stage, everyone was reconstructing, consolidating and downsizing, eliminating unprofitable programs.
Focus on those diseases that are principally contributing to the disease burden – TB, Malaria and Blindness from the category of historical diseases and HIV/AIDS from the category of newly emerging diseases. There is a gradual convergence of health under a single field administration and emphasis on implementation of programme through local self-government institutions. Emergence of Corporate Hospitals in India: Until the 1980s most of the hospitals in India were either run by the government or by private charities and trusts. The concept of corporate hospitals has come into existence with the advent of Apollo Hospitals Enterprise Limited as a public company in the year 1979.
The “Corporatization” of hospitals gained momentum only during early 1990’s with the liberalization of the Indian economy. In 1991, there was a cut in budgetary allocation for healthcare by the central government which crippled the development of rural health infrastructure. However, this approach of the Government seems to have been favorable for the establishment of private hospitals in India. Further, in 1994, the Government created a list of private hospitals that could be used to avail specific services that were not available (or whose availability was delayed) in Government hospitals or healthcare facilities, as a supplement to the Central Government Health Scheme (CGHS).
Currently, many of the State Governments are also reimbursing the cost of services availed in selected private hospitals, under various schemes. This indicates that the Government would look at the private sector to fund the development of quality secondary and tertiary healthcare facilities. The liberalization of foreign investment policy in January 2000, allowing Foreign Direct Investment (FDI) through automatic route in hospitals in India and mobilization of capital through other forms like American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), up to 49 per cent, have stimulated the establishment of corporate hospitals. Some of the examples of the hospitals established through the FDI route include Apollo Gleneagles, Columbia Asia and Max Healthcare.
Opening up of the insurance market for private players in 2000 was a major initiative by the Government that will further drive the growth of corporate hospitals in the long run. Later in 2002, the Insurance Regulatory Development Authority (IRDA) allowed Third-Party Administrators, which made medical insurance more attractive with cashless hospitalization. De-tariffing of general insurance in 2007 that allowed creation of customized medical insurance products further accelerated the growth and enhanced the acceptance of medical insurance in India. Booming Hospital Services Market in India: The hospital services market represents one of the most lucrative segments of the Indian healthcare industry.
Various factors such as increasing prevalence of diseases, improving affordability and rising penetration of health insurance continue to fuel growth in the Indian hospital industry. With continuous increase in demand, the industry is expected to witness growth of around 8% in 2009 over the previous year. The Indian hospital service industry is projected to grow at a CAGR of more than 9% during 2010-2015. Currently, the market is dominated by unorganized investors, and this is likely to continue in near future as well. Besides, high private sector investments will contribute significantly to the development of hospital industry.
Nursing and medical care, however, are not the main functions of establishments providing residential care, as they are in nursing care facilities. Offices of physicians: About 36 percent of all healthcare establishments fall into this industry segment. Physicians and surgeons practice privately or in groups of practitioners who have the same or different specialties. Many physicians and surgeons prefer to join group practices because they afford backup coverage, reduce overhead expenses, and facilitate consultation with peers. Physicians and surgeons are increasingly working as salaried employees of group medical practices, clinics, or integrated health systems.
Home healthcare services: Skilled nursing or medical care is sometimes provided in the home, under a physician’s supervision. Home healthcare services are provided mainly to the elderly. The development of in-home medical technologies, substantial cost savings, and patients’ preference for care in the home have helped change this once-small segment of the industry into one of the fastest growing healthcare services. Offices of other health practitioners: This segment of the industry includes the offices of chiropractors, optometrists, podiatrists, occupational and physical therapists, psychologists, audiologists, speech-language pathologists, dietitians, and other health practitioners.
Demand for the services of this segment is related to the ability of patients to pay, either directly or through health insurance. Hospitals and nursing facilities may contract out for these services. This segment also includes the offices of practitioners of alternative medicine, such as acupuncturists, homeopaths, hypnotherapists, and naturopaths. Ambulatory healthcare services: This segment includes outpatient care center and medical and diagnostic laboratories. These establishments are diverse including kidney dialysis centers, outpatient mental health and substance abuse centers, blood and organ banks, and medical labs that analyze blood, do diagnostic imaging, and perform other clinical tests.
Environmental factors influencing the healthcare in India: Government regulations: Indian healthcare industry is at growing stage and is thereby not subjected to strict regulations by the government. There is a general liberalization of trade and investment owing to which most devices do not need import license. Further, no restrictions have been imposed on refurbished medical equipments. In addition, tariff rates applicable on refurbished medical equipments are same as new equipment, which ranges from 5 to 30 percent. Growing middle class: the Indian middle class, with its increasing purchasing power, is more willing than ever before to pay more for quality healthcare.
Healthcare Insurance: Health insurance has a way of increasing accessibility to quality healthcare delivery especially for private healthcare providers for whom high cost remains a barrier. In order to encourage foreign health insurers to enter the Indian market the government has recently proposed to raise the foreign direct investment (FDI) limit in insurance from 26% to 49% [31]. Increasing health insurance penetration and ensuring affordable premium rates are necessary to drive the health insurance market in India. Changing culture: The fading joint family system in India and other innumerable factors have given rise to west-inspired phenomena of old age homes and retirement towns.
Privatization and marketing: In India, privatization of healthcare is taking all forms from divesture (hospitals are being handed over on outright purchase and/or long term leases) to lease contracts (Built Operate and Transfer and Built Own Operate Transfer), to contracting out of services (laundry, diet, diagnostic services, pharmaceutical supplies, private consulting facilities and others), to introduction of user fees (user charges for various services in dispensaries and hospitals) and by plain default through neglect of public provision. This increased private control and marketisation of healthcare are not only going to make access to healthcare for the poor more difficult but also given the complete absence of any regulation of private healthcare and lack of ethical conduct of professionals. It is going to make healthcare like any other economic commodity. And the pharmaceutical industry is the main engine of such growth patterns.
Technological advancement: The healthcare arena including education, research, administration and patient care has become inundated with advances in information technology over the last decade. Clinical Information Systems have replaced paper and pencil charting. Technology has created innovative medical equipments and treatment methods. Globalization and Medical tourism: Medical tourism is an emerging concept. Initiative has been undertaken all over the world to consider medical tourism as a core product. International medical service at affordable price is being considered as the selling point of medical tourism business. Market Share Analysis Major Players:
Fortis Healthcare ¦ Has a chain of hospitals with an installed bed capacity of about 1,790 beds ¦ Operations across North India – Delhi, Noida, Mohali, Amritsar, Faridabad, Raipur and Srinagar ¦ Expansion plans through mergers and acquisitions ¦ Has a joint venture with Real Estate player DLF to set up hospitals across the country with an investment of about US$ 1. 5 billion ¦ Owns a pharmacy chain by the name of Fortis Health world and plans to open 250 outlets with an investment of US$ 195 million all over India ¦ Has announced the signing of a definitive agreement (the “pre-IPO”) for allotment of 670,000 equity shares to VASCO Inc. or an investment amount of US$ 2. 6 million.
The demand for healthcare services in India has grown from $4. 8 billion in 1991 to $26. 8 billion in 2001-2002, a compound annual growth rate of 16 percent. The healthcare industry accounted for 5. 2% of India’s GDP in 2002n and this figure could reach $47 billion or 6. 2% to 7. 5% of GDP by 2012. The common tools of marketing today range from the prominent ones of giving advertisements and advertorials in the newspapers to the subtle ones like free check-up camps, talks on various health topics and creating awareness through media, Says K S Vasuki, Manager – Corporate Relations, Narayana Hrudayalaya and Bangalore.
On the one hand, the Indian middle class, with its increasing purchasing power, is more willing than ever before to pay more for quality healthcare. On the other, the supply o healthcare services have grown steadily, as the private sector becomes more involved in owning and running hospitals. Increase Access: Building on medical staff development and recruitment, the question is how to create additional access points and intake mechanisms to capture patients needing healthcare services early on. Primary care capacity development is certainly one valid approach, as are urgent and emergency care initiatives and expansion of other “front door” services such as occupational health, corporate health, and direct contracts.
Hospitals have increasingly turned to expanding urgent and emergency care capabilities as a way to provide additional access. Unlike other mechanisms, expanding these services is completely within the control of the hospital or health system and not dependent on other parties. As specialty call coverage problems worsen, some providers are turning to less frequently used approaches such as strong occupational health and corporate health programs and, in some instances, direct contracting to provide new or additional access mechanisms. Broaden and Deepen Programs and Services: The growing popularity of centers of excellence is the most obvious indication that hospitals are increasingly focusing on broadening and deepening their programs and services.
Suffice it to say, for now, that providing additional or expanded specialty services or adding other important new features, such as upgraded technology, usually creates significant share growth opportunities. Dr R V Karanjekar, Fortis Heart Institute, Mohali, says, “A patient attending a free check-up camp or talk at the hospital, goes back with a nice and charitable image of the hospital. The next time he is sick, he thinks of coming to that hospital. Fortis holds check-up camps even in the remotest places so that people are constantly made aware of its facilities. ” Out-compete Other Organizations: Physician recruitment, medical staff development, and access strategies can generally be characterized as mechanisms to out-compete others in the market.
A select few healthcare organizations are taking their cues from non-healthcare businesses operating in highly competitive markets and moving competition onto a much higher level. These organizations realize that creating sustainable, important differences between themselves and the competition gives them a significant competitive advantage. Such healthcare organizations have studied carefully the practices of industry leaders such as Federal Express, Starbucks, Intel, Ritz-Carlton, and others. As a result, they are on a quest to fundamentally differentiate themselves from other seemingly similar organizations. Some are pursuing high quality differentiation strategies, others are focusing on service differentiation, and a few are trying cost differentiation.
These long-term efforts demand patience; only time will tell whether they have the same impact in health care as they have had in other fields. Don’t Rest on Your Laurels: Market share growth remains the most basic of approaches for any organization seeking growth opportunities. No healthcare organization today, no matter how competitively strong or rural or remote, can afford to rely on past successes, geographic isolation, community goodwill, or other aspects of yesterday’s competitive attributes. If your organization is not a formidable competitor at its home base, it is unlikely to be more successful further a field.
