Parthenon_Healthcare Seminar_New Horizons in Indian Healthcare_April 22 2010
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Transcript of Parthenon_Healthcare Seminar_New Horizons in Indian Healthcare_April 22 2010
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THE PARTHENON GROUPBoston London Mumbai San Francisco
New Horizons in
Indian Healthcare
Trends in healthcare sector investment
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THE PARTHENON GROUP
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Parthenon Global Healthcare Practice
Worldwide healthcare trends and investment implications
Indias healthcare market
The Indian urban healthcare consumer
New business models and investment opportunities
Agenda
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THE PARTHENON GROUP
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The Parthenon Group
Global Coverage
= On The Ground Projects Completed
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THE PARTHENON GROUP
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Global Healthcare Practice
Deep Understanding of Healthcare Value Chain
Parthenons Global Healthcare Practice: Built up from over 10 years of project experience
Covering all major sectors of health care
Advising on corporate and business unit strategies; policy and systems design; performance improvement; mergers andacquisitions
Laboratory
equipment
Informatics
Medical publishingand education
Revenue cycle
management
Temporary staffing
Hospitals
Primary care
Specialist treatment
centers
Diagnostics and
imaging
Home health care
Cosmetic surgery
Dentistry
Managed care
Other health
insurance
Pharmacy benefitmanagers
Stop loss
Discount cards
Healthcare funding
Health policy and
strategy
Leveragedprocurement
Public health
Suppliers Life Sciences Providers Payers Government
Pharmaceuticals
Drug distribution
Nutritional
supplements
Outsourced clinical
research
Medical devices
Surgical implants
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THE PARTHENON GROUP
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Parthenon Global Healthcare Practice
Worldwide healthcare trends and investment implications
Indias healthcare market
The Indian urban healthcare consumer
New business models and investment opportunities
Agenda
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THE PARTHENON GROUP
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Healthcare expenditure threatens to reach
unsustainable levels in many developed countries
Healthcare Expenditure vs. GDP per capita, 2006
5%
10%
15%
Source: WHO, OECD, IMF
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THE PARTHENON GROUP
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Current Model
Performance
Activity
Treatment
Inpatient
Capital
Specialty Focused
Physician
Policy trends are changing the healthcare
landscape to try to bend the cost curve
Sustainable Model
Value
Outcomes
Prevention
Outpatient
Information
Patient Pathway
Basic Health Professionals
Current Model Sustainable Model
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THE PARTHENON GROUP
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This is driving a shift in investment patterns and
opportunities
Divest Hold Invest
Retail medicine / pharmacies
Clinical labs
Generic pharma
Biotech
Outsourced pharma services
Contract research
Contract manufacture
Single speciality hospitals
Medical Tourism
Mental Health
Homecare
Care extenders (location,
methods, protocols)
TeleHealth
Wellness and prevention
Obesity
Smoking cessation
Healthcare IT
Decision support
Revenue cycle management
Outsourced Provider Services
General and multispecialty
hospitals
Long term residential care
Durable medical equipment and
devices
Branded pharma
Diagnostic imaging
Note: The segments in bold are of particular interest to the Indian market
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THE PARTHENON GROUP
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Parthenon Global Healthcare Practice
Worldwide healthcare trends and investment implications
Indias healthcare market
The Indian urban healthcare consumer
New business models and investment opportunities
Agenda
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Indias healthcare spending is growing well ahead
of GDP
Rs.0B
Rs.1,000B
Rs.2,000B
Rs.3,000B
2000
Rs.893B
2001
Rs.1,027B
2002
Rs.1,155B
2003
Rs.1,281B
2004
Rs.1,486B
2005
Rs.1,729B
2006
Rs.1,943B
2007
Rs.2,231B
2008
Public
Private
Rs.2,574B
4.3% 4.6% 4.8% 4.8% 4.9% 5.0% 4.9% 4.9% 4.9%
T
otalExpenditure
on
Healthcare
(Rs
.B)
15%
13%
00-0814%
CAGR
% ofGDP
Healthcare Spending in India, 2000-2008
Source: World Health Report 2009, Primary Research
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Provider
Rs.617B Rs.1,732B Rs.168BRs.57B
Private
Payer
Out of pocket payment and private provision
dominate Indias healthcare system
0%
20%
40%
60%
80%
100%
Primary
Public
Private
Rs.203B
Secondary & Tertiary
Public
Private
Rs.1,597B
Pharma & Biotech
Private
Rs.623B
Private
Private
Private
CRO
Rs.24B
MedicalEquipment&
Devices
Rs.78B
Other
Rs.49B
Public Out of Pocket
NGO & Social
Security Contrib.
PMI&
Other
Pvt.Sources
Source: World Health Report 2009, IBEF Healthcare Report 2009, Analyst Reports, Parthenon Analysis, Primary Research
Total = Rs.2,574B
Total = Rs.2,574B
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India Private Healthcare Service Provision by Segment, 2009
0%
20%
40%
60%
80%
100%
PMI MarketShare
OtherIFFCO TOKIO
Cholamandalam
Reliance
Bajaj Allianz
Oriental
StarHealth
National
UnitedIndia
ICICI
Lombard
New India
Rs.66B
PMI 2009
The private market is highly fragmented and
focused on acute care and pharmaceuticals
0%
20%
40%
60%
80%
100%
Other
Rs.1,003B
Other
Piramal Healthcare
GSK
Cipla
Rs.556B
PrimaryCare
Rs.27B
Secondary & Tertiary Care
Manipal
Wockhardt
Apollo
Fortis
Pharma & Biotech
Zydus Cadila healthcare
Aurobindo pharma
Dr. ReddySun Pharma
Ranbaxy
MedicalDevices &
Equipment
Rs.70B
CRO
Vimta
Advinus
SaiAdvantium
GVK
Piramal
Veeda
Jubilant
Biocon
SiroClinpharm
Rs.22B
Other
Rs.43B
Total = Rs.1,720B
Source: Assocham Healthcare Report 2009, Analyst Reports, Health Insurance India, IBEF Healthcare Report 2009, Primary Research
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0
10
20
30
40
50
WHO
recommended
All-India
10
Tier I LowIncome
7
Tier I LowerMiddle
Income
15
Tier I UpperMiddle
Income
18
Tier I HighIncome
45
HospitalBeds
Per10K
Population
Note: Tier I is the average of Mumbai, New Delhi, and BangaloreSource: WHO, Primary Research
Hospital Beds per 10,000 Members of The Population
Vis-a-Vis WHO Benchmarks, All-India and Tier I Cities
Acute care provision is highly concentrated at the
high income end of Tier I cities
Price Point Single Room - Rs 4K
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0.0X
0.5X
1.0X
1.5X
2.0X
High Income Low Income
India - Urban
UK
Healthcare expenditure in India has many of the
characteristics of a luxury good
Healthcare Expenditure byIncome Segment Indexed, Top Income Segment =1
Income Level
Source: Fiscal Studies, Indicus Analytics, National Bureau of Statistics of the Peoples Republic of China, ONS
H
ealthcare
ExpenditureIn
dex
Health Expenditure
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THE PARTHENON GROUP
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Parthenon Global Healthcare Practice
Worldwide healthcare trends and investment implications
Indias healthcare market
The Indian urban healthcare consumer
New business models and investment opportunities
Agenda
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THE PARTHENON GROUP
16Note: *48 districts out of 135 districts in Tier I, II or II I are sampledSource: Primary Research, Parthenon Analysis, Indicus Analytics
0%
20%
40%
60%
80%
100%
Tier I
300-500K
1000K
500-1000K
13M
Tier II
300-500K
1000K
9M
Tier III
300-500K
1000K
500-1000K
6M
PercentofHouseholds
500-1000K
Tier I, Tier II & Tier III City Household Distribution
By Annual Household Income Segments, 2008
In urban India, the highest income segment
accounts for les than 5% of households...
Total = 28M *
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17Note: Income is annual disposable household incomeSource: Primary Research and Analysis, Indicus Analytics
Tier I, Tier II & Tier III City Healthcare Spending Distribution
By Annual Household Income Segments, 2008
...but more than 40% of all healthcare spending
0%
20%
40%
60%
80%
100%
Tier 1
300-500K
1000K
500-1000K
Tier 2
300-500K
1000K
500-1000K
Tier 3
300-500K
1000K
500-1000K
Rs.4.5K
Rs.6.4K
Rs.18K
Rs.69K
Average SpendPer Household
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0%
20%
40%
60%
80%
100%
Tier 1
>1000K
500-1000K
300-500K
1000K
500-1000K
300-500K
1000K
500-1000K
300-500K
20%
Populat ion
Growth
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Percent of Respondents Who Spent Money
on Different Healthcare Categories
0%
20%
40%
60%
80%
Blood/UrineTest
Pe
rcentSpentMoney
74%
X-ray/Ultrasound
62%
SpecialistVisit
51%
Antibiotics
51%
AyurdevicMedicine
48%
Vaccination
44%
SmallSurgical
Procedure
25%
HospitalStay for
Infection
22%
GP Visit
21%
PlannedLarge
SurgicalProcedure
14%
EmergencyLarge
SurgicalProcedure
10%
Q: Have you or your family spent money in the last three years on the following healthcare categories?Source: Parthenon Healthcare Survey (n=105)
Urban consumers purchase a wide range of
healthcare services
PercentofRespondents
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Dissatisfaction levels with hospital care are high,
particularly with smaller and government hospitals
Q: On a scale of 1-7 where 1 = Not at all satisfied and 7 = Extremely satisfied; how satisfied were you with your hospital stay?Source: Percent lower than 4, Parthenon Healthcare Survey (n=105)
0%
10%
20%
30%
40%
50%
GovernmentHospital
Percent
Unsatisfied
50%
PrivateSmall Hospital
(200 Beds)
24%
Corporate/TrustHospital
21%
PercentofRespondents
Percent Dissatisfied with Hospital Experience by
Hospital Type
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Hygiene and staff quality dominate concerns at the
low end; pricing and admin at the high end
Q: What were the three most important reasons for not being satisfied with your hospital stay?Source: Parthenon Healthcare Survey (n=105)
0%
20%
40%
60%
80%
100%
Government
Hospital
Waiting Times
Hygiene in the
Hospital
Quality of theNursing Staff
n=6
Private Small
Hospital
(200 beds)
Other
Quality of theFood
Price of the
Room per
Night
Billing and
Admin. Process
Waiting Times
Hygiene in the Hospital
Quality of thePhysician
n=20
Corporate/
Trust Hospital
Quality of the
Food
Price of theRoom per
Night
Billing and
Admin. Process
Waiting Times
Hygiene in the
Hospital
n=10
Most Important Reasons for Not Being Satisfied by Hospital Type
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HighIncome
MiddleIncome
LowerIncome
Source: Parthenon Analysis
Tier II Tier IIITier 1
Opportunity
Attractiveness High Low
Tier 2 and middle income markets offer attractive
opportunities alongside the traditional high end
focus
Expanding from High Income Tier 1 provision and to include Middle Income acrossother major urban areas, provides ~2.2X market opportunity
also allowing a move away from highly competitive Tier 1 dynamics
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Parthenon Global Healthcare Practice
Worldwide healthcare trends and investment implications
Indias healthcare market
The Indian urban healthcare consumer
New business models and investment opportunities
Agenda
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THE PARTHENON GROUP
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Several business models offer attractive growth
and lower capital intensity
Business Model Investment Thesis India Examples
Specialist hospitals Lower capital and operating costs than general
hospital models
Superior outcomes due to experience curve
effects
Patient acquisition can be an issue in Indian
context
Day surgeries Lower capital and operating costs than general
hospital models
Superior outcomes due to patient selection and
lower risk for hospital acquired infection
Financial model can be designed to create
superior incentives for all stakeholders Hub & Spoke Potential for better leverage of CapEx and star
physicians by effectively extending the
catchment area of the hospital
Satellite hospitals have a lower CapEx structure;
In addition referrals pattern to hub is locked in
http://www.novamedicalcenters.com/ -
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Business Model Investment Thesis India Examples
Diagnostic clinics Potential for consolidation for highly fragmented
market with top 5 organized chains constituting
between 7-10% of the market
Chains are growing at 3x the pace of the rest of
market through acquisitive expansion
Patient acquisition can be an issue in Indian
context
Primary care
networks
Broader offering and potential for cross-selling
through integration of primary care, diagnostic,
pharmacy and wellness services
Potential for franchise model resulting in a lower
capital base and leveraging existing referral
networks
Global CROservices
Low cost trial capacity
Cross-country capacity
Access to patients and speed of recruitment
High quality physicians and administrators
Strong regulatory capabilities
Several business models offer attractive growth
and lower capital intensity
http://www.theapolloclinic.com/home.asphttp://www.veedacr.com/index.asp -
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THE PARTHENON GROUP
India healthcare is an attractive growth market
It shares many of the characteristics of a luxury good, driven strongly by increases
in disposable income
While its traditional focus has been on the high income segment in the metro areas,
competition there is becoming more fierce
In Tier II / III, high end and mid market offer attractive potential but challenges
around scale / price points make traditional high capital solutions difficult
Business models providing lower cost, improved CapEx leverage, greater operating
efficiency and / or addressing untapped markets are potential new horizons for
attractive healthcare investments
Conclusion