Download presentation
Presentation is loading. Please wait.
1
Indian Healthcare – Successful Business Models
Dr. Rakesh Kapur
2
Contents The Context - Indian Healthcare Industry Understanding Business Models in Healthcare Comparative Case Study
3
Indian Healthcare Market
Healthcare pie (2006) US$ 34.2 Billion Healthcare pie (2012) US$ 78.6 Billion Growth : 15% CAGR Private Hospital Revenues 2006 – US$ 15.5 Billion 2012 – US$ 35.9 Billion
4
Indian Healthcare Market Characteristics
Understanding the healthcare market with 3P Model Prevalence: High prevalence, likely to be higher than reported Change in disease profile likely to drive the prevalence higher Significant disparity between states & socio-economic classes in prevalence Propensity: 3% of population slips below poverty line every year due to healthcare costs Average cost of single hospitalization equal to > 6 months of average household income Only 10-12% of Indian population is insured though growing at more than 35% Provider: Although India has 20% of global disease burden, we have 6% of beds, 8% of doctors, 8% of nurses & 1% of paramedics Of the 13 Lakh private providers, 37% are unregistered providing little quality assurance 3P Model of healthcare market Market Characteristics Provider Prevalence Propensity
5
Consumer Viewpoint Understanding consumers from the 3A model
Accessibility: Inadequate infrastructure High prevalence, increasing further Regional disparity in India Shortage of manpower Assurance: Unregulated and fragmented market Lack of data or information systems Affordability: Inability to afford quality healthcare Inadequate insurance penetration Emergence of new diseases 3A Model of consumer needs Consumer viewpoint Accessibility Assurance Affordability
6
Why are private providers not filling the gap ?
There is considerable variation In RPB / year and EBITDA for hospitals within tier-1 cities It is possible to achieve operating margins of 28%-30%, however, choice of business model will be an imperative for success
7
UNDERSTANDING BUSINESS MODELS
8
Understanding Business Models in Healthcare
Business economics Capex per bed Revenue per bed EBIDTA Business Elements Functional Mix Specialty Mix Level of Care Services Mix Growth Model Preventive Therapeutic Rehabilitative Education Research AYUSH / CAM Single Specialty Single Disease Multi-specialty Select Specialty Primary Secondary Tertiary Quaternary Pathology Laboratory Radiological set-up Dialysis Units Radiotherapy Units Laproscopy Units Greenfield Acquisition Lease Joint Venture Congregation Target Consumer - Positioning Geographic Mix
9
Hospital’s “Business Model”
HOSPITAL: SOURCES OF REVENUE OT rent constitutes 17% of revenues but indirectly it is responsible for 50% of hospitals revenues Pharmacy & Consumables generate 36% of hospitals revenues OPD, though generates 5% of revenues, is responsible for 50% of IPD admissions HOSPITAL: COST STRUCTURE (Operating Margin) * All figures are a percentage of gross revenues
10
Specialty Mix – Key to a profitable business model
Neurosciences Orthopedics 30% 150 K 22% Cardiology ARPP (IPD) 100 K ~30% General Surgery 23% OBG 16% 50 K 20% 12% Pediatrics Internal Medicine 0% 10% 20% 30% 40% Specialty Margin ALOS (Average Length of Stay) of these specialties is an important determinant of profitability, therefore their operational management is key to driving efficiencies Note: Bubble size - % revenue of that specialty % inside the bubble – specialty’s EBITDA as seen in tertiary care facilities in metro cities in India
11
Service Mix Significant variance in service mix impacts profitability through;’ Capital Expenditure Revenue realization Cost of delivery
12
Overview of Growth Models
Greenfield Acquisition Lease / Joint Venture Agglomerates Max Manipal Sterling Columbia - Asia Fortis Wockhardt Reliance ADAG Apollo Hospitals Wockhardt Hospitals Parkway Group Narayan Hrudayalaya I-Ven Medicare (ICICI) Asian Health Alliance DM Healthcare Long gestation period, delayed returns High initial capital requirement Land availability, especially in metros is a challenge Fast ramp-up High initial capital requirement Revenues accumulate from day 1 Acquiring skilled manpower along with asset limits teething issues Constrained by availability Low initial capital requirements Assured revenue base from day 1 Profit / revenue sharing limits risk Focus on core competencies / specialties Strategic stake (minor / majority) in small to medium hospitals across the country Generates economies of scale through bulk purchasing, preferred services etc Managing multiple partners requires a capable management team Capex: High Revenues: High EBITDA: Delayed, High Pay-back Period: 5-7 Years Capex: High Revenues: High EBITDA: High Pay-back Period: 5-7 Years Capex: Low Revenues: Low EBITDA: Medium Pay-back Period: 2-3 Years Capex: High Revenues: Medium EBITDA: High Pay-back Period: 3-5 Years
13
Target Consumer - Positioning Niche: Super-specialty
Indian healthcare delivery market has seen adoption of various business models in response to the local needs and changing customer behavior Lean Differentiators Differentiator Lean Differentiator 1 A strong brand Low cost provider Value 2 Cost Leaders Niche: Super-specialty 3 Revenue optimization 4 Stress on continuous improvement / innovation 5 Seamless service delivery Niche: Nursing Homes Cost / Pricing Level
14
Evaluating Business Models
9.00 Integrated medical institutes 8.00 Academic medical institute 7.00 Medical Colleges Indian Medicities 2.00 4.00 Medical Mall: (Products & Services) 5.00 6.00 Super specialty hospital (Single/Multi) 3.00 Critical care set-ups Nursing homes, Gr. Specialty hospital Integrated Rehab Institute Specialty hospitals (Single & Multi) Diagnostic centres/ network clinics Day care set-up Multi-specialty Rehab Institute Life-style & disease management centers Wellness & rejunuvation centers CAM Academic Institutes CAM Hospitals Preventive checks & OPD; Vaccination centres 1.00 Integrated Clinics CAM Clinics Specialty Clinics Poly clinics Partnering Public-funded programs Clinic/network clinics Operational Complexity Profitability Investment BUSINESS-MODEL Higher investment and complexity of business, leads to better profitability, if managed well Scale: 1 to 3 4 to 6 7 to 9 LOW MEDIUM HIGH
15
National Healthcare Model
State Reimburses private provider based on agreed upon tariffs Ensures governance and quality of care 25% Insurance premium2 Insurance company Indicates share of funding between Centre and State Monitoring Agency Financial monitoring 75% Viability gap1 funding in form of an annuity for setting up facilities in select non Tier 1 areas Quality monitoring Centre Healthcare provider Funds operating and capital expenditure 100% Cess/ Surcharge/ Health tax Provides treatment BPL Population APL Population Stakeholders involved Out of pocket premium – 0% Out of pocket premium – 70% PUBLIC SECTOR PRIVATE SECTOR CONSUMER Electronic health cards distributed by government
16
COMPARATIVE CASE STUDY
17
Comparative Case Study – 2 Healthcare Chains
Example – Chain 1 Example – Chain 2
18
Chain 1 – Feeding on the brand (Empty Calories !)
EBITDA of the group has declined… …Expansions have not yielded fruit EBITDA Rs cr EBITDA Rs cr -12% Existing hospitals have been optimized to the fullest -12% Expansions have witnessed de-growth in performance
19
Chain 1 – Some key learning's from its strategy & operating model
Business Model Multi-specialty tertiary care offering the entire functional mix Growth through JV / Lease Mid-value, mid-price differentiator positioning Doctor engagement Belief in Brand > Doctor Fee for service without flexibility Poor star retention with significant loss in revenue due to attrition No cross- leveraging of clinical staff across locations Brand Strong regional brand perceived to be expensive not portable in other geographies Patient experience Lack of common measures or frequency of measurement across locations Soft Skill Training is a localized function with no impact measurement Lack of standardized processes for feedback collection, evaluation or action Look & feel - a function of acquired infrastructure rather than brand identity Growth Selection of city based on “me-too” strategy No detailed market assessment No clear line of sight on doctors Operating model in Tier 2 not aligned to location dynamics Purchase centralized for less than 20% of value
20
Chain 2 – Every new expansion has fed the brand
EBITDA of the group has steadily increased despite manifold expansions… Most of the expansions have yielded positive EBITDA either in Year 1 or 2 EBITDA Rs cr Example: Expansions done in 06 EBITDA Rs cr 4 1 1 2 7 Existing hospitals Expansions
21
Chain 2 – Some key learnings
Positioning Super-specialty with focus on specific specialties and creation of Centres of Excellence High-value, high-price differentiator positioning, though was dynamically altered in difficult markets Doctor engagement Created and nurtured star doctors – differential payment model Strong referral network Invest in building a second line who initially feed off the brand Designated HOD’s who had equity stake and nurtured new centers Brand Created strong brand in metros initially and then expanded to nearby geographies thereby leveraging brand awareness Actively invested in creating international networks Leveraged International association to attract domestic patients Patient Experience A common MIS with central reporting Segregated clinical management from process management to minimize conflict Started a post-discharge management program Instituted SOP’s though with limited success Lack of standardization of look & feel, constrained due its lease / JV growth model
22
Chain 2 – Some key learnings from their strategy & operating model
Growth Aim to be first mover in corporate healthcare in most Tier 2 locations Extensive market assessment (demand and supply) before entry Clear line of sight on doctors Asset light model – high number of brownfields with lease rentals linked to revenue Followed differential strategies as per maturity of facilities Revenue enhancement through surgical & case mix optimization in its mature facilities Enhanced utilization in newer facilities through referral network, outreach programs & raising marketing spend to > 10% Purchase standardized & centralized for more than 50% of value Most Tier 2 hospitals are EBITDA +ve within first 2 years of operations.
23
Annexures
24
Healthcare Business Models (Annexure – A 1)
Preventive & Diagnostic focused models BUSINESS MODEL/ DELIVERY FORMATS EXAMPLE HEALTHCARE FUNCTIONS TYPES OF RESOURCES Preventive Diagnostic Therapeutic Rehabilitative Education Research Clinical Care Lab/Radiology Allied Non-clinical Support Conventional Allopath CAM Med. Intervention Surg. Partnering Public-funded programs AIDS Campaign, Polio Vaccination Disease Prevention Centres Preventive checks & OPD; Vaccination centres Wellness & rejuvenation clinics Ananda, Gold-spring Life-style & disease management clinic Medi-spa Diagnostic centres/ network clinics Dr. Lal's , SRL Ranbaxy, Stand alone set-ups
25
Healthcare Business Models (Annexure – A2)
Therapeutic focused models BUSINESS MODEL/ DELIVERY FORMATS EXAMPLE HEALTHCARE FUNCTIONS TYPES OF RESOURCES Preventive Diagnostic Therapeutic Rehabilitative Education Research Clinical Care Lab/Radiology Allied Non-clinical Support Conventional Allopath CAM Med. Intervention Surg. Clinic Single Consultant Chambers Poly clinics Apollo Clinics, Max-Clinics Specialty Clinics Cray Diabetes Management Clinic, Kaya Skin Integrated Clinics Manipal Care & Cure Clinics Day care centres Laparoscopy Units, Dialysis units (NEPHRON, USA), Endoscopy centres. Critical care centres Trauma Care Centres Nursing homes, Gr. Specialty hospital South point nursing hospital Specialty hospitals (Single & Multi) Fatima Hospital, Holy Family Super specialty hospital (Single/Multi) EHIRC, GangaRam Medicities Global Healthcare Medicity
26
Healthcare Business Models (Annexure – A3)
Multiple, Rehab, CAM & Retail focused models BUSINESS MODEL/ DELIVERY FORMATS EXAMPLE HEALTHCARE FUNCTIONS TYPES OF RESOURCES Preventive Diagnostic Therapeutic Rehabilitative Education Research Clinical Care Lab/Radiology Allied Non-clinical Support Conventional Allopath CAM Med. Intervention Surg. Integrated medical institutes Medical City Dallas hospital (Over 95 specialties, attract patients across 75 diff. countries) Academic medical institute AIIMS, PGI Medical Colleges KGMC Multi-specialty Rehab Insti. Rehabilitation Institute of Chicago Integrated Rehab Insti. Mayo Clinic, Rochester, Minn. CAM Clinics Dr. Batra Clinic, Ayurvedic clinics, Reilki Centres, AOL Centres CAM Hospitals Caritas Ayurvedic Hospital CAM Academic Institutes Vaidhyarathnam Moss, Holy Angels College of Alternative Medicines Medical Mall: (Products & Services) _
27
Emerging Opportunities (Annexure – B)
Health Services Outsourcing Currently a US$3.7 Billion industry, it is likely to double in the next 6 years and provide employment to more than 300,000 personnel Telemedicine 73% of Indian population residing in rural areas provide a significant opportunity, since 80% of healthcare facilities are concentrated in urban India Medical Infrastructure An estimated US$ 69.7 Billion is likely to be invested in medical infrastructure by 2012 Pathology Labs With revenues of more than $850 Million in 2006, fuelled by technological advancements in data transfer, it could grow into a $ 2.6 Billion industry by 2012 Health Insurance With premium collected of more than US$ 700 Million in 2006, yet only 2.4% of Indian population is insured. Premiums are likely to touch $ 3.8 Billion by 2012 with an insured base of around 10% Medical Devices Currently a $ 2.1 Billion industry, it is likely to grow into a $ 4.9 Billion industry. With significant government backing, domestic contribution could increase to as much as 50% Training & Education With predicted shortage of 450,000 doctors and 1.2 Million nurses by 2012, medical & paramedical training could be a $2.2 Billion industry by 2012. Clinical Trials Clinical trials offer a huge scope for maximizing revenues for established players with a potential to grow at 25% annually into $ 900 Million by 2012
Similar presentations
