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A

COMPREHENSIVE PROJECT REPORT


ON
HEALTHCARE INDUSTRY OF INDIA

Guided By: Dr. Darshna Dave

Submitted By: Dhaval devmurari (15F50)


Divyaraj parmar (15F56)
Divya kahar (15F55)
Jigar vara (15M14)
1

Table of Content
Sr. No.

Particular

INTRODUCTION
Introduction to healthcare industry
Healthcare service in India
Health profile in India
Major types of private hospital
Trust
Super speciality hospital
Multi speciality hospital
Objectives
Scope of study
Methodology
Importance of study
Significance for the study
GROWTH AND EVALUATION
Historical background of Indian healthcare industry
Segments of Healthcare industry
Market Size of Indian Healthcare Industry
Graduate Corporatization of the Healthcare Sector
Regulatory Framework
DEMAND ANALYSIS
Demand Determination of the Industry
Price and Income Effects
Technology
Sector growth prospects
Production/Branch Structure
Life Cycle
MARKETING STRATEGY ANALYSIS
Market Research
Current Trend & Challenges
Affordable Care
Throw Out Marketing One Size Fits All Marketing Strategies
A Retail Mindset For Consumer Healthcare
Cyber Security Concerns
Patient Centre Care
Challenges Facing Healthcare Marketers
Segmentation, Targeting & Positioning
Market Segmentation
Healthcare Market Segment
Market Targeting
Positioning in Healthcare
Marketing Mix In Healthcare
Health Care Companies In India
Biggest Innovations In Healthcare Technologies
Quality In Health Care

1.1
1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
1.1.6
1.2
1.3
1.4
1.5
1.6
2
2.1
2.2
2.3
2.4
2.5
3
3.1
3.2
3.3
3.4
3.5
3.6
4
4.1
4.2
4.2.1
4.2.2
4.2.3
4.2.4
4.2.5
4.3
4.4
4.4.1
4.4.2
4.4.3
4.4.4
4.5
4.6
4.7
4.8

Page
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4.9
5
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
6
6.1
6.2
6.3
7
8
9

Customer Service Stratagies For Healthcare Industries


FINANCIAL ANALYSIS
Profit Margin Analysis
Leverage Analysis
Profitability Analysis
Du Pont Analysis
Earnings Per Share
Dividend Per Share
Profit/Earning Analysis
Sustainable Growth Rate
INDUSTRY ANALYSIS
PESTEL Model
Michael Porters Five Forces model
SWOT Analysis
FUTURE SCENARIO OF THE HEALTHCARE INDUSTRY
CONCLUSION
BIBLIOGRAPHY

Preface
3

40
43
44
47
50
52
55
56
57
58
61
62
63
67
70
76
77

Knowledge and human power are synonyms, once said the great philosopher Francis Bacon.
However based on the experience within todays global markets, he would probably say,
The ability to capture, communicate & leverage knowledge to solve problems is human power .
This raises the question how exactly one can best capture, communicate & leverage knowledge
especially within world of system engineering.
The answer probably lies in statement itself by communicating your ideas and devising ways and
means to give shape to your plans in to reality, which requires a long-term planning, investment
and shrewd thinking.
The tryst for knowledge and power led us to two years M.B.A. degree course as part of this longterm investment. This course not only enabled us to focus firmly on the current trend but also
helped to focus on future changes.
As a part of this M.B.A. degree, students have to undergo a project, which is designed keeping
the privileges and preferences of industry in mind. This particular project gave us an opportunity to
implement what we learnt within the four walls of classroom.
This report that we are submitting intends to highlight our versatility in sustaining the pulls and
pressure of day to day professional life and put to perspective the facts that we are capable
enough to deliver whenever a challenge is thrown to us.

Acknowledgement
4

Knowledge in itself is a continuous process. At this moment of our substantial enhancement we


rarely find enough words to express our gratitude towards those who were constantly involved with
us during our project and making it a success. Men become good through practice than by nature.
We are grateful to Prof. Dr. Yogesh C. Joshi Director of G. H. Patel Post Graduate Institute of
Business Management, Sardar Patel University, Vallabh Vidyanagar, who created this opportunity
to work on the project. We are also very thankful to him for providing his guidance for the project
and for allocating such an interesting and challenging project. Inspite of being very busy, he was
ready to help us whenever required.
We are also thankful to all the faculty members of G. H. Patel Post Graduate Institute of Business
Management, Sardar Patel University, Vallabh Vidyanagar, for all their suggestions and help that
we obtained from them and we are thankful for all the support they extended to us.
We would also like to thank our parents and all our friends who have helped us, though Indirectly,
throughout the project duration and always have been a source of encouragement

Declaration
5

We, Divyaraj parmar , Dhaval devmurari, Divya kahar and Jigar vara , hereby
declare that the report for Comprehensive Project entitled Analysis of health care Industry is
a result of our own work and our indebtedness to other work publications, references, if any, have
been duly acknowledged
Place: V.V Nagar
Date:
Name of the students:
Dhaval devmurari (15F50)
Divyaraj parmar (15F56)
Divaya kahar (15F55)
Jigar vara (15M14)

1. Introduction

1.1 Introduction to healthcare industry


7

Good health is universally acknowledged to be of intrinsic value and therefore


constitutes an integral element of development. One can be rich but sick enough to not enjoy any
opportunities that wealth opens up, and poor health may translate into worsening economic
opportunities as well. In fact, one can also be healthy but too poor to pursue valued objectives.

A new awareness of the multidimensional nature of development as a process much


broader than economic growth and with health as a crucial ingredient, emerged with the Human
Development Index, the Gender Development Index and the Human Poverty Index by the United
Nations Development Programme. With the introduction of indicators to evaluate and rank
countries on the basis of achievements that affect quality of life, reduce deprivation to basic
necessities and gender equality, governments have been forced to redefine development. The
annual publication of these indices and the associated discussions around them have, over the
years, contributed to the increasing acceptance of the idea that development ought to be viewed in
terms of the extent to which individuals are able to live in the manner they find fulfilling.

These ideas have profound implications for countries such as India and Africa which
have large populations fighting for mere survival. For them the choices of enjoying basic freedoms
that are so routinely guaranteed to people living in developed countries are dependent on the
more fundamental issue of if alive'. With millions dying prematurely due to the non-availability or
unaffordability, or both, of medical attention, it is only reasonable that the focus of development
should be on matters related to providing universal access to health and its determinants such as
water, sanitation, nutrition, primary education, communication and employment. Macroeconomic
environments that pursue such compatible policies view health as central to development, a vital
public good, and a basic human right.

1.1.1 Health Care service in India


The origin of private practice can be traced to the 17th century with the
establishment of the East India Company, following which European doctors were employed on a
regular basis in India. Originally the company engaged the services of British doctors designated
as surgeons mainly for ships which were bound for India. Later, some doctors were asked to
remain in India on special request from the merchants. By the late 17 th century, surgeons were
hired and the East India Company started employing medical men to treat their resident European
employees. East India Company started treating their employees with trained medical personnel.
In India, indigenous system like Ayurveda, Unani and Siddha were largely the
domain of individual practitioners who provided services for a price which was paid mostly in kind.
Kings relied on Ayurvedic practice during 19 th century. The state played a minimal role in assuming
responsibility in providing services to the people.
Allopathic medicine was introduced by the British during the late 18 th century in order
to protect and treat the employees of the East India Company. Over time they extended these
8

services to the Indian population as well and therefore expanded the network of hospitals and
dispensaries in various presidencies. The expansion of medical care facilities required trained
personnel and this is what promoted the British to invest in medical education during 19 th century
to train subordinate staff who would work in the newly created facilities. Although the main
objective of medical education was to supply subordinate staff, many of these colleges also
admitted private students. As early as the 1880s, these private health care was in existence from
1989. By the 1990 a substantial number of graduates had established themselves in private
practice in the main towns. They took patient away from the hakims (practitioner of Unani
medicine) and Vadis (practitioner of Ayurvedic medicine) as well as from government hospitals and
dispensaries.

1.1.2 Health Profile of India


Healthcare has become one of Indias largest sectors - both in terms of revenue and
employment. Healthcare comprises:

Hospitals

Medical devices

Clinical trials

Outsourcing

Telemedicine

Medical tourism

Health insurance and medical equipment.

The Indian healthcare sector is growing at a brisk pace due to its strengthening
coverage, services and increasing expenditure by public as well private players.

Indian healthcare delivery system is categorized into two major components - public
and private. The Government, i.e. public healthcare system comprises limited secondary and
tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form
of primary healthcare centers (PHCs) in rural areas. The private sector provides majority of
secondary, tertiary and quaternary care institutions with a major concentration in metros, tier I and
tier II cities.
9

India's competitive advantage lies in its large pool of well-trained medical


professionals. India is also cost competitive compared to its peers in Asia and Western countries.
The cost of surgery in India is about one-tenth of that in the US or Western Europe.

In addition to the public health model there are alternative medical approaches
based on different theories of health and illness
The growth of private health sector in India has been considerable in both provision
and financing.

1.1.3 Major types of private hospitals:

Types of private
hospitals

Trust run
hospital

Super speciality
hospitals

Not for profit

General
purpose

For profit

General
purpose

Super speciality

10

Multi-Speciality

Corporate/Multi
chain hospital

Super speciality

Trusts
Stand-alone specialist services
Multi specialty hospitals

1.1.4 Trusts:
Trust hospitals in India are run by private trust. Generally these hospitals are set for
the people of middle class families. Such hospitals provide all types services and treatment at
concessional rates. These hospitals are managed and run by the trust.
A non-profit hospital, or not-for-profit hospital, is a hospital which is organized as a
non-profit corporation. Based on their charitable purpose and most often affiliated with a religious
denomination they are a traditional means of delivering medical care in the country. Non-profit
hospitals are distinct from government owned public hospitals and privately owned for-profit
hospitals.

1.1.5 Super specialty Hospitals:


Generally these types of hospital are established on the common or popular
diseases like cardiac, neuron, cancer and eye hospitals etc. This is observed in Indian context that
these types of hospitals are operating on small or medium scale. These types of hospitals in india
widely established and preferred by the people.

1.1.6 Multi specialty/corporate hospitals:


Corporate hospitals are the most important development in the private health sector
in 80s. The pioneer in the corporate hospitals was the Apollo hospital in Chennai.
Apollo hospital was set up in 1983. This multi-crore hospital with the latest medical
facilities raised the required money from share market.
The cost of medical care in this profit oriented corporate high-technology hospitals
are, of course, beyond the reach of ordinary citizen. They thus cater primarily to the upper-middle
or high class patient of the country. If the government is interested in making healthcare more
affordable to common man, competition among the hospitals should be encouraged.

1.2 Objective
11

To study Healthcare industry in India, in specific to Corporate Hospital.

To analyze the Competitive scenario of the Healthcare industry.

To study Factors affecting the Healthcare industry.

To study Environmental impact on the Healthcare industry.

To study futuristic scenario of the Healthcare industry.

To carry out the PESTEL and SWOT Analysis and apply Michael Porters 5 force model

1.3 Scope of study


The scope of study on Healthcare industry (Corporate Hospital) is to gain practical
knowledge of industry.
This will enable us to learn about various aspect of industry such as SWOT, PESTEL
by which we can analyses the strength, weakness and to analyses new opportunity and future
threat in the industry.

1.4 Methodology
The study is mainly based on secondary data. We have gone through large number
of websites and various magazines, books. Also we have gone through various documents and
articles pertaining to Indian Healthcare Industry.

1.5 Importance of study


While going through the analysis of The Healthcare Industry the report which is
prepared would be able to determine the product profile. It will also be able to determine the
demand determinations of the industry along with its price, Income, penetration along with its
Market Strategy Analysis as how the sectors companies use the segmentations and positioning
products in order to survive in the market. We are also going through various factors which are
showing the importance of various financial analysis showing the growth and evolution of the
industry.

1.6 Significance for the study

12

The report for our Comprehensive project is related to Indian Healthcare Industry.
Indian Healthcare Industry is highly fragmented market. The study will enable us to gain
knowledge as per objectives mentioned. Hence, we have decided to study this industry.
Understand its circumstances and growth potentials in India.

2. Growth and Evolution

13

2.1 Historical Background of Indian Healthcare Industry


There are the evidences for the existence of healthcare even during the time of
Ramayana and Mahabharata, but it has changed substantially with the passage of time and has
gone through significant changes and upgraded a lot with the up gradation of Medical Science and
technology.
Substantial increments in healthcare facilities and in the number of healthcare
personnel is seem to be happened during 1950's and 1980's, but the total number of certified
medical professionals seems to be fallen down in as we have 4 practitioner per 10,000 in 1980s
which is reduced to 3 per 10,000 in 1981. The reason behind this decrement is the fast population
growth in country. There were around ten beds on 10,000 individuals in 1991. The growth in the
number of primary health centers is also seems to be happen during the decade. These centers
are considered to be the keystone for rural health care system
There were around 22,400 primary health centers, 11200 hospitals and 27400
dispensaries were established in India in the year 1991. These services were initiated as a part of
tiered healthcare system with a focus to provide maximum routine facilities to the vast majority of
people in town and refer only critical cases to urban hospitals which are having more advanced
facilities. These centers would basically trust on skilled professionals to fulfil their maximum
requirements.
The healthcare industry of India functions with the help of both public and private
sector. The services and facilities governed by the government of sate as well as of central comes
under public healthcare system. The system is helpful in a way as it provides varied number of
services and other facilities at free of cost or at concessional rates to the people of rural areas as
well as the to the people of lower income group in urban areas. Yet there is a long way to go as till
now the industry is going through a phase of development.

14

2.2 Segments of Healthcare industry


The healthcare industry consists of eight segments. These are:

Hospitals: Hospitals are of utmost important among them. Hospitals deliver complete
medical care facilities, begins with diagnoses to surgical treatments, or to continuous
nursing facilities. Several hospitals are there having specialization in treating and handling
mentally sick patients or in cancer patients or some are in treating children. These facilities
are provided either on an outpatient or inpatient basis. The combination of professionals
required by hospitals varies according to geographical locations, size or capital structure of
the organizations or on the basis of values, goals and management philosophies. As soon
as organization strives towards efficiencies, facilities start to move towards outpatient basis
from inpatient basis.

Nursing and residential Care: One more segment which work along with hospitals is the
facility of nursing and residential care. These services comprises rehabilitation, inpatient
nursing and health-related personal care to the people required it on constant basis, and
not having the need of hospital services. The other facilities of convalescing are related to
assist those, who required minimum support. In addition the facilities related to residential
care offers 24 hours personal and social care to old age people, to children and to those
who are unable to care themselves.

Physicians: Physicians and surgeons covers around 37 % of industry. They either practice
privately or in groups having specializations either in similar or different fields. Though
various practitioners are willing to work in groups so that they will be able to reduce the
overhead expenses and also get consultation with their colleagues. Nowadays Surgeons
and physicians showing interest in working on salary basis for big groups, for other medical
clinics, or for integrated health systems.

Dentists: Dentist occupied around 20% of the industry. They provide preventative,
cosmetic, or emergency care to the patients required them. Some institutions having
specialization only in particular branch of Dentistry like Orthodontics or Periodontics.

Health Practitioners:one important section of the system covers Health


Practitioners. The section comprises the offices of optometrists, podiatrists,
chiropractors, occupational and physical therapists, psychologists, speech-language
pathologists, audiologists, dieticians, and other health practitioners. The demand of these
services is somewhere related to the ability of payment of healthcare consumer either
directly or through insurance. The segment also covers the offices of practitioners of
alternate medicine, such as homeopaths, hypnotherapists, acupuncturists and
naturopaths.

15

Outpatient Care Center: Other diversified establishments in this group contain health
maintenance organization, medical centers, Kidney dialysis centers, substance abuse
centers, outpatient mental health and freestanding surgical and emergency centers.

Other Ambulatory Health Care Services: This segment is relatively small in comparison
to other segments of the industry. It covers ambulance and helicopter transport services,
blood and organ banks, and other ambulatory health care services, such as pacemaker
monitoring services and smoking cessation programs.

Medical and Diagnostic Laboratories: These laboratories help the physicians by


providing diagnosing and analytical services to them or they provide these facilities to
patients also on the prescription of Doctors. These organizations conduct blood tests,
ultrasounds, tomography scans, X-rays and other clinical investigations. These laboratories
accounts for provide lesser employment in the industry.

2.3 Market Size of Indian Healthcare Industry


The Indian healthcare industry is one of the biggest and fastest developing sector of
world. Healthcare can form a huge part of nation's economy by consuming over 10% of GDP of
various developed countries
The Indian healthcare industry is projected to be an industry of US$ 50 billion and
now serving as the second-largest employer in service-sector of the country by offering jobs to
approx. 4.5 million persons either directly or indirectly. The healthcare sector of India will increase
upto US$ 100 billion by 2015. According to ratings agency, Fitch. It is estimated to be worth US$
275.6 billion by 2020. Presently, India spent its 8 per cent of GDP on healthcare. According to
MrPradipta, K Mohapatra, Chairman, Executive & Business Coaching Foundation India Ltd and
former chairman of CII, India needs to spend at least US$ 80 billion more in the next five years to
meet targets.
The recent trends and investment in healthcare industry can be witnessed through
various factors like recently Apollo Hospitals Enterprise Ltd and University College London (UCL)
have signed a memorandum of understanding (MoU) to collaborate their efforts in training and
clinical research. The aim of this corporate alliance is to conduct and promote research and
educational initiatives in medical sciences. A positive trend has also been seen in the rural
healthcare sector. According to the Rural Health Survey Report 2010, published by Health
ministry, 2010 specified that the number of Sub-Centers existing on March 2010 increased from
146,026 in 2005 to 147,069 in 2010. The report further stated that there is an increase of 437
primary health centres (PHCs) in 2010. Moreover, Number of nurses at PHCs and community
health centres (CHCs) has increased from 28,930 in 2005 to 58,450 in 2010.
According to the report of Department of Industrial Policy and Promotion (DIPP),
the drugs and pharmaceuticals sector has attracted foreign direct investment (FDI) worth US$ 2.4
16

billion between April 2000 and April 2011, while hospitals and diagnostic centers have received
FDI worth US$ 1.03 billion in the same period. As per Investment
Commission of India, the healthcare sector has experienced phenomenal growth of
more than 12%per annum in the last 4years and this growth is expected to be driven by different
factors: rising life expectancy, rising income levels of Indian households, increasing penetration of
health insurance and rising incidence of lifestyle-related diseases in the country has led to
increased spending on healthcare delivery.
Major players of Healthcare Industry have announced huge expansion plans in
previous two years. Many big corporate players which have no or very slight existence in
healthcare industry also declared huge investment plans in Healthcare Services. For example:

Philips Electronics India is announced for establishing nations first virtual ICU.
Corporation also has discussed the issues related with the launching of EICU technology by
the year 2012 with various major multi-specialty tertiary care hospitals groups.
Wipro Technologies has also launched a service with an aim to help drug development
owners (DDOs), clinical research organizations (CROs) and other regulatory organizations
for increasing collaborations with multi-region clinical trials.
Manappuram Health Care Ltd announce an investment plan of US$ 222.27 million from
2011-16 for setting up various medical and dental clinics and diagnostic centers across
South India. The future enterprises will be a venture of the Manappuram Group of
companies.
Fortis India Ltd. Is planning to launch hospitals of low budget under their new brand name.
They set the target of 25 new hospitals in every three years. More importantly, in last few
years, Eye market of India has significantly catches the attention of investors. The market is
currently dominated by government hospitals, Ophthalmologists and charitable trusts.
Vasan Healthcare ltd. Which is a specialist chain of eye hospitals has an advanced
discussion with Singapore sovereign wealth fund GIC with regard to sale of its 15 per cent
stake for approx US$ 75-100 million.

Indian pharmaceutical and healthcare industry was addressed to add manpower


over the last few years; this was the time when mostly players were busy in restructuring their
operations and optimizing their costs. While coming years showing a brighter perspective in this
sector as with addition of various new players in healthcare, strong penetration of specialized
services, wider insurance coverage and increasing tourism in medical guarantee better
opportunities for employment and growth in the sector. Two vital areas are also emerged in
efficient healthcare system; these are Emergency and Specialist medical care. The facilities
related to Emergency care are still in a growing stage but the acceptance of Medical Council of
India for emergency medicines as a specialty widens up the scope for professionals in this area
especially for Paramedics, Emergency medicines specialized doctors and Nurses. Presently due
to the absence of crucial factors for example: a central regulating figure, centralized emergency
number, skilled emergency medical personnel, and quality pre hospital care, are responsible for
making the present emergency medical care system inefficient.
However, increasing initiatives of government and private players which are seen in
previous years in various parts of country plays a positive role in this regard, with the acceptance
of 108 as the National Emergency Number better opportunities are arises for healthcare
17

consumers and also for Paramedics, Technicians, Nurses, and Emergency medicine specialized
doctors across India. Several multispecialty hospitals give rise to specialist care in the country in
various II tire and III tire cities; even they are the sources of better revenue generation. But major
players of the industry are struggling with the problem of severe brain drain. The various factors
which are responsible for attracting big corporate houses in healthcare sector are:

Recognition of healthcare as an industry: The segment was acknowledged as an


industry in the mid-80s. Recognition of the sector as an industry makes long term funding
possible. Government has reduced the import duty on medical equipments and technology,
which comprises an opportunity for corporate. Though the National Health Policy 1983,
few efforts has been done to amend or upgrade the policy though the nation has gone
through some variations and new problems related to health also arises because of
ecological degradation.
Socio-Economic Changes: various social and economic changes like rise in rate of
literacy rise in the levels of incomes and increase in the consciousness because of wider
media coverage, helpful in increasing awareness towards health. The rises in the nuclear
family system make routine health check-ups are necessary for the bread earner of the
family.
Brand Development: Various corporate have established various charitable hospitals.
They try to develop good image in the market by lending their name to the hospitals, which
in turn helpful in improving the image of the other products of the corporate.
Extension to Related Business: some pharmaceuticals companies like Wockhardt and
Max India have entered in the healthcare industry which is a straight expansion of the
business.
Opening of the Insurance Sector: In Indian scenario, 60 percent of health expenditure
comes from self-paid category in comparison to the government expenditure of 25-30
percent. As we know that private hospitals are quite expensive for lower or middle class
people In this regard, the emergence of insurance sector is supposed to give a bounce to
the industry. Insurance of health make the facility affordable to majority. Presently, only 2
million people in India that is 0.2 % of total population are covered under Medical insurance,
whereas in developed nations like USA about 75 % of the total population are covered
under some insurance scheme. Insurance company GIC takes up to 6 months for
processing the claim and reimburses it to the customers after they have made the
payments from their own pockets. It will be advantageous to private houses like Cigna who
have a plan for launching Smart Cards which can directly be used everywhere. The
financiers, consultants and insurance agencies also will be benefitted by this.

2.4 Gradual corporatization of the healthcare sector


In India the trend of corporate hospitals has started by Apollo Hospital, other followed
it. There seem the evidences of huge gap between first corporate hospital and the trend of
corporatization in India. The healthcare sector is rapidly moving towards organization and
corporatization. The table below helps in showing the trend of corporatization in the sector.

18

Corporate Hospitals: List and Number of Hospitals and Their Spread

Hospital
Groups

Apollo

Wockhardt
Hospitals

Fortis
Healthcare

Zydus
Hospital

Max
Healthcare

Care
Hospital

Manipal
Health
Systems
9

Number of
Locations
Number of
Hospitals
Number of
Beds
Coverage

11

11

10

13

11

14

53000

1400

1855

600

765

3000

2000

All Metros

Annual
Revenue
(Rs. Crore)

779

Bangalore, North India


Mumbai
and West
India
210
100

Gujarat

Delhi
NCR

South
India

South and
West India

250

137

&

11

2.5 Regulatory Framework


Health is the subject of state in the Constitution of India. While the constant
assistance of central government is required by the state government for controlling and
eradicating major communicable and non-communicable diseases. The assistance of government
is also required for policy formulation, international health, medical & Paramedical education.
The responsibility for the implementation of National Programmes, Sponsored
Schemes and Technical Assistance relating to the Indian healthcare industry is of Union Ministry
of Health and Family Welfare (MoHFW). AYUSH is the department which works under the
Ministry. The autonomous institutions which conduct the researches in several specific areas
under the Ministry of Health and Family Welfare are Indian Medical Association (IMA), Indian
Council of Medical Research (ICMR), and Central Drug Research Institute (CDRI). The
government of India has also introduced various National Programmes and Schemes in
healthcare industry some of them are National Rural Health Mission, National

Increase in healthcare consumerism


Rising income
Insurance coverage
Increasing awareness
Quality consciousness
Preventive focus on health
Quality improvement
19

Improved service delivery mechanism

Health Policy-2002,National Vector Borne Disease Control Programme


(NVBDCP),National Filaria Control Programme, National Leprosy Eradication Programme
,Revised National TB Control Programme, National Programme for Control of Blindness, National
Iodine Deficiency Disorders Control Programme, National Mental Health Programme, National
Aids Control Programme, National Cancer Control Programme, Universal Immunization
Programme, National Programme for Prevention and Control of Deafness, Pilot Programme on
Prevention and Control of Diabetes, CVD and Stroke, National Tobacco Control Programme etc.
The Indian government initiated many programmes and financial packages to lift Indian health
care industry such as in year 2008-09 government sanctioned 16,534 Indian rupees for healthcare
industry which marked a rise of 15 percent in 2007-2008. National Rural Health Mission (NRHM)
has also been started by the government under which 462,000 Health Activists have been trained
for creating awareness for health related problems among the people, government has also
opened sanitation committees in 177,924 villages and 323 District Hospitals have also been taken
for up gradation. The Allocated funds to NRHM has been increased by Rs. 993crore to 12,050
crore for The National Aids Control Programme. In the year 2008-09 Indian rupee 1,042 crore is
allocated for the eradication of polio. The strategy has also been revised with an emphasis on the
high risk districts of Bihar and Uttar Pradesh. A five year tax holiday has also been allowed to the
hospitals located far from the urban clusters specifically in II tier and III tier cities. Instead of it
Amounts which are going to be spent on Research and Development are also entitled for the
weighted deduction of 125%. A deduction of 10% in custom duty and full exemption of excise duty
on certain life -saving drugs and bulk drugs is a kind of prevailages given to Indian healthcare
industry, even government has permitted 100% FDI for hospitals and other related services.
The Indian government commences several policies and services to encourage foreign and
private investment in the healthcare sector. The National Health Policy 2002 stated that these
policies will support medical tourism. This also encourages the outflow of services to foreign
patients. Execution of these paid services in foreign exchange is recognized as Deemed Exports
and is entitled for all financial incentives provided on export earnings. A different class of Visa that
is "Medical Visa" has also been announced which may be provided for specified reasons to foreign
tourists. In order to lessen the doubts related to the quality of care in developing nations, the
corporate hospitals of India corporate hospitals are receiving certification by international
accreditation schemes. The Indian government has recognized healthcare as an important section
and have taken some actions to promote its one important segment Medical Device Market. With
the emergence of economic reforms in the middle of the nineties, the export conditions have
significantly improved for India like reduction in import duty on medical equipment from 25 per
cent to 5 per cent, Depreciation limit on such equipment rose to 40 per cent from 25 per cent, to
encourage medical equipment imports, Customs duty reduced to 8 per cent from 16 per cent for
medical, surgical, dental and veterinary furniture were also introduced. Customs duty on as many
as 24 medical equipments, which include X-ray, goniometry and teletherapy stimulator machines,
has also been reduced to 5 per cent.

20

21

3. Demand Analysis

22

3.1 Demand Determination of the Industry


Individuals make choices about medical care. They decide when to visit a doctor
when they feel sick, whether to go ahead with an operation, whether to immunize their children,
and how often to have checkups. The process of making such decisions can be complicated,
because it may involve accumulating advice from friends, physicians, and others, weighing
potential risks and benefits, and foregoing other types of consumption that could be financed with
the resources used to purchase medical care. This chapter presents some simple tools for
describing these choices and making empirical estimates of the effects of certain factors, such as
prices, incomes, and health status.
Economists have employed two alternative models for describing the way
individuals make choices regarding health care utilization and related decisions. A simple
approach, which we shall follow for the most part, is to treat health as one of the several
commodities over which individuals have well-defined individual preferences, and to use orthodox
consumer theory to investigate the determinants of demand. A question of interpretation then
arises as to whether we should think of individuals as having preferences for health, or for health
care. One can argue that, in general, health care is only valued to the extent that it improves
health, so that health should be primitive in the description of consumers preferences. Yet,
demand for services is more easily observed and quantified, so a mapping between the two
concepts is required.
A second approach to analyzing health care choices is to use an intertemporal model
of consumption decisions and to treat health as a stock variable within a human capital framework.
Health care use can certainly have long-lasting effects, and the idea of health care representing an
investment in health has been popular at least since the World Banks 1993 World Development
Report. In fact, the approach was originally pioneered by Grossman (1972) in a model in which
individuals consume health care not because they value health per se, but because it improves
their stock of health, which is used as a productive resource. Cropper (1977) extended
Grossmans model to account for the disutility that illness may impose on individuals, and to
examine differences in the demand for preventive and curative care, and the dynamics of demand
over the life cycle. Couched firmly in human capital theory, these models value health care
services in terms of their potential to improve productivity. While this is clearly one outcome of
better health, the consumption value of improved health status would suggest that such measures
are lower bounds.
Thus in this chapter we describe the demand for health care services within an
orthodox static utility-maximizing framework. As eluded to above, the first issue we must address
regards the appropriate choice of goods that enter the utility function. On the one hand, it is natural
to think of individuals as having preferences for health care services directly. Depending on their
health needs, these preferences change, so we need to make the utility function state dependent.
Alternatively, we might think of individuals as having preferences for health. Health care services
would then be demanded only as an input into the production of health, and the level of demand
for services would be determined by the extent to which they satisfied the individuals underlying
preference for health. Preferences for health would then be independent of health status, and
health care demand would change as the onset of illness altered the way in which medical care
services could improve health. We adopt the second of these approaches and use it to examine
the effects of health status, income, and price on the demand for medical care. Due to the
23

existence of insurance, many health care services are provided at zero or low monetary prices,
and so the standard model would suggest that demand should be infinite, or at least extremely
high. Indeed, excess demand by some insured individuals is seen as a problem in many industrial
economies, but in the developing country context, underutilization is generally more of a concern.
The main reason for this is a lack of supply, especially in rural areas. But even when clinics and
services are available, utilization rates can be low, due to both significant nonpecuniary costs of
consuming medical services and poor quality. With this in mind, the travel costs come into model
of demand, as well as quality variations.
Next it has been recognize that the demand for medical care is not constrained to a
choice of how much, but also of what kind. Thus, individuals can choose among visiting a hospital,
clinic, or traditional healer, as well as how often to visit. The existence of such discrete choices
means that somewhat more elaborate econometric techniques are required to estimate demand
curves. Knowledge of such demand patterns may also allow policymakers to target services more
effectively. Finally, we analyze the extent to which information about demand can be used to make
judgments about social welfare. These techniques will be of use later when we consider
appropriate health care financing mechanisms and the appraisal of health care projects.

3.2 Price and Income Effects


Now that we have a description of preferences for health care services, we can
examine the determinants of demand, following standard microeconomic theory of consumer
behavior. First, if health is a normal good, for an individual in a given health state, health care will
be normal as well. That is, increases in incomes lead to greater demand for health care services,
other things being equal. Of course, we may well expect that income and health status as
measured by are negatively correlated, because those with higher incomes have better access
to clean water, housing, sanitation, and the like, so the qualification other things being equal is
important.
The most useful analytical tool of economists in analyzing consumption choices is
the demand curve. . Fixing income and health status, demand will be a downward-sloping function
of price. As income increases, we expect that, if health is normal, the demand curve for health
care will shift out to the right. Similarly, the demand curve of a sicker individual will most likely be
shifted outward because of the higher effective price of health, although this effect will be
somewhat tempered by the possible reduction in income that the individual might suffer as a result
of her illness. Finally, the price elasticity of demand may vary with incomein particular, we might
expect that the demand for health care services by higher-income individuals would be less
responsive to changes in prices than that of low-income individuals. If this were so, we would also
expect changes in pricing policies to have differential effects on the demand for services by
individuals with different incomes. For example, increases in user fees may not have much effect
on the demand of individuals with average to high incomes but may result in reduced demand by
lower-income individuals. Of course, these issues are empirical matters.
We are used to thinking of prices as monetary payments for goods and services. But
the availability of insurance or government subsidies in many health care markets make the
monetary prices paid at the point of service that is, when the service is rendered by the provider
24

very low or zero. In such cases, we would expect demand for health care to be very high
indeed. This is a concern in some of the more advanced economies where the share of GDP
spent on health care is very high, but in many developing countries utilization rates are often low,
despite low monetary prices. There are two related reasons for this. First, the quality of medical
care services may be sufficiently low that demand, even at low prices, is discouraged. The second
is that consumers may well incur significant additional costs in consuming medical care above any
monetary prices charged. These costs include, for example, forgone income and travel costs.
While these costs are present in the industrial economies, consumers are sometimes protected
from the first by provisions in formal employment contracts that allow them to take time off for
medical treatments, while travel costs are usually a relatively small share of income. The large
informal labor markets of developing countries mean that forgone income may, on average,
constitute a larger relative burden than in the industrial economies, and the large, rural populations
mean that travel costs are likely to be greater as well. Generalized travel costs allow economists to
estimate demand curves for health care, even when there is little variation in observed money
prices.

3.3 Technology
Due to high population growth, rising per capita incomes, more investments in the
healthcare sector and changing patient profile, the Indian Medical Technology market has shown a
substantial growth in the recent years. However, it still is in a nascent stage. It is largely dependent
on imports, as most Indian companies do not have the capital for investing in research and
production of new technologies, or imported machines are less expensive than the ones produced
in India due to an unfavorable duty structure. Therefore, the Indian Medical Technology market is
dominated by international players who import the products, while Indian companies focus on lowcost products and maintenance services. This also creates a gap in the quality and availability of
products.
Thus, the Indian Government wants to change this situation and integrate the
Industry into its Make in India campaign. This could boost the industry as it would bring about
ease in doing business. It has already allowed 100% FDI for the Medical Devices sector and other
healthcare branches.

3.3.1 Sector growth prospects


By 2017, the Indian healthcare market is expected to grow to a volume of USD 155
Billion. This also pushes the need for technologically advanced Medical Devices. Many foreign
players are already investing in India, but mainly through exporting their Medical Devices (75% of
Sales is generated from imported Medical Devices in the sector). Still, the Indian Medical Device
exports grew at the rate same as the imports, i.e. at a 10% CAGR (Compound Annual Growth
Rate) in the period of 2011/12 to 2014/15. It is forecasted that by 2025 Indias share in the global
Medical Technology sector will be 10%.
The sectors CAGR is 15%. The need for Medical Technologies also comes from an
increasing older population. By 2025, more than 200 Million people are forecasted to be in the 60+
age group. Therefore, the hospitals that still operate privately require techniques to fulfill the
quality standards to treat their patients and to assure good treatment. Privately owned hospitals
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and institutions are also the largest buyers of Medical Equipment. But the demand for great
diagnostic devices also increases through Telemedicines needs for it.
Another key point is the affordability of Medical Device products, as the low- end
market in India is huge. To be able to offer good and cheap service is immensely important in the
Indian market. Thus, companies started to produce cheaper products which can also be affordable
to doctors with limited financial resources, operating in rural areas. This boosts the demand and in
turn helps the industry grow further. These products also help to offer qualitative healthcare in Tier
II and Tier III cities, where quality Healthcare facilities are hardly available as the major players
have traditionally always focused on Tier I cities.
India is also supporting training of young entrepreneurs and innovators in the sector.
This led to recent developments of indigenous products and increased filing of international
patents from India. Skill development is important for the Indian Healthcare sector as it faces
shortages of doctors, specialists, paramedical staff and nurses. It also needs more hospitals that
can accommodate bigger number of patients. The Government of India additionally is trying to
improve healthcare accessibility through insurance schemes which also helps the Medical Devices
sector to grow.

3.3.2 Production/Branch Structure


In the course of Make in India, FDI inflow into the Medical Devices sector shall be
raised. FDI into Indias Medical Devices sector during the period of 2000 to 2015 were US$954
Million. In the fiscal year 2014/15, US$120.9 Million came in as FDI in the sector, which is still
comparatively low with regards to other industries and other developing countries.
Medical Devices form an extremely diverse product category, with over 14,000
different types ranging in complexity from wound dressings, adhesive bandages and syringes to
pacemakers, prosthetics and MRI machines.
The Indian Medical Technology sector is highly fragmented and consists of more
than 750 companies. These include the ones from the organized sector, which are mostly
international companies, as well as the small ones from the unorganized sector, producing lowcost, simple appliances and spare parts.
As per last year, only 22 devices have been classified as Medical Devices, all other
Medical Devices are counted as Drugs, as there is no clear definition of Medical Devices under
the Drugs & Cosmetics Act of 1940, under which they fall. A new Medical Devices policy has been
drafted in 2015 to describe a new regulatory framework for Medical Devices. This Act would
combine all regulations for placing all Medical Technology products on the market in one law, but
this is yet to be approved by the Government. Overall, the Medical Device market in India is going
through transformations with expected growth rates higher than for other industries as health
insurances are becoming more easily available throughout India and customers demand higher
standards in healthcare services.

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3.4 Life Cycle


Every industry has a life cycle with four phases; there is an early phase, innovation
phase, maturity phase and decline phase. The healthcare sector is in the maturity phase. In the
maturity phase, companies settle on their key product and economies of scale are achieved.
Additionally in this phase, smaller companies are forced out of the market or are acquired and the
barriers to enter the market become very high. The companies that are left in this market no longer
focus on the company growth; instead they focus on market share and cash flow in this phase.

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4. Marketing Strategy Analysis

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4.1 Market research:


The healthcare industry is continuously evolving as new and emerging technologies
are developed to improve and extend lives. By using research reports provide market analysis,
market drivers, forecasts and trends for technologies used for diagnosis, treatment and prevention
of illnesses and conditions. Medical imaging, portable analysis instrumentation, medical robotics
and computer assisted surgery are some areas where technology has led to the discovery and
diagnosis of conditions that were previously unattainable. Use Research for depth market
analysis, patent analysis, and company profiles to determine the shape of future markets for
therapeutics to aid in the fight against cancer, diabetes, and many other syndromes. Medicinal and
non-medicinal treatments are also covered to treat and prevent such diseases.

4.2 Current trend and challenges:


Health Research Institutes projecting a 6.8% increase in medical cost growth in
2015. The report notes that this increase is due in part to consumers who postponed non-essential
medical procedures or treatment during the recession. Although the growth year over year is just .
03% HRI estimated growth of 6.5% for 2014, it raised eyebrows because growth had slowed
significantly since the recession that began in 2008.
Smart healthcare marketers will take note of how the recession has altered
consumer preferences and buying decisions, including medical care. Curated content leveraged
via owned media should play a big part in overall strategic plans moving forward, given that these
media allow healthcare marketers to start conversations and control the messaging on a micro
level. Marketers will also look to integrate content marketing efforts with CRM platforms, as well as
paid and earned media efforts.

4.2.1Affordable Care:
In 2015, a new provision of the Affordable Care Act will tie physician payments to the
quality of care they provide, which will put a large emphasis on value over volume. Physicians will
see their payments modified so that those who provide higher value care will receive higher
payments than those who provide lower-quality care. For the past several years, marketers for
healthcare plans and providers have tailored messaging to individual consumers and increased
content marketing, allowing them to communicate outcomes and performance.
According to a December 2014 survey by Contently.com, marketing companies have
earmarked nearly a quarter of 2015 marketing budgets to content development and management.
Marketing companies are also considering lifetime customer value (LTV) as a measurable metric,
along with traditional ROI, which indicates that marketers are looking to build relationships with
consumers via content platform experiences and owned channels.
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4.2.2 Throw Out One Size Fits All Marketing Strategies:


With new provisions of the ACA coming into effect, marketers need to also bear in
mind regional differences of state health insurance marketplace types being offered as part of the
ACA. Marketers that are already adjusting and customizing their messaging to targeted groups are
one step ahead of the rest of the pack. To give you an idea of the breadth of marketplace types,
there are 27 states offering federally facilitated marketplaces, 14 states offering state-based
marketplaces, seven states offering state partnership marketplaces and three states offering
federally supported marketplaces. Creating engaging, relevant content targeted demographically
and geographically will become more and more important as consumers survey the new
healthcare landscape and the many available options. Marketers will also need to help plans and
providers build and sustain long-term relationships with smaller, targeted audiences, rather than
creating ephemeral interactions.

4.2.3 A Retail Mindset for Consumer Healthcare:


In 2015 we will no doubt see the increased retailization of healthcare. In fact, this
trend has already begun to develop. In October, Walmart launched Healthcare Begins Here, an instore program designed to educate customers on health insurance options, in partnership with
DirectHealth.com, an online health insurance comparison site and independent licensed health
insurance agency.
The worlds largest discount retailer has also hinted that it will create a model that
offers primary care via retail clinics and specialty care through the Centers of Excellence program,
which Walmart offers to its employees. Walmart boasts both wide access there is a Walmart
store located within five miles of 95% of the population and big data in the form of transactional
customer data. Expect Walmart to help usher in the retailization of healthcare on a large scale.
Healthcare marketers that embrace this new retail-focused mindset will be well positioned to guide
clients strategic direction.

4.2.4 Cyber security concerns:


Even "best in field" hospitals will struggle to attract patients if they are hacked,
PwC said, citing research from its Health Research Institute's 2015 consumer survey. Consumers
are especially concerned about the vulnerability of connected medical devices to security
breaches and cyberattacks. And recent hacks of organizations, including insurance companies like
Anthem, show that organizations that are unprepared to deal with breaches can face lawsuits, lost
revenue and harm to their reputations, the report states.

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4.2.5 Patient-Centered Care:


A significant change in the healthcare industrys approach to providing care is
underwayputting the patient at the center of care. The goal is to improve patient satisfaction
scores and engagement.But, this is new territory, and the industry as a whole is just starting to
look into ways to engage with patients outside of a traditional office visit. For example, many
providers havent yet tapped social media to build relationships with their customers. This will need
to change, especially as patients begin to shop for healthcare the way they shop for cars or
electrician servicesby searching the Internet, looking for quality metrics and patient reviews, and
comparing prices.

4.3 Challenges facing healthcare marketers:


Despite the fact that there are more ways than ever to target and reach
audiences, marketers face numerous challenges.
1. Digital underinvestment:
By some estimates, healthcare spending in the US is close to 20% of GDP, but
healthcare marketers aren't funnelling much of their marketing dollars into digital .According to
Deloitte Consulting, healthcare and pharma marketers spent just $1.4bn on digital ads, a figure
that lags marketers in other industries. One of the consequences of this digital underinvestment is
that this has created opportunities for third parties to become the go-to resources for consumers
and physicians looking for healthcare information online.This is despite the fact that, in many
cases, healthcare marketers' organizations have valuable, proprietary data and content.
2. Measurement & metrics:
While measurement is top-of-mind for most marketers, it hasn't been as important in
healthcare because of the role marketing has played historically in healthcare organizations.That's
changing and many organizations have adopted a number of sensible growth and brand-related
metrics.But adoption of metrics related to stakeholder engagement and marketing
communications, including patient satisfaction and paid media, are still undervalued, which can
make it more difficult for healthcare marketers to "connect the dots."
3. Market structure:
Healthcare is not a typical market. In the US, few consumers pay directly for care
and drugs; instead, third parties like insurers pay the bills and control where, when and how
consumers access the healthcare system.For marketers, this presents a number of challenges.
One of the biggest: even if you can persuade a consumer that your hospital provides the highest
quality of care or that your drug is the most effective, the consumer might not be able to access
your product or service.So in many cases, healthcare marketers find themselves playing a game
of triangulation involving consumers and care providers, like hospital systems and physicians.For
obvious reasons, this makes developing an effective marketing strategy a more complicated
proposition.
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4.4 Segmentation, targeting and positioning:


4.4.1 Market Segmentation:
It is very natural for a market to have segments because of the variety of mindsets
that is prevalent among different sets of customers. This means that the market is usually very
heterogeneous and players in the marketing sector must be able to disintegrate the market into
numerous segments. The process of dividing a market into segments is called market
segmentation. Market segmentation is important because different sets of customers react to
variables like advertising, pricing and PR. When segmenting a market, it is important to ensure
that the differences between customers in every segment are minimal. However, each segment
should be assessed in an individual fashion.
This is because every buyer or customer has his or her own specific needs and
preferences. Because it is almost impossible to cater for the needs of every consumer, they are
grouped into various segments using the common variables among them. This will allow for a
standardized mix of marketing for consumers within the group. Segmentation of markets is an
adaptive strategy that also involves the choosing of the sections that a firm might be suited well to
provide goods and services ensuring that it has the competitive advantage over the competition.
This can assist in the development of a scope that is competitive that can have a strong impact on
the competitive advantage in the way it moulds the value chain configuration process.
For players in the health care industry, they can use a variety of market
segmentation processes. Geographic segmentation would be the most viable option where the
market is classified according to regions, states, cities or any other geographical such as divisions.
This is very efficient because it is easy for the marketers to address the special needs of different
clienteles that are varied according to their origin.

4.4.2 Healthcare market segment:


Marketing segmentation helps organizations to identify unique population subsets,
which can thereafter be targeted for delivery of specialized services and marketing initiatives.
Marketing segmentation in healthcare is usually defined by demographic characteristics, disease
categories and geographic location.
This market segment is easily identified and defined and can help healthcare
organizations targeting it to clearly formulate the various components of their marketing mix,
comprising of product, price, placement and promotion.This specific market segment can be
accessed mainly through general advertising, as well as through specific retailers, especially in the
clothing, pharmaceuticals and foods sectors that cater to its members.Whilst this marketing
segment is defined purely by demographic characteristics, it can be further segmented by way of
age, income, marital status and maternal status. Such segmentation will help in determining
whether the members of this segment will be inclined to buy general healthcare products, specific
maternity products, or anti-pregnancy products, as the case may be.The ability to buy will depend
upon their income segmentation. Members of high income segments will be ready to look at
expensive healthcare plans, whereas others may be willing to examine general plans or individual
32

services.The segment can again be broken up into different sub-segments, as described earlier to
examine their potential to develop profits for healthcare products or services.This broad segment
or its various sub segments can also be graded in terms of desirability for marketing of specific
products or services. It may for example not be very desirable to market anti-cancer checkups and
profiling to the youngest segment, because of their pre occupation with other things and lack of
interest in the issue.

4.4.3 Market Targeting:


Targeting involve the selection of a target market. This is where a marketing mix for
the sections created through segmentation is tailored. Target marketing also ensures that a certain
brand is modified into various forms to serve various segments as opposed to mass marketing that
gives the brand as a whole to the entire market. A small player in the hotel industry can use the
strategy called the single segment strategy to serve a certain section of the market with one mix of
marketing. This strategy is said to be a concentrated one and saves small players that have
limited resources many hassles, in healthcare industry target market is upper-middle class, and
premium-class People.

4.4.4 Positioning in healthcare:


Positioning is a method where a marketer attempts to create an image that the
people can identify a particular product or service with. It is the position a certain product or
service occupies in a certain market. Positioning is an impact created in the minds of a certain
market that affects the way the potential consumers view that market. In healthcare industry major
player like apollo hospital, Zydus caddila, reliance healthcare create their different positioning in
the mind of the customer
Example of Apollo hospital by providing various service like Apollo sugar clinic, Apollo
telemedicine, virtual ICU visit, Apollo lifelineetc. with the help of this its create grate image in mind
of consumer.

4.5 Marketing mix in healthcare:


The healthcare marketplace has seen both increased competition and advanced
technology complicate the landscape. With innovations ranging from market research information
imaging to genetic testing, patients have more options than ever before. Small healthcare
providers must find ways to stand out from their competitors and inform consumers about how
they can offer the best patient experience. To develop a marketing strategy that does the tricks

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Product:
The patient's office visit is a small component of the healthcare services that
providers offer. Providers must also deliver products to patients that can improve their quality of
life. Products can include medications, testing kits and orthopedic supplies, as well as on-call
"concierge" services. Providers must also determine which products and services are suitable to
meet the needs of each patient. For instance, the provider must not only determine if the patient
needs medication for pain management, but which other products can help that patient deal with
their pain.
Outpatient Care: Outpatient Care is provided in a medical treatment facility (hospital, clinic, etc.)
for a condition or course of treatment, which does not require admission to a hospital (in other
words, for a treatment which would require an overnight stay). Outpatient care can be provided by
primary care physicians and various types of medical specialists.
Inpatient Care: If, and as required by the nature of an illness, a primary care doctor or outpatient
specialist can recommend that a patient receive treatment in a hospital (a medical facility of the
inpatient care provider), or the doctor can directly arrange for the patients admission to a
hospital. There are the following types of inpatient health care facilities: acute standard, acute
intensive, follow-up and long-term.
The Health Services Act defines inpatient care as healthcare, which cannot be provided on an
outpatient basis and which requires the patient to be hospitalized in order to provide the patient
with the necessary course or type of treatment. Inpatient care must be provided in a medical
facility of a healthcare provider with 24-hour operating hours.
Dispensary Care:This type of care is given to patients with chronic or long-term illnesses or with a
condition in which there is an ongoing deterioration in an individuals health. Through the active
and long-term monitoring of the condition of such patients, it is possible to get a timely diagnosis of
when there is the need for additional therapeutic intervention.

Spa Therapeutic: Spa treatment can be included as part of therapeutic and rehabilitative care. It
is prescribed by the patients attending physician with a review by a supervising physician. The
prescription for this type of care is submitted by an individuals regular doctor or by the attending
physician while the patient is still hospitalized.

Pricing:
Hospitals have used cost to charge ratios to arrive at average costs. However,
hospital financial experts think in the environment in which hospitals now operate this method of
costing and setting changes is not an effective one. Generally, hospitals priced inpatient surgery
and day surgery at the same rate despite the fact that there were variations in cost in different
settings. More importantly, hospitals cannot make the concept of day surgery popular and attract
patients in large numbers as day surgery is expected to do unless the charges are made
competitive. In many settings, day surgery does cost less, and to charge the same amount for it as
for inpatient surgery is missing the whole point. Pricing hospital services is not as simple as many
34

of us are inclined to think. Many hospitals believe that the complicated exercise of pricing is an
expensive investment in terms of specialist personnel, time and many which most hospitals can illafford rightly. Therefore hospitals adopt short costs, or blindly follow what prevails in the region or
in the industry with little or no variations. But hospitals while pricing their services, they should
know the cost of providing those services and the scientific way of computing and fixing them,
sometimes it is called as rate setting

Price Mix in Apollo Hospital:


In Apollo hospital the pricing mix includes three heads: 1.Fees 2.Inpatient charges
3.Third party reimbursement. These three heads are based on the costs of producing concern
different services. In addition in Apollo the prices includes subsidiary elements, and the price may
be greater or smaller, depending up on the discounts. The discounts are offering to the special
groups such as employer groups and senior citizens etc. While fixing the prices of the services,
the management of Apollo considering the actual charges made by the hospital, but the hospital is
not finalizing those costs as final prices.
Because the hospital is thinking, in patients point of view i.e. what the customer
facing costs like effort costs, psychic costs and waiting costs. Some of the services are pricing by
the Apollo with a view to maximizing short-run rather than long run benefits. Apart from this certain
heart related services are pricing independently by the Apollo without considering the market
forces. In this case the hospital believes that they are providing better services when compared to
other hospitals. Some services in Apollo, prices are made by estimating demand of the service
and its supply by the other producers.
Especially this is happening when the hospital is going to launching new services.
Most of the services are in Apollo cost based that seeks effective revenue per individual service
and allows to recover all or reasonable part of the total cost of producing the concern service.
Apollo is fixing this method of prices for third party reimbursement patients. Because in Apollo 40%
of the total patients are having third party reimbursement facility i.e. medical insurance. Apollo is
providing different categories of rooms for patients depending up on their paying capacity.
Following table reveals the pricing structure for different categories of rooms, with facilities.
There are nine categories of rooms at different prices are available to the patients in
Apollo hospital. Platinum ward, Apollo suit, executive rooms, deluxe rooms, single rooms are
planned for high level income people and single room, semi-private rooms and double sharing
rooms are arranged in view to arrange facility for middle income group and special general ward,
general ward arranged for lower income group.
For maximizing the utilization of services, Apollo fixing lower prices for certain
services, especially this is happening for health promotion programs. Sometimes Apollo offering
some services at free of cost. In some cases Apollo is charging higher prices for non-appointments
and walk-in visits and to encourage appointment-setting behaviour. On the other hand Apollo
setting lower prices for certain period. On certain services like ambulatory service, paediatric
service Apollo hospital following cross-subsidization methods for fixing prices to balance the
surpluses and losses.
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Promotion:
The promotion of a healthcare provider's service is the most important aspect of the
marketing mix, yet it is often overlooked. Many larger providers, such as major hospital chains or
pharmaceutical manufacturers, use mass media to promote their services. Smaller providers can
promote their services at a grass-roots level. An example of this community involvement is the
Creston Childrens Dental Clinic in Portland, Oregon. It created colorful and educational brochures
to promote their efforts to provide dental care to the area's low-income children.
Corporate hospitals using their promotions in print media, word of mouth
advertisement, cinema theaters etc As digital advertising becomes more prevalent, it can be easy
to underestimate the role that print ads play in todays market. There may be many people
engaging with ads online, but print media still has a firm hold on the advertising world. If anything,
the digital revolution has only increased print advertising effectiveness as the competition for
attention is steep, and advertisers have become more creative in their print ad design approaches.
In fact, especially in healthcare, many advertisers still see print as a go-to medium for reaching
their target audiences. Here are five remarkable examples of print ads from the healthcare
industry that demonstrate the power of print.

4.6 Healthcare Companies in India:


Some of these hospitals are very famous and some you might dont know.
Healthcare is a big issue among urban Indians earlier, an Indian used to spend hardly on his or
36

her healthcare. However, now there is an awareness about health related issues and problems.
Not just men but women are equally concerned about their health and issues related to it.In past
decade, there have been a number of healthcare companies that have emerged in the country.
Today, if you want to go under a surgery then these hospitals are well equipped to perform any
kind of surgery .Hence people are avoiding going abroad and saving money.

1. Wockhardt Ltd
Wockhardt Ltd is an Indian company founded by Habil Khorakiwala in the year 1960.
It is a global company with huge presence in developing countries like Brazil, Russia, Mexico
etc.The company has manufacturing plants in developed countries like US, UK, France and
Ireland. Wockhardt has state of art treatment facilities and hospitals.

2. Apollo Hospitals
The second healthcare company in our list is Apollo Hospitals. The company or
chain of hospitals was founded by Dr. Pratap Reddy in Chennai in the year 1983. Apollo has over
2000 beds in the hospitals all over the country. Company is growing rapidly and one could see
new hospitals opening all across the country.

3. Fortis Healthcare
The third best healthcare company in our top 10 list is Fortis Healthcare. The
company was founded by DrParvinder Singh in the year 2001. The company has a chain of super
speciality hospitals in cities like Amritsar, Kolkata, Navi Mumbai, Hyderabad, Mohali, Jaipur,
Chennai, Kota, Bengaluru, Gurgaon. Company is also present in Singapore.

4. Piramal Enterprises Ltd


The fourth company in our top 10 list is Piramal Enterprises Ltd. The company was
founded by Ajay Piramal in 1988. Some of its business units are Piramal Healthcare, Piramal Life
Sciences, Piramal Capital & Decision Resources Group.It is a very rapidly growing company and
has many units.
.
.

7. Siemens Healthcare
The seventh healthcare company in India is Siemens Healthcare. Although it is a
German company but has huge presence in India. The company was founded by Werner von
Siemens in year 1847 in Berlin.Company manufactures different kind of healthcare systems. Many
hospitals in the country uses medical equipment build by Siemens.

8. Opto Circuits

37

Opto circuits limited (OCI) is a vertically integrated multinational medical technology


group. The company was founded in the year 1992 in Bangalore.The company is operational in
150 different countries. VinodRamani is the chairman and managing director of the Opto circuits.

9. Lotus eye care


Lotus Eye Hospital and Institute has been catering its valued added super specialty
services to the society since 1993. Lotus always imports peer approved technologies from across
the world. Lotus is a listed corporate eye hospital in India with seven state-of-the-art Centers in
Tamil Nadu and Kerala.
Dr S K Sundramoorthy and his team of ophthalmic experts, who are highly qualified
with vast experience, offer comprehensive eye care to hundreds of patients daily at our state-ofthe-art hospitals in Coimbatore, Tirupur, Salem, Mettupalayam and Cochin in South India.
LOTUS is known for its excellence in ophthalmic services with personalized care and
is committed to pioneering in the technological revolution in eye care and rendering service to
thousands of patients from across the globe to see the world better than ever before.
It serves with super specialty comprehensive eye care consisting of modern cataract
surgery, advanced LASIK procedures including bladeless lasik, ICL procedures, all varieties of
corneal transplants, medical and surgical retinal services, state-of-the-art contact lens clinic, orbital
and oculoplasty department, glaucoma care, neuro ophthalmology and uvea clinics.

4.7 Biggest Innovations in Health Care Technology:


Nanobots in Blood
Although nanobots are far from being utilized today, but the future is coming where
these tiny robots can function like our own white blood cells and destroy bacteria and other
pathogens. hese miniature robots would function like their full-size equivalents with their own
sensors, and propulsion systemsand could perform small tasks like delivering chemotherapy
1000 times more powerful than using drugs and would not cause as many side-effects to patients
like the current treatments do. Other specific types of nanobots that are being developed are
Microbivore, Respirocyte, Clottocyte, and Cellular repair nanobots that can destroy bacteria, carry
oxygen, create blood clots for wounds, and repair cells.

Interoperability between Health Systems


Interoperability solutions for exchanging patient information across care settings is
one particular technological development that will shape the future of healthcare
organizations.Value-based care and health information exchanges are an increasingly important
part of the overall healthcare landscape, and the ability for all providers from general
practitioners and specialists to post-acute care organizations, etc. will only grow as a critical
component of care delivery in the future.These types of solutions have only started being
developed in the past few years by companies such as referral MD that are changing how
38

healthcare companies communicate by including post-acute care providers in critical


interoperability workflows, as these providers are expected to be a big part of health care cost
containment.By including post-acute care in interoperability strategies, healthcare organizations
can ensure that critical patient information across all care settings will be connected, providing a
more detailed patient picture for more specific treatment plans and improved patient care.

Robotic Nurse Assistant


There are many variations from a full robot such as RIBA(Robot for Interactive Body
Assistance) developed by RIKEN and Tokai Rubber Industries and assisted hardware such as
HAL (Hybrid Assistive Limb) robot suits delivered by Cyber dyne. RIBA is the first robot that can lift
up or set down a real human from or to a bed or wheelchair. RIBA does this using its very strong
human-like arms and by novel tactile guidance methods using high-accuracy tactile sensors. RIBA
was developed by integrating RIKENs control, sensor, and information processing and TRIs
material and structural design technologies A company by the name of HAL is a robotics device
that allows a care worker to life a patient with more stability and strength and helps prevent injuries
to our nurses.

Tooth Regeneration
In health care technology comes like tooth regeneration All kidding aside, this could
be an amazing advancement if the technology holds true in the coming years. Colourful fish found
in Africa may hold the secret to growing lost teeth. In a collaborative study between the Georgia
Institute of Technology and Kings College London, researchers looked at the cichlid fishes of Lake
Malawi in Africa, who lose teeth just to have a new one slide into place. Their study published in
the Proceedings of the National Academy of Sciences, identifies the genes responsible for growing
new teeth and may lead to the secret to tooth regeneration in humans.
Another study from a Harvard team successfully used low-powered lasers to activate
stem cells and stimulate the growth of teeth in rats and human dental tissue in a lab. The results
were published today in the journal Science Translational Medicine. Stem cells are no ordinary
cells. They have the extraordinary ability to multiply and transform into many different types of cells
in the body. They repair tissues by dividing continually either as a new stem cell or as a cell with a
more specialized job, such as a red blood cell, a skin cell, or a muscle cell.
Dentures and dental implants may soon become a thing of the past. Stem cell
research
is
making
it
possible
to
regrow
your
missing
teeth!
This is a much-needed medical advancement, especially considering that by age 7426% of
adults have lost all of their permanent teeth.

Light bulbs that Disinfect and Kill Bacteria


Hospitals are known to be potentially dangerous place with lots of people with
different elements and diseases. One company, indigo-clean has developed a technology using
39

visible light that continuously disinfect the environment and bolsters your current infection
prevention efforts.

4.8 Quality in Healthcare:


Quality in health care is When a group of healthcare professionals is asked what
quality means, there may be as many definitions as people in the room. And differing definitions
can and will lead to different priorities and different goals, depending on the perspective of the
constituent: patients, their families, healthcare providers and professionals, regulators, insurers,
and employers. Quality directly but references the value of a product or service in terms of its
ability to both help the consumer as well as its marketability.leading figure in the theory and
management of quality hey refer to care that meets the expectations of patients and other
customers of healthcare services. Therefore for we have expanded the IOM definition. Quality
consists of the degree to which health services for individuals and populations increase the
likelihood of desired health outcomes quality principles are consistent with current professional
knowledge professional practitioner skill and meet the expectations of healthcare users the
marketplace.

Customer Service Matters in Healthcare


Educated patients are taking control of their healthcare dollars.
The implementation of the Affordable Care Act has put an even bigger spotlight on
the healthcare industry. Changes in medical insurance have resulted in patients more closely
reviewing their coverage. They are now, more than ever, aware of their choices and costs when it
comes to their doctor and hospital visits. When healthcare is treated like any other paid service, an
unhappy patient will move along to a new facility or doctor based on a poor experience whether
it is with the doctor or the support staff. The opposite is also true, a happy patient will make the
effort to ensure that their preferred doctors and facilities participate in whichever plan they select.
Patients are customers
Its important to identify how health care customer service is different from other
industries. This will aid you and your employees in understanding why it matters. Healthcare
customers are patients and aside from elective cosmetic surgery they typically do not want to
be there. Seeing the doctor or going to a hospital can be a scary and confusing experience. From
the first point of contact with scheduling staff, to the office staff, waiting room experience and the
actual visit with the doctors and nurses, everyone plays a role in making the patient feel
comfortable and at ease. By identifying potential sources of discomfort, and having a well thought
out customer service plan, a practice or hospital can set themselves up for the best possible
patient experience.
Surveys are carrying more weight.
Outside surveys are becoming more popular and are carrying more weight.
ConsumerReports.org, a highly reputable website with a long standing print edition compiled
40

survey results for hospitals for the first time in 2013. The HCAHPS (Hospital Consumer
Assessment of Healthcare Providers and Systems) is a standardized survey created by the federal
government to survey Medicare patients. Over a billion dollars in annual Medicare funding is now
tied to HCAHPS results. These surveys dont just cover cleanliness and doctor competencies.
They also cover the communication skills of office staff and medical staff like doctors and nurses.
These surveys are conditioning patients to recall the entire experience. With a customer service
plan in place, good service becomes second nature and will be recognized by those surveyed.
The internet is becoming a patients best friend.
Review sites like HealthGrades.com and Vitals.com provide free access for patients
to look up information about their doctors and facilities. Other popular review sites such as Yelp,
Angies List and Google+, which are not health care specific, also provide patients the opportunity
to give feedback on their experiences. This means that when a new patient is finding and
researching a doctor, they wont just rely on word of mouth from family and friends. It makes the
entire internet a public source of information about a specific doctor or facility. Having accurate
information online is another way to increase patient customer service. It indicates that you are
interested in keeping your patients informed about the practice and doctors, and as a bonus it
provides additional opportunities to be contacted by potential new patients.
Patient-cantered care is customer service too.
Its not just about the obvious. Good customer service extends beyond a pleasant
demeanour. It has a lot to do about patient- centred care. The IOM (Institute of Medicine) defines
patient-cantered care as: Providing care that is respectful of and responsive to individual patient
preferences, needs, and values, and ensuring that patient values guide all clinical decisions.
Patient-cantered care results in higher instances of patient engagement, and a 2013 study by the
College of Technology at Eastern Michigan University found that better patient engagement is
associated with better patient-perceived health outcomes.

4.9 Customer Service Strategies for the Healthcare Industry


The Strategic Role of the Contact Center in Healthcare
Strategy 1: Facilitate Integrated and Consistent Cross-Channel Interactions
Strategy 2: Offer an intelligent Customer Front Door
Strategy 3: Offer Live Agent Assistance on Web Sites
Strategy 4: Handle Calls More Intelligently
Strategy 5: Give Medical Staff the Information They Need to Do Their Jobs
Strategy 6: Initiate Proactive Contact
Strategy 7: Make More Effective Use of Customer Data and Segmentation
Strategy 8: Optimize Business Process Execution
41

Strategy 9: Deploy Workforce Management


Strategy 10: Create a Virtual Pool of Resources

Strategy 1: Facilitate Integrated and Consistent Cross-Channel Interactions The first step in
offering an exceptional customer experience is to offer a multi-channel contact centre comprised of
phone, fax, e-mail, SMS, and perhaps even Web chat, so that patients can conduct interactions
with you exactly when and how they like. For instance, the Genesys Consumer Survey 2006
USA found that 78% of consumers would like to communicate with a company via e-mail and
34% say that e-mail is their most preferred method of communication. With well-integrated
channels, healthcare providers are able to deliver better service, improve pricing and quality
transparency and lower operating costs. Providing consumers with a seamless experience across
all channels ensures that their interactions are as consistent and efficient as possible, which will
help build a solid relationship with the consumer. And, streamlining data exchange and supporting
collaboration across all channels promotes operational efficiency and reduces errors

Give Medical Staff the Information They Need to Do Their Jobs


The integration of back-office systems containing information such as patient history,
lab work, imaging, billing, etc. with everyday contact centre activities helps agents and medical
staff resolves calls more quickly and effectively. For example, when Samantha calls to make an
appointment, the nurse taking the call sees an immediate screen pop of Samanthas patient
history and is able to handle the call far more quickly than if she had to manually retrieve
Samanthas medical data. Workflow management allows staff to efficiently take all necessary
steps to resolve patient issues and reduce the time it takes to get patients the answers they are
looking for. As back-office integration with the call centre and workflow management decreases
average handling times and reduces unnecessary repeat contacts to resolve issues, consumer
satisfaction becomes higher while the contact center workload and costs are lowered

Handle Calls More Intelligently


When taking calls, top priorities for healthcare providers are to make sure they
deliver high quality healthcare service, including the ability to quickly and easily schedule
appointments. Every time that a patient cannot get through to an appointment scheduler or
decides to abandon a call, the healthcare provider loses revenue. Providing quality service does
not have to come at the expense of cost containment.
Skills-based routing, virtual hold and business priority routing are three key
strategies for meeting service requirements as efficiently as possible, while also making the most
of opportunities to save time and money. An IVR system not only identifies customers, but also
why they are calling. With this knowledge, skills-based routing determines where the call should
be directed either to a self-service application, or to an agent most qualified to efficiently handle
the call based on specialized knowledge, language skills, or the ability to carry out a specific type
of service, billing, or appointment inquiry. This serves to improve first call resolution rates and
reduce handling times. During times of peak volume, virtual hold technology allows callers to
receive a call back at a convenient time rather than to wait on hold. This technique improves call
response times and increases customer satisfaction levels without adding costs for additional
42

resources. Business priority routing uses business rules to prioritize calls based on customer
value, available channel resources, hold times, and other factors.
For instance, response times are easily met during times of low call volume and,
therefore, agents have free time to focus on other activities, such as verifying contact and
insurance information. An Example: lts lunch time and no one is available to answer the phones in
Doctor Jackmans office when Samantha calls to make an appointment. However, unlike many
other healthcare providers with less modern contact center technology, Doctor Jackman does not
miss out on this opportunity. If an agent is available in another location to take the call, Samanthas
call is routed there. If no one is available to take the call, she can schedule the appointment via the
IVR without needing to speak to anyone, or she can request that someone call her back at a later
time

Offer Live Agent Assistance on Web Sites


Opportunities for Web self-service abound in the healthcare industry. Patients can go
online and enroll in healthcare plans, request appointments, check lab results and diagnoses,
reorder prescriptions,sreview billing and claims status, and update personal information. Web self
service helps migrate calls away from expensive call center agents and medical staff, who can
then dedicate their time to providing better customer service and quality healthcare. As part of the
new trend towards consumerism, patients can also use Web sites to shop for their healthcare
services,and retrieve information about services, doctors, and prices. Just like in most other
industries that sell goods and services online, healthcare organizations should encourage these
online searches, as theyre a potential source of new business.
Offering live assistance on Web sites can make interactions go just as smoothly as
those directed to the call center, which will translate into a better self-service experience and help
patients reach favorable decisions about moving forward with a healthcare provider. Healthcare
organizations can offer-click-to-chat and click-to call options to help consumers ask questions
about health services or request guidance for self-service use.
For instance, Samantha goes to a healthcare providers Web site and reviews the
credentials of their general surgeons. She is unable to tell if one of the surgeons would be more
qualified than the others to treat her particular medical condition, and wants to obtain additional
information about each physicians training, certifications,and experience in that specialty area.
She sees the click-to call option and uses it to make her request for more information. After
Samantha receives this information, she is able to compare data and make an informed decision,
and schedules an appointment with Dr Jack man.

43

5. Financial Analysis

Financial Analysis of Healthcare industry:


Financial analysis generally refers to an assessment of the viability, stability and
profitability of a business, sub-business or project. It is the process of evaluating
businesses, industries and other finance-related entities to determine their suitability for
44

investment. When looking at a specific company, the financial analyst will often focus on
the income statement, balance sheet, and cash flow statement. These can be obtained from
published reports of various companies. Furthermore, here we have used Ratio Analysis as a
parameter to analyze the industry data. And certain conclusions & inferences have been made
based upon the calculated ratios as well as charts.

1. Profit Margin Analysis


Profit margin can be of two types.
I. Gross Profit Margin = Gross Profit/ Sales
II. Net Profit Margin
= Net Profit/ Sales

Gross Profit Margin:


Gross Profit (GP) is the difference between sales & the manufacturing cost of goods
sold. A number of companies in India define gross profit differently. They define it as earnings
before interest, taxes, depreciation & amortization. So here, we have taken EBITDA margin, which
is nothing but operating profit margin.

Formula: EBITDA margin= EBITDA/ Sales


Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

EBITD
A
margin

16.05

12.37

18.52

22.9

22.2

23

22.18

21.96

22.84

23.84

45

30
25
20
15
10
5
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
As it seen from the above graph, the EBITDA margin is decreasing from 2007 to
2011 and then there is fluctuating but finally in 2016 it has come down to 16.05 compare to 23.84
in 2007.The reasons behind EBITDA margin decreases are cost of raw material, power
consumption, employment cost and other operating cost

Net profit margin


Formula = Net profit (PAT)/ sales
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Net
Profit
Margi
n

6.48

2.2

8.38

13.90

12.41

13.79

12.40

8.23

15.74

13.90

46

18
16
14
12
10
8
6
4
2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
As it is seen from graph, from 2007 to 2013 net profit margin shows fluctuation trend
though sales were increasing continuously whereas operating cost, depreciation and tax payment
were also increasing, But in 2015 it was lowest of all time having 2.2 percent margin and then it
went to 6.48 in 2016 showing some improvement compare to previous year.

47

2. Leverage Analysis
For this purpose, we have to calculate leverage ratios, which are as under.

Debt ratio
Formula: Debt ratio= Total debt/ Total Assets
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Debt

28.15

28.90

25.60

25.28

22.67

26.74

20.98

28.57

17.17

15.07

35
30
25
20
15
10
5
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
From year 2007 to 2009 with increase in of sales of industry, sectors assets and
debts simultaneously increasing with sales so it shows continuously increasing trend, but in year
2010 it decrease by 8 percent. From year 2012 and 2016 debt and assets of industry were
increasing at lower pace compare to previous period.

48

Debt equity ratio


The relationship describing the lenders contribution for each rupee of the owners
contribution is called Debt-Equity Ratio. It is computed by using following formula.
Formula: Total Debt/ Net worth (NW)
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Debt - 51.34
equity
Ratio

52.72

41.75

40.93

35.31

48.06

34.50

51.79

26.02

23.40

60
50
40
30
20
10
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
From year 2007 to 2009 with increase in of sales of industry there is increase in debt
compare to equity i.e. it reaches to 52% compare to 23.40 of 2007. In coming year it shows
fluctuating trend and remain 51.34% in 2016.

49

Interest Coverage Ratio:


The interest coverage ratio shows the number of times the interest charges are
ordinarily available for their payment. It is used to test the firms debt-paying capacity. It is
computed by dividing earnings before interest and taxes (EBIT) by interest charges:
Formula:

Interest coverage= EBIT/ Interest

Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interest
coverag
e ratio

16

27

47

84

73

58

74

90
80
70
60
50
40
30
20
10
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
A higher ratio is desirable; but too high ratio indicates that the firm is very
conservative in using debt; and that is not using credit in the best interest of shareholders. While a
lower ratio indicates excessive use of debt. In the above graph, in the year 2007-09, there was a
lower ratio while thereafter there was an upward trend.

50

3. Profitability Analysis
Profitability ratios measure a company's level of profitability, at the gross profit,
operating profit and net profit levels. They measure overall performance & effectiveness of the
firm. For companies in the hotel industry, billions of dollars are generated, and many companies
are long-established, meaning high profit margins should be generated at all levels
The profitability ratios are calculated to measures the operating efficiency of the company.
Generally two major types of profitability ratios are calculated:
Profitability in relation to sales

Profitability in relation to investment

The following are some of the key profitability ratios.

Return on equity (ROE):


The net profit after tax represents shareholders return. A return on shareholders
equity is calculated to see the profitability of owners investment. The return on equity is net profit
after tax divided by shareholders equity which is given by net worth.
Furthermore, ROE indicates how well the firm has used the resources of owners. In fact the ratio
is one of the most important relationships in financial analysis.
Formula: ROE= PAT/ Net worth
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

ROE

10

11

14

14

12

18

18

51

20
18
16
14
12
10
8
6
4
2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
It can be seen from the above graph that Return on Equity has shown a downward
trend over the past few years. This is perhaps due to the use of more debt over years by all
companies. This indicates the firm has not used well the sources of owners. In fact, this ratio is
one of the most important relationships in financial analysis because this ratio reveals the strength
of company in attracting future investments.

Return on Investment (ROI):


The conventional approach of calculating ROI is to divide PAT by investment.
Investment represents pool of funds supplied by shareholders & lenders, while PAT represents
residual income of shareholders; therefore, it is unsound to use this approach.
Also, PAT is affected by capital structure. It is therefore more appropriate to use one
of the following formulas for calculating ROI.
Formula: EBIT/ Capital Employed

Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

ROI

11

14

14

15

15

14

19

20

52

25

20

15

10

0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
From the above graph, we can say that ROI has fallen down considerably from the
past years. This is not a good sign. Further, ROI is directly depends upon EBIT so the companies
must try to increase the earnings before tax. However, the investment in asset (whether total or
net depending upon formula) should be reduced so as to increase ROI.

4. Du Pont Analysis
Return on Net Asset (RONA) or Return on Capital Employed (ROCE) is the measure
of the firms operating performance. It indicates the firms earning power. It is a product of the asset
turnover, gross profit margin and operating leverage. All the firms would like to improve their
RONA. In practice competition puts a limit on RONA. Also, firms may have to trade-off between
asset turnover and gross profit margin. To improve profit margin, some firms resort to vertical
integration for cost reduction and synergic benefits.
RONA = Asset turnover * Gross profit margin * Operating Leverage
A firm can convert its RONA into an impressive ROE through financial efficiency. Financial
leverage and debt-equity ratios affect ROE and reflect financial efficiency. ROE is thus a products

53

of RONA (reflecting operating efficiency) and financial leverage ratios (reflecting financial
efficiency).
ROE = Operating Performance * Leverage Factor
The firm can convert its ROE into growth in equity through retention.
Equity Growth = ROE * Retention Ratio
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

G.P/Sales

0.253
8

0.263
1

0.258
8

0.241
8

0.239
6

0.234
6

0.233
6

0.182
8

0.179
8

0.186
3

SALES/C.
E

0.700
0

0.668

0.633

0.646

0.701
8

0.671
8

0.696
3

0.669
3

0.713
8

0.867
8

EBIT/G.P

0.459
3

0.309
7

0.572
5

0.811
8

0.787
0

0.845
3

0.820
9

1.050
8

1.151
1

1.102
2

EBT/EBIT

0.721
5

0.604
2

0.763
2

0.864
6

0.835
4

0.855
0

0.843
1

0.816
3

0.897
4

0.903
2

EAT/EBT

0.771
9

0.448
3

0.741
4

0.819
3

0.787
9

0.813
6

0.767
4

0.825
0

0.885
7

0.750
0

C.E/N.W

1.537
2

1.551
8

1.421
0

1.415
0

1.360
0

1.546
3

1.345
1

1.517
9

1.260
3

1.234
0

54

1.8
1.6
1.4
1.2
GP/Sales
1

Sales/CE
EBIT/GP
EBT/EBIT

0.8

EAT/EBT
CE/NW

0.6
0.4
0.2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
The Du Pont analysis is the combined effect. The above is Du Pont chart which can
be used to depict an industrys performance in terms of shareholders return. Further, it is clearly
visible from the above chart that an industrys EBT/ EBIT has deteriorated, the EBIT/ GP has also
decreased while the Sales/ CE ratio has been decreased over a period while CE/ NW has
increased over a period of time.

55

5. EPS
The Earning per Share (EPS) indicates earning power available with share holders.
So, in simple words we can say that EPS shows how much rupees available to shareholders from
net profit. The EPS calculations made over years indicate whether or not the firms earning power
on per-share basis has improved or changed or over that period.
Formula: PAT / Total number of ordinary shares outstanding
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

EPS

13

14

16
14
12
10
8
6
4
2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
EPS calculations made over the years indicates whether or not the industrys earning
power on per-share basis has changed over the period. EPS simply shows the profitability of the
firm on per share basis. In the year 2007 & 2013, PAT was higher so EPS was nearly about Rs.14
and 13 respectively. Whereas in the year 2016 & 2015 EPS was low with Rs. 5.

56

6. DPS
DPS

simply

means

the

sum

of

declared

dividends

for

every ordinary

share issued. Dividend per share (DPS) is the total dividends paid out over an entire year
(including interim dividends but not including special dividends) divided by the number of
outstanding ordinary share issued.
Formula: Dividend/No. of ordinary shares outstanding
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

DPS

1.3

1.14

3.25

0.7

1.4

1.3

3.5

3.25

3
2.5
2

1.5

1.4

1.3
1

1.14

1.3

0.7

0.5
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
As we can see from graph, in the year 2010, the DPS for the whole industry stood at
Rs. 3.25 per share out of Rs. 7 earned per share which was highest of whole period. The
difference per share is retained in the business.

57

7. P/E Analysis
The price-earnings ratio is the ratio for valuing a company that measures its current
share price relative to its pre-share earning
Formula: - Market value per share/ EPS
Year

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

P/E
Ratio

12

10.8

5.89

3.77

5.25

5.29

4.71

6.6

7.17

1.85

14
12
10
8
6
4
2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
From the above graph we can see that P/E i.e. profit earnings ratio of industry was
highest in 2016 with Rs. 12 which has shown growth compare to previous year. In 2007 P/E ratio
was lowest having Rs. 1.85.

58

8. Sustainable growth rate


The sustainable growth rate is the maximum rate of growth that a firm can sustain
without having to increase financial leverage or look for outside financing. The SGR is a measure
of how large and how quickly a firm can grow without borrowing more money.

Formula: G= b X r
Where, b= retention ratio (i.e. 1- payout ratio)
R=Return on Equity

Year

Retentio
n Ratio
(b)

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

0.82

0.90

0.94

0.95

0.92

0.92

0.79

0.86

0.88

0.89

10

11

14

14

12

18

18

4.92

5.4

7.52

9.5

10.12

12.88

11.06

10.32

15.84

16.02

ROE (r)

Growth
Rate (G)

59

18
16
14
12
10
8
6
4
2
0
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Interpretation:
As we can see in the above graph, growth rate for the Health care industry is
fluctuating since last five years. It was highest in 2007 i.e. 16.02% because ROE was highest.
From year 2012 & 2016, it was declining and it ends to 5%.

60

So the above whole chapter was about calculating different key financial ratios of a whole
industry. This shows relative performance and tables and charts were used to make the
interpretation more effective and simple.

In the first part, we have calculated two ratios under profit margin analysis. They are viz.
Gross profit margin, net profit margin.

In the second part, we have calculated leverage ratios i.e. basically three: Debt ratio, Debtequity ratio & Interest coverage ratio. This helps to judge the long term financial position of
the firm. These ratios indicate funds provided by owners & lenders.

In the third part, we have calculated profitability ratio as a part of profitability analysis. They
are basically two: ROE & ROI. These ratios measure the overall performance &
effectiveness of the firm. Apart from that, they shows the short term solvency.

In the fourth part, we have carried out Du Pont analysis to show the combined effect. This
analysis depicts an industrys performance in terms of shareholders return.

In the later part, we have calculated EPS, DPS, P/E ratio & Sustainable growth rate
separately.

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6. Industry Analysis

62

6.1 PESTEL Model

What is PESTEL model?


A PESTEL analysis is a framework or tool used by marketers to analyze and monitor
the macro-environmental (external marketing environment) factors that have an impact on an
organization. The result of which is used to identify threats and weaknesses which is used in a
SWOT analysis.

Political
Govt. stability
Taxation policy
Foreign trade
regulation
Social welfare policies

Economical
Business cycle
GNP trends
Inflation
Money supply
Disposable income
Unemployment

Sociocultural
Population
demographics
Income distribution
Social mobility
Lifestyle changes
Attitudes to work and

Legal
Competition law
Employment law
Health and safety
Product safety

The
Organizat
ion

Technological
Govt. spending on
research
Govt. and industry focus
on technology effort
New
discoveries/developments
Speed of technology

Environmental
Environmental
protection laws
Waste disposal
Energy consumption

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1. Political Factors
Being one of the largest democracies in the world, India runs on a federal form of
government. The political environment is greatly influenced by factors such as governments
policies, politicians interests, and the ideologies of several political parties. As a result, the
business environment in India is affected by multivariate political factors. The taxation system is
well-developed and several taxes, such as income tax, services tax and sales tax are imposed by
the Union Government. Other taxes, such as octroi and utilities, are taken care of by local bodies.
Privatization is also influenced and the government encourages free business through a variety of
programs.
2. Economic Factors
The economy of India has been significantly stable, since the introduction of the
industrial reform policies in 1991. As per the policy, reductions in industrial licensing, liberalization
of foreign capital, formation of FIBP (Forum for international trade training) and so on, has resulted
in a constant improvement of Indias economic environment. The country registered a GDP of
$5.07 trillion in 2013 following a further improved GDP growth rate of 5% in 2014 as compared to
4.35% in 2013. By which the disposable income of the people was increase and they can
3. Social Factors
The social factors refer to any changes in trends which would impact a business
environment. For instance, the rise in Indias ageing population is resulting in a considerable rise
in pension costs and increase in the employment of older workers. India has a population of more
than 1.2 billion people with about 70% between the ages of 15 and 65. Therefore, there are
structures with percentages according to age. These structures contain varying flexibility, in
education, work attitudes, income distribution, and so on. Implication of social factor is to rise the
income level of the people, standard of living improve, which is the positive signs for the corporate
hospitals to increase the no. of consumers.
4. Technological Factors
Technology significantly influences product development and also introduces fresh
cost-cutting processes. India is served with both 3G and 4G technology which has facilitated
several of their technological projects. Furthermore, the country also possesses one of the
strongest IT sectors in the world, promoting constant IT development, software upgrades and
other technological advancements. Recently, India has also attempted to launch their satellites
into space. Implication of technology is to enhancing the productivity of the hospitals. Nowadays
by using mobile person or doctor can recommend to the patient.
5. Legal & Environmental Factors
In the recent past, a number of legal changes have been implemented in India, such
as recycling, minimum wage increase and disability discrimination, which has directly affected
businesses there. However, when it comes to environment, the quality of air in India has been
adversely affected by industrialization and urbanization, also resulting in health problems. As a
64

result, there have been establishments of environmental pressure groups, noise controls, and
regulations on waste control and disposal.

6.2 Michael Porters Five Forces Analysis


Definition
Porters Five Forces analysis is a framework to analyze the characteristics that affect competition
within an industry. The analysis is best suited to study industry competition, but it can also help
companies establish a business strategy. The less competitive an industry, the higher the potential
to earn profits in that industry. Inversely, competitive industries work to drive down the potential for
any business to make money.
The Five Forces model has three components that measure competition. External forces include:
intensity of existing rivalry, threat of substitutes, and threat of new competitors. These forces are
out of the control of the subject company, whereas, internal forces (bargaining power of suppliers
and bargaining power of customers) are a direct result of the subject companys decisions. The
combination of these forces determines the level of competition that will affect the subject
company.

65

The Five Components of Porters Five Forces Model is Listed Below:

Intensity of existing rivalry (external): This is usually the most important determination
of competitive forces. It gauges the level of competition between rivals that compete directly on
prices and quality. Examples include: low exit barriers and low storage costs.

Threat of substitutes (external): The availability of substitute products increases the


chances that a business will lose customers; thus, substitution risk lowers profitability. Examples
include: limited number of substitutes and high cost of switching to substitutes.

Threat of new competitors (external): New competitors are often drawn to an industry
because of the opportunity to make profits. When new competitors enter markets, they become
rivals to existing market participants, which tends to lower the profitability of all market participants.
An increase in competition lowers profits with all else staying the same. Examples of the external
component include: patents limiting new competition and industry requires economies of scale.

Bargaining power of suppliers (internal): The more pressure suppliers can exert on a
company, the more bargaining power they have over that company. Bargaining power generally
increases profitability for the party that exerts it. Examples that affect bargaining power to
suppliers include: volume is critical to suppliers and there are diverse distribution channels.

Bargaining power of customers (internal): The more pressure customers can exert on
a company, the more bargaining power they have over that company. Bargaining power generally
increases profitability for the party that exerts it. Example that affect bargaining power to
customers include: limited buyer choice and large number of customers.

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Threat of new entrants

Bargaining
Power of
Consumers
Consumers have
little power and

High capital requirements in


order to build hospitals only
allows serious players in the
sector
New entrants from competitor
Trust hospitals (St. Marys
Nursing)
Non-profit hospitals

Rivalry among Competitors


Hospitals face less competitive
rivalry because there are usually
not many hospitals in a given
area and most people are brought
to nearest hospital or where they
know a doctor

Threats of Substitutes

Home care and natural treatment


Family doctor
Small hospitals
Primary health center
All alternative therapy ( Ayurveda,
Homeopathy etc)

67

Bargaining power of
suppliers
Hospitals face some threat
from medical
equipment
companies
as they could
choose
not to sell their
equipment, but there are a
fairly large
number of
suppliers available

6.3 SWOT Analysis


SWOT analysis is an acronym for strengths, weaknesses, opportunities,
and threatsand is a structured planning method that evaluates those four elements of
a project or business venture. A SWOT analysis can be carried out for a company, product, place,
industry, or person. It involves specifying the objective of the business venture or project and
identifying the internal and external factors that are favorable and unfavorable to achieve that
objective. Some authors credit SWOT to Albert Humphrey, who led a convention at the Stanford
Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune
500 companies. However, Humphrey himself did not claim the creation of SWOT, and the origins
remain obscure. The degree to which the internal environment of the firm matches with the
external environment is expressed by the concept of strategic fit.

Strengths: characteristics of the business or project that give it an advantage over others
Weaknesses: characteristics that place the business or project at a disadvantage relative to
others
Opportunities: elements that the business or project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or project

Internal and External factor


SWOT analysis aims to identify the key internal and external factors seen as important
to achieving an objective. SWOT analysis groups key pieces of information into two main
categories:

Internal factors the strengths and weaknesses internal to the organization


External factors the opportunities and threats presented by the environment external to
the organization

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SWOT Analysis in Health-care Industry


Strengths:
Increasing a large supply of qualified doctors.
India has a strong presence in good quality and advanced healthcare. We also have a high
success rate in operations.
Doctors reputation on the international front is very high.
Medical Tourism

Weakness:
Delivering healthcare in India is costly.
We have a limited access to life saving medicines.
A normal middle class family cannot afford the specialty healthcare.

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Opportunities:
Healthcare industry has good support from the government.
Major pharmaceutical companies to choose India as the preferred hub for their global R&D
and manufacturing operations.
The growth of middle class in the country has resulted in fast changing lifestyles in urban
and to some extent rural centers. This opens a huge market for lifestyle oriented drugs,
which has a very low contribution in the Indian markets.

Threats:
Primary Health infrastructure is the responsibility of the government.
Cost of discovering new drugs is very high.
Trust hospitals (St. Marys Nursing)

70

7. Futuristic scenario of Healthcare industry


Future Trends in Healthcare Industry in India
Growing population, increasing affordability, comparative cheaper treatment costs as opposed to
the west and medical tourism thereof, increased health insurance penetration, increased patient
awareness, out-of-the-box unconventional thinking by the healthcare players for better operations,
government opening up its arms to PPP and even providing tax holidays will be the key factors to
look out for which would drive the future of healthcare in India.
According to recent studies conducted, the customer's (patient) aspirations are fast changing.
Customers are growing more aware of their health needs, demand quick response, less waiting
times, and above all - demand nearness of the healthcare unit to them.
Customers though now demand better quality care; they however now do not want to travel much
as in earlier days. And if you notice, the billing and pricing though important, is not a very high
priority now as insurance reach is getting stronger (to the tune of 40 per cent among patients
visiting a urban hospital). If this is the window to the future of healthcare, then it leaves immense
opportunity for existing hospitals across the country to revamp and re-organise in order to woo
back their immediate local drainage population as the competition would heat up soon. The
patients would have a lot to choose from, now being insured. As per various studies including a
report by IDFC, and Mc Kinsey, Indian Healthcare industry will be worth $125 billion in the next
five years. Public spending is likely to increase beyond 20 per cent, there is room for everyone in
the organised private healthcare sector.
The entities who have noted this advantage to name among the other few are Apollo and Fortis
with its cumulative market cap of around $ five billion and may be considered as a reflection of the
healthcare scenario of the present and future of Indian healthcare.
India presently has a bed deficit of approximately 30 lakh beds as per the WHO recommendation
of four beds per 1000 population. Considering even a 250 bedded hospital on an average, the
country would need 12000 hospitals in the near future. As almost 80 per cent of this would be
fulfilled by the private players, a huge rise in IPO's and premium commanding players in the arena
would flutter bringing in interesting times for the healthcare industry.
Recent spurt in Public Private Partnership(PPP) projects, and thrust on quality by the government
sector and its demand (& mandate in some areas) on NABH and ISO, a lot of consultancy
business is abuzz with the projects galore in the accreditation and QMS field. India to its credit
already has one government hospital NABH accredited and many are in the pipeline. With CGHS
making NABH mandatory for care and hospitalisation cost reimbursements, there is hectic activity
seen in hundreds of hospitals waking up to the long due need for quality healthcare and applying
for the coveted quality mark.
The trend is on a steep rise, and it is just a matter of time when the government launches patient
awareness on JCI,CAP,NABH quality in full swing. This would make the patient demand at least
an ISO QMS certified hospital if not NABH.
Good times ahead for healthcare consultants in every sphere be it new projects or existing.
There are various other trends observed which will be discussed in the article ahead, but would
discuss challenges and opportunities before embarking on the same which ultimately is linked to
the justification on the future trends seen.
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Challenges
High capital costs:
Depending on the region and real estate costs, an average hospital requires capital infusion of Rs
40 lakhs to a crore per bed (& even more). Industry estimates suggest that any hospital with
capital costs of more than 50 lakhs per bed has high gestation period and even may be unviable.
Land and building together account for almost 40 per cent of the total project cost and affects the
viability depending on the resulting per bed cost.
Medical equipment:
Contributing to almost 40 per cent costs in a tertiary setup, the medical equipment though cutting
edge at the time of purchase poses the threat of inevitable obsolescence within five to seven years
of setup. This problem is compounded by the fact the most of such equipment is imported and
very few local reputed manufacturers exist. This will lead to apportioning to higher treatment costs
and will further lead to lesser competitive edges and low utilisation rates resulting in undesired
operating margins.
Human resources:
As Dr Prathap Reddy puts it, "the biggest challenge for him and Apollo is filling the void of human
resources". The fast-expanding domestic healthcare industry is the third largest employer, but is
severely short of manpower, according to him. As per ministry of health, there is a shortage of
approximately half a million doctors, a million nurses and the deficit needs to be filled in the next
five years. Such shortage will lead to exponential salary hike demands, and further lead to high
patient care costs. With organised sector being the preferred choice now, there will be a huge
demand even for the skilled and quailed health administrators to run the show. Considering one
skilled and quailed administrator is required for every 50 employees, there would be a requirement
of almost 50000 such healthcare professionals in the near future.
Highly regulated environment and unrealistic stringent norms and restriction of entry to the private
entities in the field of medical education has led to further deficiencies in terms of number of skilled
professionals being released for intake by various hospitals.
Conventional models of business:
Rarely an out-of-the-box idea of running a healthcare business is seen. Recent niche segments of
single speciality centres (for eg. - focused on OBGY or other specialities (Cradle etc) )have been
very few. Even in the public health sector, millions of square feet of space is left unutilised,
expensive equipment illmaintained and lack of skilled professionals adding to the -woe, still do not
find adequate initiatives happening towards outsourcing or even PPP.
Almost 90 per cent of private sector in India is run under the unorganised sector. The clinical
establishment bill also has faced immense opposition and a professional healthcare consultancy
firm guided healthcare business is not still seen frequently.
The conventional model would need to be broken to mitigate the presently seen long gestation
periods of five to 10 years of which almost three years are spent in project conceptualisation to
commissioning.
The conventional model of healthcare business would need to change to bring in untapped
opportunities, operational efficiencies and better profitability. This would also attract better private
equity which is now diverted to more lucrative industries.

72

In the public healthcare sector the infrastructure is provided based on the size of the population
instead of epidemiological profile. This many time results in under-utilisation of infrastructure, and
ultimately not meeting the demands of the local population and drainage.

Opportunities
Population:
Many would consider that the massive population of India would be a bane. But it has turned out
to be an immense business opportunity across industries like telecom, broadcast and healthcare.
The 1.17 billion population of 2009 is projected to reach 1.33 billion in the next 10 years. Of which
almost 60 per cent of population is in the 15-64 year age group - which is the active earning
population and will primarily drive the industry, especially the healthcare insurance industry which
will make healthcare accessible over a period of time to majority of the population.
As India 'shines', and we chant 'Jai ho', the disposable income of Indian families has increased by
a whopping 70 per cent since 2004 and is growing at a pace of 10 per cent ever year.
This will lead to increased demand for good quality healthcare even at a premium.
Insurance:
It is estimated that the penetration of health insurance in India is only 2 per cent of the population.
However this figure is expected to rise to a penetration of almost 20 per cent in the next five years
keeping in mind the high growth seen in disposable income of the Indian families. Though this
figure is the country's average, the percentage of insured visiting urban private setups even now is
in the range of 20- 60 per cent of the hospital admissions. With better government health schemes
surfacing for the poor, excellent example being the Aryogyshree, National Rural Health Mission
and kinds, the upkeep of the poor is also not left behind.
Comparative low costs and Medical Tourism:
As per industry studies, almost five million foreigners had availed treatment in Indian healthcare
setups by 2008. With surgical cost almost one tenth in western worlds, the estimated 15 billion
dollar medical tourism industry will only grow further.
This has led to the creation of health cities and medical tourism hub. Now with immense support of
the Indian tourism ministry and its dedicated medical arm, the medical tourism industry in India will
grow leaps and bounds.
Budgetary incentives and PPP:
With various tax incentives thrown in by the finance ministry for the healthcare sector and various
states realising to the fact that PPP is the best way to bring in quality healthcare at no further costs
to them, a huge spurt of activity is seen in terms of new hospital projects launched and PPP
initiatives concluded across the country.
The future
Breaking the conventional model of business: The coming years will see a great out-of-the-box
thinking by the strategists in the field of healthcare, beginning with the way healthcare is delivered.
To begin with, a rise in retail clinics, single speciality, secondary and tertiary care centres are seen
coming to the fore including the recent examples of NOVA day care, BEAMS & Apollo clinics.
Operations and management contracts are being handed over to outsourced partners and the
recent example of FORTIS managing SL Raheja is the best I can cite. There are unheard smaller
O&Ms run across the country now which will soon become very popular.
The recent trends also show how the hospitals have become quality conscious.Reputed hospitals
like Wadia,Continental,Apollo, and Masina in central and south Mumbai and others across the
country have hired a reputed healthcare consultancy firm to do a quality gap analysis and help
them streamline operations and management and suggest ways to bring about better
sustainability.
73

The tier 2/3 cities have suddenly become attractive to the healthcare players, especially because
of the tax sops and increasing disposable incomes among Indian families across the country and
dearth of quality healthcare infrastructure in these locations.
Specially focused on medical tourism, health cities are audaciously being designed and executed
and hospitals with bed strengths of 1500/2000 which were never heard in the private domain are
now coming to light.
The shift is also seen towards Brownfield's and JV for a quick entry in the target area, and the
healthcare sector has been abuzz with M&A activities of FortisWockhardt, and even acquisition of
PPP SPVs in the recently seen Hiranandani FORTIS-Navi Mumbai Municipal Corporation superspeciality project.
Once unheard of, now the non-core operational aspects including laundry, kitchen, housekeeping,
security, all are being outsourced, and the primary focus is put on the hard core patient care. Even
revenue centric departments like imaging, laboratory and pharmacy is being outsourced. Recent
examples of Piramal diagnostics running imaging centres for hospitals can be cited. The trend is
now seen even in the public health units which have outsourced its imaging, kitchen and other
services. Navi Mumbai Municipal Corporation is the best example which outsourced its imaging
department, kitchen and housekeeping.
Telemedicine and remote diagnosis is seen as a rising trend, as part of outsourcing model.
The earlier model of hundreds of visiting doctors being empanelled by the hospital is also slowly
fading away and the full time practice is taking a preference in choice of clinical operations.
Kokilaben-Andheri or HiranandaniPowai and even the recent Seven Hills-Marol have opted for a
complete, or a majority of specialities to have full time consultants on board who do anywhere
from 80 to 100 per cent of the hospital patient volumes in the hospital. This is giving an edge to the
hospital in terms of streamlining of desired quality, training and patient satisfaction which is very
difficult in terms of part time visiting doctors who do not have allegiance to one hospital and may
not adhere to the mission of the concerned hospital. This also attracts such specialists even to far
of locations as major volumes will be guaranteed in a long run promising better prospects to these
professionals. These hospitals therefore could attract skilled and experienced professionals who
were already doing well abroad.
With quality standards in JCI,NABH introduced for wellness and dental centres, and a huge
demand from medical tourists for the same, a chain of such centres will be seen in the near future.
Moreover,with patient awareness increasing the patients not hesitating to take 'second opinion'.
Recent opening of 'specialised second opinion centre's have opened and more could be seen in
near future.
Franchising models followed by both the public and private, but noticibly by the governments of
various states especially in Gujrat, Bihar and Jharkand by partnering with NGOs and individual
doctors to provide affordable and quality healthcare on pay per service model and other incentives
has proved to be mutually beneficial to all stake holders.
In the private sector, leading healthcare entities have been extending their brand name on a
royalty/franchise basis to interested partners to leverage on the brand and attract patients. This is
mutually beneficial to both the provider (he gets more patients because of brand) and the brand
provider (they earns royalty without any capital inflow)
A rising trend is seen in religious centric hospital trusts coming up, but which are of world class
infrastructure. The likes of PAKH, Saibaba Trus etc. This enables the trusts to keep their
commitment to the target society and mankind at large and also brings in higher sustainability due
to continued patronage of the members of the society and devotees.
Health Insurance
Industry gurus always have been suggesting the best governance when the government does not
deliver a product or service, but monitors its quality and ensures that the people get the relevant
service or product through able private players. In this case, government policies are seen to be
74

changing and their role in healthcare is seen shifting from healthcare delivery to financing the
delivery of care. With their launch of health insurance schemes like Rashtriya Swasthya Bima
Yojna, Aroygashree and other similar schemes has tremendously improved healthcare delivery
through private players, the schemes will cover millions of BPL patients in the years to come. The
government will save billions on the capital costs and HR costs by having the private player invest
in the same.
With opening of health insurance to private players, the insurance sector is booming. Especially
with rising disposable incomes, and the highest population being the earning age group of 15-64
years (60 per cent of population), the insurance reach is bound to grow from the present meager
two per cent to 20 per cent as estimated by industry experts. This will bring in demand for better
quality care and a dominant role of insurer on choice of healthcare units for patients in reference to
quality and professionalism.
Patients will have a lot to shop around before choosing the 'right care provider' as he will be armed
with the vital medical insurance.
Trend in keeping their insured clients healthy, have spurted a trend in providing free health
checkups in the policy package so that the clients are detected early for early intervention for
various diseases, especially the life style diseases and thus save on immense cost burdens to the
insurer in the later future in terms of costs towards treatment of their patrons. This will also lead to
a rise in opening of specialised executive health checkup centres as stand alone or in the
hospitals in time to come.
Human resources and medical education
IDFC security studies reveals that there is a clear bias within skilled professionals including
doctors towards the private sector. About 72 per cent doctors are based in tier- cities (mainly
because of lack of incentives, lack of focus on quality standards' and inadequate infrastructure in
the public health sector)
Even then, the private sector finds difficulty in bridging the deficit of manpower. As stated above,
there is a shortage of 1.5 million skilled professionals including doctors and nurses and
administrators. The reason for the same mainly is due to lack of adequate medical education
centres and in adequate numbers. Governments have liberalised the utilisation of AYUSH
practitioners through a GR into mainstream medical care provision specially in tier 2/3 cities, to
bridge their gaps, however the much awaited entry of private players in medical education will
bridge the gap further. With recent opening of numerous hospital management colleges, the gap to
provide able administrators would surely be bridged and more such institutes will be seen
flourishing in the times to come.
PPP activities have been seeing the light of the day by states like Uttar Pradesh(UP) inviting
proposals from private partners to help them setup and run medical and para-medical colleges to
streamline operations, to bring in a professional insight and outlook and further attract the vital
professionals to impart medical education.
Funding and private equity infusion
With the country's healthcare industry poised to grow to 125 billion USD in the next five years, and
only two or three major listed companies with a market cap of less than $ five billion existing, there
is huge potential for many other players to come in to the fray.
With new conventional model of healthcare delivery and for the first time EBITAS in healthcare
reaching the figures of 25 per cent and above in such businesses, venture capitalists and private
equity is hunting for the right partners every day.
A leading consultant having head office in Mumbai and various regional office across the
continent, has revealed that there is a 100 per cent increase in TEV studies, business plan
validations and enquiries for search for JV partners and due diligence.
The growing demand has also attracted a lot of foreign players to venture into the healthcare
industry and are hand-holding the existing Indian players in creating a chain of healthcare units not
just in India, but in foreign locations too.
75

Business related to medical equipment, and devices is also growing at a rapid pace, and with
more number of hospitals in the fray, this industry and the pharma industry will further grow
piggybacking on the rising healthcare demand.
Looking Forward
With the personal disposable income rising by more than 70 per cent and over all income of the
population rising, the demand for better quality in healthcare is bound to exponentially rise. With
the CGHS mandating the requirement of NABH for all reimbursements, and hundreds of hospitals
applying to get the coveted ISQua approved NABH-the mark of international healthcare quality,
this is just the beginning.
There is no doubt that the government too is focusing on improving the quality of healthcare
delivery in its own infrastructure and the promising beginning is seen with a public unit getting the
NABH accreditation in Gujrat and more on the anvil.
With only 20 per cent of healthcare delivery provided through public health units and the
government not intending to spend more on capital expenditure, more PPP projects and private
healthcare initiatives would see the light of the day.
To bridge the immense HR gap, especially in the clinical and professional side, the government is
mooting the idea of corporatising medical education and it is just the matter of time when private
run non-trust based medical education on commercial lines will be seen across the country.
Health insurance sector has never seen better days than today and with what is on the anvil. With
a population as strength, even the present two per cent penetration to a five per cent penetration
would mean millions and billions in business. The projected penetration in the next five to 10 years
is 20 per cent of the population, because the earning population of 15 to 64 year age group
comprises of more than 60 per cent of the total population who can afford health insurance. And
with rising awareness and the acknowledgement that insurance is the way to a healthy life, the
demand for medical insurance will only rise further. Trend reveals that at least in the large
corporations and private organisations including public sector units, insurance is provided as a
norm to all employees. This trend will only substantiate in time to come.
With the increase in population and to bridge the gap of number of beds, hundreds of quality
healthcare units will spring up. However, with economy growing, demand for real estate also
grows and further leads to making real estate capital investments for healthcare expensive and
making operational margins tighter. This will lead to (and already has) in unconventional model of
health care delivery by way of single speciality centres, life style units, retails clinics, to bring in
operational efficiencies and increase the EBITAs. A lot of earlier untapped models will be tapped
and the consumers will have plenty to choose.
With tax sops and other government incentives, more secondary and tertiary care units will open
in tier-2 /3 cities.
With quality standards coming on even in AYUSH and alternative medicine, and India's rich
heritage already attracting a lot of tourists, medical tourism will see a marked boom in years to
come. Health cities with an aim to woo medical tourist is on the rise, and the healthcare players
will leverage on the integrated medicine model by providing Aurveda, Homeopathy, Unani, Yoga
and others along with the modern medicine.
This holistic approach will attract patients from far lands further, because the cost of care is almost
one tenth the western worlds costs.
Technology will play a major role in bringing quality in healthcare, be it better nursing
communication systems, patient monitoring devices or telemedicine to provide low cost diagnosis
to remote patients etc.
Companies like HCL, HP and Microsoft are already investing heavily in healthcare technology and
Google trying to ambitiously woo the consumers for a centralised healthcare database, what is in
store for the future of healthcare is limitless.
Pneumatic chutes, PACS, automated laboratories ,Tableau,tabs ,and other technologies are on
the verge of becoming norms in both public and private
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8. CONCLUSION
For a complex and large country like India, and in the time frame available it has not been possible
in a first national profile to establish a comprehensive assessment of healthcare industry. For this
first version of the profile healthcare sectors to be studied in depth and already a number of
conclusions arise from analysis of the situation.
By reviewing history and some introductory information about the word Hospitals and healthcare
industry as a whole, we came to conclude the healthcare industry is a very wide subject and we
have tried to reach in each area related to healthcare industry.
We have seen the broad classification of the Healthcare with respect to different categories. We
also had seen classification of Indian hospitals. From innovation potential provided, it can be
concluded that there is lot of scope for the hospital and healthcare sector to innovate in their
services and facilities to be provided for high customer satisfaction. We also mentioned industrial
and trade policy of healthcare industry which talks about different foreign and trade policy adopted
by government for healthcare industry and how it affects any hospital in India. The healthcare
industry contributing to the national income is in such a manner where economic implication of
healthcare industry and hospital sector can be seen very clearly from each angle and aspects.
Marketing and management control of a particular service provider in a particular field is a too
difficult when it comes in to practice but Indian healthcare industry has proved that they have been
using all tools of marketing to promote for the sake of progress of health sector. Use of social
media and internet are key factors for their marketing activities.
From the financial analysis of the healthcare industry it can be concluded that there is full
completion in the healthcare industry and because everyday technology innovation taken place in
the market its required lots of investment.
Hotel industry inclusive of so many small and large players like apollo hospital, zydus caddila, who
are contributing most of the revenues by rendering services to the different class of the people at
same level of satisfaction and there by rewarded for high level of incomes for further expansion
and development. There is a wide scope for the development and expansion of the Healthcare
Industry.

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9. Bibliography
Books:
Pandey I M (10th edition): Financial Management, Vikas Publishing House,
New Delhi.
Kotler Philip (14th edition): Marketing Management,Prentice Hall publication
,New Delhi

Websites
www.wikipedia.com
www.investopedia.com
www.wikiwealth.com
www.ibef.org
www.demand analysis of healthcare industry.com
www.moneycontrol.com
www.industry analysis of healthcare industry.com

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