Indian Healthcare: Opportunity and Solutions

1. Indian Healthcare: Opportunity and Solutions 07 May 2011

2. Overview of the presentation • The Indian healthcare -- landscape and change drivers • Key imperatives and potential solutions

3. Indian Healthcare – Landscape and change drivers

4. 1 4 12.0 1 2 Doctors per '000 2.6 Nurses per '000 1 0 8 5.0 6 4.1 9.4 1.2 4 1.9 2.5 2.4 1.3 0.6 0.7 2 3.8 1.4 2.8 1.8 1 1.3 0 World avg USA Brazil China Malaysia India Snapshot of Indian healthcare industry Beds per 1000 population in India Industry composition 64% >200 beds % beds 36% 1% 5% 100-200 beds 10% 30-100 beds PHCs % of institutions <30 beds Govt. hospitals & CHCs Source: Data on Mortality & Burden of Disease, WHO, 2002 Doctor and nurse density Value: USD Bn 116 96 48 2010 2015 Source: Global atlas of the health workforce [online database]. World Health Organization, 2008. Period of data is 2000-2006. Source: EY Analysis

5. Indian healthcare in its current state is plagued by problems with the key roadblock being the lack of propensity to pay for healthcare Prevalence Provider Propensity • Highly inadequate infrastructure - Bed density is less than 1/3rd of the world average & less than ½ that of China • Inequitable distribution of infrastructure - 6 states with 37% of the Indian population have hospital beds per ‘000 less than 2/3rd of national average • Only 35% of the population has access to modern medicine • 17% of world’s population has 20% of world’s disease burden • Disease burden per 100,000 is 85% more than that of China and 38% more than that of Brazil • Disease burden for communicable diseases 3 times that of Brazil & 5 times of China • Pre-dominantly acute (~50%), disease burden with a rapidly growing prevalence of chronic diseases • Low expenditure on health • Per capita spend on healthcare ($116) is ½ of China and 1/7 of Brazil • 64% of health expenditure is out-of-pocket – 4 times the world average • Insurance covers only 12% population • In addition, monthly per capita expenditure of the Indian population is low making affordability an issue – 12% ailments remain untreated >$43 10.6% $20 to 43 31.6% % urban popn. MPCE for urban $7 to 20 55.7% 2.0% < $7 Source: EY-FICCI “Fostering Quality Healthcare for All” 2008

6. To summarize, current characteristics of healthcare in India • Largely a “Sick-care”industry • Characterized by high disease burden • Serviced by an inadequate and highly fragmented provider infrastructure • Catering to a population that has to spend from out of its pocket for most of its healthcare needs

7. However, the industry is at throes of a transformation driven by three key trends 1 Growing middle class & higher spend of middle class on healthcare Healthcare spend – Share of wallet Low Medium High Income Level Income in Rs.’000 Share of wallet 2 Changing mindset from ‘sick care’ to ‘healthcare’ >1000 • Testaments to this changing mindset are – • The increasing penetration of private insurance – CAGR of more than 30% • Increase in ‘share of wallet’ for healthcare by 30% in the coming 5 years 200 to 1000 Middle class 50 mn 600 mn < 200 Healthcare share of wallet 2025 3 2005 Emergence of healthcare as a political agenda Source: MGI & EY Government outlay for healthcare to increase from 1% to 3% of GDP BPL population meant to be a significant beneficiary thus driving ‘healthcare inclusiveness’ National immunization programs to expand

8. Unleashed demand will require an overhauling rather than incremental changes in healthcare India would need to add 1.75 Million hospital beds, 0.7 Million doctors and 1.6 Million nurses by the year 2025 No. of doctors (Million) No. of beds (Million) No. of nurses (Million) 2.3 x 2.2 x 2.9 x (Assuming current doctor to nurse ratio) Creation of the required infrastructure would require an investment of ~ USD 90bn over next 15 years Source: EY FICCI Healthcare report

9. Imperatives and solutions

10. Key imperatives 1 Reduce demand on curative care – primarily secondary and tertiary care 2 Focus on building capacity and capability 3 Undertake initiatives to enhance access – geographical and financial

11. Potential solutions – the “market shapers” and the “game changers” Game Changers Market Shapers • Emphasis on preventive care and wellness • Strengthening of primary care • Facilitative changes in norms regulating medical education and practice in India to generate additional resources from existing infrastructure • Focus on tier-II cities for expansion • Move to day care surgeries • Focus on healthcare inclusiveness driven through health insurance • Creation of healthcare infrastructure through “Public Private Partnerships” • Leveraging IT to enhance access to care • Training and empowering healthcare workers to reduce dependence on MBBS doctors and specialist

12. Market shaper – I, IIStrengthening of primary care system, promote health • Strengthening of rural healthcare infrastructure by government • Launch of NRHM in 2005 with focus on: • Creating community health workers (ASHA program): ~ 700,000 enrolled till date • Primary care infrastructure upgradation/ creation • Decentralization of healthcare requirement planning • Initiatives to create awareness, early detection and treatment of non-communicable diseases, e.g. diabetes, dialysis, cancers, strokes, cardiovascular diseases • Emphasis on promoting health • Focus on health determinants: Access to safe drinking water, sanitation including waste disposal systems, controlling environmental pollution, minimal level of nutrition safety, and education • Need for a coordinated approach for securing of these basis entitlements – “Right to Health” by Assam government

13. Market shaper - III Facilitative changes in norms regulating medical education and practice in India • Facilitative changes in norms regulating medical education and practice in India, e.g. Allowing capacity addition to existing facilities • Ceiling for MBBS admissions has been raised from 150 to 250 depending on bed strength, bed to student ratio changes • Teacher-Student ratio has been relaxed from 1 : 1 to 1: 2 in medical colleges Facilitate creation of new infrastructure • Relaxation of land requirement norms (from 25 acres to 20 acres, special concession for NE states and some UT, major cities 10 acres) • Rationalization of infrastructure requirements setting up new medical colleges • Relaxation of bed strength and patient occupancy norms • Companies registered in India permitted to set up medical colleges

14. Metro Class I/IA Class II-IV Rural Market shaper - IVIs access or affordability the key to tap these (Tier 2 & rural) markets? Current market split (pharma) No. of towns/villages Population (mn) Households with high-medium purchasing power 35 108 (11%) 27% Tier 1 39 359 88 (9%) 34% Tier 2 3792 89 (9%) 11 20% Rural 593,807 743 (72%) 56 19% Metro: >1 mn population, Class I towns: 0.1-1 mn, Class II-IV: 5000 – 0.1 mn, Rural: less than 5000 ; Tier 1 markets: Metros and Class I towns, Tier 2 markets: Class II-VI towns and Rural areas *High – medium purchasing power – Annual income is Rs. 1 lakh and above Source: NCAER, MGI, EY analysis Source: NCAER, MGI, EY analysis Is access or affordability the key to tap these (Tier 2 & rural) markets?

15. Market shaper - VMove towards day care surgeries • Concept: • Number of day care surgeries: US -- 75% of total surgeries, India ~ 40% which can go up to 60% given the current infrastructure • Advantages: • Reduced cost to the patient (can save up to 30% to 40% of typical surgery amount) • Lesser period of stay for the patient and use of high end technology for faster recovery • Lower capex requirement, quicker breakevens, Frees up precious hospital infrastructure (beds) • Can help enhance access

16. Game changer - IHealth Insurance Schemes • Government sponsored schemes for economically weaker sections of society • RSBY – 2.98 crore households covered • Weavers scheme – 18 lacs weaver families • Aarogyasri scheme (AP) – 2.03 cr BPL families • Other states: 13 other states have initiated various models of health insurance schemes in 2008-09 and 2009-10 • Private insurance – growing at a CAGR of 30% • CGHS and ESIS schemes These schemes will make healthcare financially accessible to a large section of population which earlier could not afford it 50% of Indian population can be covered by health insurance in 2015 if formal sector and BPL is given mandatory coverage

17. Game changer - IICreation of healthcare infrastructure through “Public Private Partnerships” • High potential to accelerate access since it can • Overcome Government’s budgetary constraints • Promote entrepreneurial action by private players and accelerate facility creation • Provide quality care at concessional rates to financially disadvantaged and at competitive market prices to others • Key success factors: • Agenda defined by the first “P” – i.e. “Public” • Strong philosophy of partnership - equity, trust and autonomy • Risk sharing framework designed with both public and private players assuming risks that are best suited to them • Normal rate of return on equity with upsides for efficiency for private players • National framework and standard templates for concessionaire agreements

18. A model for PPP in provider care State Reimburses private provider based on agreed upon tariffs Ensures governance and quality of care x% Insurance premium Land Insurance company % Monitoring Agency Indicates share of funding between Centre and State Financial monitoring Viability gap1 funding in form of an annuity for setting up facilities in select non Tier 1 areas y% Quality monitoring Centre Healthcare provider Funds operating and capital expenditure 100% Cess/ Surcharge/ Health tax Provides treatment BPL Population APL Population Stakeholders involved Out of pocket premium – 0% Out of pocket premium PUBLIC SECTOR PRIVATE SECTOR CONSUMER Electronic health cards distributed by government

19. Game changer - IIIUsing technology to improve access to healthcare • Encompasses data-gathering for public health research programs • Tracking of disease outbreaks, epidemics and pandemics • Development of health policy • Design of healthcare interventions Public health research • Efficiency improvement Information and self help Primary care/ remote consults • Using ICT Includes services and applications that support the diagnosis of medical conditions, and the provision of treatment by frontline local medical staff (remotely or at site) Applications promoting wellness, and incentivizing or encouraging individuals to improve their own health Management of long term conditions Emergency care Enhancement of emergency care, in hospitals and elsewhere, through the deployment of mobile technologies

20. Game changer - IIISome business models -- Enabling remote professional Pool of medical experts at central location Skilled health workers equipped with advanced Smartphone Experts can cover more ground – no need to travel Skilled health workers can deal with more problems in consultation with experts Doctor provides health record platform fro free, but charges for the consultation Developer is paid for app and platform End user pays per transaction End user Panel Doctor App Developer Mobile network operator receives fee for video call Payment company Mobile operator Receives transaction fee

21. Game changer - IVSkill upgradation, more active role of non-doctor health workers Overcome Inequitable Distribution • Need to make our health delivery less doctor dependent and more nurse enabled • Nurse to doctors ratio: India (2.5: 1), UK (5:1), US (3:1) • Three years rural medical practitioners/ assistant courses (e.g. Assam and Chhattisgarh) • Inclusion of AYUSH doctors in healthcare delivery specially in underserved areas with necessary skill upgradation Source: WHO World Health Survey 2003, Morbidity, Healthcare and Condition of the aged NSSO 60th Round, “Financing and Delivery of Health Care Services in India”, Background papers of the National Commission on Macroeconomics and Health”, 2005

22. Thank you