The Global Economic Slowdown and Its Impact on the Indian Health Care Industry

THE GLOBAL ECONOMIC SLOWDOWN AND ITS IMPACT ON THE INDIAN HEALTH CARE INDUSTRY

Mrs. Reeti Debnath Lecturer, NSHM College of Management and Technology, Kolkata

Article No: 179 ISSN 0974 – 9497

Year: August 2009 Volume 3, Issue 3/4

Abstract: After several years of robust growth, the world economy is facing some serious challenges in sustaining its brisk pace. As every business sector is affected by the present global meltdown and everybody is talking of slowdown in business, still in India there are few sectors which are expected to grow in this adverse situation and health sector is one of them. Healthcare is one of the largest sectors, contributing substantially to the increase in the GDP and urban employment, and this sector is expanding rapidly. Opportunities in the sector are growing vertically and horizontally. Interest from private players, investors and government encouragement are making the sector extremely lucrative. This article will study the Indian Healthcare Industry in details with a view to reflect the opportunities that exist, the challenges faced, emerging trends and the future scenario of the healthcare service sector in India.

Key words: Indian economy, financial, healthcare, private, growth. Introduction industrial production and financial flows has been extraordinarily rapid. The key The worst ever financial crisis to have difference from previous global slowdowns ravaged the United States since the Great is in the substantial weakening of the Depression of 1930s, has taken a heavy toll financial sectors in the United States and on the world’s largest economy. After Europe, with consequent damaging several years of robust growth, the world implications for credit extension in the economy is now facing some serious global economy. Although there are challenges in sustaining its brisk pace. The increasingly vigorous measures being taken first half of 2008 saw the economies in the United States and Europe to repair the grappling with high global prices of financial institutions and re-start the flow of essential commodities while the second half credit, these have been partial, patchy and was witness to unprecedented financial incomplete distress in the major economies which precipitated highly disruptive capital The global economic slowdown though has outflows from emerging markets followed its epicenter in the United States (US), the by global slowdown of unusual severity and contagion is being witnessed in all major speed. There is a rise in the number of job economies of the world. In fact, all the layoffs and cost cutting. The trajectory of economies of the world are facing crisis to the deceleration in global measures of trade, tackle this global meltdown. The meltdown

has led to shock waves across the world, India, the following sectors will grow inspite with economy after economy gasping for of this adverse situation. breath to survive this financial tsunami. Several countries are experiencing rapid I. Health care contraction in their Global Domestic The Indian healthcare industry has grown Product, rising unemployment levels and an manifold during the last few years. overall slowdown in the pace of investment Healthcare, which is a US$ 35 billion activity. No economy that is open to global industry in India, is expected to reach over trade, finance and other international flows US$ 75 billion by 2012 and US$ 150 billion such as remittances can escape the damaging by 2017. The healthcare industry is effects of such a slowdown.. interestingly poised as it strives to emerge as Globalization has resulted in massive a global hub due to the distinct advantages it economic changes viz. trade liberalization, enjoys in clinical excellence and low costs. expansion of the global market place, The healthcare sector has been playing a key technological changes, improved global role in fuelling the Indian economic telecommunications and improved transport performance which has been stellar with links across borders. A large part of the robust GDP growth. growth in India’s economy is dependent on II. Luxury products the “outsourcing” or “off shoring” of key business processes and software The high and affluent class of society will development activity and related services by not be affected much by global crises even if large global corporations and other their worth is reduced significantly. They organizations. Hence, the global slowdown will not change their lifestyle and will not has affected the business climate within stop spending on luxurious goods. So India and the growth rate of the every sector luxurious product market will not be is experiencing the tremors of the global affected and in fact to maintain the lifestyle recession. IT industries, financial sectors, those affluent will spend more for it. real estate owners, car industry, investment banking and other industries as well are III. M & A & Marketing Consultants confronting heavy loss due to the fall down of global economy. The Federation of Indian As in the current business slow down chambers of Commerce and Industry survival will be the main focus, the (FICCI) found that, faced with the global marketing and management consultants will recession, inventories industries like be called for to reduce the costs and to show garments, gems, textiles, chemicals and the ways to survive and stay in market. jewellery had cut production by 10 per cent Others may join hands to fight with this to 50 per cent. situation together will call for the Marketing & M&A consultants. In a booming market As every business sector is affected by there are growth strategies and M &A present global crisis and everybody is opportunities to advise on. When businesses talking of slowdown in business, still in are cutting back, consultancies will be right India there are few sectors which are there to help clients decide where to wield expected to grow in this adverse situation. the axe. IKON Marketing Consultants reports that in

According to Ministry of Commerce and sector is expanding rapidly. According to Industry’s estimation, the current size of Technopak Advisors in their report – ‘India consulting industry in India is about Rs Healthcare Trends 2008’, Healthcare, which 10000 crores including exports and is is a US$ 35 billion industry in India, is expected to grow further at a CAGR of expected to reach over US$ 75 billion by aproximately 25 per cent in next few years. 2012 and US$ 150 billion by 2017. IV. Media and Entertainment The industry has today become a growth engine for the Indian economy, contributing According to a report jointly published by substantially to the increase in the GDP, the Federation of Indian Chambers of urban employment, to achieve the vision of Commerce and Industry (FICCI), and audit a powerful and resilient India. The increase firm PricewaterhouseCoopers, the Indian M in the number of affordable middle class, & E industry is expected to grow at a rise in insured population, widening demand compound annual growth rate (CAGR) of 18 supply gap, growing number of life style per cent to reach US$ 23.81 billion by 2012. diseases especially cancer, cardiovascular diseases, diabetes and chronic respiratory According to the PWC report, the television diseases, are some of the factors which are industry was worth US$ 5.48 billion in fuelling this growth in Indian healthcare 2007, recording a growth of 18 per cent over industry. Others like wellness programmes, 2006. It is further likely to grow by 22 per fitness programmes, health management, cent over the next five years and be worth and preventive medicine- synonyms of US$ 12.34 billion by 2012. healthcare are growing more and more The current global economic slowdown has familiar with each passing heart beat. A made it a roller coaster ride for the world growing elderly population and rise in economies. Asia / Pacific is experiencing a income levels are also pushing for better deferred impact due to the “domino effect” facilities in the country. of the current crisis. While many other To meet this growing demand, the country industries have been impacted by the global needs US$ 50 billion annually for the next slowdown, the health care industry has 20 years, says a Confederation of Indian displayed resilience and tenacity in Industry (CII) study. India needs to add 3.1 countering the unpredictable conditions and million beds by 2018 to the existing 1.1 reiterating the viability of India’s million, and requires immediate investments fundamental value proposition. of US$ 82 billion, as per the Technopak As a case in point, let us analyze this Advisors report. opportunity that India is most likely to The healthcare sector seen at an significantly benefit from, during this phase infrastructural level covers the providers of of economic slowdown i.e. the health care healthcare at the primary level consisting of sector. facilities for preventive care and basic The Structure of Indian Health Care diagnostic care; secondary care with Industry diagnostic centres equipped with advanced facilities like CT scan and tertiary care. Healthcare is one of the largest sectors, in However, the entire picture of Indian health terms of revenue and employment, and this issues is not at all satisfactory. India, in case

of health care facilities still lacks the Table 1 given below gives a comparison of adequate supply and there is a huge gap important health indicators of India and the between demand and supply at all the levels United States and clearly shows that good of society. There is a yawning divide medical facility still remains beyond reach between healthcare facilities available in for most of the middle class. rural and urban India and in the demand and supply of healthcare services across the country. Table 1: Comparison of Health Indicators of USA and India

Indicators USA INDIA

No. of physicians per 10,000 population 26 6

No. of nursing and midwifery personnel per 10,000 94 13 population

No. of dentistry personnel per 10,000 population 16 1

Infant mortality rate (both sexes) per 1000 live births 6 54

Total expenditure on Health as % of GDP 15.3% 3.6%

No. of hospital beds per 10,000 people 31 7

Source: World Health Statistics, 2009 Though the quality of health care for the Healthcare is said to be the industry of the poor in India is undeniably low, the entry of 21st century. And a golden harvest awaits private players has spurred the development the players in the field even in this time of of the healthcare sector. The private financial crisis. And it is this midas touch of facilities offer advanced technology and the healthcare industry, which prompts procedures on par with hospitals in many new investments to be finalised in this developed nations. The entry of many sector even in the current economic foreign players like Columbia Asia Group, slowdown. Opportunities in the sector are Singapore's Pacific Healthcare, Wockhardt growing vertically and horizontally. Besides and collaborative ventures like that of Max hospitals, other emerging associated Healthcare and Singapore General Hospital segments like healthcare retail, medical (SGH) has contributed for the growth of this equipment manufacture, diagnostic chains, sector. Overall it can be said that the Indian assisted living centres, clinical research, healthcare infrastructure is fast improving day-care ambulatory surgery clinics and with initiatives by the government and the centers for alternative medicine are local bodies increasingly attracting investments. Areas of Opportunity and the Impact of The opportunities presented by the Global Recession on Indian Health Care healthcare sector have made it a major draw Sector for potential investors. The healthcare sector attracted US$ 379 million in 2006 - 6.3 per 4

cent of the total private equity (PE) ayurvedic and other Indian systems of investment of US$ 5.93 billion. medicine. Such unique value propositions attract a large number of foreign tourists The following areas discussed below are the here. According to the Confederation of major areas in the healthcare sector where India Industries (CII), approximately 1, we could expect growth and revenue 50,000 patients arrived in India in 2005 from generation even during this phase of across the globe for medical treatment and economic slowdown. this is expected to increase by 15% each year. 1. Medical tourism:- India has some of the best hospitals and Medical tourism seems to be the new treatment centers in the world with the best buzzword today in the healthcare delivery facilities. Naresh Trehan, executive director market. In India, medical tourism is growing of Escorts Heart Institute and Research at the rate of 30% a year and is expected to Centre, a leading private healthcare generate revenues of Rs.100 billion by 2012 provider, says India has established world- as per the study conducted by CII and class expertise in practices such as cardiac McKinsey, (CBC News, 2004). care, cosmetic surgery, joint replacements As patients throughout the world, cope with and dentistry. The Indian government is rising healthcare costs, the relatively low trying to promote the concept of medical costs of surgery and critical care in India is tourism which will not only serve as revenue projecting India as a favoured destination for earning but also make India as a "global medical tourism. Indian corporate hospitals health destination". excel in cardiology and cardiothoracic Table 2 summarizes the cost of some surgery, joint replacement, orthopedic medical procedures conducted in India and surgery, gastroenterology, ophthalmology, the US and gives an idea as to how transplants and urology to name a few. procedures conducted in India are cheap and Apart from that, India's age old tradition affordable compared to other advanced provides a holistic health care by connecting countries of the world. mind, body and spirit with yoga, meditation, Table 2: Cost Comparison of Various Medical Procedures–USA and India (US $)

Procedure COST IN USA (US$) COST IN INDIA (US$)

Bone Marrow Transplant 2,50,000 69,000

Liver Transplant 3,00,000 69,000

Heart Surgery 30,000 8,000

Orthopedic Surgery 20,000 6,000

Cataract Surgery 2,000 1250

Source: - www.medical–tourism-india.com

Even if one includes the airfare costs of a such as pap smears, mammograms and patient plus a companion and five star colonoscopies,” said Ted Epperly, MD, accommodation costs in India, the cost of AAFP president. “They also are failing to getting treated in India is still significantly return for recommended follow-up visits or lower. Hospitals such as Apollo, Escorts, refill medications that are vital to managing Hinduja, Max Healthcare, Manipal Hospital their chronic conditions. and Fortis Heart Institute are already becoming premier destinations for foreign Mr. Verma, Vice President of the Medical patients from Bangladesh, Mauritius, Egypt Tourism Council of Maharashtra, feels that and other middle-eastern countries. as a consequence of recession many people Additionally, Indian hospitals are beginning in the West will no longer be able to afford to offer combined and complete packages insurance, and thus medical tourism will that include medical treatment, health also take a beating as people will try and recuperation, relaxation, recreation and prioritize their healthcare needs and wait for some amount of tourism within India. economic conditions to get better. However, Hence, many foreign patients who are now Dr. Hari Prasad, CEO, Apollo Hospitals, coming to India for treatment are beginning Hyderabad feels that medical tourism will to spend 2-3 weeks at various tourist not have any negative impact on Indian destinations, after their medical treatment. healthcare. “We believe that there will be no impact in the Indian environment and on the Healthcare in India is expected to continue global platform, the impact will be positive. to grow strongly and reach newer heights With the dollar strengthening against the even in the wake of the global meltdown. rupee we see more patients coming into the Some experts comment that economic country for advanced healthcare,” he slowdown is actually turning a boon to India predicts. considering the patient inflow from other countries, while others feel that there can be A whole previously untapped market of a negative impact too because of recession. insured US patients has opened up for Indian hospitals giving medical tourism a A national survey conducted by the whole new value. Previously, foreign American Academy of Family Physicians patients were traditionally not covered under (AAFP) confirms the negative and medical insurance outside their home potentially serious impact the recession is countries but now with the recession well having on Americans’ access to health care. under way and corporate America seeking to The national poll of AAFP members shows cut costs by outsourcing treatment overseas, that nearly 90 percent of the family India has occupied centre stage. A recent physicians surveyed reported their “patients report by Deloitte Center for Health have expressed concerns recently over their Solutions on medical tourism highlighted ability to pay for their health care needs.” In the fact that health care costs in the US are fact, 58 percent said they had “seen an increasing at 8 percent per year. It also says increase in appointment cancellations.” with a growing number of healthcare Furthermore, 60 percent reported they had facilities in other countries now accredited “seen more health problems caused by their by Joint Commission International (JCI), patients forgoing needed preventive care.” perceptions about quality have undergone a The survey found that patients are canceling radical shift. In November 2008, Wellpoint, or deferring important preventive screenings the largest health benefits company in the 6

US, announced a new international medical partnership (PPP’s), opportunities are tourism product aimed at helping recession- emerging for foreign companies to create struck American corporates cut their super-specialty hospitals in collaboration healthcare costs. The significant thing about with Indian corporations. this product is that members can opt for elective procedures at healthcare facilities in For instance, Wockhardt Hospitals Group India. Another significant event that has partnered with Harvard Medical occurred was the recent tie-up between International to create a chain of super South Carolina-based Companion Global specialty hospitals in India. There also is Healthcare, a medical travel facilitator, with strong demand for tertiary care hospitals, Wockhardt Hospitals in Bangalore and which emphasize the treatment of lifestyle Mumbai which ensured that those insured diseases, focusing on specialties such as with BlueCross, Blue Shield who is tied up neurology, cardiology, oncology and with Companion Global Healthcare, can orthopedics. now exercise an option of getting treated at In addition to the need of physical Wockhardt Hospitals. infrastructure, India faces a huge shortage of According to Ankur Bharti, consultant, trained medical personnel, including Technopak Health, “Cost-cutting would be doctors, nurses, technicians and even the main reason why more international healthcare administrators, who may be more patients would come to India, especially willing than doctors to live in rural areas from the US as medical costs are four to five where access to care is limited. Such times lesser here,” he said. challenges present an opportunity for both domestic and foreign players in the form of 2. Medical infrastructure:- “medical training & education”. This could provide additional opportunities for private Medical infrastructure forms an important sector providers or public-private portion of the healthcare pie, and according partnerships. The communications to the World Health Statistics Report 2009, technology that enables telemedicine could the number of hospital beds per ten thousand also be used to deliver training courses. population for India in 2008 stood at 7 as against an average 22 of comparable 3. Medical equipment:- countries (like China and Thailand). The report thus points out that in India, an Another area of opportunity is medical enormous amount of private capital will be equipment. A recent FICCI-Ernst and required in the coming years to enhance and Young (E&Y) report titled, “Opportunities expand India’s healthcare infrastructure to in Healthcare Destination India,” stated that meet the needs of a growing population and currently the medical equipment industry is an influx of medical tourists. It is estimated around $2.2 billion and is growing at 15 per that 450,000 additional hospital beds will be cent per year. It is estimated to reach $5 required by 2010—an investment estimated billion by 2012. 65 per cent of the medical at $25.7 billion. The government is expected equipment is imported; hence this is a key to contribute only 15-20% of the total, area for forging partnerships across borders. providing an enormous opportunity for The lack of liquidity resulting from the private players to fill the gap. In addition to current economic slowdown may perhaps participating in infrastructure public private affect the market for medical devices 7

(particularly those that are very expensive) with the ability to have a strong sales, because hospitals may not wish to commit distribution and support network. In addition large funds which could be better utilised in to this, engineering excellence, creating patient pull. However, the effect cost effective labour, increasing emphasis hasn’t percolated yet as most medical on intellectual property rights and most equipment companies deny feeling any importantly a fast growing domestic market recession blues. K. Mohanlal, Managing makes India an ideal manufacturing base. Director, Esaote India, a leading Also this is the perfect opportunity for a manufacturer of ultrasound imaging, insists, number of local players to evolve and “We have not seen the impact yet. But if this establish themselves due to cost advantages. recession period continues then there will be some impact in this industry.” However, the 4. Health Insurance company does admit to strategically Currently only 10 per cent of the Indian changing its growth plans wherein it will population has health insurance, which now focus on cost sensitive products means that there is tremendous scope for instead of high end products. “As we have growth in this area. The Indian health been growing by almost 30 per cent per insurance business is growing at 50 per cent. year, probably there will be a drop of 10 per The sector is projected to grow to US$ 5.75 cent. However, this is not merely because of billion by 2010, according to a study by the recession, but because of Indian consumer New Delhi-based PHD Chamber of needs.” Commerce and Industry. This increase is Maquet also denies any dramatic change, largely supposed to be a result of the but does admit delays in sales of its new proposed stipulation that would increase projects. Says Ashim Purohit, CEO, Maquet, Foreign Direct Investment (FDI) limit in “Though there is no immediate setback on standalone health insurance companies from our sales at the moment, we definitely 26 percent to 51 percent. foresee delays in some projects. However, it Pulling out of FDI from India coupled with is likely to be a passing phase. Knowing the rising unemployment during the recession grit and determination of the Indian and simultaneous decrease in number of industry, it’s not hard to visualise an even insured people could affect growth of this stronger rebound. But for sure, it’s going to sector. Corporate insurance programmes that be a different marketplace from now on.”For were off to a jump start have slowed down being seemingly unaffected by the current with companies reducing health insurance tide, Michael Rieder, Getinge Medical coverage and increasing the co-payment Systems, Vice President, Sales and expected from employees. Marketing, reasons, “Maquet is interacting with acute care hospitals on a global scale 5. The pharmaceutical market with more than 30 subsidiaries and over 200 distributors. We do see a high potential for With increasing lifestyle-related ailments, growth for medical device companies, improvement in life expectancy rate and especially in emerging markets, such as soaring healthcare spending worldwide, the India.” global pharmaceutical market is projected to generate revenue of nearly US$ 1043.4 The key to success will be differentiation Billion by 2012, said RNCOS new research through use of relevant technologies coupled report “Global Pharmaceutical Market 8

Forecast to 2012”. The growth in the global sustained double-digit growth. Thus, pharmaceutical market will create immense pharmaceutical manufacturers are focusing opportunities in different areas such as on these countries to keep rolling their clinical trial market, pharmaceutical businesses. According to a survey by the packaging market, medical devices, logistics Federation of Indian Chambers of devices and health insurance. Commerce and Industry (FICCI), pharmaceutical exporters are expected to According to the RNCOS latest report record 16% increase in 2009-10 whereas “Booming Pharma Sector in India”, in near many industrial sectors are expecting future, the potential and opportunities within negligible growth or shrinking of exports, as the Indian market will increase by several reported by Business Standard. folds. The market, presently driven by over a billion population, an expanding GDP, and 6. Clinical trials rapid epidemiological transitions, is expected to be the major player in the global India presently occupies a very small pie of pharmaceutical market both in terms of its this global opportunity. The total number of large domestic market and also as a clinical trials in India stood at 221 in 2007, pharmaceutical export hub. which equates to less than 2% of the global clinical trials. With all major In these turbulent times, the Indian pharma pharmaceutical/biotech companies and sector has shown comparative resilience and CROs establishing their presence in India, has been relatively less impacted. There are the number of clinical trials in the country is two reasons for this: expected to grow several folds in the next five years. The country is projected to 9 the domestic pharma market conduct nearly 5% of the global clinical continues to experience healthy trials by 2012. However, to achieve its goal growth and of becoming a global hub of clinical trials, the country has to overcome challenges like 9 Secondly the demand for generic (a unethical trials, delay in trial approval, biological equivalent of an originator inappropriate protection of clinical data, and pharmaceutical product) medicines is lack of Good Clinical Practice (GCP), on the rise in international markets. certified sites and investigators. Surging Japan, the world's second largest pharma clinical trials market in India will create market, has a low penetration of generic enormous opportunities for a number of medicines and Indian companies are looking associated industries, including IVD market, to make the most of this opportunity as the education sector and clinical data Japanese market for generics opens up. management. These fast growing branded generics India has already established herself as a markets offer higher profit margins and valuable source for outsourcing drug sustainable earnings. development and clinical trials and it is The US (world’s largest pharmaceutical anticipated that more business in this area market) posted the slowest growth in several will be driven towards her as exemplified by decades, whereas the BRIC countries recent deals done by Astra Zeneca and GSK (Brazil, Russia, India and China) along with in the country. The $200 million Indian some eastern European countries registered clinical research outsourcing market is 9

forecast to reach $600 million by 2010 manpower and industry maturity. Also, according to a joint study by KPMG and India provides an ideal location for Confederation of the Indian Industry (CII). conducting medical transcription with the While the cost of clinical trials vary on the large population of educated English basis of complexity and disease segment, a speaking people and the comparative low simple trial in India can cost 15-20 percent cost which encourages companies abroad to of the US price, while a more sophisticated outsource their work to the Indian Medical trial-involving imaging systems-may be 50- Transcription field. 60 percent of the US price. According to RNCOS’ report, “Booming Clinical Trials From an outsourcing perspective from US, Market in India”, India promises to be one the recession has not affected the field of of the hottest destinations for conducting Medical Transcription in any meaningful global clinical research, owing to a huge way and is, in fact, burgeoning with more patient pool representing both chronic and and more career opportunities. By infectious diseases, easy recruitment of improving the work standards and quality of patients, and high cost savings. service, India has a wide scope for capturing the huge clientele in the US and provide The Indian clinical research organisation employment opportunities to the huge mass (CRO) seems not to have been affected by of English speaking and computer literate the global recession. In fact more people in the country. Despite the global opportunity has been created as large economic downtrend, the Medical pharma companies are forced to cut down Transcription industry is looking for a on expenditure of R & D. Studies suggest further growth buoyed by a report of the that R&D expenditure is increasing by 15 NASSCOM stating that recession has not hit percent per year, making global biopharma the healthcare industry. companies look for cheaper options. India would be an obvious choice. Another related field, Healthcare IT, with help from India’s thriving IT industry, has 7. Medical transcription begun to grow faster than that of any other Asian country. Hospitals have realised that Recession-proof, Medical Transcription is information technology (IT) can be an one of the fastest growing fields in effective tool towards efficient systems. healthcare industry. Medical According to a report by Springboard Transcriptionists are in demand in Western Research, India has the fastest growing countries especially in the US where the healthcare IT market in Asia, with an entire healthcare industry is based on expected growth rate of 22 per cent, insurance and detailed medical records are followed closely by China and Vietnam. In needed for processing insurance claims. It fact, the Indian healthcare technology estimated the size of the US MT industry, market is poised to be worth more than US$ which is in the range of around $ 12 million 254 million by 2012. in 2005, would reach $ 16.8 billion by 2010. The work off-shored was expected to be in Is the healthcare industry relatively the region of $ 860 million in 2010, of insulated from the current economic which India is expected to capture $ 647 crisis? million. India remained a preferred offshore destination primarily due to availability of

Many believe that healthcare is a necessity A slowdown is the best time for healthcare and is therefore not likely to be sacrificed, to consider growth, avers G.S. Rao, unlike certain consumer goods or services. Executive Director at Yashoda Hospital in Hence, the healthcare industry is relatively Hyderabad. He has set up an integrated and insulated from the current economic crisis. advanced cancer treatment center involving The industry should be able to weather the investments to the tune of Rs 100 crore; this current economic storm because ill health includes over Rs 17 crore on installation of always prompts people to seek medical care, Asia's first Rapid Arc Linear Accelerator, irrespective of the state of the economy. As which is used for radiotherapy. Rao also Suyash Borar, COO, BM Birla Heart and plans to invest Rs 250-300 crore on super- Research Centre, Kolkata, points out, speciality services by 2010. His growth “When someone needs cardiac care, they plans are driven by the fact that there is would not worry about recession or market constant demand and it is only during a conditions. In fact, due to rise in stress slowdown or recession that input costs come levels, the need for immediate healthcare down. Funding isn't an issue either, with would escalate further.” Rao claiming that banks are vying with each other to offer good rates. Inspite of the economic slowdown, healthcare majors in eastern Indian, such as However, some are of the opinion that the Calcutta Medical Research Institute “insulated” healthcare industry is also facing (CMRI), BM Birla Heart Research Centre, the heat. The impact is mainly noticed in a Medica Synergy Limited (MSL) are on track funds crunch in new projects or expansion with expansion plans. B M Birla Heart plans. Reportedly, many hospital groups Research Centre, a super speciality hospital have either postponed or put their expansion dedicated exclusively to the diagnosis, plans on hold. Except for ones which are 75 treatment and research related to per cent complete, projects have definitely cardiovascular diseases, have plans of slowed down. expanding its reach in the eastern and north eastern regions. "The new hospital projects coming up will definitely be affected because of the Apollo Hospitals is also going ahead with its liquidity crunch in the market, as debt planned expansion – setting up new funding has become more expensive," hospitals, clinics and pharmacies as well as opines Anupam Verma, CEO, DM separate centres for cosmetic surgery. The Healthcare, a healthcare-specific PE firm. group expects that the slump will have a The anticipated liquidity crunch is making positive impact on medical tourism. banks cautious about lending to newer “Healthcare is insulated from economic ups ventures. Thus, the impact of this on the and downs, as it is not possible to postpone hospital segment is a likely slowing down of medical needs. Our plans are moving in their the expansion projects that were being usual pace,” K Padmanabhan, group vigorously pursued in the last few years. president of Apollo Hospitals, told Financial Analysts say groups who are dependent on Chronicle. The slowdown will bring in debt funding are already feeling the heat. Dr patients from the developed world who are Vivek Desai, MD of HOSMAC India, a looking out for cost-effective healthcare leading hospital consultancy firm concurs, options, he said. "Those who were planning higher debt equity ratios to fund the project will perhaps 11

delay the commencement date till interest Conclusion rates soften." But amidst all the gloom and panic, the good The Manipal Group, too, has slowed down news is that even as the "world is in an era expansion of projects due to the liquidity of slower growth and recession", India's crunch. Dr. Ranjan Pai, CEO, Manipal economy is set to expand 5.1 per cent in Education and Medical Group, claims, 2009 and by 8.0 per cent in 2010, the World "There has been no real impact other than Bank forecasted in its Global Development fund availability for expansion. Hence Finance 2009 report. An analysis of the expansion capital will be constrained." Indian health care industry reveals that in the current situation of foreboding financial The economic slowdown also has had a crisis, the opportunities are massive. telling impact on hospital occupancy rates, Lessons need to be learned from the recent especially for higher-end rooms. Many of financial turmoil to reduce vulnerabilities to these rooms have been going empty during future financial stress. Some feel that the the last few months. Hospitals have taken current slump in real estate prices due to the several steps to cope with the slowdown battered market is good news for healthcare. through resource utilisation by Srinivasan of Arvind Eye posits, "As real organisational restructuring and cost-cutting estate prices have corrected now we can strategies, including cutting down on probably think about newer projects. We can expenses like branding. Measures to negotiate better. Now land is available at a improve the bottomline through operational more reasonable rate." efficiency include increasing multi-tasking, going slow on recruitments with the While the major driver is the cost advantage exception of extremely important positions, India enjoys in terms of employee cost, cutting down on new projects and expansion comparatively lower rentals for space etc., plans and strengthening existing operations. western outsourcers opt for India for various other reasons like better management, focus Apollo Hospitals Group is a case in point. It on core areas where they specialise, quality has already taken certain steps to soften the of treatment, service etc. It is in fact India's blow of global meltdown by restructuring its recognition on the global stage as a quality internal cost framework and bringing in provider in healthcare which is responsible operational efficiency. The Group has for driving the booming medical tourism restricted its recruitment. Says Dr. K. business. Murali Nair, Partner, Ernst Prabakar, VP, HR, Apollo Hospitals Group, &Young, believes that the current time is an "Unit heads have to justify requirements for excellent opportunity for Indian healthcare replacements and all new recruitments will industry players to come together and have to go through clear sanctions for the exploit the opportunity of drawing overseas next six months." The Group is banking patients where there is true recession upon multi tasking of human resource at the through targeted marketing initiatives. Like second level like managers and supervisors. the NASSCOM for IT, healthcare also needs It has cut down on travel expenditure unless to adopt a collaborative approach to win the very essential. "We are doing most of our overseas market, he says. These areas, if management review meetings through video tapped intelligently, would enable the sector conferencing rather than travelling," shares to ease the blow of this financial crisis and Dr. Prabakar. help India tide through the tough times. If 12

played right, there is a strong possibility that pharma, The Economic Times, 2nd India could be more resilient to the global January, 2009. downturn.

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