CHAPTER 1 INDUSTRY ANALYSIS

HEALTH CARE INDUSTRY

The health care industry is an aggregation of sectors within the economic system that provides
goods and services to treat patients with curative, preventive, rehabilitative care. Health care has
become one of India's largest sectors - both in terms of revenue and employment. The healthcare
sector is the sector of the economy made up of companies that specialize in products and services
related to health and medical care. The healthcare sector includes publicly-traded companies that
power all dimensions of the healthcare industry. It comprises of providers of diagnostic,
preventive, remedial, and therapeutic services such as doctors, nurses, hospitals and other
private, public, and voluntary organizations. It also includes medical equipment and
pharmaceutical manufacturers, health insurance firms. The modern health care sector is divided
into many sub-sectors, and depends on interdisciplinary teams of trained professionals and
paraprofessionals to meet health needs of individuals and populations. The health care industry is
one of the world's largest and fastest-growing industries. Consuming over 10 percent of Gross
Domestic Product (GDP) of most developed nations, health care can form an enormous part of a
country's economy. The health care industry is typically divided into several areas.
The sector comprises hospital and allied sectors that include:
a. Medical care providers that includes physicians, specialist clinics, nursing homes and hospital
b. Diagnostic Service Centre and pathology laboratories
c. Medical equipment manufacturers
d. Contract research organizations and pharmaceutical manufacturers
e. Third party support service providers. The third party involves activities of or under the
supervision of nurses, midwives, physiotherapists, scientific or diagnostic laboratories, pathology
clinics, residential health facilities, or other allied health professions. E.g. in the field of
optometry, hydrotherapy, Medical massage, yoga therapy, music therapy, occupational therapy,
speech therapy, chiropody, homeopathy, chiropractic, acupuncture, etc.
The Indian healthcare industry is growing at a tremendous pace due to its strengthening
coverage, services and increasing expenditure by public as well private players.

HEALTH CARE INDUSTRY IN INDIA

Healthcare in India features a universal health care system run by the constituent states and
territories of India. The Constitution charges every state with "rising of the level of nutrition and

the standard of living of its people and the improvement of public health as among its primary
duties". The National Health Policy was endorsed by the Parliament of India in 1983 and updated
in 2002. However, the government sector is understaffed and underfinanced; poor services at
state-run hospitals force many people to visit private medical practitioners, Government
hospitals, some of which are among the best hospitals in India, provide treatment at taxpayer
expense. Most essential medicines are offered free of charge in these hospitals. Government
hospitals provide treatment either free or at minimal charges. For example, an outpatient card at
AIIMS (one of the best hospitals in India) costs a onetime fee of rupees 10 (around 20 cents US)
and thereafter outpatient medical advice is free. In-hospital treatment costs depend on financial
condition of the patient and facilities utilized by him but are usually much less than the private
sector. For instance, a patient is waived treatment costs if he is below poverty line. Another
patient may seek for an air-conditioned room if he is willing to pay extra for it. The charges for
basic in-hospital treatment and investigations are much less compared to the private sector. The
cost for these subsidies comes from annual allocations from the central and state governments.
Primary health care is provided by city and district hospitals and rural Primary Health Centres
(PHCs). These hospitals provide treatment free of cost. Primary care is focused on
Immunization, prevention of malnutrition, pregnancy, child birth, postnatal care, and treatment of
common illnesses. The Indian healthcare market is one of the prominent contributors to the
countrys Gross Domestic Product (GDP) having attracted large number of players- domestic as
well as International during the past few years. According to a report, The Indian healthcare
market is currently estimated at US$103 billion and is expected to reach US$120 billion by 2015
and US$150 billion by 2017. Highly qualified doctors and scientists, state-of-the-art technology
and low costs have helped India become an attractive global destination for medical tourism,
clinical studies, and research and development (R&D) programs.
HISTORY OF GROWTH AND DEVELOPMENT IN THE HEALTH CARE INDUSTRY
In the last three decades the sector has gone through a very rich transition. The sector has
witnessed tremendous growth in all the segments. Some of the private, corporate players and
also leading government institutions have now become some of the best names worldwide. The
Government has done a splendid job in focusing on healthcare in the last few years. A lot of
attention has been coming on the different necessary elements of healthcare; the global
technology providers have been focusing on the Indian market now.
In between the 1950's and 1980's the Health care facilities and personnel increased
substantially, but gradually due to the fast population growth, the number of licensed medical
practitioners per 10,000 individuals had fallen in the 1980's to 3 per 10,000.
From the 1981 level of 4 per 10,000. There were approximately ten hospital beds per 10,000
individuals in 1991. Primary health centers are majorly the cornerstone of the rural health care
system.
In the year 1991, India constituted about 22,400 primary health centers, 11200 hospitals, and
27,400 dispensaries. Such facilities were the part of a tiered health care system which funnels
more difficult cases into urban hospitals while attempting to provide routine medical care to the

vast majority in the countryside. Primary health centers and sub-centers would majorly rely on
trained paramedics to meet most of their needs.
Indian healthcare industry operates in both of the private and public sectors. The public sectors
are healthcare system consists of facilities run by the central and state governments. The facilities
are provided freely or at subsidized rates to lower income families in rural and urban areas.
However, further the Indian healthcare industry is going through a growth phase due to its
healthy economy. As the country's middle class continues to grow this industry's growth will
increase. India's ever-growing middle class are able to afford quality healthcare. With such an
increased ability to pay for better healthcare, the demand for healthcare services has grown from
$4.8 billion in 1991 to $22.8 billion in 2001-2002. Today 50 million Indians are able to afford
western medicine and over 150 million have annual incomes of more than 1000 US dollars

FUTURE GROWTH PROSPECT OF HEALTHCARE INDUSTRY

Healthcare support occupations are expected to grow by about 28 percent, or about 1.1 million jobs, from
2012 to 2022. Healthcare support occupations are projected to grow more than any other service
occupations. In terms of numbers, registered nurses are the largest healthcare occupation, with 2.7 million
workers in 2012. Healthcare occupations will continue to dominate the list of the fastest growing
occupations. Among the 20 fastest growing occupations between 2012 and 2022, 11 of them are healthrelated. Personal care aide is projected to be the fastest growing healthcare occupation, increasing by 53
percent, followed closely by home health aide, increasing by 48 percent and diagnostic medical
sonographers, increasing 46 percent. The job growth in these occupations is a result of a growing elderly
population, less costly home care compared to institutional care and discharged patients need for
continued healthcare. Personal care aides are expected to gain the largest number of jobs, about 581,000,
by 2022. Registered nurses are the second largest healthcare occupation in terms of job growth, followed
by home health aides and nursing assistants. Interested in a more in-depth look at healthcare employment
in your target geographic area? Click on this link to speak with an NAS Insights Analyst.
Industry Employment 2012 and Projected 2022
Employment in the healthcare and social assistance industry is projected to grow by 29% from 2012 to
2022, according to the Bureau of Labor Statistics. This is more than twice as fast as the projected total
employment growth overall.
Employment in the Healthcare and Social Assistance Industry 2012, and Projected 2022
The healthcare and social assistance industry is projected to have a nearly 2% growth rate from 2012 to
2022, adding nearly 5 million jobs to the economy over the decade.
Employment Growth within the Healthcare and Social Assistance Industry Projected 2012-2022
(thousands)
Ambulatory healthcare services is expected to grow by nearly 2.5 million jobs over the 2012 to 2022
period. Ambulatory services include offices of physicians, dentists and other healthcare practitioners, as
well as outpatient care centers, medical and diagnostic laboratories, home health services and other
ambulatory care services.
Employment Distribution in the Healthcare and Social Assistance Industry 2012 and Projected 2022

Over the next decade, hospitals share of the healthcare and social service industry is expected to decline,
while ambulatory healthcare services will increase. This is because of a shift from higher cost hospitals to
less expensive outpatient services. Hospitals are actually the slowest growing industry within the
healthcare and social assistance sector.
Occupational growth rate 2012 and Projected 2022
Healthcare support occupations are expected to grow by 28% from 2012 to 2022 or about 1.1 million
jobs, according to the Bureau of Labor Statistics. Healthcare support occupations include home health
aides, nursing assistants, dental assistants, medical assistants, medical transcriptionists, phlebotomists,
physical therapist aides and others. Healthcare practitioner and technical occupations will grow by 22%,
or about 1.7 million jobs. These occupations include physicians, pharmacists, registered nurses, therapists,
diagnostic medical sonographers, health information technicians and many others.

MAJOR PLAYERS IN THE INDUSTRY

1. FORTIS HEALTHCARE
Fortis Healthcare Limited is a leading integrated healthcare delivery service provider in India.
The healthcare verticals of the company primarily comprise hospitals, diagnostics and day care
specialty facilities.
The company operates its healthcare delivery services in India, Dubai, Mauritius and Sri Lanka
with 54 healthcare facilities (including projects under development), approximately 10,000
potential beds and 260 Diagnostic Centre.
In a global study of the 30 most technologically advanced hospitals in the world, its flagship, the
Fortis Memorial Research Institute (FMRI), was ranked No.2, by topmastersinhealthcare.com,
and placed ahead of many other outstanding medical institutions in the world.

2. MAX HEALTHCARE
Max Healthcare commenced operations in 2001. Today, it is India's first provider of
comprehensive, seamlessly integrated, world-class healthcare services. The organisation has 12
facilities in North India, offering services in over 32 medical disciplines. Of these, nine facilities
are located in Delhi & NCR and the others in Mohali, Bathinda and Dehradun. These include
state-of-the-art tertiary care hospitals at Saket, Patparganj, Shalimar Bagh, Mohali, Bathinda and
Dehradun; secondary care hospitals at Gurgaon, Pitampura and Noida; and an out-patient facility
and speciality centre at Panchsheel Park. The 12 hospitals together have over 1900 beds.With the
most advanced technology and state-of-the-art infrastructure, Max Healthcare is one of the
leading chains of hospitals in India. It is committed to the highest standards of medical and
service excellence, patient care, scientific and medical education.

3. LILAVATI HOSPITAL AND RESEARCH CENTRE

The premier multi-specialty tertiary care hospital of India has been acknowledged globally as
centre of medical excellence. The kind of confidence, trust it has developed on strong foundation
of the state-of-the-art facilities, best medical expertise, research, education and charitable
endeavors; that today it serves patients from all walks of life national and international. Based
on a powerful Sanskrit inspiration, Sarvetra Sukhina: Santu, Sarve Santu Niramaya: which
means Let all be blissful, Let all stay healthy, the hospital has focused its operation on
providing quality care with a human touch; which truly reflects the essence of its motto More
than Healthcare, Human Care.
The hospital is located in the heart of Mumbai; and is very close to the domestic and the
international airport. The hospital started functioning in 1997 with 10 beds and initially had only
22 doctors. Today, it boasts of 314 beds with one of the largest Intensive Care Units (ICUs),
most advanced 12 Operation Theaters, more than 300 consultants and manpower of nearly
1,800.Hospital attends to around 300 In-patients and 1,500 Out-patients daily.

4. MEDANTA HOSPITAL
Medanta - The Medicity is one of India's largest and most prestigious multi-super
specialty medical institutes. Spread across 43 acres in Gurgaon NCR and houses 1,250
beds and over 350 critical care beds, with 45 operation theatres, the hospital was founded
in 2009 by renowned cardiovascular and cardiothoracic surgeon, Dr. Naresh Trehan and
is located in Gurgaon, part of the National Capital Region. Primarily known as an
institute specializing in cardiology, presently Medanta has 32 institutions, departments
and division that cater to over 20 specialities. Adhering to NABH standards, the hospital
is as of 2013 accredited by ISQua (International Society for Quality in Healthcare),
NABL, and JCI.

5. TATA MEMORIAL
The Tata Memorial Hospital was initially commissioned by the Sir Dorabji Tata Trust on 28
February 1941 as a center with enduring value and a mission for concern for the Indian
people.In 1952 the Indian Cancer Research Centre was established as a pioneer research
institute for basic research - later called the Cancer Research Institute (CRI). In 1957 the
Ministry of Health took over the Tata Memorial Hospital. The transfer of the administrative
control of the Tata Memorial Centre (Tata Memorial Hospital & Cancer Research Institute) to
the Department of Atomic Energy in 1962 was the next major milestone. The Tata Memorial
Hospital and Cancer Research Institute merged as the two arms of the Tata Memorial Centre
(TMC) in 1966 as a classic example of private philanthropy augmented by Government
support with a mandate for Service, Education & Research in Cancer.

GOVERNMENT POLICY IN HEALTHCARE INDUSTRY

The Government of India has planned some significant policy changes and intends to introduce
new regulations to make healthcare not only more accessible and affordable but also more
transparent and ethical. Health policy can be defined as the "decisions, plans, and actions that are

undertaken to achieve specific health care goals within a society." According to the World Health
Organization, an explicit health policy can achieve several things: it defines a vision for the
future; it outlines priorities and the expected roles of different groups; and it builds consensus
and informs people.
There are many categories of health policies, including personal health care
policy, pharmaceutical policy, and policies related to public health such as vaccination
policy, tobacco control policy.

Medical research policy

Medical research can be both the basis for defining evidence-based health policy, and the subject
of health policy itself, particularly in terms of its sources of funding. Those in favor of
government policies for publicly funded medical research posit that removing profit as a motive
will increase the rate of medical innovation. Those opposed argue that it will do the opposite,
because removing the incentive of profit removes incentives to innovate and inhibits new
technologies from being developed and utilized.
The existence of sound medical research does not necessarily lead to evidence-based
policymaking. For example, in South Africa, whose population sets the record for HIV
infections, previous government policy limiting funding and access for AIDS treatments met
with strong controversy given its basis on a refusal to accept scientific evidence on the means of
transmission. A change of government eventually led to a change in policy, with new policies
implemented for widespread access to HIV services. Another issue relates to intellectual
property, as illustrated by the case of Brazil, where debates have arisen over government policy
authorizing the domestic manufacture of drugs used in the treatment of HIV/AIDS in violation
of drug patents.

Health workforce policy

Some countries and jurisdictions have an explicit policy or strategy to plan for adequate
numbers, distribution and quality of health workers to meet health care goals, such as to
address physician and nursing shortages. Evidence-based policies for health workforce
development are typically based on findings from health services research.

Health in foreign policy

Many governments and agencies include a health dimension in their foreign policy in order to
achieve global health goals. Promoting health in lower income countries has been seen as
instrumental to achieve other goals on the global agenda, including:

Promoting global security linked to fears of global pandemics, the intentional spread
of pathogens, and a potential increase in humanitarian conflicts, natural disasters, and
emergencies.

Promoting economic development including addressing the economic effect of poor

health on development, of pandemic outbreaks on the global market place, and also the gain
from the growing global market in health goods and services.

Promoting social justice reinforcing health as a social value and human right, including
supporting the United Nations' Millennium Development Goals.

Global health policy

Global health policy encompasses the global governance structures that create the policies
underlying public health throughout the world. In addressing global health, global health policy
"implies consideration of the health needs of the people of the whole planet above the concerns
of particular nations." Distinguished from both international health policy (agreements among
sovereign states) and comparative health policy (analysis of health policy across states), global
health policy institutions consist of the actors and norms that frame the global health response.

MICHAEL PORTER FIVE FORCES MODEL IN HEALTHCARE INDUSTRY:

1. POTENTIAL OF NEW ENTRANTS
The two important considerations in observing the topic of new entrants to the health care
industry are the levels of attractiveness and the barriers to entry. The industry incomes form the
focus of operations for this analysis. The rapid growth of private hospitals was the result of the
government policy of letting private sector play greater roles in the healthcare industry. The
prospect of making money has therefore resulted in more potential entrants under companies
wanting to make fortunes in healthcare industry.
The threat of new entrants reflects the ease with which a competitor can enter the market. Private
hospitals may be threatened by increased funding for public hospitals. As with the increase in
number of private hospitals, there is a big (or high) threat in private healthcare industry. New
entrants can provide better services & promotion to the customers which can be a threat for other
hospitals.
The new entrants are coming wing a sole purpose to get the same market. There have been a few
complications faced by potential entrants in executing the strategy to establish new hospitals.
Despite high healthcare costs involved. The operation costs are relatively low. Secondly the
government has made it easier to find sites, purchase land, gain various approvals and build
hospitals strategically positioned adjacent to prime markets especially in cities and big towns.

The barriers to entry into the healthcare sector are fairly high. For the biotechnology industry, the
biggest barrier is the initial cash investment necessary for research and development (R&D).
Firms must be willing to risk large amounts of money with the likely possibility of no return. For
the insurance companies, the most significant barriers to entry are state regulatory requirements
and the initial cash investment of establishing a physician network. Recently, though the
insurance industry has had large profits, there have been very few new entrants into the market
because it is very difficult for a start-up insurance company to compete with the large insurers
for physicians to add to their network. Hospitals face similar barriers to entry as the insurance
industrythey are also heavily regulated by the government, which often will not allow new
hospitals to be established in a given area or will not allow a hospital to acquire healthcare
technology, thus preventing it from entering the market.
Within the healthcare industry, the threat of new entrants is very tight. For example,
pharmaceutical companies must have the initial capital to invest into their research and
development department to develop new drugs. After developing these new drugs, these
companies must also deal with the policies that must be meet by the government agencies before
the drug is released. When it comes down to insurance companies, the threat of new entrants is
also limited. This is due to the fact that there are many federal and state guidelines that these
insurance companies must follow to remain open. These policies make it very hard for anyone to
open an insurance company. Besides federal and state regulations, new insurance companies
would need to have a significant amount of capital to be able to attract physicians to their
network. Having to compete with the large insurance companies like Aetna, Kaiser Permenante,
and Blue Cross, would take a require a strong supporting cast and the necessary capital to draw
other physicians from their existing network. In regards to actual healthcare, this field also seems
to be very tight for new entrants to enter. This is very difficult due to the fact that the US has
very strict guidelines and regulations set by the government to open a hospital. These guidelines
also prevent the huge monopoly of hospitals being open in a certain area by only allowing certain
amount of hospitals to be open within a given area.
A general conclusion from potential new entrant dimension is that it is much attractive to enter
the health care industry, even by way of setting up new facilities. The companies do not need to
acquire existing operations but rather they establish hospitals from scratch.

2. COMPETITION IN THE INDUSTRY

According to Nankervis A. (2005), Competitive Rivalry reflects the relationship between
dominant players in the industry. The competitive rivalry within the private healthcare industry in
is high as the private sectors are increasing day by day. The increase in number already increases in
competition which gives so many reasons for the hospitals to give different offer to their customers
(Patients). As the competitors number is high in the private industry, the hospitals have to appoint
highly qualified staff which is also a factor hospitals are looking to.
Although many hospitals are continually increasing & improving the services and quality
management to attract more customers compare to other competitors.

The competitive rivalry in the healthcare industry is very intense, especially in the biotech/drug
discovery and insurance industries. Pharmaceutical companies are continuously competing with
each other to be the first one to create a drug that can effectively treat a disease. Many companies
are simultaneously investing a great deal of money into R&D, but only one company (if any)
will reap the benefits because only the first company to come up with the drug will be able to
acquire a patent for it and thus profit from the drug. The rivalry in the insurance industry is also
intense because people will not buy more than one insurance policy. Oftentimes, the insurance
companies sell most of their policies to large companies who provide healthcare to their
employees, so large insurance companies must continuously compete for the business of large
companies. Hospitals face less competitive rivalry because there are usually not very many
hospitals in a given area and if anyone is very sick, they will be brought to the nearest hospital.
Also, hospitals essentially all cost the same price (and most of the time is covered by insurance),
so there is no price competition between hospitals and therefore very little competitive rivalry.

3. POWER OF SUPPLIERS
The Health Care Providers and Services industry, the suppliers, has high bargaining power
simply because such high demand exists for its services. There are few suppliers relative to the
number of buyers, which also contributes to their high bargaining power. Ideally, every American
will someday have health care, which means that each person in the U.S. would be a customer of
this industry. Although health care costs are rising, that does not decrease the demand for health
care as people continue to pay for the services at whatever price the supplier (industry) dictates
simply because they wish to stay in good health at whatever the cost may be.

Bargaining power of suppliers in terms of medicine supplement is sometimes high and

sometimes could be low. For example when a company gives out a new medicine into the
market, it needs the hospital to carry the drug in order to make its profits. In this situation, since
the hospital wants to attract more new customers and retain the existing patients they must be
able to provide the latest medications. So the hospital has a demand on the pharmaceutical
companies, so if the hospital decides that they need that particular drug, the pharmaceutical
company wins, and because it is a patent drug distributed by the hospital usually the
pharmaceutical company can bill higher price. However, when a particular patent expires and the
drug becomes a generic, the bargaining power of the supplier becomes lower because everyone
can carry the drug, which will result to significant drop of drug's price.

The bargaining power of suppliers is low as with the increase in hospitals, the numbers of
suppliers are also increasing. The bargaining of suppliers also depend on the service providers.
4. BARGAINING POWER OF CUSTOMERS
With the healthcare industry, it seems that the bargaining power of buyers is very low. When
people get sick, they will suffer from the illness. The current economy is doing well or bad will

not change it. People still cannot predict when they will get the flu, or they need a knee
replacement. People are willing to trust that insurance company, pharmaceutical company, and
hospital can provide them the best services. At the moment people have the chance to select a
certain hospital or insurance company; however, since there are limited numbers of insurance
companies or hospitals within a network or an area, it becomes much harder to have buyer
bargaining power.
Seeing that so much of the bargaining power in the health care sector lies with suppliers it is no
surprise that the bargaining power of customers is weak. If someone wants health care coverage
they must pay the price for it, which is relatively consistent from company to company. A person
faces very high risk not being able to afford life-saving operations or medications if they do not
own health insurance and is injured in an accident or develops a medical condition, and therefore
many people are willing to pay health insurance costs at a price given by the supplier.
The healthcare industry as a whole is relatively unaffected by buyer power in the sense that the
healthcare industry is composed of all of the companies involved in providing healthcare to
people. Whether the economy is good or bad, whether the prices of medicine are high or low,
does not really affect the choice of buyers to consume (or not consume) healthcare. People
cannot just choose to be healthy when the economy is bad. People get sick independent of the
economy (except maybe the fact that when the economy is bad there are more poor people and
poor people tend to be less healthy than wealthier people), so they need medicine anyway.

5. THREAT OF SUBSTITUTE PRODUCTS

The availability of substitutes varies within the healthcare sector. In general though, the
healthcare sector as a whole has no substitutes. There is essentially no way to get healthcare from
anywhere other than the healthcare industry (there are smaller, more specialized places you could
go, like traditional Eastern medicine, or acupuncture, etc. but those are small enough and few
enough that we can ignore them for our purposes). Within the industry, the pharmaceutical
companies face substitutes for their drugs when their patents expire. When their patents are in
effect, they have a monopoly over the drug, so they have a great deal of power, but once generic
medicines are produced after the expiration of the patent, they lose their monopoly and
essentially all future prospects of profit from the drug because other companies producing
generic medicines can charge less for the drug because they did not have to pay the initial cost of
R&D. Insurance and hospitals essentially have no substitutes.
In the healthcare industry, the pharmaceutical industry profits are greatly affected by High treat
of substitutes after the patents of drugs has expired. When the patents expire, all pharmaceutical
companies have the opportunity to make the drug. By allowing all companies to make the drug,
this reduces the profits experienced by the sole company. In regards to the healthcare sector,
substitutes do not usually affect the field. For example, if a patient has to obtain an ankle surgery,
he or she has to go to a surgeon. Now, one can go to any physician they would like, but that
would be more of competition amongst physicians. In recent times, there are certain substitutes
such as alternative medicine which treat primary care problems.