Healthcare-IT Business Strategy

Tuesday, June 19, 2012

Size of Healthcare-IT Market in India


There are a lot of numbers floating around on the web about size and scope of Healthcare IT market in India. Therefore I decided to add to the confusion. Here is my take on it--

Size of the Healthcare-IT Market in India:

- beds to population ratio 9:10000 or 0.9:1000 which is less than 1/3 of WHO recommendation. [Kaiser Family Foundation - http://www.globalhealthfacts.org/data/topic/map.aspx?ind=78]
- Considering 1.2 billion population of India = i.e. 1.2 * 10^9 / 1000 = 1.2 * 10^6 beds = 12 Lac beds

Cost of building 1 bed = INR 40 Lac. Usually 15% of that is the cost of hospital operations per year. 
Usually the hospitals allocate 2-5% [Average 3.5%] of budget for IT.  

The Healthcare IT market is about USD 504M per year. ((1200000 * 4000000) * 15%) *3.5% = INR 2520Cr = USD 504M

- India needs 80K to 1 Lac beds every year for 30 years. [Deccan Herald - http://www.deccanherald.com/content/94485/india-needs-add-1-lakh.html,

Commensurate to the expected growth of hospital beds, the Healthcare IT market is expected to grow @ about USD 160M per year. ((80000 * 4000000/2) * 5%) = INR 800Cr = USD 160M

- Whereas [in real] India has been able to add only 10k-15k beds every year for past 5 years. [http://www.rediff.com/money/2009/jul/27india-inc-finds-wealth-in-health.htm]

The Healthcare IT market is currently growing @ about USD 30M per year. ((15000 * 4000000/2) * 5%) = INR 150 Cr = USD 30M

Therefore Total Healthcare-IT market size = 504 + 30 = $ 534M. Currently growing every year @ 5-6%. If the new hospital infrastructure picks up speed, then we can expect the market to grow @ 31% every year.

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Spectrum of Healthcare-IT deals:

Only the top end hospitals have implemented EMR. Rest all the hospitals and healthcare organisations have clinical work mostly on paper. They have implemented some stand alone IT systems such as billing, material management, Lab, Pharmacy or all of this in a single HIS. However the HIS is for administrative and auxiliary medical functions only and it lacks any clinical automation.

Top 5 Hospital chains are entering into multi year contracts for total IT outsourcing.

Example1 - Max Healthcare has a ITO with Perot Systems worth USD 20M over 10 years. Includes infrastructure upgrade, EMR implementation, application support and clinical transformation. It is a private cloud hosted on the Dell data center. [http://www.expresshealthcare.in/200910/market32.shtml]

Example2 - Fortis Healthcare has a ITO with HCL worth USD 15M over 5 years. Includes infrastructure upgrade, new application implementation and support. this includes support for EMR. They have TrakHealth EMR from Australia. Now TrakHealth is owned by Intersystems USA. It is on a private cloud hosted in HCL data center. [http://www.financialexpress.com/news/fortis-signs-outsourcing-deal-with-hcl/525300/]

Example3 - Manipal Hospitals has signed a deal with Wipro for implementation of Wipro HIS product over 10 years. Manipal Hospitals also has a similar deal with TrakHealth EMR from Australia.  The size of the deal is not known.  [http://www.thehindubusinessline.com/industry-and-economy/info-tech/article3480169.ece]

Example4 - Narayana Hrudayalaya has signed a 10 year deal with HCL for putting their applications on the private cloud infrastructure. NH is implementing the ICT HIS/EMR, which is a break away group from earstwhile SRIT. The size of the deal is not known. [http://www.medicalbuyer.co.in/index.php?option=com_content&task=view&id=3988&Itemid=92]

Lower end of the spectrum is 20-50 bed nursing homes. There are HIS products being sold for INR 5-10 Lac for licenses including support for 5 years.

Chains of Labs and Pharmacies are the new entrants into the Healthcare-IT. It is a good trend to watch but the largest chains have only a few hundred centers which is a minuscule as compared to the mom-and-pop shops and fly-by-night Lab and Pharmacy operators in this market.  

GP clinics have little or no automation in their clinics. They dont have the motivation for any IT implementation. Also they cant afford a capex model in IT because they work on a extremely low-cost opex model.

The market is extremely price sensitive, it is looking for solutions on the public cloud with an opex model. Almost all healthcare organisations dont want to own any capex. However they are most concerned about the data security because India lacks any data security act.

The funny thing is that most hospitals budget for IT as a support function and not as a core business enabler. Therefore it gets a very low priority. Also they invest in IT because its the in-thing not because they need to solve a business problem. No one can call any IT implementation a success because the success criteria were never established. The large hospital chains have now started investing into large deals way beyond their budget because they have burnt their fingers with fly-by-night operators; but it is still not clear to them as to what do they want out of it!

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