The improvement in life expectancy coupled with rising proportion of non-communicable diseases (NCDs) in the disease-mix has opened growth opportunities for the healthcare delivery segment in India. As per a report by Anand Rathi Research, the share of NCDs in the disease-mix rose to 55% in 2016 from 30% in 1990.

NCDs largely imply lifestyle diseases like diabetes, hypertension, cardiovascular ailments, cancer, neurological disorders, and ailments requiring specialised procedures like intraocular lens replacement, hip-replacement, knee replacement, neurosurgery, angioplasty etc. These diseases require complex procedures, specialised facilities, expert care, and costly treatment, which are mostly the domain of private healthcare institutions in India.

Hospitals in the healthcare delivery segment constitute the largest segment in the Indian healthcare sector. As per the report, domestic pharmaceuticals constitute 20% of Indian healthcare sector, medical devices 9%, and healthcare delivery, i.e hospitals, constitute 71% of the overall healthcare sector.

The research report puts 'buy' recommendations on Max Healthcare, Rainbow Children’s Medicare, Krishna Institute of Medical Sciences and Jupiter Life-Line Hospitals.

Growth of private healthcare in India

Amongst developed and developing countries, India lags the most in healthcare infrastructure and spending. This demand-supply mismatch is unlikely to be bridged soon. Given the limited fiscal headroom, the private sector is likely to continue to benefit from industry growth.

As per the report, favourable demographic shifts, a rising proportion of non-communicable diseases and greater ability to pay are the health care sector’s key structural drivers. These would, in turn, lead to a market size of around ₹7.7 lakh crore by FY25 with a CAGR of about 15% since FY22, says the report.

The primary need that pushes the demand for healthcare in India is the increase in level of education, and hence awareness for both curative and preventative healthcare, and the ageing population with increased life expectancy. The enablers of meeting this need are growing urban population, increased income levels, growing penetration of health insurance, and various central and state government schemes that enable people to pay for healthcare.

Between FY17 and FY22 the share of private healthcare services vis-a-vis government healthcare services increased from 63% to 65%. The growth of share of private healthcare services at a 10%- 12% CAGR is expected to reach up to 73% by 2027. Also, between FY16 and FY22 the share of private hospitals vis-a-vis government hospitals in India increased from 59% to 66% and private hospitals’ share is expected to reach up to 73% by 2025, as per the report.

Within the private hospital segment, large hospital chains with facilities across multiple states or cities account for about 12% of the market while the standalone, small and medium-sized hospitals, mostly offering secondary or higher-secondary healthcare, dominate the segment. However, due to the complexities of care and procedure involved in non-communicable diseases the small and medium sized hospitals are often dependent on large hospital chains or tertiary-care hospitals for diagnostic and therapeutic support, on referral, and for patient transfer.

Why private hospitals will grow?

Affordability of quality healthcare facilities continues to be a major constraint in seeking quality healthcare. Therefore, growth in household income and, consequently, disposable income is critical to overall demand expansion for healthcare delivery services in India. Households with annual income of more than ₹2 lakh were 35% in 2022, up from 23% in 2017 (CRISIL estimate), which suggests a growing propensity for affordable and superior healthcare services provided by private healthcare companies.

India’s urban population is projected to grow to 40% by 2030, from about 35% in 2020, which is also a chief driver for rise in demand for private healthcare delivery services.

In 2020, out-of-pocket expenses made up approx. 51% of health expenses. As per IRDAI, more than 52 crore people had health insurance in India in FY22 while only 28.8 crore people had health insurance in FY15. Moreover, between FY18 and FY22, the share of health insurance provided by the government decreased from 74% to 59% while the share of health insurance taken by private parties increased from 26% to 41%.

India is the lowest cost hub for medical treatment as compared to its global peers. Due to the availability of quality healthcare at an affordable price, India is the preferred destination for procedures like hip, and knee replacement, heart bypass, angioplasty, heart valve replacement, dental implants etc., especially for people from Bangladesh, Eastern Europe, Middle East, Afghanistan, Africa, and Iraq.

According to the Ministry of Tourism, of foreign tourists arriving in India, the proportion of medical tourists grew from 2.2%, or 1.1 lakh, in 2009 to 6.4%, or 7 lakh, in 2019. The number of medical tourists coming to India grew at a CAGR of 20% between 2009 to 2019. Covid-19 travel restrictions curtailed medical tourists sharply in 2020 to 1.8 lakh but the numbers recovered to 6.5 lakh medical tourists in 2022, almost back to pre-Covid levels.

The government is also aiming at $12 billion revenue from medical tourism by 2026 and has launched many initiatives under the ‘Heal in India’ programme to position India as a medical-tourism hub. These measures include constituting a National Medical and Wellness Tourism Board, introducing a category of medical visa for 165 countries, and providing ₹6 lakh financial help to medical tourism service providers under market development assistance (MDA).

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