Strategy Management Project

[INDUSTRY ANALYSIS OF THE INDIAN HOSPITAL INDUSTRY]

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Table of Contents:

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Overview of Healthcare Industry in India:

Health is wealth! Without sound health no one can achieve anything in his/her life, nor they can enjoy whatever they had. To sustain the health, the healthcare industry plays a vital role. In India, the Healthcare expenditure as percentage of GDP is approximately 5% as compared to 4.7% in China, 8.2% in UK and Japan, 9.7% in Canada and 15.2% in USA. Healthcare industry is the largest service sector expected to grow at a growth rate of approx. 8% (in terms of GDP) and in terms of amount expected to double up to US $ 14.2 billion in 2012 and quadruple in 2017,. The industry is also experiencing the employment boom with approx. 9 million people involved directly or indirectly in this industry in India. According to the WHOs report on world health statistics (2007), India's healthcare industry has per capita healthcare expenditure of approx. US$ 40 (on a purchasing power parity basis), far behind the global standard of around US$ 250. The central, state and local governments which is suppose to provide the adequate healthcare accounts for only approx. 25% of the total healthcare expenditure in India (amongst the lowest in the world). As a consequence of low public expenditure and the non-discretionary nature of utilisation of healthcare delivery services, the gap in healthcare delivery is filled by the private sector which accounts for around 75 per cent of the total healthcare expenditure in India; this is among the highest proportions of private healthcare spending in the world. The private sector in India comprises of assorted providers such as not-for-profit and voluntary organisations, providers with a commercial motive including corporate houses, trusts, stand-alone specialist services, diagnostic laboratories and pharmacies.

The customers of this industry can be catagorised as (i) Local v/s non-local (ii) Free patients (iii) Indian v/s foreign patients. In India, hospitals are largely urban-centric. Initially, for any new hospital, the potential demand is derived from the areas in the immediate vicinity of the hospital. However, once the hospital develops its brand in the market, it then looks at demand from neighbouring cities and towns and later, neighbouring countries. Mature tertiary care hospitals

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having an established brand image often have a mix of clients from various locations. Moreover, in the case of a few tertiary care hospitals, a small percentage of beds is provided free of charge to below-poverty line (BPL) individuals. For example, in Sankara Nethralaya based in Chennai, 81 per cent of the patients are self-paying, while in Arvind Eye Hospital, only 30 per cent pay for the [Link] we talk about the nationality of the patients, in addition to domestic patients, there is an increasing incidence of foreign individuals travelling to India for treatments (usually for high-end, complex surgeries or procedures) as a result of high quality healthcare being provided at lower costs than their native countries. The hospital sector is highly capital-intensive due to the high per capita bed cost. The cost of setting up a bed in secondary and tertiary hospitals ranges from Rs 2-2.5 million and Rs 3-5 million (ex-land), respectively. The main component of capital expenditure is the purchasing of medical equipment. The hospital sector is also highly manpower-intensive. Skilled manpower required includes doctors, nurses and para-medical staff comprising labtechnicians, radiographers and therapists. India is currently facing a severe shortage of adequately trained skilled manpower. India lags behind most global parameters in terms of hospital infrastructure and manpower. According to the WHO Report on Health Statistics 2010, India's bed to population ratio stands at 9 for every 10,000 people, as compared to the global median value of 26. Also, while India has one of the largest medical workforces with almost 650,000 doctors and over 1.3 million nurses and midwifery personnel, there is a major shortage of skilled labour. India's ratio of physicians per 10,000 individuals stands at 6 (global median 13) and ratio for nurses and midwifery personnel per 10,000 individuals stands at 13 (against the global median value of 27). There is high market potential in the Healthcare industry in India owing to the increasing health awareness, increased penetration of the health insureance and the rapid growth in the private sector healthcare industry. Moreover, there is also high growth in medical tourism due to the best quality service available in india at a very low cost comparative treatment as compared to foreign countries. The healthcare industry in India is also experiencing the multiple segment opportunities in the field of service providers, diagnostics services, infrastructure and health insurance. The key growth drivers in this segment are changing demographic profile, increasing

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health care expenditure, proliferation of hospital services, user friendly/ handy medical devices, medical tourism, pathology services, tele-medicine, etc. The Hospital Industry in India can be broadly classified based on the (a) Types of services rendered, (b) Type of the ownership of the hospitals and (c) Complexity of ailment Based on the type of services rendered, hospitals can be classified into: (i) Primary care/ dispensaries (ii) Secondary care hospitals, (iii) General secondary care hospitals, (iv) Specialty secondary care hospitals, (v) Tertiary care hospitals, (vi) Single specialty tertiary care hospitals, (vii) Multi-specialty tertiary care hospitals, (viii) Nursing homes. Hospitals can be categorised based on their ownership as (1) Government owned and managed (e.g. Brihanmumbai Municipal Corporation (BMC) Hospitals, KEM Hospital, Cooper Hospital in Mumbai) (2) Private owned and managed (e.g. Asian Heart, Apollo, Wockhardt) (3) Trust owned and managed (e.g. Lilavati, Hinduja), (4) Trust owned and managed by private party (Apollo in Ahmedabad is owned by a trust and managed by the Apollo group), (5) Owned by a private player and managed by another private player (Kamineni Hospitals, Hyderabad managed by Wockhardt Hospitals). Healthcare industry may also be classified on the basis of the complexity of ailment being treated. For example, a hospital addressing heart diseases (cardiac ailments) may be classified as a primary facility if treating conditions such as high cholesterol, a secondary facility if treating the patient for a stroke and a tertiary facility if dealing with cases such as cardiac arrest or heart transplants.

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Outside-In Analysis:
Here we will analyze the Indian Hospital Industry from an outside-in perspective, i.e. we will look at what are the characteristics of the industry and what are vital to the functioning and profitability of the players in this industry. We will begin with Porters Five Forces analysis and then follow it up with a Resource Based View Analysis.

Porters Five Forces Analysis:

If we take into account the secondary and tertiary healthcare industry in India and perform the porters five force analysis on the Indian Healthcare industry, the following scenario emerges :Threat of the new entrants :Owing to the high cost involvement in the infrastructural investment like land and building in conformation of the minimum standards requirement, there is a little threat of entry for any new entrant in this industry. The infrastructural investment is also very high as regards to the medical equipments which cost very high and are mostly exported from foreign countries. This investment makes the entry still tougher. Moreover, the sociopolitical environment also poses a threat to the new entrant in the healthcare industry. One of the reason for the restriction on the new entrant in hospital industry is the shortage of the qualified doctors in india. Substitutes :The substitutes to the secondary and tertiary healthcare industry in India are the Primary health sector along with small dispensaries, Preventive health care, the nursing homes, the wellness / fitness centres. The other substitutes to the healthcare industry are the alternative systems of the medicines which does not require admission of the patient to any hospital. Some of these alternative systems are Ayurvedic treatment, Naturopathy, Unani care, Homeopathic treatment, Sidhdha and yoga. Looking to the growth rate vis-vis the requirements, the power of the substitutes to the secondary/tertiary healthcare industry in India ranges between low to medium. Rivalry among the competitors :-

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There is fierce rivalry amongst the established competitors in the healthcare industry in India. Some of the major players in the secondary/tertiary healthcare industry are : ADS Diagnostics, All India Institute of Medical Sciences (AIIMS), Apollo Hospitals (AHEL), Aravind Eye Hospital, Dr. Agrawals Eye Hospital, CARE Hospitals, Chennai Meenakshi, Dolphin Medical Services, Fortis Healthcare (FHL), Indraprastha Medical Corporation, Kovai Medical Centre, Medinova Diagnostic Services, Manipal Group, Metro Hospitals, Max Healthcare Institute, Tata Hospital, Lilawati Hospital Breach Candy Hospital Wockhardt Group of Hospitals Suppliers bargaining Power :The major suppliers to the healthcare industry in India are : the Pharmaceutical industry producing the lifesaving drugs;

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the manufacturers of the high-tech medical equipments and surgical equipments; the suppliers of the consumables etc. The suppliers power ranges between Low to Medium. Consumers bargaining power :The bargaining power of the consumers swings between high in some sector and low - medium in other sector. The consumers power is high so far as the government hospitals are concern. However, since the share of public sector in the healthcare industry is restricted only to 25%, the consumer power does not affect adversely on the public healthcare industry. On the other hand, as regards the private hospitals providing services and treatments for serious illnesses, the bargain power of the consumer seems to be low due to the shortage of adequate number of such super-specialty hospitals, shortage of expertise doctors and the qualified manpower providing services to this sector.

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Resource Based View Analysis:

The potential key resources in the Hospital Industry could be enumerated as:

Service Quality: A hospital, be it of any type, is critically judged by the kind of services it provides and the quality of those services. Here, by services we mean the group of facilities that a hospital provides. We deem a hospital to be high on service quality if it has a wide range of services and the quality of services provided is high.

Specialty (single/multiple): By this we mean that the hospital specializes in treating one or more ailments or is adept and known for treatment of one or more particular types of ailment.

Specialists and Physicians: These are by far the most critical resource of any medical facility. The expertise and experience of the medical practitioners in a hospital in treating specific ailments is a big factor in deciding the competitive advantage of a hospital. Hospitals are often judged by the kind of medical expertise that they posess.

Type of services provided: This refers to the capabilities of the hospital to provide medical and/or surgical services. Research facilities are also a type of services provided.

Degree of complexity of treatment: Hospitals may be judged on the basis of the complexity of ailment being treated. For example, a hospital addressing heart diseases (cardiac ailments) may be classified as a primary facility if treating conditions such as high cholesterol, a secondary facility if treating the patient for a stroke and a tertiary facility if dealing with cases such as cardiac arrest or heart transplants. Capabilities in providing highly complex treatment can attract patients from far off areas or regions.

Emergency Department: The level of efficiency of the emergency department is a metric to decide the approachability of the hospital in case of urgent demand. It is a critical resource for any hospital.

Capacity in terms of beds: The capacity of a hospital is a crucial resource and decides how profitable a hospital can be. Also the general acceptance of the hospital by its target population depends upon the number and hence availability of beds.

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Hospital Staff: The staff is another important resource in a hospital. The hospitality, courteousness and care that nurses and other hospital staff provide may turn out to be the hygiene factor for a hospital.

Cost Effectiveness: This could be a factor in attracting patients, especially from the middle and lower classes. This could turn out to be the differentiating factor among medical facilities.

Research Acumen: The research facilities in a hospital are key resources in deciding how much a hospital is providing towards the improvement of medicine. Often, good researchers and good research facilities can deem a hospital as state of the art.

Equipment: The technological superiority of the equipment present in a hospital is also an important resource. Equipment costs range anywhere between 30 per cent and 60 per cent, depending on the sophistication of equipment purchased. As obsolescence of these equipments is rapid, hospitals need to channelize resources periodically for technology upgradation. Moreover, the maintenance cost for high-end equipment is generally around 5 per cent of the capital cost.

Location: The location can be a great asset to a hospital. Proximity to key demographic locations as well as closeness to competitors may affect the revenue generation capabilities of a hospital. Moreover, location can be a key factor in attracting good medical practitioners, who in turn are key resources for the hospitals.

Brand Value: A strong brand value can be a keen driver as far as competitive advantage is concerned. If a hospital is a member of a strong chain of hospitals, then it has a natural advantage as far as revenue generating capabilities are concerned.

Referral Network: Any secondary or tertiary hospital is dependant in a big way on the referrals from other hospitals. Having a strong referral network can be a keen advantage against competitors.

Tie-ups with Insurance Companies: This could be a big deciding factor as and when medical insurance comes of age in India. As of now, with the not-so-impressive state of

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medical insurance coverage, this may not be a very big advantage, but in the near future the situation might change. The resources identified above could now be placed on the RBV matrix to evaluate them on VRIN, i.e. Value, Rarity, In-imitability and Non-substitutability:

Resource Service Quality Specialty (single/multiple) Specialists and Physician Type of services provided Degree of complexity of treatment Emergency Department Capacity in terms of beds Hospital Staff Cost Effectiveness Research Acumen Equipment

Valuable?

Rare? X

Costly to Imitate? X

NonSubstitutable? X X

Competitive consequences Competitive Parity Temporary Competitive Advantage Sustainable Competitive Advantage Competitive Parity Sustainable Competitive Advantage Competitive Parity Competitive Parity Competitive Parity Competitive Parity Sustainable Competitive Advantage Temporary Competitive Advantage

X X X X

X X X X

X X X X

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[INDUSTRY ANALYSIS OF THE INDIAN HOSPITAL INDUSTRY] Temporary Competitive Advantage Temporary Competitive Advantage Competitive Parity Competitive Parity

Location Brand Value Referral Network Tie-ups with Insurance Companies

X X X

From the above it could be gauged that Specialists and Physicians, Degree of complexity of Treatment and the Research Acumen (facility, equipments and research cadre) are the key assets of any member of the hospital industry and are a source of competitive advantage to them. For any player in this industry it is essential that it concentrates its efforts into building capabilities and resources aligned towards these resources. All the other resources which provide either competitive parity or temporary competitive advantage are more hygiene factors than anything else. They ought to be present for the player to be at par with its competitors.

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Inside-Out Analysis:
Here we will analyze the Indian Hospital Industry from an inside-out perspective, i.e. we will look at what are the characteristics of the environmental factors and the threats and opportunities that the incumbents and prospective entrants face or are likely to face in this industry. We will begin with SPELT analysis and then follow it up with SWOT Analysis.

SPELT Analysis:
In this section we look at the broad environmental characteristics of the hospital industry. Any industry thrives because of many factors and all that goes on in the vicinity of the operations of that industry affect it in a big way. Here, we will look at the various Social, Political, Economic, Legal and Technological factors affecting the hospital industry. Following are broadly the social, demographic and economic factors driving the growth of the hospital industry in India:

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Source: CRISIL Research

Social and Demographic Factors: Indias population is expected to grow from around 1.1 billion in 2009-10 to over 1.4 billion by 2026. The number of treatments required is therefore expected to increase in accordance with the population. Looking at the current state of the hospital industry and the healthcare sector as a whole, we are looking at a great opportunity for incumbents as well as prospective entrants into this industry. Below is the projected population in billions in India.

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Source: CRISIL Research As a result of increasing life expectancy due to various advances in technology and overall well being in society, the proportion of people above 60 years is also expected to increase by quite an amount as can be seen from the diagram shown below. As the requirement for healthcare delivery amongst the senior citizens is high, this shift in demographics signals the need for greater potential in store for the hospital industry.

Source: CRISIL Research With more and more of the Indian population coming under the influence of education, there is greater awareness about the need for proper healthcare, both preventive and curative. This further increases the scope of the health sector and consequently, the hospital industry as well. There has also been a marked change in the disease profile of the average Indian. With a greater percentage share of the population falling in the 30-60 age group and a greater percentage of Indian households earning more than INR 200,000 per annum (amongst whom the incidence of lifestyle related diseases such as diabetes and hypertension is highest), the prevalence of lifestyle

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related diseases is expected to increase. As a result, demand for such peripheral services like diagnostic facilities and Outdoor Patient centers for regular checkups can be expected to increase. Economic Factors: Over the next 3 to 4 years, the share of households in the lowest income bracket (below INR 100,000 per annum), is expected to decline from current levels of 55 per cent to as low as 38 per cent by 2014-15. On the other hand, the share of households in the above INR 200,000 per annum bracket is expected to increase from 14 per cent to 26 per cent, indicating a strong increase in the disposable incomes of households. With rising income levels the purchasing power increases, making higher-quality healthcare affordable for a larger section of the population and thereby providing an impetus for demand growth. This is even though healthcare may be considered a non-discretionary expense. Currently, the Indians are heavily under-insured. Especially, the health insurance coverage is dismal. Over 95 per cent of Indias private healthcare expenditure currently takes place in the form of out-of-pocket expenditure as health insurance coverage is under 5 per cent. As the penetration of health insurance increases, healthcare is likely to become more affordable for a larger percentage of the population. Consequently, hospitalization rates (the percentage of times an individual actually visits a hospital when he/she needs to) and health checkups, which form a mandatory part of health insurance coverage, are expected to increase significantly. Another economic factor is medical tourism. This phenomenon has gained momentum over the years and India is fast emerging as a major medical tourist destination. India is extremely competitive in healthcare costs vis--vis the developed countries and other nations in Asia. The fact that India offers advanced medical facilities in critical areas such as cardiology, joint replacement, orthopedics, ophthalmology, organ transplants and urology adds to its competitive advantage. The presence of large private hospital chains, whose hospitals are globally renowned, enhances Indias status as an attractive destination for medical tourism. Political and Legal Factors:

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Though India is slated to become the next big economic super power to look out for, the state of affairs of the hospital industry and the healthcare industry as a whole is pretty dismal. According to the World Health Organizations (WHO) report on world health statistics of 2007, India's healthcare industry constituted around 5 per cent of the gross domestic product (GDP); per capita healthcare expenditure stood at US$ 40 (on a purchasing power parity basis), far behind the global standard of around US$ 250. The central, state and local governments share the responsibility of providing healthcare in the country. The public sector accounts for only around 25 per cent of the total healthcare expenditure in India (amongst the lowest in the world).

Source: World Health Organization (WHO) As a consequence of low public expenditure and the non-discretionary nature of utilization of healthcare delivery services, the gap in healthcare delivery is filled by the private sector which accounts for around 75 per cent of the total healthcare expenditure in India; this is among the highest proportions of private healthcare spending in the world. The private sector in India comprises of assorted providers such as not-for-profit and voluntary organizations, providers with a commercial motive including corporate houses, trusts, stand-alone specialist services, diagnostic laboratories and pharmacies.

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India: Health expenditure as per cent of GDP

Source: WHO The Union Ministry of Health and Family Welfare is responsible for the implementation of various programs of national importance such as family welfare, prevention and control of major diseases. The ministry comprises the following departments, each of which is headed by a Secretary to the government of India: 1. Department of Health 2. Department of Family and Welfare 3. Department of Indian Systems of Medicine & Homeopathy. In developing countries like India, where health services are delivered mainly through private health providers, regulations is a vital instrument and function of government policy. There are many methods for the assessment of quality in healthcare, licensure, certification etc; the accreditation system is one of these budding concepts. Accreditation of hospitals is a voluntary process by which an authorized agency or organization evaluates and recognizes health services according to a set of standards related to the structure and process that contributes for desirable patient outcomes.

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India, until date, does not have an accreditation agency. Hospitals may apply for international accreditation from agencies such as International Organization for Standardization (ISO), Joint Commission International, US (JCI), and Joint Commission for Accreditation of Healthcare Organizations (JCAHO), US. However, it is not compulsory for a hospital to apply for accreditation. Technological Factors: The Hospital Industry in particular and the Healthcare Industry in general is pretty dynamic in terms of the technological advancements that occur almost perpetually. New lines of medicine and treatment procedures are being developed every so often and hospitals cannot afford to sit back and see while the rest of the world is going ahead at great speeds towards a more technologically intensive healthcare sector. Even within the industry, state-of-the-art equipment and research facilities are distinguishing factors between competitors. While the costs of newest equipment with the newest in technologies are inhibitive, hospitals do not have a way out of installing these in them so as to keep up with or go ahead of competition. In the case of tertiary care hospitals, most high-end diagnostic and surgical equipment is imported. The equipment costs vary across hospitals, depending on the type of ailment the hospital specializes in. Under normal circumstances, equipment cost would be the highest in the case of neurology and cardiac care, followed by orthopedics and oncology. Hospitals have to have good research facilities and up to date administrative equipment personnel to keep track of the latest in advancements.

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SWOT Analysis:
The SWOT analysis of the Hospital industry reveals the position of various sectors of hospitals in India in respect to its internal and external environment. Strengths: 1. Quality and Range of Services : India has number of hospitals offering world class treatments in nearly every medical sector such as cardiology and cardiothoracic surgery, joint replacement, orthopaedic surgery, gastroenterology, ophthalmology, transplants and urology to name a few. The various specialities covered are Neurology, Neurosurgery, Oncology, Ophthalmology, Rheumatology, Endocrinology, ENT, Paediatrics, Paediatric Surgery, Paediatric Neurology, Urology, Nephrology, Dermatology, Dentistry, Plastic Surgery, Gynaecology, Pulmonology, Psychiatry, General Medicine & General Surgery. For its quality of services and the infrastructure available, India is attracting a vast pool of tourists from the middle east, Africa etc. 2. Affordable costs : India is now being put up on international map as a heaven for those seeking quality and affordable healthcare. Since Indian healthcare industry is offering the quality treatment at a 5th of the cost in comparison to the rest of the world, many foreigners without health insurance and waiting lists for state-run facilities are increasingly flocking to India. Moreover, in India, complicated surgical procedures are being done at 1/10th the cost as compare to the similar services provided in the developed countries. 3. Cost Comparison with the West : Price advantage is, of course a major selling point. The cost differential across the board is huge ranging between 1/10th to 1/16th of the cost in the west. The Open-heart surgery, which could cost approximately upto $70,000 in UK & upto $150,000 in USA, are available in Indias best hospitals for a cost between $3000-10,000. Knee surgery (on both knees) costs Rs 3,50,000 ($7700) in India ; in Britain this cost----10,000 ($16,950)- more than twice as much. Dental, eye and cosmetic surgeries in western countries cost three to four times as much as in India. 4. Vast supply of qualified doctors : one of the major strength of Indian healthcare industry is its large pool of qualified doctors,, nurses & paramedics with required specialization and expertise and the language advantage ( English speaking skills).The medical education system caters to the ever increasing demand for the delivery of the quality healthcare services all over the country. 5. The growth of the middle class in the country has not only led to rapid changes in the urban lifestyle but also to some extent rural centers. This opens a huge market for the hospital

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industry and the healthcare sector, which has a comparatively lower level of contribution in the markets of India. 6. One of the supportive part of the healthcare industry in India is the pharmaceutical and the paramedical industry which posses excellent chemistry and process reengineering skills, which adds to the competitive advantage of the Indian hospital industry too. Weakness: 1. India with a population of over a billion, the rural markets are largely untapped. Most of the healthcare industry is concentrated in the metros or urban areas leaving the rural areas to strive for proper treatment. In other words, the healthcare industry is not catering to the needs and demand of the growing population in rural India, which comprises of approx. 60% of the population.

2. The involvement of the Public Sector in the healthcare industry in India is not upto the mark. The hospitals operative with the aid of public sector comprises of only 25% of the entire industry, leaving 75% share to the private players to cater the needs/demand/expectation from this industry. Further, the penetration of modern medicine is less than 30% in India.

3. The per capita expenditure on the health in comparison to the rest of the world is too low. India's healthcare industry constituted around 4 per cent of the gross domestic product (GDP); per capita healthcare expenditure is approximately US$ 40 (on a purchasing power parity basis) which is far behind the global standard of around US$ 250. If we put the things in other perspective, per capita expenditure on health care in India is even lower than many other developing countries like Brazil is US$ 453 and Malaysia US$189.

4. The research & development support system is meager against the requirements in the Indian healthcare industry. Moreover, the excessive dependency on the imports of the lifesaving drugs and the medical machinery is one of the major weaknesses for the Indian hospital industry. Most of the medical equipments/ huge machinery are imported from foreign countries draining the money from the country.

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5. India lags behind most global parameters in terms of hospital infrastructure and manpower. According to the WHO Report on Health Statistics 2010, India's bed to population ratio stands at 9 for every 10,000 people, as compared to the global median value of 26. Also, while India has one of the largest medical workforces with almost 650,000 doctors and over 1.3 million nurses and midwifery personnel, there is a major shortage of skilled labour. India's ratio of physicians per 10,000 individuals stands at 6 (global median 13) and ratio for nurses and midwifery personnel per 10,000 individuals stands at 13 (against the global median value of 27).

Opportunities 1. The increasing joint ventures and the agreements between the popular and well known chain of hospitals is creating the challenging environment. However, the same may lead to consolidation as well. 2. The overseas company investments are providing new life (oxygen) to the healthcare industry in India, which is likely to transform the fortunes of the entire healthcare industry in the long term. 3. The regulatory improvements are playing a positive role in the expansion of the healthcare industry in India. The contribution of private sector in the healthcare industry during last few decades is remarkable making the services available to a large geographical and demographical region. 4. Due to the cost effective services available in India, the overseas assisted projects have created never before opportunities for the healthcare industry in India. 5. Opening up of health insurance sector and the expected growth in per capita income are key growth drivers for the healthcare industry from a long-term perspective, which is likely to lead to the expansion of healthcare industry in India. 6. Being one of the lowest cost producer of pharmaceutical products supporting to the healthcare service sector i.e. hospitals, Indian hospitals and the healthcare industry can become a global outsourcing hub for its services.

Threats:

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1. The major threat against the healthcare industry is the unorganized market for the medical disposables. It is likely to create health hazards at a very greater level nullifying the positive effects of the high expansion of the industry. 2. Threats from other low cost countries like China and Israel exist. However, on the quality front, India is better placed relative to China. So, differentiation in the service side may wane. 3. The recent restrictive regulation may lead to the industry becoming costlier and out of the reach of many people. Due to increased taxation on the highly specialized hospitals, the costs of services are likely to go high, which may become unaffordable for many middle class people. Further, the lack of regulation specifications in spurious products used in the industry may create health hazard.

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Decision making framework for industry players:

In todays complex healthcare industry, strategic decisions must be effective and competitive in order for hospitals to survive. Strategic decisions include major pronouncements, such as where to invest capital, where to expand service lines, or whether to start a new surgery center. To make these decisions, more often than not, the administrators of healthcare organizations involve teams. In strategic management literature, these are called strategic decision-making teams (SDMTs) which are the basic building blocks of organizations and are responsible for formulating and implementing decisions which have long-term strategic direction and performance implications. Strategic decisions are vague, complex, and non-routine. Since most of the strategic decisions require inputs from the professional doctors it is more likely that these professionals are involved in decision making. A decision making role helps in directing the future course of a business. Basically, the type of decisions that consumers make regarding health care are the same types of decisions that health care professionals and other consumers make in a commercial environment.

The Framework consists of a series of inter-connected and inter-related steps. These six steps may be grouped into three phases: Issue identification (identify the issue and put it into context); Risk assessment (assess risks and benefits); and Risk management (identify and analyze options, select a strategy, implement the strategy and monitor and evaluate the results). The process begins at the top of the diagram, and proceeds clockwise through the other steps. The process is flexible in that one may move back and forth between steps or revisit steps based on available information. For example, a previous step may be revisited when new information becomes available and needs to be considered.

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The problem should be framed through analysis (e.g. scientific risk assessment) and its urgency needs to be determined. Responsibility centers and stakeholders should be engaged for redressal of the problem. Proper roles and responsibilities of each individual should be identified. Determination of policy goals and commitments related to the issue to articulate options, their advantages and disadvantages, should be done. Evidence-based recommendations should be made. Partnerships and collaborative models (domestic and international) are essential for scientific risk assessment and risk management. Adaptability and flexibility is necessary for making viable decisions. Informed decisions require quality, impartial advice based on best available evidence and rational analysis.

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Strategy for the Challenger:

Healthcare expenditure in India is expected to increase by 15 per cent per annum. There is a growing demand for improved public health infrastructure due to the countrys high population and increasing disease profile. An additional 1.75 million beds are needed for India to achieve the target of two beds per 1,000 populations by [Link] additional 7, 00,000 doctors will be required by 2025 to reach a ratio of one medical doctor per 1,000 individuals. To maintain the current doctor-to-nurse ratio of 2.2, an additional 1,600,000 nurses will have to be trained by [Link] these targets will require a total investment of US$ 77.9 billion. The market for tertiary care is expected to grow exponentially due to the rise in complex ailments such as heart diseases and cancer. Indias changing demographics and the increasing incidence of noncommunicable and lifestyle-related diseases is expected to trigger the need for more tertiary care hospitals to cater to this demand. The share of tertiary care in the total healthcare market was around 11 per cent in 2008. The Indian medical tourism industry is poised to grow at 30 per cent annually, primarily driven by world-class healthcare services that are offered at a fraction of the overall cost, compared with western countries. According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the cost of surgery in India is nearly one-tenth of the cost in US and European countries. Approximately 180,000 patients visited Indias medical centers during the first eight months of the [Link] boom in medical tourism industry is expected to complement the growth of the domestic healthcare delivery market. So it can be seen that there are a lot of opportunities available in the present healthcare industry and only a few players are there in the industry. It gives a lot of possibilities to the market challenger to become the leader. A market challenger is basically a firm in a strong, but not dominant position that is following an aggressive strategy of trying to gain market share. The fundamental principles involved are: Assess the strength of the target competitor. Consider the amount of support that the target might muster from allies.

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[INDUSTRY ANALYSIS OF THE INDIAN HOSPITAL INDUSTRY]

Choose only one target at a time. Find a weakness in the targets position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot.

Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place.

Launch the attack quickly, and then consolidate.

The market challengers strategic objective is to gain market share and to become the leader eventually. In essence the challenger has three strategic alternatives open to him: (a) direct or head-on attack using cost/price/value for money as the key strategic variable; (b) an indirect or flanking approach using product differentiation or promotional activities as a means for winning consumer preference and loyalty; and (c) a by-pass strategy based upon radical innovation through which the challenger seeks to change existing purchasing behavior in favor of a new solution to basic consumer needs. Frontal Attack - This is a direct head-on assault. It usually involves marshaling all your resources including a substantial financial commitment. This strategy seldom works unless the challenger has sufficient fire-power (a 3:1 advantage) and staying power, and he has clear distinctive advantage. Flank attack - A flanking attack involves competing in a market segment that the target does not consider mission critical. The target competitor will not be as concerned about your activities if they occur in market niches that it considers peripheral. By-Pass Strategy - By diversifying into unrelated products or markets neglected by the leader, like pharmaceuticals and online healthcare, a challenger could overtake the leader by using new technologies. A challenger can use a combination of several strategies to improve market share over time. Rome was not built in a day. Challenger has to remain patient and work hard to improve its market share.

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[INDUSTRY ANALYSIS OF THE INDIAN HOSPITAL INDUSTRY]

References:

Crisil Research ([Link] serviceId=503&userId=17190&research=false) [As on 19th March, 2011 to 23rd March, 2011]

[Link] ([Link] [As on 20th March, 2011] Slideshare .net ([Link] [As on 20th March, 2011]

[Link] [As on 20th March, 2011]

[Link] [As on 20th March, 2011]

[Link] March, 2011]

[As

on

20th

[Link] [As on 20th March, 2011]

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