Hospitals

Summary
The attractive returns earned by
hospital projects coupled with
shortage of hospital beds in the

Annual Review

August 2009

country makes this sector an

attractive long term investment
opporunity. In our base case
scenario, an investment in a
tertiary care, multi-speciality
hospital would have a project
IRR of 16.4 per cent. In the
short term, however returns
would be negative as green field
hospital projects would typically
make a net profit only in their
fourth year of operations.
The market size of the
healthcare delivery (hospitals)
sector is expected to grow at a
CAGR of 12 per cent and reach
Rs 2,970 billion in 2013, up from
Rs 1,693 billion in 2008.

Contents
Part A: Hospitals - An attractive long term investment opportunity
Executive summary
Financial attractiveness of a hospital project
Hospital project location identification
Market size, beds needed and investments required
Ailment-wise market size and key demand drivers
City-wise upcoming hospitals

A-1
A-3
A-11
A-13
A-21
A-27

Part B: State of the industry

Industry structure
Evolution of the health system in India
Healthcare delivery: Revenues, costs and margins
How to analyse a healthcare delivery company?
Key success factors of a hospital
Player profiles

B-1
B-15
B-19
B-25
B-29
B-33

Part C: Industry statistics

Hospitals financials
Diagnostics centers
Countrywise comparison
Health indicators
Human resources for health in India

C-1
C-11
C-17
C-23
C-29

This document has been prepared by Karishma Shetty (Associate), Karan D Vasani (Analyst) and Sudhir Nair
(Head

of

Research).

For

any

queries

(clientservicing@crisil.com. Ph -022-66913561)

please

get

in

touch

with

our

client

servicing

desk.

Opinion
Sections

1.0
2.0
3.0

4.0

5.0

Executive summary
Financial attractiveness of a hospital project
- Project details and assumptions
Hospital project location identification
Market size, beds needed and investments required
- Market size
- Requirement of beds and the corresponding investment needed
- Growth drivers
Ailment-wise market size and key demand drivers
- Cardiovascular diseases
- Oncology
- Diabetes
City-wise upcoming hospitals
- Upcoming and current scenario of hospital beds
- City-wise scenario of existing and upcoming hospital beds

A-1
A-3
A-3
A-11
A-13
A-13
A-14
A-16
A-21
A-22
A-24
A-25
A-27
A-27
A-29

Boxes
3.0 Market size, beds needed and investments required
01 Methodology - No. of beds needed state-wise
02 Methodology - Ailment-wise no. of treatments

A-18
A-19

2.0 Hospital project location identification

01 Process of identifying a location for a hospital project

A-11

3.0 Market size, beds needed and investments required

01 Growth drivers

A-16

Charts

Continued

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

A-i

continued

Figures
1.0
01
02
03
04
05
06
07
08
09

Financial attractiveness of a hospital project

Base case occupancy assumptions
Bull case occupancy assumptions
Bear case occupancy assumptions
Base case - margin movement
Bull case - margin movement
Bear case - margin movement
Base case movement of gearing and interest coverage
Base case movement of gearing and interest coverage
Base case movement of gearing and interest coverage

3.0
01
02
03
04
05
06
07

Market size, beds needed and investments required

Healthcare delivery - Market size
Percentage of market size
No. of treatments - In-patients
No. of treatments - Out-patients
No. of beds and investments needed
Population in India
Age demographic shift

A-13
A-14
A-14
A-14
A-15
A-16
A-16

4.0
01
02
03
04

Ailment-wise market size and key demand drivers

Hospitalised cases in 2008
Cardiac prevalence
Prevalence of oncology
Prevalence of diabetes

A-21
A-23
A-24
A-25

5.0
01
02
03
04

City-wise upcoming hospitals

City-wise population
Supply of beds in 2008
City-wise beds per thousand population in 2007
Planned supply of beds - 2009 to 2012

A-27
A-27
A-28
A-28

A-6
A-6
A-6
A-8
A-8
A-8
A-9
A-9
A-9

continued

A-ii

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

continued

Tables
1.0
01
02
03
04
05
06
07

Financial attractiveness of a hospital project

Attractive IRR's
Project details
Assumptions on capital cost and funding mix
Assumptions on revenues
Assumptions on costs
Sensitivity of IRR to ramp up of occupancy and land cost
Sensitivity of gearing to ramp up of occupancy and land cost

3.0 Market size, beds needed and investments required

01 State-wise number of beds needed

A-3
A-3
A-4
A-5
A-7
A-8
A-10

A-15

4.0 Ailment-wise market size and key demand drivers

01 Ailment-wise hospitalised cases and market size
A-22
02 Prevalence rate per 1,000 for rheumatic heart disease (RHD) and congenital
heart disease
A-23
03 Crude incidence rate of oncology
A-25
04 Prevalence rate of diabetes per 1,000 in India
A-26
5.0
01
02
03
04
05
06
07
08
09
10
11
12

City-wise upcoming hospitals

No. of beds in Bangalore in 2008
2009-2012 Upcoming supply: Bangalore
Total no. of beds in Chennai in 2008
2009-2012 Upcoming supply: Chennai
No. of beds in Hyderabad in 2008
2009-2012 Upcoming hospitals: Hyderabad
No. of beds in Kolkata in 2008
2009-2012 Upcoming hospitals: Kolkata
No. of beds in Mumbai in 2008
2009-2012 Upcoming hospitals: Mumbai
No. of beds in NCR in 2008
2009-2012 Upcoming hospitals: NCR

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

A-29
A-29
A-29
A-30
A-30
A-30
A-31
A-31
A-31
A-32
A-32
A-33

A-iii

State of the industry

Sections
1.0 Industry structure
- Healthcare delivery in India: An overview
- Slicing the healthcare pie
- Classification of hospitals
- Options for operating a hospital in India
- Industry characteristics
- Regulatory framework
- Accreditation of hospitals
2.0 Evolution of the health system in India
- Phase 1 (1947-83) A poor start
- Phase 2 (1983-2000) The National Health Policy 1983
- Phase 3 (post 2000) The National Health Policy 2002
- Pradhan Mantri Swasthya Suraksha Yojana (PMSSY)
3.0 Healthcare delivery: Revenues, costs and margins
- Revenue mix
- Cost structure of a hospital
4.0 How to analyse a healthcare delivery company?
- Business strategy of the company
- Companys operating efficiency
- Market position of the company
5.0 Key success factors of a hospital
- Key success factors
- Other factors leading a hospitals success
6.0 Player profiles
- AIIMS (All India Institute of Medical Sciences)
- Apollo Hospitals Enterprise Limited
- Aravind Eye Hospital
- CARE Hospitals
- Fortis Healthcare Ltd
- Max Healthcare Institute Limited (Max Health)
- Metro Hospitals
- Sankara Nethralaya
- Wockhardt Hospitals
- NIMHANS (National Institute of Medical Health and Neuroscience)
- Manipal Group

B-1
B-1
B-2
B-3
B-9
B-10
B-10
B-12
B-15
B-15
B-15
B-16
B-17
B-19
B-19
B-21
B-25
B-25
B-26
B-27
B-29
B-29
B-30
B-33
B-33
B-34
B-39
B-42
B-44
B-50
B-54
B-55
B-57
B-62
B-63

Continued

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

B-i

continued

Charts
1.0
01
02
03
04
05
06
07
08

Industry structure
Ailmentwise complexity based definition
Hospitals Classification
Hospital classification based on medical specialities
Hospitals Value chain
Working environment of TPAs
List of licences, registrations and approvals
Hospitals Regulatory compliance
Healthcare accreditation in various countries

B-4
B-5
B-6
B-7
B-9
B-11
B-12
B-13

3.0 Healthcare delivery: Revenues, costs and margins

01 Healthcare delivery Breakup of revenues
02 Ailmentwise ALOS

B-19
B-20

6.0 Player profiles

01 Integrated health delivery model
02 Business structure table

B-43
B-47

Figures
1.0
01
02
03

Industry structure
Public expenditure on health has been very low in the past
Health expenditure as per cent of GDP - 2006
India: Health expenditure as per cent of GDP

6.0
01
02
03
04
05
06

Player profiles
Revenue & Contribution Margin Trend
Average Operational beds & Average Revenue per Occupied Bed per Day
Inpatient trends
Outpatient trends
Break-up of inpatients
Break-up of outpatients

B-1
B-2
B-2

B-51
B-51
B-52
B-52
B-56
B-56

continued

B-ii

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

continued

Tables
1.0 Industry structure
01 Ailmentwise margins and realisations

B-21

6.0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33

B-33
B-34
B-35
B-36
B-36
B-37
B-37
B-38
B-38
B-39
B-40
B-40
B-42
B-42
B-44
B-45
B-49
B-50
B-50
B-53
B-54
B-54
B-55
B-55
B-56
B-57
B-58
B-59
B-61
B-63
B-64
B-64
B-66

Player profiles
AIIMS-Operational Details 2005-06
Apollo Group - Business structure
Apollo Hospitals Enterprise Limited
Apollo Group - Accreditations
Apollo Group - Capital expenditure plans
Apollo Hospitals Enterprise Limited (AHEL): Operational details
Hospital beds owned by AHEL
Hospital beds owned by subsidiary/associates/JVs of AHEL
AHEL-affiliated hospital beds
Aravind Eye Hospital - Business Structure
Aravind Eye Hospitals - Hospitalwise no. of beds
Aravind Eye Hospitals - Performance 2007-08
CARE Group - Business structure
CARE Group - Operational details
CARE Group - Capital expenditure plans
Fortis Group - Hospitalwise no. of beds
Fortis Group - Capital expenditure plans
Max Healthcare Model
Max Health - Operational Details
Max Health - Capital expenditure plans
Metro Group - Business Structure
Metro Hospitals - Operational details
Metro Hospitals - Capital expenditure plans
Sankara Nethralaya - Business structure
Sankara Nethralaya - Market Position
Sankara Nethralaya - Operational details
Wockhardt Hospitals - Business structure
Wockhardt Hospitals - Hospitalwise no. of beds
Wockhardt Hospitals - Capital expenditure plans
Manipal Group - Business structure
Manipal Group - Owned hospitals
Manipal Group - Associate hospitals
Manipal Group - Capital expenditure plans

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

B-iii

Industry statistics
Sections
1.0
2.0
3.0
4.0
5.0

Hospitals financials
Diagnostics centers
Countrywise comparison
Health indicators
Human resources for health in India

C-1
C-11
C-17
C-23
C-29

1.0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21

Hospitals financials
Apollo Hospitals Enterprise Ltd Ratios
C-1
Apollo Hospitals Enterprise Ltd Balance sheet parameters
C-1
Apollo Hospitals Enterprise Ltd- Audited results
C-1
Fortis Healthcare Ltd (Standalone) Ratios
C-2
Fortis Healthcare Ltd (Standalone) Balance sheet parameters
C-2
Fortis Healthcare Ltd (Standalone)- Audited results
C-3
Chennai Meenakshi Multi-speciality Hospital Ltd Ratios
C-4
Chennai Meenakshi Multi-speciality Hospital Ltd Balance sheet parameters C-4
Chennai Meenakshi Multi-speciality Hospital Ltd- Audited results
C-4
Dr Agarwal's Eye Hospital Ltd Ratios
C-5
Dr Agarwal's Eye Hospital Ltd Balance sheet parameters
C-5
Dr Agarwal's Eye Hospital Ltd- Audited results
C-6
Indraprastha Medical Corporation Limited Ratios
C-7
Indraprastha Medical Corporation Limited Balance sheet parameters
C-7
Indraprastha Medical Corporation Limited- Audited results
C-7
Kovai Medical Centre and Hospital Ltd Ratios
C-8
Kovai Medical Centre and Hospital Ltd Balance sheet parameters
C-8
Kovai Medical Centre and Hospital Ltd- Audited results
C-9
Max Healthcare Institute Ltd: Ratios
C-10
Max Healthcare Institute Ltd Balance sheet parameters
C-10
Max Healthcare Institute Ltd- Audited results
C-10

Tables

Continued

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW

C-i

continued

Tables
2.0
01
02
03
04
05
06
07
08
09

Diagnostics centers
ADS Diagnostics Ltd Ratios
ADS Diagnostics Ltd Balance sheet parameters
ADS Diagnostics Ltd- Audited results
Dolphin Medical Services Ltd Ratios
Dolphin Medical Services Ltd Balance sheet parameter
Dolphin Medical Services Ltd- Audited results
Medinova Diagnostic Services Ltd Ratios
Medinova Diagnostic Services Ltd Balance sheet parameters
Medinova Diagnostic Services Ltd- Audited results

3.0 Countrywise comparison

01 World health statistics
02 Human resource for health

C-17
C-19

4.0
01
02
03
04
05
06

C-23
C-24
C-25
C-26
C-27
C-28

Health indicators
State-wise birth rate in India
Crude death rates in rural/urban areas in India
State-wise death rate by sex and residence in India in 2007
State-wise life expectancy at birth by sex in India
Life expectancy at birth in India across years
State-wise infant mortality rate by sex and residence in India in 2007

5.0 Human resources for health in India

01 State-wise number of medical colleges in India (as on 30th September 2008)
02 Number of doctors possessing recognised medical qualifications
(under I.M.C Act. 1956) and registered with State Medical Councils in India
03 State-wise total number of practicing doctors registered with Medical
Council of India
04 Number of registered General Nursing Midwifery, Auxiliary Nurse-Midwives
and Health Visitors in India
05 State-wise number of registered nurses in India in 2007
06 State-wise doctor, nurse and doctor nurse ratio in India

C-ii

C-11
C-11
C-11
C-12
C-12
C-13
C-14
C-14
C-14

C-29
C-30
C-31
C-32
C-33
C-34

CRISIL RESEARCH HOSPITALS ANNUAL REVIEW