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Asia Pacific Equity Research |
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12 March 2014 |
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Indian Healthcare Services Medical tourism in India: Attractive destination for healthy future; Easier visa regime and weak INR to support growth |
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India is gradually emerging as a destination for elective and critical treatment with growth of 25% in medical tourism over the medium term given quality healthcare services, specialized treatment options, post-care quality and cost saving vs. developed countries. Assocham expects the healthcare tourism market to touch ~Rs120bn by 2015 as inflow of medial tourist increases. This will be further boosted by the INR depreciation last year, which increases the cost advantage for medical tourists. In our view, Apollo and Fortis are the key beneficiaries from the opportunity in the medium term given the presence in key cities, internationally accredited facilities (FORH and APHS have 12 out of out of 19 accredited hospitals in India) and focus on core specialties. International patients account for <15% of their revenue currently but is a potential growth area for the companies. Historically, we believe the cumbersome visa process vs. competing countries (like Thailand, Singapore, and Malaysia) is an impediment to growth of the segment. However, the Indian government has amended the visa norms for foreign tourists by extending the visa-on-arrival facility to 180 countries vs. 11 countries currently (to be implemented from Oct-14), which we believe would be a positive for medical tourism.
· How big is the medical tourism opportunity for India? As per Ministry of Tourism, Medical Treatment accounts for ~2.6% of Foreign Tourist Arrivals (FTAs) into India. In our view, the medical tourism segment also caters to NRIs, who seek lower cost medical options, which is not included in the FTAs number. While the medical tourism segment in India has grown rapidly over the last few years (~20-22%, in our view), it is still ~3% of the global medical tourism industry, which provides significant opportunity for growth. As per Assocham, medical tourism in India is at Rs75bn currently and is expected to touch Rs120bn by 2015 (implied CAGR of 25%) with the inflow of medical tourists likely to cross 4.5Mn by 2015 from the current level of 2.5Mn. The key states that are emerging as preferred destination for medical tourists are Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Maharashtra and New Delhi.
· Medical tourism – Advantage India: The drivers for growth in medical tourism in India are lower cost, scale and range of treatments, internationally accredited healthcare facilities (~19 JCI-accredited hospitals), availability of skilled doctors/nursing staff, sophisticated medical technology and infection control processes without the long waiting period of the developed countries. India has witnessed an influx of patients from SAARC nations (South Asian Association for Regional Cooperation including 8 member nations), Africa, West Asia and CIS countries. There has been an increase in patients from The US and Europe over the recent past, but are still a small proportion of medical tourists in India (<5%, in our view).
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Figure 1: Country wise Breakup of Foreign Tourist Arrivals for Medical Treatment Purpose (2012)
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Figure 2: Key Medical Tourism Product in India (2010)
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Figure 3: No. of hospital with JCI Accreditation in India vs. Competing Countries
Source: Joint Commission International (JCI).
· A real potential in the medium term for Indian hospitals: The positive factor of the Indian Healthcare services industry make medical tourism a significant potential for large hospitals in India including Apollo and Fortis. Presence in key medical centers (like Chennai, Hyderabad, Mumbai, Bangalore, Delhi, etc.), JCI accreditation (4 hospitals for FORH and 8 for APHS), and specialty focus with skilled doctor panel and superior technologies are the key drivers for growth in medical tourism in listed hospitals. Fortis and Apollo have witnessed strong growth (over 15-20%) in international patients revenue, which currently accounts for 7% of domestic hospitals and 12% of revenue, respectively.
· The cost advantage – Got even better: India is the sought after location for organ transplant, orthopedic, cardiology, urology, fertility/reproductive health and oncology problems. As per Patient Beyond Borders, the average saving in India for key specialties and procedures is nearly 65-90% cheaper than the US and much lower than competing countries like Thailand, Malaysia, Singapore, Korea, etc. Further, the INR depreciation by 13% last year has also aided medical tourism in India, and as per an Assocham study the number of medical tourists coming to India has risen by 40% during the period of sharp INR depreciation (Mar-Aug). The study highlighted that the INR depreciation has reduced cost of complex surgeries by 35-45% for patients from Middle East, Africa and SAARC countries.
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Figure 4: Cost Comparison of key medical procedures (US$)
Source: American Medical Association |
Figure 5: Average Saving for Most Traveled Destination vs. the US
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· But not good enough. While the quality standards and facilities providing healthcare services are at par with international standards, there have been concerns on underdeveloped healthcare infrastructure (physician and nurse density). The physician density in India (per 10,000 population) is 6.5 vs. over 20 for most developed countries and higher in competing countries. Further, the cumbersome visa regime with higher fees has also impacted the growth of medical tourism in India. Further, the delay in visa processing for India is an impediment to immediate medical procedures vs. countries like Thailand (the most favored destination for medical tourism). As per news article (ET based on Patients Beyond Borders), India attracted ~350k medical tourists in 2012 vs. 1.2Mn patient treated in Thailand and ~610k medical visitors to Singapore. Last month, media reports (ToI) highlighted that the Indian government has amended the visa norms for foreign tourists by extending the visa-on-arrival facility to 180 countries (from currently 11 countries), which should help increase tourist arrivals for medical treatment purpose too.
Figure 6: Key Healthcare Density Parameters (per 10,000 population) for India remains below peers
Source: WHO Statistics.
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Pharmaceuticals & Healthcare Services Neha Manpuria AC (91-22) 6157-3589 neha.x.manpuria@jpmorgan.com Bloomberg JPMA MANPURIA <GO> J.P. Morgan India Private Limited |
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