9th December, 2009
The imaging and diagnostic market is poised for a consistent steady growth upwards holding great potential in the future. India is at a stage of ‘health transition,’ brought about by rapid growth. The factors aiding this transition include changing disease patterns, growing health awareness, a well-informed middle class, increase in per capita spending, demand for health insurance and favourable government policies.
X-ray, ultrasound, CT and MRI are expected to collectively account for 68.6 per cent of the health imaging market, according to Ernst & Young’s report. Imaging diagnostics will play an important role in shaping the future of healthcare industry in the country, with treatment decisions largely being based on these test results.
Across the country, the imaging diagnostic market is highly fragmented and predominantly ‘unbranded,’ making it extremely difficult for the layperson to ascertain as to where to go for diagnostic tests. These services are essentially offered by four broad groups.
The first group consists of hospitals funded by the central, state Governments or municipal corporations. The second group consists of hospitals backed by trusts and private corporations. The third group gaining prominence is private imaging centres manned by groups of radiologists. The last category, considered indispensable by some, is aptly described as ‘mom -and-pop clinics’ run by single radiologists.
The basic difference between the four above mentioned groups of service providers in the radiology diagnostics space is the patient factor. With Government funded and trust hospitals, the patient population is essentially diseased, economically vulnerable and availing of the gradation on the pricing of tests. This has resulted in a price war between players who have high-end quality and those who have low-end quality. The focus should be on value-added services, better technology and not price cutting.
The patient pools that go to freestanding centres expect high-quality service and a comfortable, non-hospital environment for their tests, in addition to the quality of their tests. Hence, the way forward for free standing diagnostic centres will be multiple centres in different locations, each with high-quality technology, superb service and ambience so that one does not feel like they are in a medical setting. This is the only way by which high-end diagnostic centres can differentiate themselves from low-end centres who do not value the service concept.
A thorough business planning along with understanding of the realities of the Indian setting are essential to make the investment pay off. While balancing strategic, operational and personnel concerns, financial planning takes precedence.
For Government hospitals, resources are essentially budgeted. Finances are planned years in advance. When it comes to trust hospitals, internal generation is the primary mode of raising finances. There is no pressure to repay loans, while corporate conglomerate hospitals are backed by private corporations where profit is the bottom line. Trust and corporate hospitals alike, definitely have an edge as captive cases and patient referrals are easier to come by, guaranteeing a sizeable patient volume and thus ensuring return on investment within three, five or seven years at the most. With Private Equity (PE) players increasingly coming to the fore, there are more options available for funding expansion. However, when PE players examine the fundamentals of the imaging market they realise that it is vastly different from their traditional investments.
As a result of a visible lack of a domestic manufacturers of medical devices, currently more than 65 per cent of the equipments are imported (mostly from the US, Japan and Germany). At present, most of the diagnostic services take place in sophisticated urban areas. The reach of these top-players, therefore, is mostly in urban India. Domestic companies are active in the semi-urban and rural markets. Many players who opt for equipment supplier funding, do not have to worry about generating funds at one go, allowing for an amicable ‘pay-as-you-go’ policy, a seemingly win-win situation for the provider and the radiology set-up.
Re-Use of Equipments:-
For small (50-100 bed) to medium (up to 200 beds) sized hospitals, the refurbished equipment market is a seemingly economically feasible alternative. Equipment sharing is another such model, common in small set-ups of less urban areas, making these diagnostic tests more affordable for the layman. It follows two models, where a few radiologists get together and install equipment or many clinical doctors get together and install equipment and then hire radiologists.
Another emerging trend is to outsource the entire radiology department of a hospital to a group of radiologists. In such instances, hospitals do not have to bother about funding, but are also unburdened from running the department, while being able to savour a share of the revenue.
Off Shoring of Radiology:-
The market boom within diagnostic services has also seen a remarkable increase in the requirement of outsourcing of radiology services globally. With a pool of well-trained Health Insurance Portability and Accountability Act (HIPAA) compliant radiologists in India, there is a shortage of radiologist’s world over, and high-tech infrastructure investments. India is also an up-and-coming market for tele-radiology, providing offshore X-ray reporting services to the US, Singapore and the Middle East. Outsourcing tele-radiology services to India has proven to be an advantage to small and medium hospitals for countries outside India.
Thus, Radiology is now at the forefront and not just a back office diagnosis function. It certainly has a central role to play in going forward. Both, hospital and stand-alone models will do well if strategically and suitably located. However, purely from a long-term perspective, hospitals would do better if they manned their own service diagnostic departments as quality can be ensured and in days ahead when accreditations will be a must for success, the uniformity of processes will be an important issue towards maintaining quality.