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A patient entering a Max Healthcare hospital in Delhi can see a highly qualified physician within minutes without an appointment. The cost of a simple doctor’s visit at the clean, modern private clinic is about $5.50.

It is a small sum relative to healthcare costs in the developed world. Under many US health plans or national healthcare services in Europe, it could take weeks to get an appointment with an overbooked doctor.

Prices at Max Healthcare, a private chain started in 2000, are, however, beyond the reach of the average Indian, much less the millions of poor who lack even basic healthcare. Although India’s doctors are typically highly trained, many public hospitals are overcrowded and badly equipped. Rural areas often have dismal primary healthcare services.

For the fortunate who can afford them, India’s private hospitals are a welcome boon. Sparkling, professional clinics are another example of the extremes in India: world-class care set against India’s accounting for one-fifth of the world’s maternal and child deaths.

But as India’s middle class grows, so will demand for top-of-the-line health services. Higher expectations for good healthcare accompany higher incomes. Ironically, the rise of “lifestyle” diseases such as heart disease, diabetes, asthma and obesity that come with greater affluence is also fuelling the need for more medical attention.

The vision for private healthcare does not stop at treatment. Apollo Hospital, launched more than two decades ago in Chennai, has 38 hospitals and clinics across India as well as a network of nursing and hospital management colleges, pharmacies, diagnostic clinics, medical transcription, and “telemedicine” services.

Private healthcare groups are also trying to expand the health insurance industry. Through a joint venture with New York Life Insurance, Max Healthcare has sold more than 1m policies over the past five years.

At its best, private healthcare goes far beyond simple consultation into the realm of complex procedures such as heart surgery. With government support, India is touting the potential of its medical tourism industry abroad to attract foreigners to India for treatment.

Several international investors are backing the sector. Warburg Pincus, the largest private equity investor in India, has invested more than $30m in Max
Healthcare, where it holds a 23 per cent stake and about $43m in parent company Max India.

ChrysCapital, another US private equity fund, invested approximately $10m in Max Healthcare in 2004.

George Soros’ Quantum Fund along with investment firm Blue Ridge are the sector’s most recent investors. In a pre-initial public offering placement last month, Fortis Healthcare agreed to issue $33.3m in shares to the two funds.

Fortis has 12 hospitals in north India and 16 cardiac facilities, including one in Afghanistan. The group, founded by the former head of drugmaker Ranbaxy, intends to hold an IPO in India in the next few months and use the proceeds to build hospitals in Jaipur and the Delhi suburb of Gurgaon and to acquire other hospitals.

Fortis bought Escorts, a Delhi-region hospital group that specialises in heart treatment, in 2005 for $127m. Fortis plans more speciality hospitals for cardiac care, orthopedics, oncology, and mother and childcare. Real estate funds are also seeking a slice of the pie. Recent media reports have hinted that Trikona Capital will announce an $18m investment in Fortis.

As India begins to develop large swaths of property, hospitals will be part of the landscape in new townships. “Hospitals raise the value of real estate,” said Aashish Kalra, managing director of US-based Trikona. “There’s a tremendous opportunity to create value. This is the fastest-growing real estate segment in the country.”

India’s healthcare market is highly fragmented and demand far outstrips supply. India has 1.5 hospital beds per 1,000 people, compared with a ratio of 4.3 beds in developing countries, according to a report from McKinsey and the Confederation of Indian Industries. Meeting swelling healthcare demand will require an investment of $22bn-$31bn by 2012, the bulk of which will come from the private sector.

The growth of medical tourism is also expected to fuel demand for private healthcare. About 180,000 patients travelled to India in 2004 from across the globe for medical treatment, said the McKinsey-CII report. Medical tourism, estimated to be a $333m industry in 2004, is projected to become a $2bn-a-year business for India by 2012.

Medical tourists are arriving from countries in Africa and Asia that lack adequate healthcare infrastructure. Costs of treatment in India are on average one-eighth to one-fifth of those in western countries. A cardiac procedure that costs between $40,000 to $60,000 in the US can be $3,000 to $6,000 in India.

Copyright The Financial Times Limited 2017. All rights reserved.
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