The World Health Organization recognises health financing as a “core function of health systems that can enable progress towards universal health coverage by improving effective service coverage and financial protection.” For a significant part of the Indian population, this is crucial given the rural-urban healthcare divide, the prevalence of low and middle-income groups, and the general lack of awareness about health concerns. These factors compromise our healthcare infrastructure and delivery.
Despite the notable evolution of our healthcare system, providers are yet to realise their true potential as global leaders. Healthcare financing can fuel their efforts with a multifaceted approach to provision, management, and accessibility for India's vast and diverse population.
Healthcare finance in action
The healthcare finance arsenal is designed to enable organisations to meet every person's needs and achieve positive patient outcomes. Proper and informed financial planning promotes operational efficiency, ensuring smooth day-to-day functioning, preparedness for unforeseen circumstances (highlighted by the COVID-19 pandemic), and adherence to regulatory parameters.
Private equity (PE) investments play a critical role in Indian healthcare. Hospital owners or promoters often opt for PE investments instead of accumulating more debt. PE investors aim to enhance financial performance by curbing expenses, enhancing service quality, boosting sales, and embracing technological advances, collectively improving the company's profit and loss statement and strengthening its balance sheet.
Investors' steps in this direction
Substantial progress has been made in recognising changing healthcare priorities, as outlined in the National Health Policy of 2017. The policy aims for the highest possible level of health and well-being for all through a preventive and promotive healthcare orientation in all developmental policies. It emphasises professional standards, reducing inequity, ensuring universality, patient-centred quality care, financial and performance accountability, and adapting healthcare organisations based on new knowledge and evidence.
Healthcare finance has attracted significant recent investments. For example, the healthcare financing startup Icanheal raised Rs15 crores from IvyCap Ventures, offering customised solutions focusing on critical care needs like cancer. Platforms such as CarePay and SaveIN provide holistic care, leveraging digital zero-cost EMI to make “healthcare for all” a reality.
Private equity and healthcare investments
A 2016 Deloitte report acknowledged the growth of the Indian healthcare industry at double-digit rates over the past decade, predicting the medical devices market to be a USD 25-30 billion industry by 2025. Major buyouts in this sector by KKR, Temasek, and Warburg have garnered substantial attention due to significant investments and valuations.
In April 2023, Temasek spent USD 2 billion to raise its stake in Manipal to 59 per cent from 18 per cent, marking the biggest-ever hospital sector deal in India. This interest can be attributed to the demand for private care in smaller cities facing bed and equipment shortages and overburdened public facilities. Additionally, the alarming increase in chronic and life-threatening diseases has drawn foreign investor attention to Indian healthcare.
The future of Indian healthcare
With increasing global deal activity, India's healthcare sector is emerging as a prime investment opportunity. The market's segmentation and under-penetration, particularly among private healthcare providers, offer significant long-term potential. India should no longer be associated with lack and ill-favored health outcomes. The India Private Equity Report 2024 by Bain & Company lists healthcare as a sector poised to attract significant investments due to supportive policies and large-scale assets across various sub-segments.
These deals signify a commitment to a healthier nation, with healthcare providers equipped to serve people in what is considered the highest service to mankind. Investors who can scale their operations to meet the rising demand for high-quality care are likely to see substantial returns, echoing recent successes.
The risk-return profile for healthcare investments in India is particularly advantageous, offering considerable returns for relatively modest incremental risks compared to more developed markets. This dynamic, coupled with visionary leadership and substantial investments, positions India as a leader in global healthcare transformation.
Overall, India's healthcare sector, driven by growing demand, supportive policies, and strategic investments, offers a compelling opportunity for healthcare finance. Investors who seize these opportunities can anticipate robust growth and substantial returns, solidifying the sector's role at the forefront of global healthcare innovation and expansion.
The author is Co-Founder, Versatile Healthcare Advisory LLP, Member of NATHEALTH
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