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Home >Politics >Policy >EM private hospital market to reach $240 billion by 2020: report

New Delhi: The emerging market (EM) private hospital market is likely to triple to $240 billion by 2020 (16% compounded annual growth rate), driven mainly by India (also 16%) and China (20%), according to a Bank of America-Merrill Lynch report released on Tuesday.

The Indian healthcare industry is expected to touch $160 billion by 2017 and $280 billion by 2020 with an estimated population growth of 1.2% annually and a 15% annual rise in healthcare spending due to changing demographics and rising income levels.

The report, Healthcare-Emerging Market Hospitals, said that with only 4.8% of gross domestic product spent on healthcare versus much higher spends in developed markets, EMs offer immense scope for growth. The private sector is likely to remain the dominant force as EM governments are committed to promoting the development of private healthcare to meet surging demand.

The findings of this report align with data released by the National Sample Survey Organisation in June 2015. Over 72% of the rural and 79% of urban population rely on private hospitals for treatment. During a 15-day reference period, 89 of every 1,000 people—proportion of ailing persons (PAP)—reported an illness in rural India, against 118 persons in urban areas.

The Merrill Lynch report states bed penetration in India is low at 1.3 per 1,000 people against the global median of 2.5. Hence, India is best placed to offer strong structural growth, as it needs two million more beds over the next decade assuming penetration rises to 2.0. Not just beds, the report states that the healthcare workforce, particularly physicians and nurses, is smaller in EMs compared with developed countries. Physician density in particular is low in India and Thailand. Considering the US as the benchmark, calculations indicate EMs would need an additional 3.5 million physicians and 19.7 million nurses by 2020 (per 1,000 population).

Overall insurance penetration is 25% but private insurance penetration is just 5% in India and out-of-pocket expenditure accounts for a large part of health coverage. In comparison, out-of-pocket expenditure in China is 31% while the government spends 30%.

The report does not give India’s out-of-pocket expenditure but NSSO data reveals that, “To pay for treatment, rural households primarily depended on their ‘household income/savings’ (68%) and on borrowings (25%) whereas urban households relied much more on their ‘income/saving’ (75%) for financing expenditure on hospitalisation, than on borrowings (only 18%)."

The hospitals sector contributes nearly 70% to the $81billion healthcare industry in India. During 2009-12, the private hospitals market is estimated to have seen a nearly 27% CAGR, said the report, adding that this rise could be attributed to a low share of government spending in healthcare and strong demand trend.

Even in the long-term, the Indian government plans to spend only 3% of GDP on healthcare, according to the report. The only benefit of this is that regulatory risks are significantly lower in India, given that the private healthcare industry is still nascent and accounts for a smaller proportion of GDP.

The report said this won’t change in the medium term. In the very long term, the regulatory risk will almost certainly increase, as an ageing population is likely to drive increased healthcare utilization, with spending on healthcare is rising substantially. At that point, as seen now in developed markets, the government is likely to take steps to curb expenditure, the report added.

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