The Private healthcare sector is undergoing a metamorphosis by broadening the focus of its services using technology, deliverables, and newer applications. Hospitals that were confined to a specified area with limited infrastructure and services are now expanding, mainly due to the foreign investment being received by the sector. Here are some of the factors are affecting the healthcare industry.
Consolidation of hospitals
The increase in lifestyle-related diseases and an expanding middle class have led to a growing demand for quality healthcare services over the years.
India’s healthcare infrastructure has been unable to keep pace with the demand. This led to creating a huge void in demand and supply of quality health care services and a growing capital demand due to an increase in operational costs and technology acquisitions.
Thereby pushing healthcare service providers to expand inorganically by merging with competitors or by accepting large capital injections. Last year, Fortis Healthcare Ltd. accepted the proposal from Malaysia’s IHH Healthcare Berhad to invest INR 4,000 crores in the Indian Hospital Chain.
Debt funding
Debt finance is a major source of capital for the private healthcare industry. Doctors are now inclining majorly towards debt funding. The borrower must offer primary security and collateral security before securing a loan. Primary security is usually provided in the form of a charge over the asset against which the loan is taken and collateral security is usually given in form of a personal guarantee.
The requirement to offer collateral in the form of a personal guarantee is the biggest consideration for promoters of small and medium scale hospitals while accepting debt which, many times, hinders expansion. Many new healthcare services are emerging quickly and are looking for funding.
Emerging Tier 2 and Tier 3 cities
Recently there has been tremendous growth in secondary and tertiary care hospitals in Tier 2 and 3 cities. There are many reasons for this emerging trend. The per capita income of the people has increased significantly in the past few years, resulting in a significant increase in their capacity to pay for quality healthcare. A major factor is the willingness of doctors who have been practising for a long time and enjoying goodwill, to join hands to start big hospitals.
Another possible reason is reaching of saturation level due to an increase in the competition in Tier 1 cities, causing the serious players to explore opportunities outside these cities. Lower cost of availability of land, labour, electricity etc. has posed as an additional attraction of Tier 2 and 3 cities.
