McKinsey's $ 2 BILLION medical tourism revenue projections for India by 2012 - time to rethink?

When I heard that a friend of mine is quitting her full time job to join the medical tourism bandwagon, I thought it is about time to clear the air on some of the rosy projections out there. Here is a recent report that projects 30% growth in medical tourism revenue for Fortis (I do not have data to question this..)

http://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/healthcare/Fortis-Healthcare-eyes-30-pc-jump-in-medical-tourist-arrivals/articleshow/6098907.cms

However the devil is in the details. Though the 30% number looks good in percentage terms, the absolute number of patients in 2009(4000 patients), is what one may need to look at more closely.. The revenue figures for Fortis Hospitals (formerly Wockhardt Hospitals ) for 2009 was Rs 93 crores ( about $ 25 million) making the revenue from medical tourism segment for Fortis Hospitals to 9 crores (about $ 2.5 million).

http://www.business-standard.com/india/news/fortis-net-profit-zooms-five-fold/396401/

If we are seeing $ 2.5 million for Fortis Hospitals, the total including other major hospital groups could add up to a reasonable of $ 15 million for 2009. A 30% growth would put the 2010 revenue at about $ 20 million.

So I was wondering if it is high time we revised Mc Kinsey’s medical tourism revenue estimates for India downward from $ 2 BILLION in 2012. Would $ 20 -30 million million be more realistic?

For those who are chasing the hype cycle it makes sense to take a realistic look at the numbers based on the facts available. Medical tourism in India will continue to grow, however the pace of growth is debatable.

Why are international hospitals not setting up shop in India?

I would think there are a lot of hospitals in India that provide better outcomes than what is provided in developed countries. But in general there is a lot that can be done to improve management practices in Indian healthcare sector.

There are a few projects underway,where healthcare groups from US and Europe are esatblishing presence in India. However in general international providers are reluctant to set shop in India due to various reasons

US providers:
1. Many have a local and regional focus, not even expanding within US
2. Profit in dollar terms would be miniscule, unless they build scale
3. Healtchare projects have long gestation periods; medium term geopolitical risks could upset plans
4. Availability of staff in the paramedical area
5. Business models and marketing in India are vastly different from US
6. Hyper competitive due to the presence of a lot of quality providers in India
7. Many hospitals in US are barely getting by, profit margins are razor thin
8. Potenatial for PE investments other co investment models leveraging existing infrastructure/business models.

Europe:
1. Since Europe in general has a public health system, the number of expert players in private sector is lesser compared to the US.
Many of the India centric issues listed above apply.
We may still see a couple make inroads in India, but would face intense competition from established Indian players.

If the financial system in Europe worsens, and senior patients struggle to find affordable public health care, we may see investments in medical tourism projects in India coming from Europe. However the first choice for such investments would be in Eastern Europe.

Middle East: Not many established healthcare brands in the Middle East.
However, we may see lot more co-investment in healthcare sector in India coming from the Middle East.

US healthcare reforms- impact on offshore vendors

http://timesofindia.indiatimes.com/articleshow/5714166.cms

My take:

Though some of the technology work from the top three outsourcing vendors would go to India, Indian based IT outsourcers may not stand to benefit much. However India based BPO firms could see an increase in business.