Home Health Care in India: In Search of the Right Business Model

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Home-based health care in India is gaining traction and is poised for transformation. Once an unorganized and fragmented sector, it is fast catching the attention of entrepreneurs and investors and becoming an organized, technology-led industry with standards and protocols.

A recent paper by consulting firm Pacific Bridge Medical notes that the global home health care market, which includes devices, products and services, was worth almost $215 billion in 2013 and is projected to grow at 8% per annum until 2020. Pacific Bridge Medical pegs the Indian home health care market at around $2.3 billion and growing at more than 18%. According to Mahendran Balachandran, a partner at venture capital fund Accel Partners, which has invested in Portea Medical, a Bangalore-based home health care firm: “The home health care market in India, currently estimated to be a $2 billion to $4 billion-a-year opportunity, is driven by an aging population, the increasing prevalence of chronic diseases and the need for better quality post-operative and primary care.”

Devi Prasad Shetty, a cardiac surgeon based in Bangalore and founder of the Narayana Health Group (formerly called Narayana Hrudayalaya) notes, that with life expectancy increasing significantly in India, “home health care is becoming mandatory. Patients who are suffering from chronic illness like heart failure, respiratory failure and Alzheimer’s do not really need hospitalization. With advanced medical gadgets, most of the patient monitoring, which [was earlier] possible only in hospitals, can now be offered with remarkable ease at home.”

India has the second largest geriatric population in the world. According to a United Nations Population Fund report, the number of people age 60 and over in India will increase from 100 million in 2011 to 300 million by 2050; this means one in five Indians will be above the age of 60. Of the 300 million over-60s, 200 million are likely to be suffering from chronic ailments. Already, non-communicable diseases including cardiovascular diseases, diabetes, chronic obstructive pulmonary disease and cancer cause around 50% of all deaths in India.

“With life expectancy increasing significantly in India, home health care is becoming mandatory.” –Devi Prasad Shetty

The concept of old-age homes or assisted living is socially largely unacceptable in India and therefore better home-based health care facilities are becoming an imperative. It is estimated that for an average individual, 70% of health care needs can be met in the home environment. This can result in better health outcomes and lower medical costs for the patients.

Rana Mehta, executive director and leader of the health care practice at PricewaterhouseCoopers India, sees the growth of home-based care as a part of the expanding spectrum of health care services in India. This ranges from government-run primary health care centers and private family physicians to large hospital chains, specialized boutiques, luxury services and telemedicine. He points out that as a country moves up the economic ladder, different pockets of the population demand different services.

“As a result of advances in communication and medical technology, a lot of interventions that could earlier take place only in hospital settings are now becoming possible in the home environment,” Mehta says. “Alongside, there is now a sizable population in India that needs and is willing to pay for these services. This makes it a viable business proposition for entrepreneurs and their investors.” Arnab Mukherjee, a professor at the Center for Public Policy at the Indian Institute of Management in Bangalore adds: “As this market grows, there is an increasing realization that profit streams can be huge and long-term, and lead to large returns on capital invested.”

Entrepreneurs on the Trail

Take Meena and K. Ganesh, a well-known entrepreneur couple in India. In January 2011, they sold their pioneering online education business TutorVista to the world’s largest education company, the U.K-based Pearson, for $213 million. The duo then starting looking for the “next disruptive model” and zeroed in on home health care. “We wanted to do something of size and scale where we could create a social impact using our strengths in technology and the Internet,” K. Ganesh notes. “From our personal experience, we knew that home health care service in India was totally inadequate. We analyzed the space and were convinced that there was a billion-dollar opportunity for us.”

In September 2013, they acquired the fledgling Portea Medical from its New Delhi-based founders. Post acquisition, they raised $8 million from Accel Partners and Ventureast. In July, Portea raised a strategic investment from Qualcomm Ventures, the investment arm of the U.S. tech firm Qualcomm Inc. While they have not disclosed the details, in a conversation with Knowledge@Wharton prior to this funding, the couple said that they plan to raise $40 million for Portea by May 2015.

Portea’s service offering includes geriatric care, post-operative care, palliative care, primary care and physiotherapy. It also provides collection of lab samples, home delivery of medicines, and medical equipment for hire. The company currently offers its services across 18 cities in the country using a proprietary technology platform and has a team of 1,000, including doctors (50), physiotherapists (350), nurses (250), care givers (300) and office staff (50). “Currently we handle 18,000 home visits every month. Our target is to increase our team strength to 3,200 and be present in 50 cities which have a population of over one million in the next 18 months,” says Meena Ganesh. To cast its net wider, Portea has also introduced what it calls the NRI Package. Under this, non-resident Indians (NRIs) can sign up for customized in-home health care services for their relatives in India and get regular updates from the company.

Earlier this year, Vishal Bali, former Group CEO of Fortis Healthcare, teamed up with Ferzaan Engineer, chairman of health care research firm Cytespace Research to set up Medwell Ventures, a “specialty” home health care company. Medwell is funded by the duo and a few high net-worth individuals. Bali and Engineer plan to raise and invest $15 million to $20 million over the next three to five years. Their first move was to acquire the Bangalore-based Nightingales Home Health Services, an 18-year-old organization that offers elder and nursing care with a range of services like physiotherapy, injections, wound care and post-operative care. At present, Nightingales has a team of 150, provides 53,000 patient bedside nursing days per annum and has a subscriber base of more than 5,000 families for its annual care plans.

“Specialty home health care will be a key element of patient-centric care in the coming years.” –Vishal Bali

Over the next two years, Bali and Engineer plan to establish a network in 10 Indian metro clusters serving more than one million families. More importantly, they are looking to expand Nightingales’ services to specialties such as pulmonology, cardiology, metabolic diseases, neurological health, orthopedics, geriatrics, rehabilitation and post-operative surgical site management. “Our plan is to transform Nightingales from home nursing to a specialty home care company with a strong focus on chronic illnesses. We believe that specialty home health care will be a key element of patient-centric care in the coming years,” says Bali.

Last September, Bayada, one of the largest private home health firms in the U.S., took a 26% stake in India Home Health Care (IHHC) a Chennai-based firm started in 2009.According to IHHC president Anitha Arockiasamy, Bayada will invest around $10 million in IHHC over the next few years. “We are currently in Chennai and Bangalore, and are in the process of launching in two new cities in the next six months. We will expand further after consolidating in the four cities,” she notes.

Other recent entrants in this space include Healthcare at Home, which is backed by the Burman family of the Dabur Group, and Homital Medcare. Some large hospital chains like the Manipal Group and Max Healthcare have also started providing this service either on their own or through partnerships with standalone providers. Most service providers have a dual revenue stream comprising annual or monthly subscription fees and a per-interaction fee.

A Technology Play

Unlike in developed countries, home health care in India is not covered by most health insurance policies. According to PwC’s Mehta, organized players will bring in credibility, standards and accountability, which have been lacking in this area in India. This could encourage insurance companies to cover home health care giving a further boost to this sector. Organized firms are also expected to bring scale, which will result in cost benefits.

Medwell’s Bali and Portea’s Ganesh note that technology will play a crucial role in their success. Home health care is not a high margin business and in order to be profitable, it has to be at scale; strong execution capabilities are also critical. This is possible only with the effective use of technology across every aspect — be it scheduling of appointments and other logistics to manage remote workers, having standardized care protocols, capturing and analyzing patient data, and continuous monitoring for error-free and personalized treatment. Of the $8 million it raised in its first round of funding, Portea has earmarked a $2 million for investments in technology. Medwell plans to invest more than $1 million in the first 18 months.

Some of these firms are also evaluating wearable medical devices and plan to offer them as part of their service or work with manufacturers to define care protocol standards. These devices can record patient data in real time and can trigger alerts in the system for quick and pre-emptive actions.

According to PwC’s [Rana] Mehta, organized players will bring in credibility, standards and accountability, which have been lacking in this area.

Mukherjee of IIMB notes that the home health care delivery system is an “important but underdeveloped component” of the larger health care delivery system in India. “Similar systems in many countries, such as in Sweden, play a critical role in reducing costs of care, and in decongesting hospital systems by helping patients leave earlier,” Mukherjee notes. “A side benefit is that with better home management of chronic care, the patient is able to come to the hospital at an early stage of the disease and receive less intensive and sometimes even less invasive care.”Arockiasamy of IHHC adds: “Home health supports the hospital systems by reducing the average length of stay and [enabling] quicker turnover of patients.”

Obstacles to Overcome

But delivering health care at home has its own challenges. “Service providers need to ensure that there is consistency in quality and continuum of care for the patients,” says Accel’s Balachandran. Pointing to cancer care in particular, David Kerr, professor of cancer medicine at the University of Oxford notes: “The obvious advantages are that the service can come to the patient, rather than vice versa. This makes a difference to patients’ quality of life given the range of side effects from anti-cancer therapy.” But Kerr adds that it also requires “strong management, medical oversight, and high-quality chemotherapy nurses supported by a quality controlled pharmacy. We need clear, evidence-based treatment protocols that cover the range of protocols delivered by the team.”

Shetty of Narayana Health says that one of the biggest problems in expanding home health care services in India is the lack of skilled manpower. “The Indian educational system currently does not have a structured training program for home health care,” Shetty notes. “Unless there is vocational training for para-medical services, a strong home health care system will remain a distant reality.”

K. Ganesh points out that the ability to handle last-mile logistics and remote health care workers is critical for effective home health care delivery. He suggests that specialized players are more equipped to offer this service than hospitals because the core competencies and business models are very different. “For hospitals, the singular metric of profitability is average revenue per operating bed, which depends on the average length of stay of a patient,” he says. “Typically, hospitals make the maximum money per patient in the first 48 hour to 72 hours of admission. It is a high margins model. Home health care is a different business model. It is a volume game.” Pointing out that disruptive models usually come from new players, Meena Ganesh adds: “It can never be done by incumbent players because of legacy and mindset.”

Mehta agrees: “Big players are not focused on home health care because the revenue model is very different. It requires a different mindset and a different business model.” Oxford’s Kerr adds: “I think that we need specialist groups providing these services as the large hospitals are under great pressure to deliver their own services without taking on any further duties.”

Shetty, however, offers a contrary view. He says that home health care in India can be better provided by the big hospitals since they have extensive trained and skilled manpower. They also have well-built infrastructure for training and monitoring. “In the Western countries, standalone home health care providers are becoming very popular. But for a standalone home health provider to deliver this service in India will be difficult and expensive.” According to Shetty, “to begin with, hospitals in India will tie up with standalone home health providers. But this relationship will continue only until this service becomes a significant part of the hospital’s offering.”

Balachandran suggests that business models that coexist with the current health care systems and networks in India will be the key to success in this market. “Very often we see companies trying to work outside of the health care referral networks that exist today and quickly fade away.” Adds PwC’s Mehta: “The biggest challenge in home health care in India is discovering the business model that will work here.”

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