Indore Indira Business School

Project Report On

MANAGERIAL ECONOMICS (BATCH 2014-2016)

Submitted in partial fulfillment ofPost Graduation Diploma in Management (PGDM)

Submitted To: Submitted by:Prof. Radhika Sahni Ankit Gupta

Anuj Agrawal PGDM Ist Sem (A)

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C E R T I F I C A T EIndore Indira Business School

INDORE

This is to certify that ANKIT GUPTA & VIVEK MISHRA a regular student of Post Graduation Diploma of Management at Indore Indira Business School, Indore has

worked under my guidance in the sincere preparation of his dissertation entitled:-” A

REPORT ON INDUSTRY RESEARCH I am fully satisfied with this project report which is truly eligible and acceptable for the partial fulfillment of the degree of Post Graduation of Diploma in Management.

DATE; 02/12/2014 PROF. Radhika Sahni

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ACKNOWLEDGMENT

We would like to record our sincere gratitude to for giving us a wonderful opportunity to do a project on A REPORT ON INDUSTRY RESEARCH for our Curriculum project.

We also Express our sincere gratitude to my faculty guide Prof. Radhika Sahni for

guiding us all throughout the Project.

We also thank the People who helped us whenever We needed guidance & help

during our curriculum Project.

Last but not the least we were heartfelt gratitude to all those people who knowingly &

unknowingly supported us & boosted our morale to make this project a reality.

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DECLARATION

We, the undersigned ANKIT GUPTA & ANUJ AGRAWAL student of POST GRADUATION DIPLOMA IN MANAGEMENT 1st year here by declare that the project work presented in this report “A Report o Industrial Research Is our own work and has been carried out under the supervision of PROF.RADHIKA SAHNI (INDORE INDIRA BUSINESS SCHOOL).

This work has not been previously submitted to any other university for any examination.

DATE:02/12/2014 STUDENT SIGNATURE: 1.Ankit Gupta 2.Anuj AgrawalPLACE: INDORE

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APOLLO HOSPITAL

At the behest of his father, in 1971, Dr. Reddy left behind a flourishing practice in Boston and returned to India. On his return he found the medical landscape in the country plagued by gaps in infrastructure, delivery and affordability. Things took a turn for the worse when he lost a young patient who just did not have the means to go abroad for treatment. The incident marked a cross road in Dr. Reddy's life and steeled his determination to get quality healthcare to India. He set the blueprint to build India's first multi-specialty private sector hospital.

Undaunted and unfazed by the obstacles faced, Apollo Hospitals opened its doors in 1983 and ever since nurtured a goal which read as "Our mission is to bring healthcare of international standards within the reach of every individual. We are committed to the achievement and maintenance of excellence in education, research and healthcare for the benefit of humanity".

In the 30 years since, it has scripted one of the most magnificent stories of success that India has seen. Not only is the Apollo Group one of the largest integrated healthcare groups in the region, it also did successfully catalyze the private healthcare revolution in the country. Apollo today has made every aspect of their lofty m ission a reality. Along the way the journey has touched and enriched 39 million lives who came from 120 countries.

Apollo Hospitals was the forerunner of integrated healthcare in Asia, as well as globally. Today, the group's futuristic vision has ensured that it has been in a position of strength at every touch point of the healthcare delivery chain. Its presence encompasses over 10,000 beds across 56 hospitals, more than 1500 pharmacies, over 100 primary care & diagnostic clinics, 115 telemedicine units across 9 countries, health insurance services, global projects consultancy, 15 academic institutions and a Research Foundation with a focus on global clinical trials, epidemiological studies, stem-cell and genetic research.

Over the past three decades Apollo Hospitals' transformative journey has forged a legacy of excellence in Indian healthcare. The Group has continuously set the agenda and led by example in the blossoming private healthcare space. One of Apollo's

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significant contributions has been the adoption of clinical excellence as an industry standard. Apollo pioneered the concept - the group was the first to invest in the pre-requisites that led to international quality accreditation like the JCI and also developed centres of excellence in Cardiac Sciences, Orthopaedics, Neurosciences, Emergency Care, Cancer and Organ Transplantation. Along with excellence the Apollo philosophy rests on the pillars of technological superiority, a warm patent- centric approach, a clear and distinct cost advantage and a edge in forward-looking research. Apollo's spectacular success rests on sustained commitment and investments in each of these pillars.

The Group continues to break new ground in adopting new technology. From leveraging new age mobility, to getting futuristic equipment Apollo has always been ahead of the curve. Currently, the group believes in the tremendous potential of robotics and is investing heavily in making it a real and robust option for all. Apollo pioneered Tender Loving Care (TLC) and it continues to be the magic that inspires hope, warmth and a sense of ease in the patients.

Apollo started out with the promise of bringing quality healthcare to India at a price point that Indians could afford. The cost of treatment in Apollo was a tenth of the price in the western world. Today as the group charts out its roadmap to take healthcare to a billion, the focus on driving a strong value proposition remains constant.

Apollo Hospitals has taken the spirit of leadership well beyond business metrics. It has embraced the onus of keeping India, healthy. India could soon become the heart disease capital of the world if the surge of lifestyle diseases goes unchecked. Apollo Hospitals has its agenda full in taking steps to avoid this. Recognizing that the risk of heart disease can be significantly reduced, even reversed, Apollo Hospitals launched the pathbreaking Billion Hearting Beating, a campaign that empowers Indians with the knowledge to fight the common adversary - heart disease.

Apollo Hospitals has always strongly believed in social initiatives that help transcend barriers. In keeping with this, the group has started several impactful programmes in this area. One among these initiatives is SACHi (Save a Child’s Heart Initiative) - a community service initiative with the aim of providing quality pediatric cardiac care and financial support to children from underprivileged sections of society suffering from heart diseases. Apollo also runs the SAHI (Society to Aid the Hearing Impaired) initiative to help poor children with hearing impairment, and the CURE Foundation which is focused on cancer screening, cure and rehabilitation for those in need. In the area of Cancer care Apollo has also joined hands with Yuvraj Singh's YOUWECAN to organize massive cancer screenings. Apollo regularly conducts comprehensive health screening camps across the nation. The Group actively leverages its telemedicine and mHealth capabilities to take its screening programmes to even remote corners of the country.

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Apollo's remarkable story has captured India's attention. For its service to the nation, the Group was felicitated with the honour of a commemorative postage stamp bearing its name. For his untiring pursuit of excellence in healthcare, Dr. Prathap C Reddy, was bestowed with the second highest civilian award, the ‘Padma Vibhushan’, by the Government of India.

Recently Apollo Hospitals celebrated its 30th year. The Group, led by Dr. Prathap Reddy, reaffirmed its goals and redefined their focus. With ambitious projects like Apollo Reach Hospitals, a strong focus on preventive healthcare and an unabated commitment to nurture excellence and expertise in healthcare, Apollo Hospitals envisions for a new horizon - a future where the nation is healthy, where its people are fighting fit, and India emerges as the preferred global healthcare destination.

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ADITYA BIRLA MEMORIAL HOSPITAL

Aditya Birla Memorial Hospital is a homage and tribute to late Shri Aditya Vikram Birla.

He had envisioned a world-class hospital in India. His vision has taken shape in the form of a medicity sprawled over 16 acres of land.

This medicity is a super specialty healthcare facility to cater to the needs of all sections of society. The hospital's mission: Compassionate Quality Healthcare.

Aditya Birla Memorial Hospital is a multi-speciality tertiary hospital located at Pimpri-Chinchwad, Pune in the western Indian state of Maharashtra. It is Maharashtra's First Joint Commission International (JCI)and National Accreditation Board for Hospital (NABH) accredited hospital, and also India's First HACCP and ISO: 22000:2005 certified hospital.

Spread across 16 acres, Aditya Birla Memorial Hospital has 500 Beds, 152 ICU Beds, 13 Operation Theaters and a flat panel Cath Lab. The hospital employs the finest talent in the medical industry as full time consultants using ultramodern medical technology to provide high quality cost-effective medical services. It lays special emphasis on preventive care towards which is hosts a complete Wellness Assessment Center under one roof. Operating in a paperless and filmless environment, the hospital is committed to maintain the highest standards of healthcare at an affordable cost.

The hospital's sophisticated Medical Emergency Center is equipped with 10 beds - 4 red zone, 6 yellow - fortified with most advanced life-saving facilities such as cardiac, trauma,  pediatric bays,a special room for infectious diseases, and mini operation theatres within the department to manage all major life saving procedures.

The Mother & Child unit is has modern neonatal intensive care and pediatric surgical care facilities. It is equipped with four independent and fully furnished labor suites

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connected to a dedicated Gynaec operation theatre where patients receive individual pre and post pregnancy care. Its experienced gynecologists are trained to detect cancer in the OPD itself, offering Gyne-Oncology and Urogynecology services for highly specialized care to patients with cancer and urinary problems. The Mother & Child unit also provides Assisted Reproductive Technologies (ART) services, offering In Vitro Fertilization (IVF), Intracytoplasmic Sperm Injection (ICSI) and Intrauterine Insemination (IUI) in a separate test tube baby clinic.

MISSION

The hospital is committed to maintain the highest standard of care and respond to the needs of the community in a compassionate manner.

To provide state-of-the-art, high quality and cost-effective healthcare services and latest information to improve and maintain health for the well-being of the community.

To unrelentingly pursue the creation of value for our customers, shareholders, employees and society at large.

To foster a therapeutic relationship based on compassion that is felt, quality that is measurable and cost that is affordable.

To become partners in health promotion with every section of society.

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COLUMBIA ASIA

Columbia Asia is a chain of hospitals in Asia with 27 medical facilities across

India, Malaysia, Vietnam and Indonesia The company is based in Kuala Lumpur,

Malaysia, and was founded in 1994.

The company offers full-service hospitals usually built in suburbs, rather than the

central city. Columbia Asia's target market is the fast-growing middle income group.

Columbia Asia believes in setting up smaller hospitals; less than 100 beds; built in

residential areas for

accessibility and

efficiency. This

helps keep costs

down for consumers

but maintains the

quality of

healthcare, modern

amenities, highly

trained specialists

and nurses  A

typical hospital has

about 65 adult beds, costing about $15 to $16 million to build. It sees about 8,000

patients a month, and brings in about $1 million in monthly revenue.

With streamlined administration and fewer beds, the hospitals have an average patient

stay of two days.

Most of the company’s 10,000 employees are from the host countries. Columbia Asia

hires its doctors and staff largely from the local areas.

The company is in the midst of expansion, especially in India. Upon completion of the

phase the company will have 13 hospitals and one clinic in India, 13 hospitals in

Malaysia, three hospitals in Vietnam and four hospitals in Indonesia, together

representing an investment of over $600 million (U.S.).

Columbia Asia is an international healthcare group operating a chain of modern hospitals across Asia. Columbia Asia Hospitals Pvt. Ltd.is one of the first healthcare

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companies to enter India through 100% foreign direct investment (FDI) route. The Columbia Asia Group is owned by more than 150 private equity companies, fund management organizations and individual investors. 

Columbia Asia hospitals are clean, efficient, affordable and accessible. The innovative design of the hospitals, from their manageable size to their advanced technology, is focused on creating positive experience for patients.

The first hospital in India commenced operations in 2005 in Hebbal - Bangalore. Currently Columbia Asia operates seven multispecialty hospitals, one referral hospital and a clinic. The group has presence in Bangalore, Mysore, Kolkata, Gurgaon, Ghaziabad, Patiala and Pune.

Columbia Asia Hospital, Mysore receives the NABH (National Accreditation Board for Hospitals and Healthcare providers) accreditation, the highest national recognition for quality patient care and safety. The hospital achieved this in a short span of a little over three years after opening. 

Within three years of serving the community, Columbia Asia Hospital, Mysore has become a name to reckon with for providing high quality services at an affordable price. “We have met all the standards set by NABH and the accreditation is a testimony to our commitment to provide the best quality of healthcare to the people of Mysore,” said Dr. Viju Rajan, General Manager, Columbia Asia Hospital- Mysore. 

The NABH accreditation process covers all aspects of hospital management; like fire safety, disaster handling, infection control practices, equipment maintenance, customer feedback, credential checking of the staff and doctors, employee satisfaction etc which ensures that the hospital quality is achieved and maintained. The accreditation once granted is valid for 3 years but requires a reassessment in the middle of this period.

The NABH is part of the Quality Council of India (QCI) set up by the government of India as an autonomous body to establish and operate accreditation programme for healthcare organizations. The board is structured to cater to much desired needs of the consumers and to set benchmarks for progress of the healthcare industry. 

Speaking on NABH accreditation, Dr Nandakumar Jairam, Group Medical Director and Chairman, Columbia Asia Hospitals said, “We have grown extensively in the past few years and are now recognized for the quality of our service; and the Mysore hospital has been a major contributor to our growth process. The Hospital that started operations three years back has already become well recognized and sought after. We have always focused on Technology and International standards of clinical care combined with the highest levels of Quality.” Congratulating the team, he further

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added, “This accreditation further strengthens our commitment to patient safety and International quality healthcare.” 

The NABH certificate is an added feather in the hospitals’ endeavor to provide quality

healthcare and spread awareness on healthy living among the people of Mysore. The

hospital, apart from having set high standards in clinical care, has been working on

various healthcare awareness drives that has built a positive impact on the people of

Mysore.

The Columbia Asia Group is owned by more than 150 private equity companies, fund management organizations and individual investors. The group currently operates six multi-specialty community hospitals, one referral hospital and one clinic in India. The company also operates hospitals in Malaysia (10), Vietnam (3), and Indonesia (1). The Indian management operations are managed from its office in Bangalore.

Columbia Asia Hospitals Pvt. Ltd. is one of the first healthcare companies to enter the country through 100% foreign direct investment (FDI) route.

Mission:"Columbia Asia is pledged to deliver effective and affordable medical services in a clean and caring environment"

Vision:"To build the best managed healthcare company in Asia"

Our Motto:Customer First

Our PeopleWe hire the best talent from healthcare and other industries, invest in training the employees and have numerous rewards and recognitions for them.

Patient-Centred CareWe pride ourselves on our service standards, the people working with us and the clinical expertise extended to patients. Our mission is to provide effective and affordable care in a clean and caring environment.

We have a hospitality-based approach wherein our patients are treated as guests. Our processes are technology-driven, making it convenient for patients to use our services. All our medical programmes are underpinned by an uncompromising belief and practice of ethics, excellence and strict clinical governance.

Infrastructure and ServicesColumbia Asia today serves more than one million patients every year. Our hospitals offer comprehensive clinical programmes that are supported by a list of ancillary

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services (ICU, NICU, physiotherapy, referral lab, teleradiology/telemedicine, pharmacy and imaging facilities).

A comprehensive electronic medical records system forms the core of the hospital information system (HIS) that supports clinical decision making. While four of our hospitals are already accredited by NABH, the rest are under process. We cater to healthcare needs of international patients from developed and developing countries. 

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FOREIGN DIRECT INVESTMENT(FDI)

Foreign Direct investment (FDI) can be defined as an investment involving a long-term relationship, and reflecting a lasting interest and control, of a firm or individual from one country in another. The different forms of Foreign Direct investment are equity capital, reinvestment of earnings from the „host‟ country, and provision of long- and short-term intra-company loans. Transnational corporations (TNCs) which are enterprises comprising parent enterprises and their foreign affiliates often engage in this form of investment, through the „parent-affiliate‟ model of control and ownership, where the „domestic‟ parent company controls the assets of the „foreign‟affiliate firm, usually through equity capital stock ownership, but which may or may not directly manage it (IMF, 1993). The FDI (Foreign Direct Investment) equity inflows have been of the order of Rs. 112,019 crore (US $ 24.2 Billion) during the financial year from April 2011 to December 2011, as against Rs. 73,177 crore (US$ 16.0 Billion) during the corresponding period last year. The cumulative FDI inflows from April, 2002 to December 2011 are Rs. 713,079 crores (US$ 158.1 billion).The sectoral distribution of FDI is dominated by the service sector. The highest FDIequity inflows were received in this sector (financial & non financial services), amounting to 19% of the total FDI inflows, followed by drugs & pharmaceuticals (13%), telecommunications (8%) construction activities (7%) metallurgical Industries and power sectors (6% each), Misc mechanical & engineering industries (5% each), hotel &tourism and chemicals (other than fertilizers- 3% each). The balance of inflows (30%) was accounted for by other sectors. The major source of FDI in Mauritius which accounts for 34% of total inflows, followed by Singapore with 17%, Japan & United Kingdom with 11% each, Germany with 6%, Netherlands, Cyprus & USA with 4% each, France with 2% and UAE 1% of the total inflows (Annual Report, DIPP, 2012. p. 17).

INDIAN HEALTHCARE SECTOR- FOREIGN DIRECT INVESTMENT

(FDI)

Foreign Direct Investments (FDI) in the hospitals and diagnostic centre segment has reached a new high with total cumulative FDI inflow crossing Rs 35, 544.34 million (M Neelam Kachhap, 2010). This may be a small but significant step for the healthcare sector. However, the benefits of such investments would only materialize under conducive regulatory environment focusing on affordability and accessibility. Interestingly, the private sector, over the years, has increased its stake in healthcare delivery. This, in recent years, has caused foreign players and non resident Indians to enter the Indian healthcare market.

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FOREIGN DIRECT INVESTMENT IN HOSPITALS

Since January 2000, FDI is permitted up to 100 percent under the automatic route in hospitals in India. Thus no government approval is required as long as the Indian company files with the regional office of the RBI within 30 days of receipt of inward remittances and file the required documents along with form FC-GPR with that Office within 30 days of issue of shares to the non-resident investors.6 Controlling stake is also permitted in hospitals for foreign investors. FIPB approval is currently only required for foreign investors with prior technical collaboration, but is allowed up to 100 percent. Prior to January 2000, FDI in hospitals was permitted under theFIPB route, which meant that the FIPB would consider the investment proposals and take a decision and the Indian company with the RBI would make thereafter filings. Current regulations also permit other forms of capital mobilization, which are treated as FDI.

For instance, Indian companies can raise foreign currency resources abroad through ADRs and GDRs under the automatic route, up to 49 percent subject to specified conditions and such investments are also treated as FDI. In order to understand the extent and nature of foreign direct investment in hospitals, a list of all FDI approved projects in hospitals and diagnostic centres during the January 2000 to July 20006 periods was obtained from the Department for Industrial Policy and Promotion. Thislist consisted of 90 projects, for a total approved FDI amount of $53 million, and covering a wide range of countries, such as Australia, Canada, UK, US, the UAE, Malaysia, and Singapore, among others. However, if one examines the list of approved projects and separates hospitals from diagnostic centres, then one finds that the majority of these approved projects are diagnostic centres. Only 21 of the approved projects are in the hospitals segment. The following table shows the approved projects for FDI in hospitals as received from the DIPP, along with the source countries, and the Rupee and US dollar values of FDI approved.

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FEW APPROVED FDI HOSPITAL BY DIPP

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GOVERNMENT POLICIES

The health care sector consists of independent, privately-run hospital and health care centers. Private health care centers accounts for the major share. Nearly 63% of the total spend is accounted by the private health care sector. . Noted service providers in this sector include Apollo Hospitals, Escorts Group and Fortis Healthcare.

To encourage investment in the health care sector, government of India has allowed 100% FDI under the automatic route. Government has also accorded the infrastructure status to the hospitals and Lower tariffs on medical equipment. Government has also announced tax holiday for five years for the hospitals in rural areas

TOP PRIVATE HEALTH CARE PROVIDED IN INDIA

A few trends emerge that will define the way forward for the healthcare sector. Growth—faster, sustainable and inclusive; these are the mantras of the Planning Commission for the 12th five year plan, which aims to increase public health spending to 2.5% of GDP by 2017. Some of the levers that the government will employ to achieve this: - A broader vision for National Rural Health Mission. According to the Rural Health Statistics (RHS) 2010, there is shortage of 19,000 sub-centres; 4,000 primary health centres (PHCs) and 2,000 community health centres(CHCs). Moreover, there is no systematic public health infrastructure available to the aam aadmi in urban slums and settlements. Establishment of 6 new AIIMS like institutions. The government has allocated approximately $1.2 billion for establishment of these hospital complexes and up gradation of 13 existing medical colleges. These hospital complexes were expected to be complete by October 2012.

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"The Constitution of India places obligations on the Government to ensure protection and fulfillment of right to health for all, without any discrimination, as a Fundamental Right under Articles 14, 15 and 21 (rights to life, equality and non- discrimination), and also urges the State, under the Directive Principles of State Policy, to eliminate inequalities in status, facilities and opportunities (Article 38); to strive to provide to everyone certain vital public health conditions such as health of workers, men, women and children (Article 39); right to work, education and public assistance in certain cases (Article 41); just and humane conditions of work and maternity relief (Article 42); raised level of nutrition and the standard of living and improvement of publichealth (Article 47); and protect and improve environment (Article 48A). Therefore, it is clear that providing healthcare to all is the duty of the Central and State Governments, 'health' being a state-subject und1er Indian Constitution.Though Foreign Direct Investment is characterized by many challenges and limitation most of the respondents has a favourable attitude towards FDI and believe that FDI definitely adds to the economic development of the country. Under such circumstances government should take necessary measures to encourage FDI inflows into health care sector.

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KEY PLAYERS IN INDIAApollo Hospitals Enterprise Ltd

•It manages a network of 43 specialty hospitals and clinics with a bed capacity of over 7,543 across the country and abroad.

•Besides the recently launched Health City in Hyderabad, it plans to launch similar facilities pan India.

•Has tied up with insurers like BUPA (UK), Vanbreda (Belgium) and Mondial (France) to direct inflow of foreign patients to India

•Has a joint venture with Singapore-based Parkway Group Healthcare PTE Ltd.

•Has tied up with Indian Oil Corporation (IOC) to set up its pharmacies at the latter‘s petrol stations.

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Applying Supply and Demand Analysis to Health Care

One out of every seven dollars spent in the India is spent for health care services. This is

a greater percentage than in any other industrialized country. The topic of health care

arouses deep emotions and generates intense media coverage. How can we understand

many of the important health care issues? One approach is to listen to the normative

statements made by politicians and other concerned citizens. Another approach is to use

supply and demand theory to analyze the issue. Here again the objective is to bring

textbook theory to life and use it to provide you with a deeper understanding of health

service markets.

THE IMPACT OF HEALTH INSURANCE

There is a downward-sloping demand curve for health care services just as there is for

other goods and services. Following the same law of demand that applies to cars,

clothing, entertainment, and other goods and services, movements along the demand

curve for health care occur because consumers respond to changes in the price of health

care. As shown in Exhibit A-1, we assume that health care, including doctor visits,

medicine, hospital bills, and other medical services, can be measured in units of health

care. Without health insurance, consumers buy Q1 units of health care services per year

at a price of P1 per unit. Assuming supply curve S represents the quantity supplied, the

market is in equilibrium at point A. At this point, the total cost of health care can be

computed by the price of health care (P1) times the quantity demanded (Q1) or

represented geometrically by the rectangle 0P1 AQ1.

Analysis of the demand curve for health care is complicated by the way health

care is financed. About 80 percent of all health care is paid for by third parties, including

private insurance companies and government programs, such as Medicare and Medicaid.

The price of health care

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SHIFTS IN THE DEMAND & SUPPLY FOR HEALTH CARE

While changes in the price of health care cause movements along the demand curve,

other factors can cause the demand curve to shift. The following are some of the

nonprice determinants that can change the demand for health care.

The Impact of Insurance on the Health Care Market

Without health insurance, the market is in equilibrium at point A, with a price of P1 and a

quantity demanded of Q1. Total spending is 0P1AQ1. With copayment health insurance,

consumers pay the lower price of P2, and the quantity demanded increases to Q2. Total

health care costs rise to 0P3CQ2, with 0P2BQ2 paid by consumers and P2P3CB paid by

insurers. As a result, the quantity supplied increases from point A to point C, where it

equals the quantity demanded of Q2.

Number of Buyers

As the population increases, the demand for health care increases. In addition to the total

number of people, the distribution of older people in the population is important. As

more people move into the 65-and-older age group, the demand for health care services

becomes greater because older people have more frequent and prolonged spells of

illness. An increase in substance abuse, involving alcohol, tobacco, or drugs, also

increases the demand for health care. For example, if the percentage of babies born into

drug-prone families increases, the demand for health care will shift rightward.

Tastes and Preferences

Changes in consumer attitudes toward health care can also change demand. For example,

television, movies, magazines, and advertising may be responsible for changes in

people's preferences for cosmetic surgery. Moreover, medical science has improved so

much that we believe there must be a cure for most ailments. As a result, consumers are

willing to buy larger quantities of medical services at each possible price.

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Doctors also influence consumer preferences by prescribing treatment. It is often argued

that some doctors guard against malpractice suits or boost their incomes by ordering

more tests or office visits than are really needed. Some estimates suggest that fraud and

abuse account for about 10 percent of total health care spending. These studies reveal

that as many as one-third of some procedures are inappropriate.

Income

Health care is a normal good. Rising inflation-adjusted incomes of consumers in the

United States cause the demand curve for health care services to shift to the right. On the

other hand, if real median family income remains unchanged, there is no influence on

the demand curve.

Prices of Substitutes

The prices of medical goods and services that are substitutes can change and, in turn,

influence the demand for other medical services. For example, treatment of a back

problem by a chiropractor is an alternative for many of the treatments provided by

orthopedic doctors. If the price of orthopedic therapy rises, then some people will switch

to treatment by a chiropractor. As a result, the demand curve for chiropractic therapy

shifts rightward.

Number of Sellers

Sellers of health care include hospitals, nursing homes, physicians in private practice,

HMOs, drug companies, chiropractors, psychologists, and a host of other suppliers. To

ensure the quality and safety of health care, virtually every facet of the industry is

regulated and licensed by the government or controlled by the American Medical

Association (AMA). The AMA limits the number of persons practicing medicine

primarily through medical school accreditation and licensing requirements. The federal

Food and Drug Administration (FDA) required testing that delays the introduction of

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new drugs. Tighter restrictions on the number of sellers shift the health care supply curve

leftward, and reduced restrictions shift the supply curve rightward.

Resource Prices

An increase in the costs of resources underlying the supply of health care shifts the

supply curve leftward. By far the single most important factor behind increasing health

care spending has been technological change. New diagnostic, surgical, and therapeutic

equipment is used extensively in the health care industry, and the result is higher costs.

Wages, salaries, and other costs, such as the costs of malpractice suits, also influence the

supply curve. If hospitals, for example, are paying higher prices for inputs used to

produce health care, the supply curve shifts to the left because the same quantities may

be supplied only at higher prices.

HEALTH CARE REFORM

In October 1993, the Clinton administration submitted a 1,336-page proposal for health

care reform to Congress. After a much-publicized and heated debate, Congress rejected

this complex and controversial proposal. The cornerstone of President Clinton's plan was

universal health care. First, all employers would be required to provide their employees

with health insurance. Second, those persons who were unemployed or not in the labor

force would obtain health care through regional health alliances established in each state.

In addition, the plan considered taxing destructive personal behavior that increases

health care costs, such as cigarette smoking and alcohol abuse.

The critics of the Clinton plan argued that the quantity of health care cannot be

extended to meet the demands of everyone without enormous additional costs. The result

would be price controls and the rationing of health care (recall Exhibit 4 of Chapter 4 ).

In short, critics viewed the Clinton proposal as creating a system of new bureaucracies

and employer mandates that would produce an unwarranted increase in the government's

role in the health care industry.

In 2003, legislation was passed that will lead to the most far-reaching changes in

Medicare since this program was signed into law in 1965. This complex measure for the

first time provides a $400 billion prescription drug benefit beginning with a drug

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discount card for purchase by seniors that might provide savings of 15 percent to 25

percent at retail pharmacies. The next big change for Medicare will be in 2006 when

drug benefits begin. As envisioned, private insurers will sell drug coverage policies and

seniors can choose a plan for a monthly premium estimated at $35. The most

controversial provision of the bill allows private insurers to compete with Medicare in

six metropolitan test areas beginning in 2010. Critics argue that this is a major first step

toward privatization of Medicare.

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CONCLUSION

There are certainly many factors that could drive foreign funding into hospitals in India. The most important driving factor is the demand-supply mismatch and the huge amount of private sector investment that is required in this sector to raise its infrastructure even marginally to meet international metrics. With the growing economy, rising incomes, increased willingness among Indian consumers to pay for quality healthcare and to go to institutional providers, the comparably lower costs of establishment in India, and the healthcare packages offered by companies which are increasing affordability of healthcare for consumers, this is a potentially attractive sector for both foreign and domestic investors. Also, with the prospects for setting uphospitals in Special Economic Zones and large-scale Medicities, there are opportunities for foreign investors to finance such projects. The growing presence of private healthcare in some developed countries also creates opportunities for foreign investment in the healthcare sector of developing countries such as India.

Foreign investment in hospitals would benefit the Indian healthcare segment if theultimate aim is to expand capacity, improve standards, and make healthcare affordable and accessible to a wider segment. “One of the large opportunities that are emerging in the healthcare space is the opportunity to consolidate through aggressively pursuing mergers and acquisitions (M&A) opportunities. These opportunities are for regionally strong established hospitals run by successful doctor/doctor groups. To make the hospital segment more attractive to both domestic and foreign investors some other suggestions made by the industry focus on policy reforms. The investments in the healthcare sector need to look beyond investment-specific and capital market policies to the larger ecosystem and make it supportive for investors. Most importantly, health needs to be a core focus of government policy. The Government should have strong healthcare policy and promote healthcare tourism and promote Private Public Partnership (PPP) for the growth of thehealthcare sector and health insurance of a larger percentage of population.

The government if possible needs to incentivize private investments through reforms in land laws; quick regulatory approvals, zero duties on imported equipment and other strings of measures like higher spend on healthcare by the Government, mandatory insurance by employers etc. to attract FDI. However, as positive sentiment for doing business in India is resurfacing, in-flow of FDI in India is rising. Further, FDI in healthcare especially hospitals is understood to pay off rich dividends and good returns on investment in the long run. But yet, only time will tell how theseinvestments would impact the core of the inadequacies and inequities of the Indian health system and whether the people would benefit from such measures. The country should provide the quality health services by examining the challenges first and then the opportunities for

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