Thursday, February 29, 2024

The pandemic may be behind us, but digital healthcare is here to stay

India’s $167 billion healthcare industry has made substantial progress, with an increasing focus on preventive health, a rise in government spending on healthcare from 1.4% of GDP in 2018 to 2.2% in 2022, and strong growth in insurance penetration (around 37% of households are now insured). 

We expect the market to grow to $458 billion by 2030 as value pools across in-patient and out-patient care are growing rapidly, driven by secular factors. The Indian healthcare industry, with its many constraints and challenges, has been ripe for technological disruption for a while.

The pandemic revealed deficiencies in our healthcare systems, spurring the need for technological adoption to enhance patient outcomes when physical interventions alone were insufficient. This sparked a wave of digital transformation in healthcare and led to the emergence of online versions of traditional services, such as e-pharmacy and e-diagnostics. 

Since then, several companies with tech-driven business models have sought to tackle the myriad challenges in healthcare. This tremendous unlocking of value enabled by technology drew the interest of investors and healthcare saw record funding of more than $2.5 billion in 2021. The investments were spread across mature segments such as e-pharmacy, e-diagnostics, fitness and wellness; and emerging segments such as specialty care, healthcare financing and healthcare SaaS. 

Funding momentum continued in 2022 with more than $1 billion in investments, showing that some of the behavioural changes were irreversible, and that patients and doctors were adapting to the new normal. 

The government also has been proactive by launching initiatives such as the Ayushman Bharat Digital Mission, which could enable access to health for billions, help bridge the large infrastructure gaps by optimising the use of resources to expand across tier-2 towns and beyond.

Digital healthcare customised for India

Health-tech players have been deploying solutions rapidly for multiple pain points in the existing healthcare value chain, from diagnosis and treatment to post-care management and healthcare financing. 

The digital wave gave rise to players focused on optimising delivery models, such as Tata 1mg, Pharmeasy and Netmeds, and teleconsultation firms such as MediBuddy. These players were able to build a strong customer base and are now expanding their offerings with diagnostics, nutrition and wellness, financing and other value-added services. 

The next wave of innovation is focused on developing more personalised and specialised care models using technology. Companies such as BeatO, Fitterfly and TatvaCare have developed successful specialty-care models that allow continuous monitoring of patients’ health to improve outcomes for chronic conditions. 

There are also asset-light business models like those of HexaHealth and CloudPhysician, which are trying to disrupt the traditional, provider-care models, which are capital-intensive, by using existing infrastructure (hospitals and doctors) to reduce costs. 

While health-tech startups have been driving innovation, established players in pharma, insurance, provider and diagnostics have also been ramping up their digital capabilities to capture this growth and counter the threat from digital natives. 

With this rapid adoption of technology, we expect the digital healthcare market in India to grow from $2.7 billion in 2022 to around $37 billion in 2030.

Innovative partnerships and consolidation

As startups and established players have unique strengths, they have distinct opportunities to harness synergies and maximise value. Many partnership models are being implemented. Pharma companies are partnering with disease-management platforms to improve access and patient adherence, and traditional insurance players are partnering with health-tech players to develop innovative insurance products and embed themselves more deeply in the patient-care chain. 

The highly fragmented healthcare market is also seeing consolidation, led by large players such as Tata, Reliance and PharmEasy. Given the complexities in healthcare and presence of multiple value pools, this ecosystem should allow multiple players to scale their services and thrive in their respective categories.

Digital health ecosystem in India is at an interesting cusp. For startups, it is crucial to find a product-market fit by identifying a value pool and defining the scope of their services. A go-to-market approach that leverages partnerships in the ecosystem would enhance their chances of success. Similarly, it’s important for established players to integrate digital capabilities into their existing business models and build a startup mindset. 

Digital platforms have not just allowed healthcare to adjust to a remote and contactless world but also played a significant role in reducing inefficiencies in the sector. Going forward, the momentum in innovation must be counterbalanced with cost-optimisation while generating value for patients.

Priyanka Aggarwal is MD & senior partner, co-leads healthcare practice for BCG India.

Ketan Kapuria is a senior knowledge analyst at BCG.

#pandemic #digital #healthcare #stay

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