The Obama administration has allocated $19 billion in incentives for hospitals and practices that make meaningful use of electronic medical records systems, and everyone is biting their nails, waiting to find out the meaning of “meaningful.” But sitting 8,000 miles away from Washington, DC, I’m spending my summer internship focused on healthcare IT that’s measured in Rupees crores (tens of millions of rupees) instead of billions of dollars, helping Infosys define their offering for the Indian healthcare IT market.

At roughly $325 million per year, the market for healthcare IT in India is dwarfed by that in the US, which is in excess of $40 billion—more than 100 times as large. So why should you and Infosys care about this tiny market? For the same reason that IBM, Wipro, Tata Consultancy Services, Perot Systems and many local players are elbowing their way in: it’s all up and to the right set to hit $1 billion by 2014.

In this column I aim to give you a primer on one of the fastest moving and most exciting healthcare markets in the world. This is some of what I’ve learned over the last two months, by interviewing doctors, nurses, managers, and C-level executives at hospitals, payors, and third party administrators that are all betting on the Indian healthcare market.

Macro Forces Driving Growth

India has one of the lowest ratios of hospital beds to patients in the world, at 0.7 beds per 1000 people. This is less than a third of the world average of 2.6 and well below other countries such as Sri Lanka, Brazil, and China (2.9, 2.6, and 2.2 respectively).

But incomes are rising rapidly and studies show that when they do, a higher proportion is spent on healthcare. Rapid urbanization will mean a more concentrated population that can be served by larger hospitals located in metropolitan areas. A more concentrated and urban patient population is very attractive to private equity investors, who pumped $450 million into Indian hospitals in the first half of the 2008-9 fiscal year, triple the $150 million in the previous year.

As more and larger (100+ bed) hospitals are built, they will spend more on IT, typically 1-2 percent of their revenue but sometimes as high as … Next Page »

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