ESIC Expansions to Improve Healthcare Access (Explained for Investors)

ESIC Approves New Hospitals and Dispensaries in Several States to Boost Healthcare Infrastructure and Access

Analysis for Layman

ESIC, which stands for Employees’ State Insurance Corporation, is a government organisation that provides health insurance and medical services to insured employees and their families. Here are the key points:

ESIC Expansion in Maharashtra, Madhya Pradesh, and Uttarakhand

ESIC is planning to establish 9 new hospitals in Maharashtra, Madhya Pradesh, and Uttarakhand. This expansion will provide better healthcare access for insured workers and their families in these states.

17 New Dispensaries in Gujarat

In Gujarat, 17 new dispensaries will be opened. Dispensaries offer outpatient care and medicines, improving access to basic healthcare services.

Increased Financial Benefits

ESIC is increasing financial benefits for disabled insured persons (IPs) and dependents of deceased IPs. This includes the Permanent Disablement Benefit (PDB) and Dependant’s Benefit (DB), which will help offset the impact of inflation.

Bed Capacity Expansion

Bed capacity will be increased in existing hospitals like Bibvewadi and Rourkela. This means more patients can be treated, reducing overcrowding.

Multi-Specialty Hospital in Mumbai

A 500-bed multi-specialty hospital will be established in Mumbai. This large hospital will offer comprehensive treatments in various medical specialties.

In summary, ESIC is expanding medical facilities and increasing financial aid, which will improve healthcare access for insured low-income workers and their families.

Impact on Retail Investors

The expansion of ESIC has limited direct impact on most retail investors, except for those who own stocks in companies involved in healthcare infrastructure, hospital equipment manufacturing, and pharmaceuticals. Here are some examples:

Construction Firms

Companies like L&T and Shapoorji Pallonji may benefit from contracts to build new hospitals and dispensaries, potentially leading to stock price increases for investors.

Medical Equipment Makers

Companies like Poly Medicure and Opto Circuits could see higher revenues from equipping new healthcare facilities, potentially resulting in gains for retail investors.

Pharma Majors

Pharmaceutical companies like Sun Pharma and Lupin, which cater to ESIC, may experience some growth due to the increased patient pool. However, the effect may be modest for these large-cap companies. There may be better opportunities for retail investors in mid-small cap companies focusing on generics for the masses.

Healthcare Services Firms

Firms like Aster DM Healthcare, which operate diagnostic centers and pharmacies within the ESIC network, could see an increase in clinic and pharmacy footfalls.

In conclusion, retail investors should research stocks focused on mass health services, generics, diagnostics, and related sectors rather than broadly looking at the healthcare sector, as the impact of ESIC’s expansion will be concentrated in specific areas catering to its demographic.

Impact on Industries

The expansion of ESIC positively impacts multiple industries:

Healthcare Services

Hospital chains, specialty clinics, and diagnostic centers covering the ESIC network will benefit from improved infrastructure and a larger patient base. Both public and private hospitals with a significant low-income patient population would see increased revenues.

Pharmaceuticals

Drug manufacturers supplying generic medicines for chronic diseases and common acute treatments can expect higher volumes and sales. Companies producing branded or patented drugs may have limited upside in this context.

Medical Equipment

Indian medical device manufacturers have an opportunity as new healthcare facilities require a wide range of equipment, from hospital beds to advanced medical devices worth significant amounts. Import levels may also rise for advanced equipment.

Medical Insurance

Insurers covering employees under the ESIC scheme will have more premium payers and may experience policy extensions to cover employee families. Higher revenues will be accompanied by increased claims processing.

Healthcare IT

Electronic medical records and hospital workflow systems to serve over 15 crore ESIC members represent a substantial market for healthcare IT. Healthcare apps and digital health infrastructure will also benefit.

Infrastructure

Major national infrastructure companies will receive construction contracts for new medical facilities, and specialty hospital designers will see strong demand.

Manpower

The healthcare sector faces a severe shortage of staff, including doctors and para-medical workers. The expansion of ESIC will create thousands of new jobs, which is positive but poses human resource challenges.

In summary, ESIC’s expansion benefits labor-intensive, low-margin healthcare industries catering to the masses more than those focused on high-end healthcare.

Long-Term Benefits & Negatives

Expanding ESIC healthcare infrastructure offers several long-term benefits but also presents some downsides:

Benefits

1. Improved access to healthcare for millions of low-income Indians will enhance overall population health, longevity, and workforce productivity over decades.
2. The creation of thousands of new jobs in healthcare and related sectors will have a multiplier effect, increasing incomes and raising living standards outside of cities.
3. The emergence of domestic manufacturing clusters for hospital equipment, generic drugs, and supporting services aligns with the “Make In India” imperative.
4. The digital health infrastructure created can be leveraged for reaching remote areas and implementing population-scale public health interventions based on health data.

Negatives

1. The massive capital investment required for these facilities may reduce funding available for other social development schemes, potentially impacting needy citizens elsewhere.
2. Managing healthcare manpower at scale for staffing facilities across India will require policy adjustments related to medical education subsidies and government duty reserves, which could have disruptive effects.
3. Healthcare access and treatment behavior vary widely across states based on demographics, culture, income levels, etc. Some investments in new hospitals/staff may yield lower returns compared to other optimized models.

Overall, this initiative lays the foundation for healthcare infrastructure serving the working class but also carries the risk of misdirecting resources if not efficiently executed or aligned for maximum utilization per rupee spent. Achieving the full benefits of this initiative requires sustained governance prioritizing healthcare over 10+ year horizons.

Short-Term Benefits & Negatives

Expanding the ESIC network offers both short-term opportunities and challenges:

Benefits

1. Immediate job creation in construction, equipment supplies, and healthcare hiring will stimulate short-term economic activity.
2. For insured workers/families with existing ailments, access to healthcare will improve quickly with the launch of dispensaries or outpatient wings before the completion of entire hospitals, reducing expenses and travel burdens.
3. States approving new projects receive financial allocation for medical infrastructure as a priority over 2-5 year periods, providing assured funds.

Negatives

1. Large procurement and construction projects may be vulnerable to corruption and delays if oversight is inadequate, particularly in the medical equipment/devices industry.
2. Managing manpower needs at short notice is challenging, and contract hiring models may enable a start but retention could suffer. Poaching staff from existing public healthcare facilities worsens the human resource crunch.
3. A quick influx of patients within the first few years could strain new healthcare facilities as full-capacity services and workflows are still stabilizing. Infrastructure gains may precede the capacity for quality healthcare delivery.

In the first 2-3 years, there will be an economic stimulus, with positive signals in healthcare. However, the risk of project delays or staff talent wars creating operational challenges, even while budgets continue to fund new sites, is not insignificant.

Companies that Will Gain

This ESIC scheme offers business growth potential for several public companies:

1. Larsen & Toubro (L&T): India’s premier infrastructure engineering major is likely to win large construction contracts for new ESIC facilities, leading to positive additions to their order book over 2-3 years.
2. Apollo Hospitals: As a leading private hospital chain, Apollo can benefit from increased demand due to health insurance-linked access, resulting in higher footfalls at lower-cost clinics and diagnostics.
3. Poly Medicure: A top medical gear maker, Poly Medicure, can grab a share in the procurement of medical devices for ESIC facilities, boosting their sales.
4. Sun Pharma: India’s largest pharma company could experience increased revenues by supplying generic medicines to public hospitals and dispensaries, particularly in areas such as anti-infectives, diabetes care, and cardiovascular medicines.
5. Infosys: As a major IT services firm, Infosys has created the NDHM digital health records system and can implement enterprise healthcare IT modernization, potentially benefiting from health-tech in the long term.

Companies that Will Lose

While the healthcare sector as a whole gains from ESIC investments, some specific public companies face risks:

1. Aster DM Healthcare: This healthcare major, operating clinics and pharmacies in low-income areas, may face increased competition from expanded ESIC medical access and nearly free medicines.
2. Metropolis Healthcare: Leading diagnostics chain Metropolis and similar private entities may lose low-end diagnostic revenues to capacity additions in pathlabs and basic radiology under ESIC.
3. Wipro GE Healthcare: The joint venture between Wipro and General Electric for domestic medical gear manufacturing may face challenges as budget allocations prioritize expanding basic equipment availability, potentially affecting demand for premium categories.
4. Dr. Reddy’s Laboratories: Pharma player Dr. Reddy’s may cede market share in high-volume anti-infectives, primary care, and other areas to peers better entrenched in serving public healthcare channels.
5. Torrent Pharmaceuticals: Torrent Pharma focuses predominantly on branded specialty and super-specialty medicines for chronic diseases, with lower volumes from cheaper chronic drugs/OTC categories seeing upside under ESIC.
6. Cipla Ltd, Cadila Healthcare, Macleods Pharmaceuticals: These companies may miss volume opportunities compared to manufacturers specialized in public health and tender-based generic drug supplies.

Source:

• Author: PTI
• Title: ESIC to set up 9 hospitals in Maharashtra, MP, Uttarakhand
• Date: Friday, December 16, 2023
• Publisher: Public Sector’s voice PSU Watch