Porter's Five Forces In Healthcare

The model of the Five Competitive Forces, developed by Michael E. Porter, is based on corporate strategy, industry structure and the way they change. Porter has identified five competitive forces that shape every industry and every market and they determine the intensity of competition and hence the profitability and attractiveness of an industry. We further look into how the strategy and industry structure is placed in the field of healthcare and hospitals and analyze the attractiveness of the overall industry.
2.2 Rivalry among competitors
Industry Rivalry is one of the 5 forces used to determine the intensity of competition in the industry.
Competition in health care is the potential to provide with a mechanism to reduce cost and hence accessible

The healthcare sector is expected to continue with its accelerated growth momentum and by 2020 it is expected to reach $ 280 billion [5]. As per 2015 data, no. of beds to population ratio is just 0.09% and no. of physicians to population ratio is 0.07%. Comparatively bed to population ratio is 0.38% and no. of physician to population is 0.19%. The numbers are similar for
US and UK [9].
India has multiple players in the healthcare segment but there is a huge gap in the demand and number players in the market. Also, considering the growth potential projected in the next few years, it is a highly attractive industry for the existing players.
Considering government hospitals as incumbents: This does not impact the industry attractiveness for private players by much because of following reasons in urban areas.
­ Accessibility in terms of commuting and waiting time is much more in govt. hospitals than the private clinics ­ Even though the cost of physician in govt hospitals are almost nil, the opportunity cost could

This can be further substantiated by the fact that the operating margins of Apollo, Wockhardt and Fortis being consistently above 15­20% year on year.
2.2 (f) Rivalry among incumbents will increase if high class Govt hospitals like AIIMS, MAMC etc are accessible in the vicinity. This rivalry will increase to the extent that it will bring down the cost per patient in private hospitals and attractiveness of the industry will be reduced but it is less likely to happen in the near to medium future pan urban India. The important differentiation is most of the famous govt. hospitals also have medical colleges associated with it and it is a great source of research experience. Many private hospitals counters this by poaching the experienced physicians with high remuneration. The Private players also looking to various methods to reduce cost including economies of scale and scope so that more people can be treated with better facilities.
2.2 (g) Bed occupancy rate remains high for the last 5 years despite increase in number of beds. Also the growth of in­patient volumes in line with addition of beds are also increasing. Hence the excess capacity is in general small and Industry attractiveness is high