Giving a booster shot to India's Healthcare sector

1. Giving a booster shot to India’s healthcare sector
Vaibhav Khurana

2. A Growing Economy’s Snapshot
• India’s economy has grown at an average of 7.5% over last
thirteen years
• Population growth rate has been reduced from around 2% during
1960’s to 1.6% currently
• Recently India has emerged as the fastest growing emerging
economy
• With stable socio-economic indicators, India seems to be in the
sweet-spot where things are seeming to be happening in its favor
• Lets look at some graphs:

3. A Growing Economy’s Snapshot
0%
1%
1%
2%
2%
3%
1950s 2000s
Population growth
rate
2.0%
1.6%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
1970s 1990s
Incidence of Poverty
0%
10%
20%
30%
40%
50%
60%
70%
80%
1991 2001 2011
Literacy rate
Increasing literacy rate
Declining poverty rate

4. So…What about healthcare sector?
• While the economic indicators paint a flowery picture, India’s healthcare sector
tells a different story
• India’s healthcare spending has remained around 4.5% of GDP over past 15
years
• At 4.2% of GDP in 2009, India ranked second to last among OECD and select
other countries, and 171/175 among all countries
• Out of the 4.2%, only about 0.9% was public sector spending
• Per capita spending on healthcare in India is just around $132, adjusted for
purchasing power parity
• Around 70% of healthcare cost are borne by the patients out of their pocket

5. So…What about healthcare sector?
• While OECD average is around 4.9 hospital beds per 1000 population, India
offers just 0.7 hospital beds per 1000 population
• In fact, even though India has maximum number of medical colleges in the
world, India has just 0.7 physicians per 1000 population
• Rural population accounts for almost 60% of India’s population. But this is
being served by just 30% of medical professionals
• Even this 30% includes a large number of unqualified practicing professionals,
commonly called “quacks”

6. Developments in situation of healthcare sector in
India
• In India, healthcare is a responsibility of the State government as well as the
Central or Federal government
• While the central government forms policies, state governments are responsible for
the delivery of healthcare services to the masses
• Given the bad results of government in rolling the services, private sector soon
became the major provider of healthcare services
• However, the gap between provision of services to the rural population got left
behind
• While the government has been very successful in some healthcare programs like
eradication of small pox and polio, policies on provision of basic healthcare
services have had little outcomes
• Given the risk of loosing out on the demographic dividend India’s public sector has
awakened to the need of providing better healthcare services but there is a long way
to go…

7. Pin-pointing major reasons for this abysmal
situation:
• Low allocation of public funds to healthcare sector
• Zero accountability of healthcare facilities maintained by
public sector employees
• Higher levels of absenteeism amongst doctors and nursing staff
in public sector hospitals
• Non-availability of basic diagnostic machines at majority of
healthcare centres

8. Solutions????
Reforms
Structural
Reforms
Policy
Reforms

9. Structural reforms
• India’s public sector has historically depended on capital
intensive solutions like building new hospitals, etc. which locks
a lot of capital, thus leaving less for running these hospitals – the
main reason for their bad performance
• Structural changes are the need of the hour
• Structural changes refer to finding alternative ways of increasing
the reach of the masses

10. Structural reforms
• Public Private Partnership models
• Incentivizing private sector to take equity risk by giving tax
benefits
• Allowing more impact investment funds to open offices in India
• Rolling out healthcare specific bonds to tap capital markets

11. PPPs – Public Private Partnership models
• PPPs are opportunities waiting to be tapped by the healthcare sector in India
• Various PPP models can be followed:
– State government donates the land to a private sector healthcare provider to build and operate
the hospital which will provide healthcare services to poor at subsidized rates
– Maintenance contracts are awarded for the upkeep and running of already established healthcare
centers, which include hospitals, Primary health care centers, chronic disease control centers
• Though some of the facilities are being maintained under PPP model, there is a lot
of scope of ramping up in both rural and urban areas
• Examples of successful PPP models in healthcare sector include:
– Apollo Hospitals maintain government hospital in Richur
– Primary healthcare centers in Karnataka are maintained by Karuna Trusth
The KEY to the success of these models is to use “PAY FOR SUCCESS” model
wherein government pays private sector players performing maintenance services
only on the basis of their outcomes and public good

12. Impact Investing in healthcare
• Wikipedia defines Impact Investing as “Investments made into companies,
organizations, and funds with the intention to generate a measurable, beneficial
social or environmental impact alongside a financial return”
• Outside the Western world, India is the biggest market for Impact Investment
Funds. However, around 70% of these investments go to microfinance sector and
healthcare receives around 9-10%
• There is clearly a big opportunity available for more impact investment funds in
this sector
• The only push needed is from the government to allow setting up of new impact
investment funds which invest specifically in healthcare sector - this will start the
much awaited domino effect
• One of the examples is that of investment done by Acumen in Vaatsalya Hospitals –
a chain of hospitals which operates in South India

13. Other structural reforms
• New innovative solutions to healthcare provision like Single specialty
hospitals instead of multi-specialty hospitals are still considered risky
businesses because of their little ability of revenue generation
• Government can invest in such new ventures – to absorb the initial
riskiness and to set examples for the industry to follow
• “Hub and Spoke” models connecting primary healthcare centres to
main city hospitals should be promoted by the government
• Some examples of these are Aravind Eye Hospitals, LVPEI hospitals,
etc.

14. Policy Reforms
• Reformulate / redraft healthcare laws to make medical professional more
accountable
• Devise strategies to attract trained doctors for working in rural areas - this
could involve giving tax breaks to such doctors, etc.
• India’s current Tax-GDP ratio is at a low of 17% compared with 25% as average
for OECD nations
• The incremental funds arising from higher taxes could be diverted to funding
public sector healthcare expenditure
• India has recently introduced “Swachh Bharat Cess” to accumulate funds for
running programs across country aimed at cleaning the garbage. Similar “Healthy
India Cess” could be levied to accumulate funds for healthcare sector
• India needs stricter laws to control “Brain drain” in medicine students

15. Reversal of “brain drain”
• “Brain drain” has been the biggest reason for shortage of trained
physicians in India
• Brain drain refers to the leaving of trained medical professionals from
India to developed nations in search of better opportunities, better
salaries, etc.
• India offers medical education at subsidized costs. However, it does
not have strict laws to prevent flow of rained doctors to the developed
nations before serving for some time in India - this has resulted in
acute shortage of trained medical professionals
• Reverse “brain drain” has become very important. However, given the
challenges in doing so, stricter laws should be made to prevent brain
drain

16. Conclusion
• India’s healthcare systems are in a bad shape and need a booster shot at the soonest possible
• While India has always relied heavily on private sector to take the lead in provision of
healthcare, its time to incentivize the private sector for continuing to do so
• PPPs and impact investment in healthcare sector represent the tipping point which could start
an avalanche of better healthcare but these represent only the tip of iceberg
• From starting new healthcare ventures to innovating the older established models, healthcare
can provide a lot of opportunities to those looking into the space
• In order for private sector to ramp up its efforts, government has to create some ground rules
around Transparency and Accountability of services provided by the private sector
• Though this is just the beginning, it’s a long long way to go…

17. THANKYOU

18. • Sources of information include OECD database, India
Healthcare statistics, etc.