healthcare financing infrastructure paper

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(Submission No: ICIF164)A STUDY OF HEALTHCARE INFRASTRUCTURE FINANCING IN INDIA NEW

PERSPECTIVE

Nenavath SreenuABSTRACT

Purpose: The purpose of the study is to assess the financing needs of healthcare infrastructure,

and develop management model that identifies problems, a framework for implementation and

helps to evaluate dynamically performance of healthcare infrastructure service in India.

Design/methodology/approach: This study reviews the developmental problems of Indian

healthcare infrastructure system. This is principally a diagnostic study to investigate

interdisciplinary issues, including the role of social infrastructure (healthcare), continuous

improvement in healthcare infrastructure financing and performance measurement system.

Finding: The study finds causes of the current healthcare infrastructure system in India. i) The

reform will be essential to ensure that the revitialzed PHCs infrastructure is used efficiently and

accessed equitable and ii) improved delivery of quality healthcare services, accessibility and

affordability.

Research limitations/implications: This study is based on secondary data, examining current

problems in Indians healthcare infrastructure finance. Contribution to research on healthcare

infrastructure by the developing a comprehensive mechanism of provider-perceived healthcare

delivery system in India.

Practical implications: The proposed model can be implemented in hospital-based healthcare

services in order to improve infrastructure performance. It may also be applied to other services.

Provides a practical framework for stakeholders to develop a healthcare infrastructure

performance measurement system to rationalize resource allocation process that enhances

continuous healthcare infrastructure improvement.

Originality/value: The study suggests the adoption of an approach of management practices in

dealing with problems of Indians healthcare infrastructure and that some fundamental issues

found to be critical in developed countries experience, when striving for performance

improvement are not attained under Indians current healthcare system. Explores the

fundamental issues pertinent to Indias current healthcare system and the possible use of

performance measurement system for dealing with existing deficiencies

Keywords: India, healthcare infrastructure, measurement, performance, healthcare and financing

Nenavath Sreenu. Research Scholar. School of Management Studies. University ofHyderabad, Hyderabad, A.P, India 500046. [email protected] mobile no:9966483998
mailto:[email protected]:[email protected]


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A STUDY OF HEALTHCARE INFRASTRUCTURE FINANCING IN INDIA

NEW PERSPECTIVE

INTRODUCTION

Economic growth in a country largely depends on the standards of its socialinfrastructure. Healthcare is important areas of social infrastructure. It also covers care

of the other healthcare organization objective of which can be met through healthcare

infrastructure needs, management model that identifies problems, develops a framework

for implementation and helps to evaluate dynamically healthcare infrastructure service

performance and social security measures. There are over 2.5 lakh panchayats or rural

government bodies in the country and they hold the key for social infrastructure

development in rural areas where the challenge is formidable. Apart from the initiative of

the government and its various agencies, NGOs and corporates are other social entities

that can make valuable contribution in revamping healthcare social infrastructure

financing development. Also it is attempted to reviewed a set of public private

partnership models relevant for healthcare infrastructure financing development and

review problems and issues in different areas of social infrastructure finance (healthcare),

in the past four decades there has been a succession of different approaches to the

development of infrastructure for the delivery of healthcare services. There have been

striking similarities among these approaches in both direction-and timing in many

different countries, particularly in the developing world. This study begins with an

literature review of trends in the development of health services infrastructure in recent

decades. It precedes to analyses the implications for the organization of health services

and for resource allocation when the health services infrastructure is reviewed as part of

a health system based on primary health care. Finally Indian governments maintain that

district health systems based on primary health care provide an excellent practical model

for health development, including an appropriate health system infrastructure. Within thisModel the concerns with accelerating the application of known and effective technologies

and the concerns with strengthening of community involvement and intersectoral action

for health are both accommodated. The district health system provides a realistic setting

for professionals and non-professionals concerned with health and social development.


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The public sector is the most dominant contributor to the health services in

India. No country in the world is committed to universal health care at affordable cost

without the active participation of the government. Even the World Bank and other

supporter of the free market economy recognizes that health is one of those areas, where

public sector must continue to have a very important role because the market forces may

prevail in other sector, health is an area of market failure. Therefore public sector

continues to have a very important role but unfortunately, as we know, has not delivered

with the level of efficiency it should have. It has serious bureaucratic hurdles and

managerial inefficiencies. It also had resource constraints and therefore we have had

major issues of inadequate performance by public sector. The outreach of the services has

been very poor. With the primary health care services not being as efficient as they were

designed to be and many of the public primary health centers are not adequately staffedresourced in terms of equipments and drugs and even emergency treatment is often not

available, even in the best of the cities. The private sector is certainly far more efficient

in its delivery mechanism and has been increasing its role and its outreach. In recent

years 80 per cent of health care expenditure in India, is out pocket expenditure and much

it goes to private health care providers. Even the poor often tend to access the private

health care providers, because they may not want to lose a working days wage by

queuing up in the government hospitals. The private sector however has limitations

because it is driven by profit maximization and unless there are regulatory mechanisms,

which direct and discipline the private sectors. This sector can often become abusive in

the absence of active government regulatory mechanism. The Government of India is

committed to provide high quality, affordable and accessible, preventive, curative,

primitive and comprehensive health care services to the population. But unfortunately the

performance of the states on various health parameters is not encouraging. Although an

extensive infrastructural network of Medical and Health services in the government as

well as private sectors has been created over the years, the available health infrastructure

is inadequate to meet the demand for health services in the states. The problem is more

serious in rural areas as compared to urban areas. The rural population primarily depends

on government infrastructure and on private health services providers or mainly on

quakes. The availability of physical health infrastructure in the states still lags behind the


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National average. Apart from this, non availability of staff and medical services at these

health facilities is another issue of major concern As a result the state is facing a great

challenge to fight communicable and non communicable diseases, The objective of the

study is to find out the primary reason to encourage public private participation in health

care delivery system in rural area and the study Also aim to analyses states rural

healthcare perspective

INDIAN INFRASTRUCTURE HEALTHCARE FINANCING

In the Health Care segment, stagnant public spending on healthcare (less than 1 percent

of GDP) places India among the bottom 20 percent of countries. Most low-income

countries spend more than India, where current levels are far below what is needed to

provide basic health care to the population. The bulk of public spending on primaryhealth care has been spread too thinly to be fully effective, while the referral linkages to

secondary care have been suffered. As in other countries, preventive health services take

a back seat to curative care. Over the last five decades, India has built up a vast health

infrastructure and manpower at primary, secondary and tertiary care in government,

voluntary and private sectors. The current doctor population ratio is 1:1800. Tertiary

hospitals in major cities are in many cases, run by business houses and use corporate

business strategies and hi-tech specialization to create demand and attract those with

effective demand or the critically vulnerable at increasing costs. Standards in some of

them are truly world class and some who work there are outstanding leaders in their

areas. Public health spending accounts for 25% of aggregate expenditure, the balance

being out of pocket expenditure incurred by patients to private practitioners of various

hubes. Public spending on health in India has itself declined after liberalization from

1.3% of GDP in 1990 to 0.9% in 1999. Consider the contrast with the Bhore Committee

recommendation of 15% committed to health from the revenue expenditure budget,

against the WHO, which recommended 55% of GDP for health. The current annual per

capita public health expenditure is no more than Rs. 160and a recent World Bank review

showed that over all primary health services account for 58% f public expenditure mostly

but on salaries, and the secondary/tertiary sector for about 38%, perhaps the greater part

going to tertiary sector, including government funded medical sector.


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FINANCING INDIAS HEALTHCARE INFRASTRUCTURE NEEDS

The growing demand for quality healthcare and the absence of appropriate infrastructure

pose a challenge both to the government and private healthcare delivery providers. The

study examined the quantum of the problem and how newer modes of financing

including Private Equity infusion and Healthcare. The healthcare sector in India is today

at the point of inflection in transforming the delivery setting in terms of the formats,

quality of care, affordability and geographical access. The delivery capacity of India's

healthcare industry has not been able to match up with the burgeoning population and

socio economic changes. India needs an annual incremental addition of healthcare

facilities equivalent to almost half of what UK or France or Italy may need for their entire

populations. Against a world average of 3.96 hospital beds per 1000 population, Russia

has 9.7, Brazil has 2.6, China has 2.2, and India languishes at just over 0.7 indicating the

big gap. Just to bring the availability of the beds to 1.7 per thousand from the current

levels, it is required to create a million or more new beds, requiring substantial financial

investment.

To reach developed country healthcare norms by 2028, it will require an

astronomical US$ 1000 billion over the next 20 years. Even reaching halfway (i.e. the

current norms of China and Brazil in terms of number of beds) will entail an investment

of over US$ 500 billion (i.e. anywhere between US$ 25 billion to US$ 50 billion per yearfor next 20 consecutive years). Unfortunately, unlike other sectors, healthcare delivery

cannot be priced on a cost plus basis since the payee's ability in India is severely

constrained with practically negligible penetration of health insurance. It is no surprise,

therefore, that almost all of the current organised healthcare service providers are

struggling to show any profitability at all despite carrying the tag of being "premium". In

these circumstances, it is very difficult to imagine fresh capital formation of this

magnitude anytime in the near future, since, generating adequate return on investment

under current healthcare sector dynamics is a huge challenge. Till a decade ago, health

(and the healthcare sector) was not considered a key driver of national economic

performance. Today, there is incontrovertible evidence from the world over establishing

that improved health leads to better economic performance. Poor healthcare on the other

hand can severely impact economic growth (Estimated loss due to cardiac disease &


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diabetes alone in India will be US$ 236 billion in the coming decade). A fast growing

economy, rising incomes and increased urbanisation have been instrumental in changing

the perception of patients as consumers. The present day patients are more demanding,

expect better services for their money and exercises choice in choosing a facility for

reasons other than cost. The Indian consumer in choosing a facility for reasons other than

cost. The Indian consumer spend on healthcare will increase from the current 7% to as

much as 13% by 2028.

Private equity investments in India have witnessed significant growth during 2007. PE

deals have increased from US$ 7.9 billion in 2006 to US$ 19.03 billion in 2007. There

were around 53 deals of over US$ 100 million as against 11 deals in 2006. Healthcare

sector attracted over US$ 448 million in year 2007. Between 2008 and 2011, the sector is

expected to see investments of around US$ 5 billion. According to industry experts,funds will flow from capital markets or PEs to set up Greenfield and brownfield projects.

India already has an active fund provider base supported by ICICI Ventures - one of the

largest private-equities, which allocated US$ 250 million for a dedicated healthcare

fund through I-Ven Medicare. Others include IDFC, HSBC, JP Morgan Private Equity

Fund, American International Group Inc. (AIG), Evolvence India Life Sciences Fund,

George Soros's fund Quantum and BlueRidge. The healthcare sector in India is

witnessing a surge of activity and the beginning of what is seen as a rapid phase of

growth. Emerging healthcare segments like diagnostic chains, medical device

manufactures as well as hospital chains are increasingly attracting investments from a

variety of venture capitalists. At a broader level, this trend in healthcare is often seen as a

manifestation of the overall surge in private equity and also growing interest

among private equity funds for Indian companies. Private equity is smart money because

these investors bring more to the table than just money. The capital and expertise of

private equity act as a catalyst for creating enterprise value. Healthcare is poised to be a

new driver of growth for economy. Given the geographical access required for delivering

care and the fact that infrastructure has to be spatially distributed, Rapid growth has

brought about a health transition, in terms of shifting demographics, socio-economic

transformations and changes in disease patterns - with increasing degenerative and

lifestyle diseases and altered health seeking behavior. Healthcare, which is a US$ 35


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billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150

billion by 2017. Bulk of the investments would be made by the private sector.

TABLE: 1

India needs an immediate investment of US$ 82 billion to make up for the back-log. Anadditional US$ 465 billion is needed to catch up with demographic shifts as well as

improvement in healthcare indicators in the next 10 years. The growing demand for

quality healthcare and the absence of matching delivery mechanisms pose a challenge

and certainly a great opportunity We stand at the threshold of an exciting opportunity to

design and engineer sustainable healthcare delivery systems, develop numerous

commercially viable & customizable delivery formats for the growing, demanding and

health conscious Indian population. Healthcare providers have been struggling to copewith this exciting scenario where change is the only constant

FINANCING HEALTH CARE: THE INDIVIDUAL AND THE STATE

When the study look at the profile of diseases we can see that rural urban differential in

the proportion of hospitalization within each ailment is negligible, except for the heart

diseases, where the proportion of hospitalization cases in the urban areas was almost

double that in the rural areas. The average medical expenditure on health for both

hospitalization and non-hospitalization cases in rural areas is lower than in urban areas.

However, household income lost per treated person is much higher in the rural areas (Rs

135) than urban (Rs 96) for non-hospitalization cases. In either scenario, private players

play a dominant role. There are demonstrated differences between the payment patterns

of the rich and the poor in both inpatient and outpatient care. the private sector does not

appear to be charging much more than public facilities. While significant user charges are

being paid by all economic segments for availing of health care services, the remains as

to who will pay for the expansion and rationalization of health care facilities to augment

physical, technical as well as human resource infrastructure to cater better to the needs ofthe economically challenged sections of the society. Clearly it is not the user but the state

or the central government budget that must bear the load of this expense. While dearth of

financial resources at the state-level cannot be denied, studies can prove that states that

spend the least on health care on per capita basis also tend to be the ones that are the least

distressed financiallyas in states with low per capita state budget deficit are


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surprisingly spending less per capita on healthcare than states with higher per capita

budget deficits. States such as Bihar and UP have among the lowest budgetary deficit on

a per capita basis. These states also tend to have poor health indicators. And they also

spend among the lowest in health care on a per capita basis. For these states, spending

more on health care is possible. Those states that currently spend the least on health care,

can at some cost to their deficit, increase health care expenditures. Thus Bihar, Uttar

Pradesh, Chhattisgarh, Madhya Pradesh, Jharkhand, Orissa, and Assam, that spend the

least on health care on a per capita basis are also among the states that have the lowest

per capita budgetary deficit.

HEALTHCARE INFRASTRUCTURE SPENDING TO REACH $14.2 BY 2013

Expenditure on healthcare infrastructure in India is expected to touch $14.2 billion over

four years in 2013, according to a report by government of India. Total healthcare

infrastructure expenditure for 2013 is predicted to reach $14.2 billion, a near 50%

increase on the 2006 total, the report said. Healthcare infrastructure includes buildings,

equipment, ambulances, etc. The main factors propelling this growth are rising income

levels, changing demographics and illness profiles with a shift from chronic to lifestyle

diseases, the report said. Of the states and union territories, six Maharashtra,

Rajasthan, Uttar Pradesh, West Bengal, Andhra Pradesh and Tamil Nadu account for

more than 50% of the total healthcare infrastructure spending in the country. The reportforecast that during 2009-13, Maharashtra will spend over seven billion dollars on

healthcare infrastructure. The report said during the period, Rajasthan and West Bengal

will cumulatively spend $5 billion on healthcare infrastructure, while Uttar Pradesh,

Andhra Pradesh and Tamil Nadu will spend over $4 billion each. Maharashtra with less

than 10% of the total population accounts for around 12% of the total expenses in the

segment. It spent $1.1 billion on upgrading healthcare institutes in 2006. According to the

report, there are twelve states that spent less than $100 million each in 2006, together

representing 4.5% of the total national expenditure and 3.6% of the total population. In

terms of the per capita health infrastructure expenditure in 2006, the Andaman and

Nicobar islands led at $36 per head while Bihar lagged with lowest expenditure at $1.9

per head. This reveals an uneven distribution in terms of development of health

infrastructure in India, the report said. Himachal Pradesh, Manipur and Andaman &


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Nicobar Islands were the only states, which spent over $30 per head on developing

healthcare infrastructure. Cumulatively, per head spend on healthcare infrastructure

during 2009-13 is projected to be over $250 for Andaman & Nicobar and Manipur, while

for states like Bihar, Uttar Pradesh, Chattisgarh and Jharkhand it will be less than $50

HEALTHCARE INFRASTRUCTURE EXPANSION IN INDIA

An enormous amount of private capital will be required in the coming years to enhance

and expand Indias healthcare infrastructure to meet the needs of a growing population.

Currently India has approximately 860 beds per million populations. This is only one-

fifth of the world average, which is 3,960, according to the World Health Organization. It

is estimated that 450,000 additional hospital beds will be required by 2010an

investment estimated at $25.7 billion. The government is expected to contribute only 15-20% of the total, providing an enormous opportunity for private players to fill the gap

Recently have seen many new investments in healthcare infrastructure facilities in India.

For instance, ICICI Venture, the countrys largest private equity fund, has invested $8.6

million in a chain of diagnostics facilities, along with Metropolis Health Services Ltd.

And in 2006, General Electric announced a $250 million investment in infrastructure and

healthcare projects in India. With the advent of private insurance and the emergence of

India as a medical tourism destination, there also has been a surge of growth in so-called

super specialty hospitals, which have teams of specialists, sophisticated equipment,

links to other medical centers, and the ability to treat a broad range of ailments. Some of

these new facilities, such as the Rajiv Gandhi Super Specialty Hospital, are public-private

partnerships. Government fiscal constraints are driving the growth of PPPs to help meet

Indias growing demand for healthcare infrastructure. Such partnerships have gained

legitimacy worldwide in recent years as a major strategy for health sector development.

In addition to participating in infrastructure PPPs, opportunities are emerging for foreign

companies to create super-specialty hospitals in collaboration with Indian corporations.

For instance, Wockhardt Hospitals Group has partnered with Harvard Medical

International to create a chain of super specialty hospitals in India. Two hospitals, in

Mumbai and Bangalore, are attracting large volumes of medical tourists from the UK and

US. There also is strong demand for tertiary care hospitals, which emphasize the


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treatment of lifestyle diseases, focusing on specialties such as neurology, cardiology,

oncology and orthopedics. Tertiary hospitals are projected to grow faster than the overall

healthcare sector,

In addition to a deteriorating physical infrastructure, India faces a huge shortage of

trained medical personnel, including doctors, nurses and especially paramedics, who may

be more willing than doctors to live in rural areas where access to care is limited. There is

an immediate need for medical education and training, which could provide additional

opportunities for private sector providers or public-private partnerships. The

communications technology that enables telemedicine could also be used to deliver

training courses. Indias healthcare infrastructure has not kept pace with the economys

growth. The physical infrastructure is woefully inadequate to meet todays healthcare

demands, much less tomorrows. While India has several centers of excellence inhealthcare delivery, these facilities are limited in their ability to drive healthcare

standards because of the poor condition of the infrastructure in the vast majority of the

country. Of the 15,393 hospitals in India in 2002, roughly two-thirds were public. After

years of under-funding, most public health facilities provide only basic care. With a few

exceptions, such as the All India Institute of Medical Studies (AIIMS), public health

facilities are inefficient, inadequately managed and staffed, and have poorly maintained

medical equipment. The number of public health facilities also is inadequate. For

instance, India needs 74,150 community health centers per million population but has less

than half that number. In addition, at least 11 Indian states do not have laboratories for

testing drugs, and more than half of existing laboratories are not properly equipped or

staffed. The principal responsibility for public health funding lies with the state

governments, which provide about 80% of public funding. The federal government

contributes another 15%, mostly through national health programs. However, the total

healthcare financing by the public sector is dwarfed by private sector spending. In 2003,

fee-charging private companies accounted for 82% of Indias $30.5 billion expenditure

on healthcare. This is an extremely high proportion by international standards.3 Private

firms are now thought to provide about 60% of all outpatient care in India and as much as

40% of all in-patient care. It is estimated that nearly 70% of all hospitals and 40% of

hospital beds in the country are in the private sector.


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TABLE: 2

)HEALTH INFRASTRUCTURE IN RURAL INDIA

The healthcare services are divided under State list and Concurrent list in India. While

some items such as public health and hospitals fall in the State list, others Such aspopulation control and family welfare, medical education, and quality control of drugs.

The Union Ministry of Health and Family Welfare (UMHFW) is the central authority

responsible for implementation of various programmes and schemes in areas offamily

welfare, prevention, and control of major diseases. In the case of health the term

infrastructure takes on a wider role than mere physical infrastructure. Healthcare centres,

dispensaries, or hospitals need to be manned by well trained staff with a service

perspective. In this chapter we include medical staff in our ambit of discussion on rural

health infrastructure. The current conditions of physical infrastructure, staff, access, and

usage are laid out here before identifying critical gaps and requirements in infrastructure

and services. Issues related to institutions, financing, and policy are discussed in the

context of these critical need gaps and the potential role of the private sector in healthcare

provisioning in villages is explored.

PUBLIC INFRASTRUCTURE

The healthcare in rural areas has been developed as a threetier structure based on

predetermined population norms . The sub-centre is the most peripheral institution andthe first contact point between the primary healthcare system and the community. Each

sub-centre is manned by one Auxiliary Nurse Midwife (ANM) and one male Multi-

purpose Worker PW(M)]. A Lady Health Worker (LHV) is in charge of six sub-centres

each of which are provided with basic drugs for minor ailments and are expected to

provide services in relation to maternal and child health, family welfare, nutrition,

immunization, diarrhea control, and control of communicable diseases. Sub-centres are

also expected to use various mediums of interpersonal communication in order to bring

about behavioural change in reproductive and hygiene practices. The sub-centres are

needed for taking care of basic health, needs of men, women and children. As per the

figures provided by the UMHFW there were 146,026 sub centres functioning. in

September 2005 about 12 per cent lower than the prescribed number as per government

norms. Primary Health Centres (PHCs) comprise the second tier in rural healthcare


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structure envisaged to provide integrated curative and preventive healthcare to the rural

population with emphasis on preventive and promotive aspects. (Promotive activities

include promotion of better health and hygiene practices, tetanus inoculation of pregnant

women, intake of IFA tablets and institutional deliveries.) PHCs are established and

maintained by State Governments under the Minimum Needs Programme (MNP)/Basic

Minimum Services rogramme (BMS). A medical officer is in charge of the PHC

supported by fourteen paramedical and other staff. It acts as a referral unit for six sub-

centres. It has four to six beds for inpatients. The activities of PHC involve curative,

preventive, and Family Welfare Services. There were 23,236 PHCs functioning in

September 2005 compared to 23,109 a year earlier, according to the Ministry of Health.

Though the numbers appear to be increasing there is still a shortfall of about 16 per cent

when compared to the required norms for PHCs. Community Health Centres (CHC)forming the uppermost tier are established and maintained by the State Government

under the MNP/BMS programme. Four medical specialists including Surgeon, Physician,

Gynaecologist, and Paediatrician supported by twenty-one paramedical and other staff

are supposed to staff each CHC. Norms require a typical CHC to have thirty in-door beds

with OT, X-ray, Labour Room, and Laboratory facilities. A CHC is a referral centre for

four PHCs within its jurisdiction, providing facilities for obstetric care and specialist

expertise. There were 3346 CHCs in the country, almost a 50 per cent shortfall. About

49.7 per cent of the sub-centres, 78.0 per cent of the PHCs and 91.5 per cent of CHCs are

located in the government buildings. The rest are located either in rented buildings or rent

free Panchayat/Voluntary Society buildings. As on September 2005, overall 60,762

buildings are required to be constructed to house sub-centres. Similarly, for PHCs 2948

and for CHCs 205 additional buildings are still required.

ACCESS TO INFRASTRUCTURE

Even if a healthcare provider is not present in a village, he/she can be reached easily,

some basic access issues would be taken care of. However, the study find manylimitations especially in the context of road connectivity and adequate transport services.

Many of the healthcare facilities, public or private,

TABLE: 3


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Are not accessible throughout the year to about a third of the villages. Private and

government hospitals are relatively more accessible as they are typically located in areas

well connected by metalled roads (1) a well defined system of public healthcare provision

exists, (2) there is some shortfall in infrastructure, (3) there is a significant problem with

the adequacy of working facilities (supplies and equipment) within these centres, (4)

there is a significant lack of adequately trained staff, and (5) there continues to be a lack

of adequate access to the facilities The affects usage of the healthcare infrastructure and

therefore access to adequate healthcare, a concern we address in the detailed section on

issues related to access, where the study also introduce the important role being played by

the private sector.

GLOBAL TRENDS IN HEALTH SERVICES INFRASTRUCTURE DEVELOPMENT

The development of national health systems during the past three decades has been

marked by two major trends, which vary in their inter-relatedness from country to

country. The first was the establishment of 'vertical' programmes for the control of

specific priority health problems, each with its own specialized infrastructure staffed by

uni-purpose workers . The programmes against yaws and malaria, and the global mall

pox eradication effort are among the more successful examples of this approach . The

second was the development and expansion of general health services infrastructure

designed for the provision of curative services with a variable range of preventiveservices. They were at first largeh hospital-based and often urban-oriented, but the, have

become increasingly accessible to national populations, though often still with a strong

curative orientation . The limitations of these basic health services in reaching non-urban

populations, and their weak attention to promotive and preventive health care, provided

the underlying stimulus for the development of the primary health care approach. Since

the WHO/UNICEF Conference on Primary Health Care at Alma-Ata in 1978, the trend

toward more integrated health services infrastructure has accelerated dramatically,

through the expansion and strengthening of health facilities, emphasis on priority

activities such as immunization, and especially the training of community health workers

and the involvement of communities in health efforts ; these have made it possible, more

and more, to reach unserved populations with primary health care services. Although, in

general, health decision-makers accept the idea of comprehensive primary health care


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with its multiple components, there have been many difficulties in making the transition

from semiautonomous vertical programmes, alongside a general health infrastructure, to

an integrated infrastructure capable of providing both general and specialized health care

effectively to entire populations in relation to their main needs. These difficulties have

included a variety of hurdles to be overcome administrative integration of personnel.

finances, supplies and information, training and reorientation of uni-purpose workers to

carry out a broader range of activities ; ensuring the effective maintenance of desired

special programme activities ; and mediating among the various persons and groups

affected by the changing roles and power relationships caused by the integration

progress.

These operational difficulties within countries have often. been compounded by the

continued international debate on the merits and demerits of vertical and integratedapproaches to the organization of health programmes, and the continuing preference of

some donor agencies for the support of specialized programmes with autonomous

infrastructures concentrating on a single set of activities, which can be insulated from the

broader demands of the general health services. In attempt was made to review the

evolution of the health services infrastructure in a number of countries.

INDIA HEALTHCARE TRENDS 2008

The Indian healthcare industry has grown manifold during the last few years. Although

there is a yawning divide between healthcare facilities available in rural and urban India

and in the demand and supply of healthcare services across the country, overall the Indian

healthcare infrastructure is fast improving with initiatives by the government and the

private sector. The entry of private players has further spurred the development of the

healthcare sector. The striking feature of the sector is that it has the potential to grow at a

much faster rate in the foreseeable future and will present new ' sectors of opportunity'

within healthcare, which will emerge as growth drivers. With abundant opportunities for

equipment makers and service providers to invest in curative and preventive services andpossibilities of investing in medical infrastructure and medical tourism, it becomes

imperative for providers to get a feel of whats happening in the industry to make

informed decisions on investment options. The India Healthcare Trends 2008 aims to be

an informed view of trends and drivers for the Indian Healthcare industry by delving into


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how providers like hospitals and physicians conduct their business and the issues they

face in doing so, as well as dissect it in terms of what healthcare means to the end

consumer. This study reflects the opportunities that exist, the challenges faced, emerging

trends and the future scenario of the healthcare service sector in India and provides a

comprehensive understanding of the healthcare market and practices, customer attitudes

and behavior study in India. The report will serve as a market / investment guide for

healthcare providers, investors in healthcare and allied businesses.

HEALTH SYSTEM INFRASTRUCTURE IN SUPPORT OF PRIMARY HEALTH CARE

The health system infrastructure needed for primary health care is comprised of the

physical structuresand the functional capacities needed to support all primary health care

activities . This includes health services infrastructure such as facilities, including

equipment; supplies and communications; health manpower, including education,training and supervision; planning, management and evaluation. Financing systems,

including health surveillance and programme monitoring; and possibly action-oriented

research. It is the infrastructure which makes it possible to assess a population's health

problems, to extend health care to communities and to people and groups with special

needs, to ensure that manpower is deployed according to need, and to monitor the

effectiveness of programmes. In addition to the health services infrastructure, the health

system also includes health-related infrastructure of other sectors and the more informal

community infrastructure including local leaders, health committees, voluntary

organizations, and community health workers. It is the latter which through its

interaction with the health services enables communities to become fully involved in the

planning and implementation of health activities in a health system based on primary

health care. Both the health services and the community infrastructure must be

adequately developed, and working together, to provide an adequate infrastructure for

primary health care. The range of needed structures and functional capacities is as yet

only partly developed in most health systems. The possibilities of achieving health for alldepend largely. Upon further development of this infrastructure, and improvement of its

effectiveness. Infrastructure levels. A primary health care system isolated from central

policies, technical support and logistic systems cannot be expected to function effectively

. The primary health care approach was a departure from the provider-receiver approach


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of the basic health services. It is a way of planning, organizing and providing health care

and is known to yield maximum gains in health. It is a people-focused approach and is

based on the principles:

1. Equitable access according to needs, particularly, for the underserved and

disadvantaged;

2. Affordability to be maintained and sustained, thus promoting self-reliance;

3. Appropriate technology - that is scientifically sound and socially acceptable;

4. Full involvement of individuals and communities;

5. Intersectoral action for health and overall social development, and

6. Emphasis on promotive and preventive aspects.

Achieving Health for All goals requires the development of a health system infrastructure

based on the principles and strategies of health for all. The system starts with individuals,families and communities. They are linked with the first health facility and extend to the

first referral level. This is the primary level of health care which is the foundation of

health care in a country. It is the first line of health development and is the level where

maximum gains in health are realized. Appropriately trained health personnel work

closely with personnel from other sectors and with communities for the provision of

essential health care as per the local needs and overall community development. Thus,

health is pursued as an integral component of socioeconomic development. The primary

level of health care is supported by secondary and tertiary referral facilities through a

referral system for providing more specialized services.

FINDING QUALITY HEALTHCARE SOLUTIONS: PUBLIC, PRIVATE PARTNERSHIPS

Ideally the presence of public health care should take care of both the ability to pay and

ability to process information on the quality of health care. But it so happens that

especially for those residing in the smaller and far off villages, many public services are

out of reach geographically and often such consumers are left with their needs unmet.

The private sector cannot emerge in such areas because of lack of adequate scales. Inother words, more important than the price is the issue of geographical accessibility for

many rural residents. Lack of physical infrastructure and staff both contribute to this

problem of access. While economic history is full of examples of how in such situations

some market solutions emerge that are in the interests of both providers as well as


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consumers, we do not have to wait for such solutions to emerge by themselves, where

there are broadly three areas where proactive policy-making can make a difference. The

first is to expand the public provision and find ways around the staff and infrastructure

constraints. Issues of regulation and pricing then are subsumed within the system. The

problem at the policy level would be to find a way to finance it. At the administrative

level, however, the study have another serious problem, as it is difficult to imagine the

government maintaining and sustaining quality health care service provision for all. An

important policy innovation could be to enable greater private sector involvement in the

sector, while directly subsidizing the poor through health care stamps etc to transfer

resources to the poorest segments. Since the private sector is already the dominant force,

the critical issue here would be to find a viable and sustainable system of monetary

transfers to the identified poorest target group. The call for public-private partnerships inthe infrastructure sector is an urgent one and the health care sector has not been left out.

A public-private partnership of sorts has been prevalent in the health care sector from the

pre-independence period where land is allocated and credit provided at submarket rates to

private players to build healthcare facilities in return for making a few services available

to the poor free or at nominal prices. Other types of public-private partnerships such as

government financing and private provision are still largely absent in India.

Any institutionalized expansion of the role of the private sector will entail some form of

least intrusive regulation, along With a strong consumer redressal mechanism. While it is

difficult enough to foresee large-scale competent governmental administration of an

expanded healthcare mechanism, it is even more difficult to foresee effective regulation

of private sector activities. The study draw a strong conclusion, that others may disagree

with and that is, there is little the state can do to effectively regulate the practices of

private practitioners, whether legal and illegal, in rural areas. Regulation costs money and

manpower resources which are already in short supply where availability of quality care

for the poor is concerned. In other words, mechanisms that involve a greater role of the

private sector typically do not guarantee either (i) assured geographical access in the

hinterlands, or (ii) effective regulation to ensure quality health care provision.

PUBLIC PRIVATE PARTNERSHIP IN HEALTH CARE DELIVERY SYSTEM AND

GOVERNMENTS ROLE


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Since independence emphasis has been put on Primary Health Care and India has worked

continuously to improve its health care system in the last several decades. Considerable

progress has been made in expanding the public system and reducing the burden of

disease. But the government funded facilities were not enough to meet to the growing

demand of population, whether it was primary, secondary or tertiary care, which

necessitated the need for alternate source of funding in the healthcare sector. It is widely

accepted that the deficiencies in the public sector health system require significant

reform. The need for Indias health sector reform has been emphasized by successive

plan document since eighth five year plan in 1992, by 2002 National Health Policy and

by international donor agencies. The World Bank emphasized that, now is the time to

carry health sector reform in India. But there is no single strategy that would be best

option. The proposed reforms are not cheap, but the cost of not reforming is even greater.The World Health Organization defined health sector reform as, . a sustained process

Of fundamental change in policy and institutional arrangements of health sector usually

Guided by government It is designed to improve the functioning and performance of

Health sector and ultimately the health status of the people.

Reform strategy include-

1. Alternative financing

2. Institutional management

3. Public sector reform

4. Collaboration with the private sector(PPP)

After reviewing the health sector of India, the World Bank (2001) and National

commission on macroeconomics and health (2003, 2005) strongly advocated the

harshening of private sector. The private sector is not only Indias unregulated sector but

also untapped sector. Although inequitable, expensive, the private sector is easily

accessible, better managed and more efficient than its public counter parts. It is assumed

that collaboration with the private sector in the form of public private partnership will

improve equity and efficiency, accountability quality and accessibility of the entire health

system. Uttar Pradesh is the countrys largest state and we have to take it on the fast track

of development. Having realized that the biggest resource for Uttar Pradesh is its 19

crores population and that there is an urgent need to invest in human capital if the state


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has to improve its ranking on Human Development Index and also help the country to

attain Millennium development Goals by 2015. Now, have to speed up the pace of

development and fulfill the aspiration of the people. Infrastructure is the biggest need of

every state. We cannot achieve the desired growth rate till there is the development of

infrastructure. Improvement in the quality of life of people should be the basis of

infrastructure development. Now it has been realized that government is unable to

provide qualitative, effective and adequate health services to the huge population of UP.

As a result people lose faith in public health system and diverted to private health

providers. But we want that people of the state should have access to have health

services. The district hospitals, operation theaters are in pathetic situation, their

instruments etc. which are rusted and environment is so dirty that one wonders if it

hygienic to get operation done here. Do the people no right to get good operation theater,even when they are willing to pay reasonable user charges? Uttar Pradesh government or

any other Government cannot transform or modernize all the hospitals over night. It

requires huge amount of money. The private sector is now capable and confident. The

time has come now, when at this juncture we can facilitate the development of the

country by giving a new dimension and a new confidence to public private partnership.

The study can invite private sector to invest and modernize these public hospitals and use

government hospital buildings for delivering health services and allow charging some

nominal fees. The involvement of private sector in health sector is a viable option, which

is being explored by a number of states such as Tamil Nadu, Gujarat, Maharashtra, west

Bengal, Rajasthan, Punjab and Delhi to mitigate the problem of adequate resources in

curative and tertiary care services. Public private partnership is becoming a popular mode

of implementing government programmes and schemes throughout the country in all the

sectors of the economy. There are various areas, where the study consider PPP. Health

services are our biggest priority. Over the last few years there have been many initiatives

to improve the efficiency, effectiveness and equity in provision of healthcare services in

the country.

SOCIAL INFRASTRUCTURE ANALYSIS FOR THE INDIAN HEALTHCARE INDUSTRY

Indians have become increasingly healthy since the mid 1990s, as is evident from the

improvements in almost all commonly used healthcare indicators such as maternal


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mortality ratio (MMR), life expectancy, infant mortality, and death rate. This is mainly

due to the countrys economic and social transformation as well as a rise in the standard

and quality of medical services and its greater accessibility. The Government has been

emphasizing on the development of the healthcare industry, especially, its infrastructure.

To this end, it has collaborated with the private sector as well as initiated healthcare-

related programs such as e-Health and telemedicine. Numerous family welfare and

healthcare programs such as national disease control receive considerable funding from

several bilateral and multilateral donor agencies. The social and infrastructural

development plays a critical role in the development of this industry. General

demographic trends greatly impact this demand-driven industry and increased industry-

specific infrastructural developments provide added impetus. India is experiencing a

continuous increase in life expectancy and a decline in the birth rate. This trend isexpected to persist over the next couple of years. The increased importance given to

medical and technical education by the Government has resulted in a qualified labor

force, which bodes well for the countrys potential as a healthcare outsourcing hub. A

possible shortage in the number of hospital beds (considering the rising healthcare needs)

will compel the industry to consider the use of remote patient monitoring systems. Frost

& Sullivans Healthcare Country Industry Forecast provides vital inputs for evaluating

the attractiveness of a country and its healthcare industry. Besides enabling decision

makers to assess the impact of non-market forces, it also helps in identifying new market

opportunities. This service provides a strong base for preparing contingency plans. In

addition, investors can assess industry-specific risk factors as well as conduct a more in-

depth micro research.

ANALYSIS

1. Healthcare is important areas of social infrastructure. It also covers care of the

other healthcare organization objective of which can be met through healthcare

infrastructure needs, management model that identifies problems, develops aframework for implementation and helps to evaluate dynamically healthcare

infrastructure service performance and social security measures.

2. This study begins with an literature review of trends in the development of

health services infrastructure in recent decades. It precedes to analyses the


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implications for the organization of health services and for resource allocation

when the health services infrastructure is reviewed as part of a health system

based on primary health care.

3. The Government of India is committed to provide high quality, affordable and

accessible, preventive, curative, primitive and comprehensive health care services

to the population. But unfortunately the performance of the states on various

health parameters is not encouraging. Although an extensive infrastructural

network of Medical and Health services in the government as well as private

sectors has been created over the years,

4. Public spending on health in India has itself declined after liberalization from

1.3% of GDP in 1990 to 0.9% in 1999. Consider the contrast with the Bhore

Committee recommendation of 15% committed to health from the revenueexpenditure budget, against the WHO, which recommended 55% of GDP for

health.

5. The current annual per capita public health expenditure is no more than Rs.

160and a recent World Bank review showed that over all primary health services

account for 58% f public expenditure mostly but on salaries, and the

secondary/tertiary sector for about 38%, perhaps the greater part going to tertiary

sector, including government funded medical sector.

6. The average medical expenditure on health for both hospitalization and non-

hospitalization cases in rural areas is lower than in urban areas. However,

household income lost per treated person is much higher in the rural areas (Rs

135) than urban (Rs 96) for non-hospitalization cases. In either scenario, private

players play a dominant role. There are demonstrated differences between the

payment patterns of the rich and the poor in both inpatient and outpatient care.

7. India faces a huge shortage of trained medical personnel, including doctors,

nurses and especially paramedics, who may be more willing than doctors to live

in rural areas where access to care is limited. There is an immediate need for

medical education and training, which could provide additional opportunities for

private sector providers or public-private partnerships.


22/25

8. The health system infrastructure needed for primary health care is comprised of

the physical structuresand the functional capacities needed to support all primary

health care activities . This includes health services infrastructure such as

facilities, including equipment; supplies and communications; health manpower,

9. The social and infrastructural development plays a critical role in the development

of this industry. General demographic trends greatly impact this demand-driven

industry and increased industry-specific infrastructural developments provide

added impetus. India is experiencing a continuous increase in life expectancy and

a decline in the birth rate

CONCLUSION

1. Indian governments maintain that district health systems based on primary health

care provide an excellent practical model for health development, including anappropriate health system infrastructure. Within this model the concerns with

accelerating the application of known and effective technologies and the concerns

with strengthening of community involvement and intersectoral action for health

are both accommodated. The district health system provides a realistic setting for

professionals and non-professionals concerned with health and social

development.

2. The private sector is certainly far more efficient in its delivery mechanism and has

been increasing its role and its outreach. In recent years 80 per cent of health care

expenditure in India, is out pocket expenditure and much it goes to private health

care providers.

3. The availability of physical health infrastructure in the states still lags behind the

National average. Apart from this, non availability of staff and medical services at

these health facilities is another issue of major concern As a result the state is

facing a great challenge to fight communicable and non communicable diseases,

4. India has built up a vast health infrastructure and manpower at primary, secondaryand tertiary care in government, voluntary and private sectors. The current doctor

population ratio is 1:1800. Tertiary hospitals in major cities are in many cases,

5. The study examined the quantum of the problem and how newer modes of

financing including Private Equity infusion and Healthcare. The concept of an


23/25

Inflection Point suggests that there are critical points in the history of an industry

or an individual company that signal permanent and enduring change.

6. Private equity investments in India have witnessed significant growth during

2007. PE deals have increased from US$ 7.9 billion in 2006 to US$ 19.03 billion

in 2007. There were around 53 deals of over US$ 100 million as against 11 deals

in 2006. Healthcare sector attracted over US$ 448 million in year 2007.

7. According to the World Health Organization. It is estimated that 450,000

additional hospital beds will be required by 2010an investment estimated at

$25.7 billion. The government is expected to contribute only 15-20% of the total,

providing an enormous opportunity for private players to fill the gap.

8. India faces a huge shortage of trained medical personnel, including doctors,

nurses and especially paramedics, who may be more willing than doctors to livein rural areas where access to care is limited.

9. The current conditions of physical infrastructure, staff, access, and usage are laid

out here before identifying critical gaps and requirements in infrastructure and

services. Issues related to institutions, financing, and policy are discussed in the

context of these critical need gaps and the potential role of the private sector in

healthcare provisioning in villages is explored.

10. A public-private partnership of sorts has been prevalent in the health care sector

from the pre-independence period where land is allocated and credit provided at

submarket rates to private players to build healthcare facilities in return for

making a few services available to the poor free or at nominal prices. Other types

of public-private partnerships such as government financing and private provision

are still largely absent in India.

11. The challenges the sector faces are substantial, from the need to improve physical

infrastructure to the necessity of providing health insurance and ensuring the

availability of trained medical personnel. But the opportunities are equally

compelling, from developing new infrastructure and providing medical equipment

to delivering telemedicine solutions and conducting cost-effective clinical trials.


24/25

REFERENCE

1. The Eleventh Five-Year Plan(2007-2012): Report of the Working Group on PublicHealth Services Ministry of Health & Family Welfare Nirman Bhawan, New Delhi 110011

2. Emerging Market Report: Health in India (2007) Health care India

PricewaterhouseCoopers 22. LLP right all reserved3. Dr. Biswajit Sarma(2002) extension of modern healthcare infrastructure of majorcities to the rural areas using gis- a pilot study for indian condition senior lecturer,department of civil engineering, jorhat engineering college, jorhat-785007, assam,india,

4. richard b. berlin, jr., md, and bruce r. schatz()the evolution of healthcare infrastructurefrom physical centers to logical agreements, university of illinois at urbana-champaign

5. Ayesha De Costa Vinod Diwan(2007)Where is the public health sector? Public andprivate sector healthcare provision in Madhya Pradesh, India , RD Gardi MedicalCollege, Ujjain, Madhya Pradesh, India b Division of International Health,Department of Public Health Sciences, Karolinska Institutet, Stockholm, Sweden

6. K.M. Mital and Vivek Mital (2003) Public Private Partnership and Social

Infrastructure. Institute for Integrated Learning in Management, New Delhi, India7. Steffen Bayer, Martina Kberle-Gaiser and James Barlow(2005)Planning for

adaptability in healthcare infrastructure Innovation Studies Centre Tanaka BusinessSchool Imperial College London South Kensington Campus London, SW7 2AZ, UK

8. MARTN VALDIVIA(2002):public health infrastructure and equity in the utilizationof outpatient health care services health policy and planning; 17(suppl 1): 1219 oxford university press 2002

9. Indo-italian report (2007)overview of the healthcare industry in india; new delhi10. Indian healthcare rport(2008) opportunities & investments in indian healthcare strategy

healthcare delivery healthcare design healthcare financing 2 - 4 a pri l 2 0 0 8 mumb ai indi a h e a l t h c a r e the taj mahal palace & towers

11. Laveesh Bhandari and Siddhartha Dutta(2007)health infrastructure in rural india,planning commission report new delhi

12. rod wilson,(2004) strategic directions for a national primary health care policy victorianmedicare action group, tony mcbride, health issues centre, tim woodruff, doctorsreform society

13. duane l. smith and john h. bryant(2000)building the infrastructure for primary healthcare an overview of vertical and integrated approaches 'district health systems, divisionof strengthening of health services, world health organization, 1211 geneva 27,switzerland and 'chairman, department of community health sciences, faculty of healthscience, aga khan university, p .o . box 3500, karachi 5, Pakistan

14. Baru,Rama v and Madhurima Nundy(2008), Blurring Boundries: Public-PrivatePartnership in Health Services In India,EPW,Vol.XLIII,No.4,January 26 to Feb 20008

15. Ashok sahni(2007)public-private partnership in health care: critical areas andopportunities , Professor and Hony. Executive Director, ISHA, Bangalore.16. Ashlesha Datar, Arnab Mukherji* & Neeraj Sood(2007) Health infrastructure &

immunization coverage in rural India; Economics & Statistics Group & *Pardee RANDGraduate School, RAND Corporation Santa Monica, CA, USA

17. BDI Report(2009): Healthcare Infrastructure in Developing Countries; and EmergingMarkets An initiative by the Federation of German Industries (BDI) with support fromthe KfW Development Bank and the Federal Ministry for Economic Cooperation andDevelopment (BMZ)


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TABLES

Table- 1

Healthcare Infrastructure need in India

2008 2018 2028Additional Beds Required 1.1 million 3.1 million 2 million

Bed / 1000 PopulationRatio 0.7 to 1.7 4 5

Additional Floor Space(800 sq. ft. / bed)

880 million sq. ft 2480 million sq. ft 1600 million sq. ft.

Additional Land Area(Floor Space)

20,000 acres 56,400 acres 36,400 acres

Table- 2

Healthcare infrastructure expansion in india

population Beds hospitals dispensariesUrban 178.78 3.6 3.6Rural 9.85 0.36 1.49

Table- 3Percentage Villages with Access to various Health Care Facilities round the Year

Infrastructure/services % villagesPHCs 68.3Sub-centre 43.2Govt. dispensary 67.9Govt. hospital 79.0Private clinic 62.7Private hospital 76.7

Source: RCHS Round II, 2006.

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