Enabling Access to Long Term Healthcare Funding in India

8/9/2019 Enabling Access to Long Term Healthcare Funding in India

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Enabling access to long-termnance for healthcare in India

October 2013

www.pwc.in


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India is currently engaged in battling the dualburden of communicable and non-communicablediseases, which developed countries have had todeal with only sequentially.

Enabling access to healthcare in India

India has achieved considerableprogress in the provision of healthcaresince independence. Recent reformsand innovations under the NationalRural Health Mission (NRHM) haveresulted in many states reportingsignicant improvements in keyhealth indicators such as institutional

deliveries, out-patient cases, completeimmunisation, availability of diagnosticand family welfare services and diseasecontrol programmes.

However, the countrys health systemcontinues to face many challenges.

Simultaneously battlingcommunicable and non-communicable diseases

While India is witnessing an increasein chronic disease related morbidityand mortality, it still hasnt overcome

health challenges posed by infectiousdiseases and under-nutrition. Thecountry is currently engaged in battlingthis dual burden simultaneously,which developed countries have hadto deal with only sequentially. RuralIndia accounts for not only 70% ofcommunicable disease cases, but alsoover half of non-communicable disease.

Unmet health goals

Several planned health goals havefailed to keep pace with the rapideconomic growth. The MillenniumDevelopment Goals of reducing IMRto 28(per 1000 live births) and MMRto 109(per 1000,000 live births)is unlikely to be achieved by 2015.While the maternal mortality rate hasdeclined over the past 30 years from460 to 212 per 1,00,000 live births, itstill remains high relative to the targetsset by the policy. Based on the currenttrajectory of the 11thPlan India is likelyto fall short of the 12th Plan goals forIMR and MMR. Despite a considerabledecline in child malnutrition ratesover the past few decades, Indiacontinues to have the highest numberof malnourished children in the world.

Health expenditure by the governmentremains at around 0.9% of GDP versusthe target of 2.0% of GDP (2010) setby the National Health Policy in 2002.

Source: WHO Global Burden of Disease 2010

Source: WHO Statistics 2013

Source: National Health Prole 2011

Leading causes of deaths: Non-communicable

Infant Mortality Rate (per 1000 live births)

Maternal Mortality Ratio (per 100,000 live births)

Leading causes of deaths: Communicable

Public health expenditure (% of GDP)

India 0.9%

Global average 6.0%

6.0%

0.9%

India is likely to miss the MillenniumDevelopment Goals by 2015.


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High out-of-pocket spend nancing

health expenditure

Most of the countrys healthexpenditure is supported by privatespending, primarily out-of-pocket(OOP), with public funds constitutingan insufcient amount. Despite severalgovernment initiatives relating to social

protection, such as the Employees StateInsurance Scheme and the CentralGovernment Health Scheme, only aboutone-fourth of the population is coveredby some form of health insurance.Though several efforts, such as theNRHM, the Janani Suraksha Yojana andthe Rashtriya Swasthya Bima Yojana,have been made in the past few years toprovide equitable healthcare to Indians,these programmes by themselvescannot accomplish Universal HealthCoverage (UHC).

The urban-rural divide

There are considerable gaps betweenrural and urban areas with respect todisease morbidity and mortality. Whilethe combined problems of under-nutrition and inappropriate nutritionaccount for almost equal populationproportions in the rural (48%) as wellas urban areas (49%), under-nutritionis a dominant problem in the formerwhile obesity accounts for half theburden of malnutrition in the latter.Urban areas have about four times more

health workers per 10,000 populationthan rural areas. About 42% of healthworkers identifying themselves asallopathic doctors in rural areas haveno medical training as against 15%in urban areas. Compounding thesedisparities is an urban bias in healthnancing. For example, almost 30% ofthe public health expenditure from thecentre and states, is allocated to urbanallopathic services while rural centresreceive less than 12%.

Variations at the state level

Some states such as Tamil Nadu andKerala, have model health systems,while others, in particular the statesof Bihar, Chhattisgarh, Jharkhand,Madhya Pradesh, Odisha, Rajasthan,Uttarakhand and Uttar Pradesh, havea long way to go in terms of soundhealth infrastructure. The differencesare stark. For instance, for a girl born inrural Madhya Pradesh, the risk of dyingbefore she is one is approximately sixtimes higher than that for a girl bornin rural Tamil Nadu. There exists an18-year difference in the life expectancynoted between Madhya Pradesh(56 years) and Kerala (74 years).These disparities suggest that activesteps towards addressing the socialdeterminants of health can begin toreverse the chronic underdevelopmentthat characterises poor healthperformance of Bihar, Chhattisgarh,

Jharkhand, Madhya Pradesh,Odisha, Rajasthan, Uttarakhandand Uttar Pradesh.

Talent and skill gap

Clinical talent shortage looms large asthe single biggest bottleneck affectingthe growth of the sector and creationof healthcare access in the country.The last decade saw an increasein physicians from 0.55 per 1,000population to a mere 0.65 per 1,000,

which substantially lags as comparedwith China at 1.3 physicians per 1,000.It is also substantially lower againstthe WHO benchmark of 2.5 per 1,000population. Despite the scarcity ofmedical personnel, the problem ofunder-utilisation exists. Ironically,about 50% of the existing medicalworkforce does not practise in theformal health system.

The healthcare access gap

The biggest challenge of all remains thesubstantial gap in accessing healthcare.

Healthcare infrastructure gaps remainsubstantial, with only 1.3 beds per1,000 population, signicantly lowerthan the other BRIC economies andthe WHO guideline of 3.5 beds per1,000 population.

70% of Indias healthcare infrastructure isconcentrated in the top 20 cities.

Uttar Pradesh

Health expenditure in Uttar Pradesh isrelatively higher which is not translated inhealth outcomes (IMR 61/1000 live births)

Odisha

Odisha has highest number ofgovernment hospitals in the country butfares poorly on health indicators. IMR is stillhighest amongst Indian states

Tamil Nadu

Although Tamil Nadu has lower healthexpenditure but achieved better healthoutcomes (IMR is 24 per 1000 live births)

Good

Low

Average

Source: National Health Prole, 2011


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45%of the population travel more than100 kms to access a higher level of care.

member states to pursue universalhealth coverage, ensuring equitabledistribution of quality healthcareinfrastructure and human resources, toprotect individuals seeking care againstcatastrophic healthcare expenditureand possible impoverishment. Italso highlighted the importance ofoptimising the opportunities that existfor collaboration between public andprivate providers and health-nancingorganisations, under strong overallgovernment stewardship. The 2010World Health Report builds upon the2005 WHA recommendations and aimsat assisting countries to quickly attainuniversal health coverage. The reporthighlights three basic requirements forreaching UHC:

Raising sufcient resources forhealth

Reducing nancial risks and barriersto care

Increasing efcient use of resources

Beds per 1000 population The non-communicable disease burden in India

The gap in healthcare access isnot limited to the number of bedsindicator. Cardiac disease and cancerhave emerged as the top two causesof mortality in India. The state ofhealthcare facilities for these twodiseases has not kept pace either indiagnostics or therapy. India has amere 1050 cardiac centres, adequate toperform about two million angiographyprocedures; woefully inadequateto cover the more than 50 millionpatients aficted with coronary heartdisease. Access to cancer care is abigger challenge with only around 325comprehensive cancer centres, despiteabout 1.2 million newly diagnosedcancer patients every year. India has amere 90 PET and CT scanners, 1,300MRI scanners and around 1,400 CTscanners (above six-slice). The existingshortage of diagnostic infrastructure

across the country severely limits earlydetection of diseases and access tocare. This lack of healthcare access hasresulted in the country facing one of thehighest mortality rates in the world.

The related challenge of healthcareaccess is the quality component. The 1.6million beds in the country are spreadover an estimated 55,000 hospitalswhich translates to an average of 30beds (approximately) per hospital.About 42,000 of the hospitals in Indiaare nursing homes with an average bedcapacity of 20 to 25 beds. The resultantchallenge for India is the need forinvestment to improve access to bothprimary and tertiary care.

Nearly 50 countries worldwide haveattained universal access to healthcare,according to the International LabourOrganisation (ILO). Conspicuousgaps still exist, however, in Asia,Africa and the Middle East, and inparticular, in India. Globally, there isa greater recognition of the need forhealth systems to adopt sustainablenancing mechanisms that permit

population-wide coverage and theefcient delivery of a wide rangeof health services. The 2005 WorldHealth Assembly (WHA) urged

Source: WHO Statistics 2013

Cardiac

50 millionpatients

Diabetes

63 millionpatients

Cancer

1.2 millionnew cases

every year

Stroke

0.9 millioncases every

year

Renal

1,75,000transplants

required

Rising incidence of

non-communicable

disease will adversely

impact the economy

to the extent of 230

billion INR in a

decade.

About

70% of patientsdiagnosed with cancer die within the

rst year.


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Despite healthcare being accorded infrastructurestatus, the benets of this are yet to accrue to thehealthcare providers.

The healthcare infrastructure imperative

The Planning Commission has laidout a vision to establish a systemof UHC in the 12th Five Year Plandraft (2012-17). This was based on

the recommendations of the HighLevel Expert Group constituted bythe Planning Commission in October2010, with a mandate to develop aframework to provide easily accessibleand affordable healthcare to all Indians.

Setting realistic goals forhealthcare access

To avoid unmet goals at the endof the 12th Plan period, India will

conservatively need to aim to add atleast 650,000 beds by 2017. This willhelp improve access to healthcareinfrastructure from the current 1.3beds per 1,000 population in 2011(approximately 1.6 million beds on apopulation of 1.21 billion) to 1.7 bedsper 1,000 population (2.25 million bedson an estimated population of 1.33billion) by the end of the 12th Planperiod in 2017. While this will still be

less than half the WHO recommendedguideline of 3.5 beds per 1,000, it willbe the minimum required to buildIndias healthcare access towards the

Vision 2020 goal of 2.0 beds per 1,000.Achieving Vision 2020 will requirenot just the availability of healthcareinfrastructure, but also parallelprogress in universal healthcarecoverage, a skilled health workforceand affordable care in order to ensurethe quality of care given to everycitizen.

The long-term nancing imperative

Projected bed requirement by 2017

Source. WHO health statistics and PwC analysis

Total beds

Bed density per 1000 population


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The addition of 650,000 beds inIndia by 2017 will require a capitalinvestment of 162,500 crore INR(approximately 26.2 billion USD at thecurrent exchange rates). This translatesto more than 50% of Indias annualhealthcare expenditure.

In India, this scale of creation inhealthcare access will require a strongpartnership between the public and

the private stakeholders. In the last 10years (2002-12), private healthcareproviders have created 80% of thenew bed capacity. Venture capital andprivate equity, external commercialborrowings and rupee debt were usedas primary mechanisms by the privatehealthcare providers to nance thisexpansion.

Based on the publicly announcedgovernment plans (center and state),we estimate that approximately130,000 beds ( 20%) will be put up in

the government or the public sector.This will necessitate the additionof approximately 520,000 beds bythe private healthcare providerswhich implies a capital investment ofapproximately 130,000 crore INR overthe next four years.

The Rangarajan Committee and theCabinet Committee on infrastructurehave identied hospitals as a separateinfrastructure sector.

Source: Gazette Notication, Ministry of Finance, May 2013

Despite this, long term andconcessional lending that has beenavailable to the Indian infrastructuresector has not been made available tohealthcare providers in India. Banklending has been largely restricted toseven year loans at commercial ratesof interest, which has constrained the

ability of private healthcare providersto scale and create healthcare access.Tertiary care hospitals have longergestation periods (similar to the coreinfrastructure) and typically require atleast three years to break even.

In the last

10 years,private healthcare providers

have created

80%of the new bed capacity


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The addition of 650,000 beds will require acapital investment of 162,500 crore INR by

2017. This will require enabling access to longterm and concessional funding similar to coreinfrastructure.

Funding access to healthcare

Raising the needed 130,000 croreINR will require an equity infusion of39,000 crore INR(30%) by the privatehealthcare providers and a long term

debt funding of 91,000 crore INR(70%).

This scale of equity infusion to buildhealthcare infrastructure will requirethe government and the privatehealthcare industry together to put inplace six key enablers:

#01: Creation of a governmentcorpus for a healthcareinfrastructure fund

The government can lead to the

creation of healthcare infrastructurethrough the establishment of ahealthcare infrastructure fund (HIF)with an initial corpus of 15,000 croreINR similar to the establishment ofthe IIFCL for core infrastructure. Theinitial corpus can be raised throughbilateral investment treaties and longterm pension funds. The managementbody for the HIF will be appointed bythe government to handle investmentallocation, portfolio, and fundmanagement. The core mission of

the HIF will be to spur investment inhealthcare through lead investment(equity and long term debt) in thecreation of healthcare infrastructureand providing viability gap funding forhealthcare projects that are alignedwith the Vision 2020 goals and therecommendations of the High LevelExpert Group (HLEG) by achievingUHC.

#02: Allowing business trustsand real estate investment trusts(REITS) in healthcare

REITS is dened as, any corporation,

trust or association that acts as aninvestment agent specialising in realestate and real estate mortgages (asper US federal Laws). Thus it operatesand owns income generating realestate ranging from residential, retail,hospitals, hotels, etc. It offers theadvantage of offsetting the instabilityof the stock or bond markets as theirlong-term real estate investments aremostly dependent on debt ratings andinterest rates.

Key advantages of REITS

Transformation of business from asset heavy to

asset light model

Monetisation of assets: Realisation of market

value

Perpetual growth capital raised: Not a debt but

ownership by investors for perpetuity

Business continues to control assets

Promoters fund raising at low cost

Business can focus on core-expertise:

Segregation of operations and Infrastructure

International fund raising vehicle for future

funding


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#03: Establish a nodal agency for

healthcare

The industry and governmentstakeholders need to work together toestablish a nodal facilitation agencyto spur the growth of the sector andcreation of healthcare infrastructure.The mission of this nodal agency will

be to facilitate and expedite investmentapprovals in healthcare infrastructure,coordinate inter-ministerialdeliberations and be a single windowfor public private partnerships, asidentied by the Planning Commission,as essential to the creation of healthcareaccess and achievement of UHC. Theestablishment of this agency will helpovercome the current bureaucraticdelays and multiple hurdles that anygreen eld healthcare project faces.

#04: Transparent and viable pricing

formula for reimbursement

One of the key factors that contributedto the investment growth in the powersector was the transparent pricingformula for investors. While the needfor affordability is well recognised thelack of a transparent and viable CGHSpricing formula has made investorsand long term lenders wary of fundingprojects in this sector. A key to thecreation of healthcare access on thescale required to meet the 12th Plangoals will be the establishment of a

CGHS pricing formula similar to theone used for the power sector. Thiswill help provide the transparencyand certainty sought by equityinvestors, banks and long term lendinginstitutions to provide long termfunding for the growth of this sectorand creation of healthcare access.

#05: Standardising collateral and

exit clauses for PPP projects

The Planning Commission and theHLEG have identied public privatepartnerships (PPPs) as an importantroute for the creation of healthcareinfrastructure. While a few PPP projectshave been executed in the healthcare

sector, especially in greeneldhospitals and radiology, the healthcaresector has signicantly lagged coreinfrastructure sectors like roads andairports in PPPs. The growth of PPPsin the roads sector has beneted fromthe transparent master guidelines andconcession agreements with standardcollateral and exit clauses that haveenabled long term funding. Scalingup PPPs in the creation of healthcareinfrastructure will require a similareffort to standardise concessionagreements and collateral and exit

clauses. This will substantially helpbanks, long-term lenders and equityinvestors to back these projects.

A study carried out by PwC on QueenElizabeth II hospital in Lesothorevealed a more comprehensive PPParrangement.

Public private integrated partnerships(PPIPs) are a special form of PPPthat comprise long-term, highlystructured relationships between thepublic and private sectors designedto achieve signicant and sustainableimprovements to healthcare systems atnational or sub-national levels.

#06: Enhancing nancial access

through Universal Health Coverage

Finally, we believe the enhancementof nancial access through UHC forevery citizen will be the 6th key pillarrequired to ensure the successfulattainment of the Vision 2020 goals.This has already been outlined in detailby the HLEG in their recommendationsto the Planning Commission andincorporated in the 12thPlan draft.Strong implementation of this plan

will place India on the same path toprogress that around fty countriesaround the world have achieved inhealth outcomes.

Quality of care

Improved quality of care, including the poorest

and most marginalised Better healthcare access

Predictable government health expenditures

Fixed payments and capped overall project

costs promotes predictability in governmenthealth expenditures

Cost neutrality

Patients utilising the new PPIP healthcare

facility experience no change in out-of-pocket

payments

The PPIP may be cost neutral to the

government, ensuring its annual expenditure

for the new PPIP facilities and services is equal

to historical expenditures.

Independent monitoring and evaluation

An independent private or public agency

to collect and validate performance data,

ensure all contractual obligations are met and

administer and arbitrate rewards rewards and

penalties.

Important role in maintaining public confidence

in the new PPIP

Equity of access

PPIP facilities are open to all, regardless of a

patients income level or social status Especially critical for poor or disenfranchised

populations which may not have had access to

quality healthcare services previously

System-wide efficiency gains

PPIPs strive to set high and transparent

standards for service delivery and outcomes,thus raising the bar for the entire national

healthcare system.

Key characteristics of public private integrated partnerships (PPIPs)

Source. PwC health systems innovation in Lesotho report


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Summary

The creation of physical and nancial access to healthcare for everycitizen is core to the development of the economy. This will be essentialto build the safety net that every citizen is entitled to. India can drawlearnings from several countries (developed and developing) aroundthe world in how they have progressed in building the backbone ofinfrastructure (physical and social) for the growth of their economies.

Enabling access to long-term funding will be essential to the creation ofthis infrastructure in India.

Bibliography

http://articles.timesondia.indiatimes.com/2010-03-21/

india/28123849_1_stroke-cases-risk-factors-bphttp://articles.timesondia.indiatimes.com/2013-06-08/india/39833869_1_kidney-disease-kidney-failure-ckd

World Health Statistics 2013, WHO

NSSO

National Health Prole 2011

WHO Global Burden of Disease, 2010


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About NatHealth

With a view to safeguard and nurture the gift of good health for all in our

country, NatHealth, Healthcare Federation of India was formed in May 2012.

A new healthcare paradigm needs a lot more infrastructure, facilities, resources

and empowerment. Moreover, a robust healthcare delivery system needs

the wholehearted commitment of its fraternity and a foundation of strong

legislature and far-reaching policy.It is therefore important for all stakeholders in the healthcare industry to come

together, address the inequalities and challenges that characterise Indian

healthcare today, and strive to build a better tomorrow

NatHealth is the endeavour to facilitate just that. It is the voice that will speak

for us, that will address the urgent issues and in time redene our space.

NatHealthwill work for Indian healthcare stakeholders.

About PwCsHealthcare practice

PwCs global reach and resources help governments, businesses and

healthcare industry players accomplish their missions in todays dynamic

and competitive environment. We provide health organisations with expertguidance not just on healthcare issues in their local markets but also on

operating in global markets. We have a proven track record in working

with providers, payers, pharmaceutical life sciences companies to improve

operational performance.

Anjan BoseSecretary General

Healthcare Federation of India

(NatHealth)

Tel: +91 (11) 4076 9956

Email: [email protected]

Dr. Rana Mehta,Leader, Healthcare Practice, PwC India

PricewaterhouseCoopers Pvt Ltd

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Enabling Access to Long Term Healthcare Funding in India