The Need for a new Healthcare Model and some Concerns

The organized private healthcare in India needs to urgently evolve a new business model.

The present model faces challenges as the government goes about changing the healthcare landscape of the country in a ham-handed manner. The price controls that are being put in place essentially mean that private healthcare players will have to develop a new business model, which is ultra low cost and allows them to accept patients at the government mandated low prices.

The Ayushman Bharat Scheme and its different versions being developed by the state governments appear to be a precursor to some kind of Universal Healthcare system in India. The government in itself is not in a position to significantly increase its own healthcare spending on badly needed public healthcare infrastructure. Thus, it will willy-nilly rely on private healthcare, which in any case caters to a majority of the citizens of our country. This is likely to see the emergence of a low-cost health care system, which will serve the needs of the masses.

The Contours of the New Model

Going by the prices on offer from the government for various medical procedures, the new model will have to be quite bare bone. Essentially, this would mean less number of people employed in the hospital, very little by way of ”support services”, no private rooms, generic medicines (my fear is of inferior quality as well, as India has over 30000 pharmaceutical companies with poor regulation in place) and very little by way of patient comfort. The model can only work on large volumes of patients and high patient throughput.

The Concerns

While the model can be developed, the biggest concern will have to be the quality of care that will be delivered. The model’s cost-driven approach completely ignores the minimal clinical quality standards that must be delivered. Presently too, this is a nebulous area as the quality of health care services vary widely and there are no comparative acceptable benchmarks. Large private corporate hospitals have their own standards often comparable to global standards and they have systems in place to monitor the quality parameters and clinical outcomes. Small, private nursing homes have fuzzy standards not clearly defined and stated. No one publishes there outcomes.

To make matters worse, in India we do not have a clinical quality watchdog, which keeps an eye on medical processes and outcomes. Thus, hospitals can report their outcomes and clinical data as they wish. This is clearly a recipe for disaster.

While the implementation of National Health Protection Scheme (NHPS) may lead to better access to medical care to a large number of citizens, the large private healthcare players may get deluged with patients far beyond their capacity. When the payor will be the government through insurance companies, everyone would want to access the highest level of care possible. This in itself is fine and laudable if the care available in the country is of a uniformly high quality. However, in India, the quality of care varies tremendously and therefore the private healthcare players with high standards of care may find themselves unable to cope. Sadly, they may end up compromising on these very clinical standards to manage the patient volumes, thus blunting the competitive edge that they had to begin with.

The third big concern is the ability of the government agencies to be able to effectively implement this ambitious scheme. While the mandarins in Niti Aayog are burning the proverbial midnight oil to get the scheme off the ground, the challenge is indeed enormous. The best-planned schemes come to naught if the execution is tardy. That sadly has been the fate of almost all such similar schemes implemented earlier in different states. The government’s track record is hardly inspiring and the stakes this time around are truly high.

The private healthcare players, however, have their task clearly cut out for them. They have to find a new business model, which delivers world-class care to a very large number of people at a cost which is impossibly low. The sooner they get on with finding the right business models for themselves, the better off they will be.

The views expressed are personal






The Big Healthcare Challenges in FY 19

As the present financial year draws to a close, I am left reflecting on the challenges the private healthcare services organizations in the country face in the coming year. The present year has been a pretty tumultuous one. The regulatory environment threw up several challenges. The NPPA orders on price controls of devices such as stents and joints impacted the profitability of most private healthcare companies adversely. The DPCO’s orders on price controls on key drugs too are also likely to dent the bottom line of private hospitals. The media brouhaha triggered by two cases one at Fortis Hospital Gurgaon and one at Max Hospital, Shalimar Bagh, New Delhi created consumer distrust of an unprecedented nature. The private sector hospitals were called names and their doctors were addressed in the vilest of terms leading to all around despondency. Private hospitals are now limping back from this assault. The government of Delhi also announced a half-baked scheme for its citizens, which allows them access to private hospitals if the government-owned hospitals put them on a wait-list of more than a month. Finally, in the budget, the union government announced the path-breaking ”Ayushman Bharat”, which is supposed to provide a cover of INR 500000 to a million families across the country.

All these are expected to lead to some fresh challenges for the private healthcare providers in the next financial year.

Regaining Patient’s Trust 

If there is one thing, which ranks higher than any financial matrix of revenue, costs, and profits it has to be the effort to regain the patient trust. The reasons for the loss of trust are many, some genuine and some purely trumped-up, however, most private hospitals see the urgent need to regain the customer trust. Significant investments will have to be made to improve transparency, patient communication, and organizational culture, which will lead to patients trusting their hospitals. This too is a difficult task and will involve a lot of senior management time and effort.


The government and the media have quite successively sold a narrative to ordinary citizens of the country that the private sector hospitals are profiteering and that they are out to cheat patients by over-prescribing, over-billing or worse. Thus, they have ascribed themselves the role of the guardians of the ordinary citizens against the rapacious, profit-hungry hospitals. The truth is far more prosaic and indeed worrying for the private sector hospitals. Most of them have seen a shrinkage in their profits, which to begin with were meager. The biggest challenge that private sector hospitals face in the coming year is clearly of ensuring reasonable returns for their shareholders. In an environment, driven by complete distrust between patients and the hospitals, with power-hungry politicians seemingly baying for their blood in what might be an election year, most private sector hospitals are staring at a bleak year ahead. The EBITDA margins are likely to contract. The hospitals will have to thus figure out a way of reining in costs, without compromising on patient care, safety, and outcomes. This is obviously easier said than done and will probably consume most of the bandwidth of the top management of the hospitals.

Managing the Changing Regulatory Environment

Healthcare is finally getting some attention from the government, which in itself is not a bad thing at all.  However, the controls being put on pricing and the schemes like the Ayushman Bharat and similar programs are not at all well thought through. The private sector, however, has no choice but to adapt to the changing situation. The National Health Protection Scheme (NHPS), will be rolled out this year. One is hopeful that it will be backed by suitable technology, which allows private hospitals to handle patients covered under NHPS. The hospitals will need to usher in change to be able to accommodate the large number of NHPS beneficiaries, which may flow into private hospitals. These changes may include modifying the bed configurations in the existing hospital, tweaking systems and processes and creating special areas to handle NHPS patients and create low-cost models, which allows the private hospitals to manage the NHPS patients in high volumes. Other regulatory changes in drug price controls, devices pricing controls and guidelines on re-usage will all lead to significant tweaks in hospital processes.

Managing Media and Consumer Activism

Consumer and media activism is here to stay. An unexpected outcome, a perfectly explainable error of judgment and sometimes a perceived lack of attention can trigger a media avalanche. Much as the hospitals may crib about being unfairly targeted, they will have to learn to live and cope with it. However, this does not mean that hospitals will not take a stand or push-back particularly when they are in the clear. They will have to learn to work with a partisan media and try their best to put out their side of the story. Speed will be of the essence and the communication teams of the hospitals will have to be beefed-up. Social Media too will throw up new challenges and the hospitals will have to learn to respond quickly and have a ready base of loyal supporters who will help defend them against motivated tirades.

These are all unique and new challenges. I am sure something good and lasting will emerge from these as well.

The views expressed are personal













The National Health Protection Scheme and a few Questions

The union finance bill presented in parliament earlier this month promises a lot by way of better access and improved healthcare services for the citizens of the country. The government seems to have suddenly woken up to the broken down public healthcare system in India and wants to fix it. This is good news for the ordinary citizens of the country as well as the various stakeholders in the healthcare industry.

It also raises a few questions.

But before that, let us have a quick look at what the finance minister has promised. The finance minister has announced The National Health Protection Scheme (NHPS), which will provide an insurance cover of INR 500000 to 10 million families and is being presented as the world’s largest government-funded healthcare programme.

The government has also proposed to set up over 150000 Wellness Centres under the Ayushman Bharat Scheme. These Wellness Centres will be set up in rural areas, providing better access to the rural communities, presently deprived of any sort of healthcare altogether.

The finance minister has also announced that the government will set up 24 new medical colleges and training institutions.

On the face of it, these announcements do appear to be bold and innovative. They certainly indicate that the government is thinking big on overhauling the public healthcare system in the country. This in itself is a big step forward and should be applauded.

Let us now look at some troubling questions regarding the NHPS.

The Worrying Questions

The finance minister, while making these grandiose plans hasn’t announced the financial allocations for this scheme. The government also does not seem to know how will this program be funded. Essentially, one isn’t sure, how much money will be needed and where will it come from. Some independent experts have calculated that this will cost around INR 60000 Cr (A little over USD 9 bn). That is a lot of money to find.

Healthcare in India is a state subject and thus the scheme will have to be managed by different states and will probably be funded by contributions from the union government as well as the state governments. With the precarious state finances of most of the states, one is not sure if they will be able to find adequate funding for the program.

The logistics of the scheme appear very vague. One is not clear as to how these 10 mn families are identified. One assumes that they will hail from the economically weaker sections of the society, one isn’t sure how will the benefit really be passed on to them. Also, what isn’t clear is the exact details of the coverage that will be extended. For instance, will the insurance cover day to day out-patient expenditure, drugs or just in-patient services. These details will have to be thought through and worked out rather quickly. Not a mean task, considering the sheer scale of the scheme.

If we were to now look at the supply side of things, one obvious question is, which all hospitals, nursing homes, and clinics will be involved in the scheme. Since more than 80% of healthcare services in India are provided by the private sector, it seems they will have to play a major role in the implementation of the scheme. The government will have to initiate some kind of a dialogue with the private healthcare services providers and get them to agree to the commercial terms of the scheme. This in itself is a gargantuan task as the private healthcare sector is pretty fragmented.

Then there are questions related to the availability of sufficient beds to be able to cater to the sudden explosion of demand that is likely to happen, once the scheme is rolled out. An assessment of the supply side constraints will have to be done to ensure that there are enough beds to meet the demand. Also, a suitable mechanism will have to be evolved to control access to high-end secondary and tertiary care beds, which are in limited supply. This would probably imply developing a robust primary healthcare system, which isn’t visible as yet.

The Indian healthcare system suffers from a patchy and uneven quality of services that are delivered across the healthcare spectrum. Thus, on one hand, we have corporate hospitals, attracting overseas patients in large numbers, we also have small “mom and pop” nursing homes, registered as hospitals providing very little by way of service. In a world of free insurance coverage of INR 500000, how will the government ensure that patients do not end up only at the doors of large and better-equipped hospitals? We will also require a multi-level healthcare quality regulator, which transparently documents and publishes quality outcomes at various hospitals working under the scheme.

Finally, in a scheme this size and with the financial provisions that need to be done, the government will have to figure out a foolproof delivery mechanism to the truly deserving. In the past, we have seen that corruption and greed at all levels of bureaucracy derail such massive public spending programs. One hopes that the government will be able to work out some mechanism by which the benefits of the NHPS will percolate down to those who need it most.

The views expressed are personal