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Funding in Healthcare: Key features from NATHEALTH-PwC Report

Funding in Healthcare: Key features from NATHEALTH-PwC Report

New Delhi : To bridge the huge infrastructure gap, India will need much more participation from the private sector and for these conventional modes of healthcare funding will need to be aided by innovative modes funding to improve healthcare investments in India, reveals a NATHEALTH-PwC Report which was released here today at NATEv2017, an annual seminar organized by the Healthcare Federation of India (NATHEALTH).

As per the NATHEALTH-PwC Report on Funding Indian Healthcare – Catalysing the Next Wave of Growth report With a 22% shortage of primary health centres (PHCs) and 32% shortage of community health centres (CHCs), it is estimated that 50% of beneficiaries travel more than 100 km to access quality care.

Source: 6 – World Bank Data 2014, 7 – National Health Policy Draft 2015

Also India is struggling with Poor infrastructure, shortage of a skilled workforce and lack of standards impact the quality of care.

India has only 1.1 beds per 1,000 population in India compared to the world average of 2.7.9.  70% of India’s healthcare infrastructure is in the top 20 cities.

 

The private sector has been involved in building the healthcare infrastructure in the country with active participation from private equity players and increase in FDI investments, the paper says innovative modes of funding are needed to meet the requirements of the healthcare sector which has also been highlighted in recently unveiled New Health Policy 2017 by the government.

The New Health Policy 2017 aims at universal health coverage and affordable quality healthcare services to all.

NATEv2017, an annual seminar organized by the Healthcare Federation of India (NATHEALTH) witnessed the release of the Report on ?Funding Indian healthcare; Catalyzing the next wave of growth? by NATHEALTH in association with PwC. The Report was released in the presence of Faggan Singh Kulaste, Minister of State, Ministry of Health and Family Welfare, Government of India.

The Report recommends four scaling innovative modes which should be introduced for funding Indian healthcare. These include Fund of funds such as Pension funds, Investment route through PPP, long term debt. Report bats for financing through pension funds which may provide access to a large pool of money. It also suggested funding through business trust entity like Real Estate Investment Trusts along with bilateral investment treaties.

While underlining the need of huge funding requirements, the Report says the FDI in the sector has been significantly increased in the last three years.

Source: Source: FDI Fact Sheets (Mar 2010, Mar 2011, Mar 2012, Mar 2013, Mar 2014, Mar 2015, Mar 2016)

However, healthcare expenditure?s share in GDP remains around 1.6 percent in FY 16 and innovative funding modes would support the target of taking to 2.5 percent 2030. It also highlights the fact that Private Equity Deals are supporting the funding in the sector and value of transactions has increased from 94 million USD in 2011 to 1,275 million USD in 2016 a jump of 13.5 times.

Out of pocket expenditure (OOPE) constitutes more than 60% of all health expenses, a major drawback in a country like India where a large segment of the population is poor. Approximately 63 million people fall into poverty each year due to lack of financial protection for their healthcare needs.

Source: PwC analysis, World Bank data on healthcare expenditure, World Bank Data 2014

The Report also examines the key challenges the healthcare industry is facing and the opportunities with which Indian Health Care system can overcome these challenges ?With a 22 percent shortage of primary health centres (PHCs) and 32 percent shortage of community health centres (CHCs), it is estimated that 50 percent of beneficiaries travel more than 100 km to access quality care. India has only 1.1 beds per 1,000 populations in India compared to the world average of 2.7. Most physicians are located in urban areas, resulting in significant access issues in the rural regions.?

On the occasion, Dr. Rana Mehta, Partner and Leader, Healthcare PwC India, said ?Access to capital has been one of the biggest roadblocks to the growth of the Indian healthcare sector. Today, the Indian government spends only about 1.5 percent of its GDP on healthcare, which is among the lowest globally for any country. Along with building highways, firing up our power plants and ensuring there is a roof over every Indian?s head, there is a need to focus on the healthcare needs of the country.?

While the opportunity for improvement of Health services in India as well as globally is huge, for it to fall into the right place the government and the entire healthcare ecosystem will have to work together even as they compete on other fronts so that the benefits percolate to the segment which most requires it. Promotional government policies such as New Health Policy and adequate regulatory regimes would support scaling up the healthcare sector,? said secretary general NATHEALTH, Anjan Bose.

 

How can the Indian government facilitate investments in the healthcare sector?

Increase spend on healthcare:-

  • Increase public expenditure on health to at least 2.5% of GDP by 2025
  • Focus of this spend to be on government’s role as a payor
  • Increase in spending will spruce up private participation in creating new healthcare infrastructure

Move towards UHC:- 

  • Facilitate UHC framework development and subsequent implementation
  • UHC, once fully implemented, should focus on these three pillars: Measurement and focus on health outcomes, Due weightage to quality of care, Adequate private sector participation

Fiscal incentives for hospitals in Tier 3 cities and below:- 

  • Provide tax benefits for setting up healthcare infrastructure in Tier 3 and 4 cities as well as rural areas
  • Similar to the now withdrawn North East Industrial and Investment Promotion Policy (NEIIPP), 2007
  • Pan-India focus (NEIIPP focused on the northeast)

Health savings fund:-

  • A fund similar to the provident fund should be introduced for salaried employees
  • It could be also used to pay for outpatient services and preventive health checks
  • Investments into this fund could be tax deductible under section 80C of the IT Act

Development of healthcare-specific standard PPPs:- 

  • Scaling up PPPs in the healthcare sector will require effort to standardise concession agreements and collateral and exit clauses
  • Clauses should ensure financial viability to aid exponential growth of such PPPs

National priority status:- 

  • Healthcare should be given a priority sector tag (currently, agriculture, MSMEs, export credit, education, housing, social infrastructure, renewable energy and others have been given this status)
  • This will help channelise funds from the banking sector to create necessary healthcare infrastructure

Zero tax under the GST regime:- 

  • Healthcare services should continue to be charged zero tax under the GST regime
  • Levying GST can add to the financial burden on the patient and/or patient’s family

Enhancement in medical reimbursement exemption limit:-

  • The limit of 15,000 INR p.a. for medical reimbursement was fixed in 1999
  • Adjusting it with the healthcare inflation of ~10.4%*, the amount should be around 80,000 INR in
    today’s terms
  • This limit needs to be revised to at least 50,000 INR p.a. with a provision to increase the same as per medical inflation every year

Timely reimbursement of scheme dues:-

  • Multiple healthcare schemes such as RSBY, CGHS, Rajiv Aarogyasri and Yeshasvini by both the central and state governments, where beneficiaries can also avail of cashless treatment at empanelled
    private hospitals
  • Government reimburses the private hospitals at notified/agreed prices
  • These payments should be adequate and on time, which will ensure viability of the sector.

Read the full report of NATHEALTH-PwC below

Source: ANI
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