Healthcare - KPMG

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Healthcare: Reaching out to the masses

PanIIT Conclave 2010

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1

Introduction Current state of healthcare in India

Over the last few decades, there has been a tremendous improvement in the quality of healthcare services in India. This is illustrated by the significant improvement in healthcare indicators such as life expectancy at birth, infant mortality rates, maternal mortality rate, etc. over this period.

Life expectancy at birth (years)

1990

2008

Male

Female

Male

Female

57

58

63

66

Source: World Health Statistics 2010

Infant mortality rate Per 1000 live births

1994

2008

74

53

Source: National Health Profile 2009

Maternal mortality ratio Per 100000 live-births

1999-01

2004-06

327

254

Source: National Health Profile 2009

The improvement in the healthcare indicators is a direct result of the improved penetration of healthcare services in terms of the increase in the number of government and private hospitals in India. There is a noted increase in the number of allopathic doctors with recognized medical qualifications, who have registered with state medical councils.

Number of Physicians (Allopathic)

2005

2006

2007

2008

2009

660856

682080

708043

736743

757377

Source: National Health Profile 2009

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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It has been observed that there is a widespread effort to improve the accessibility of healthcare amenities to every strata of society. The fact that a major part of India is rural cannot be ignored and indispensable services such as healthcare need to be made available to all.

In spite of this significant development, considerable gaps continue to exist in the demand for and supply of quality healthcare. This paper highlights these gaps through: I. International benchmarking II. Identifying the urban – semi-urban and rural disparity III.Identifying the inter-state disparity.

Demand and supply analysis I: International benchmarking India rates poorly on even the basic healthcare indicators when benchmarked against not just the developed economies, but also against the other BRIC nations. This can be attributed to the poor healthcare infrastructure reflected in the low bed density ratio, low doctor density ratio, and poor healthcare spending.

Developed Economies

Emerging Economies

Indicator

Year

India

US

UK

Japan

Brazil

Russia

China

Life expectancy at birth (years)

2008

64

78

80

83

73

68

74

Infant mortality rate (probability of dying by age 1 per 1000 live births)

2008

52

7

5

3

18

9

18

Maternal mortality rate (per 100000 births)

2000-09

254

13

7

3

77

24

34

Hospital bed density (per 10000 population)

2000-09

9

31

39

139

24

97

30

Doctor density (per 10000 population)

2000-09

6

27

21

21

17

43

14

Births attended by skilled health personnel (percent)

2000-08

47

99

NA

100

97

100

98

Source: World Health Statistics – 2010

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

3

India is facing a serious challenge in matching the supply of healthcare resources with the growing demand on account of population growth, improving socio-economic drivers, and the increasing disease burden of lifestyle diseases.

Further, a major fraction of the Indian population lacks access to even basic amenities such as clean water and sanitation.

Developed Economies

Emerging Economies

Indicator

Year

India

US

UK

Japan

Brazil

Russia

China

Population using improved sanitation (percent)

2008

31

100

100

100

80

87

55

Source: World Health Statistics – 2010

Demand and supply analysis II: Urban – semi-urban and rural disparity

Indicator (2007)

Rural

Urban

The following table highlights the disparity in healthcare indicators between the rural and urban population.

Crude death rate

8.0

6.0

Infant mortality rate

61.0

37.0

Neo-natal mortality rate

40.0

22.0

Post-natal mortality rate

20.0

16.0

Peri-natal mortality rate

41.0

24.0

Still birth rate

9.0

8.0

This can be attributed to the lack of uniformity in healthcare resources available in rural and urban India. This has also been dragging down the overall India average.

Source: National Health Profile 2009

Healthcare penetration has for a long time been concentrated in urban areas, particularly in metropolitan cities such as Mumbai, Delhi, Chennai and Kolkata and other Tier I cities. While 70 percent of the Indian population lives in semi-urban and rural areas, 80 percent of the healthcare infrastructure is built in urban areas1. For instance, there are 369,351 government beds in urban areas and a mere 143,069 beds in rural areas2.

Some other alarming facts about status of healthcare infrastructure in rural areas vis-à-vis urban areas are:3 • Rural doctors to population ratio is lower by six times • Rural beds to population ratio is lower by 15 times • Seven out of ten medicines in rural areas are substandard / counterfeit • Sixty six percent of the rural population lack access to critical medicine • Thirty one percent of the rural population travels for over 30 kilometers for medical treatment.

The primary reasons for underdeveloped infrastructure in the semiurban and rural areas are the lack of investment incentives for private sector investment, inefficiencies in the public healthcare system and lack of a quality human resource pool and supply and distribution infrastructure.

1 Vaatsalya Hospitals, http://vaatsalya.com/2009/ 2 National Health Profile 2009 3 Healthcare in Rural India: Challenges, Rural Technology & Business Incubator, IITM, Chennai, March 2008 © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Rural areas also suffer from the lack of basic amenities such as electricity, appropriate drainage and sewage, etc., which further contribute to poor hygiene and increased susceptibility to diseases. Although there have been various government initiatives to supply healthcare amenities to the rural population and also the slum dwelling urban population, these efforts are clearly not sufficient.

1991 Distribution of households having safe drinking water facilities in India (percent)

2001

Rural

Urban

Rural

Urban

55.54

81.38

73.2

90

Source: National Health Profile 2009

2001 Distribution of households having electricity in India 2001 (percent)

Rural

Urban

Total

43.53

87.58

55.85

Source: National Health Profile 2009

Hence, the National Rural Health Mission was initiated in 20054 in order to resolve the issues of accessibility and affordability of healthcare to the population below the poverty line and the lower and middle classes, in rural India. The primary focus of this initiative is on 18 states that have low public health indicators and/or inadequate infrastructure. These include Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Jammu & Kashmir, Manipur, Mizoram, Meghalaya, Madhya Pradesh, Nagaland, Orissa, Rajasthan, Sikkim, Tripura, Uttaranchal and Uttar Pradesh5. Through the Mission, the government is working to increase the capabilities of primary medical facilities in rural areas, and

ease the burden of tertiary care centers in the cities by providing equipment and training primary care physicians in basic surgeries.

living in slums characterized by overcrowding, poor hygiene and sanitation and the absence of civic services7.

The government of India is also providing a five-year tax holiday for new hospitals (in Tier II and III towns) commissioned in the period April 2008 to March 2013, in the Union Budget 2008-09, in order to boost investment in this sector6. The National Urban Health Mission focuses on the healthcare needs of the urban poor, particularly the slum dwellers in urban areas. Nearly onethird of India’s urban population (~100 million people) are estimated to be

4 Ministry of Health and Family Welfare 5 NRHM Document 2009 on Rural Healthcare System in India 6 Union Budget 2008-09 7 Urban Health Resource Center

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Demand and supply analysis II: Inter-state disparity

States

India is a diverse country with 28 states and seven union territories, each receiving different densities of rainfall, and experiencing different weather conditions. There is also a difference in the socio-economic status of people, literacy levels, living conditions and political situations. These factors play a significant role in the difference in the healthcare status and resources across states. For instance, female life expectancy in Kerala is the highest and approximately 16 years more than that in states such as Uttar Pradesh and Bihar. The female infant mortality rate in Madhya Pradesh is approximately 7.2 times more than that in Kerala. Similarly, the maternal mortality rate in Rajasthan is almost thrice that in Maharashtra, as indicative in the table. States such as Uttar Pradesh, Bihar, Orissa, and Madhya Pradesh rank poorly when compared with Kerala, Maharashtra, Tamil Nadu, Gujarat, and Andhra Pradesh.

Life expectancy (Years)

Infant mortality rates (per 1000 live births)

2002-06

2008

Maternal mortality ratio (per 100,000 live births) mortality

2004-06 Male

Female

Male

Female

Punjab

68.4

70.4

39

43

192

Bihar

62.2

60.4

53

58

312

Uttar Pradesh

60.3

59.5

64

70

440

Rajasthan

61.5

62.3

60

65

388

Gujarat

62.9

65.2

49

51

160

Maharashtra

66

68.4

33

33

130

West Bengal

64.1

65.8

34

37

141

Karnataka

63.6

67.1

44

46

213

Madhya Pradesh

58.1

57.9

68

72

335

Orissa

59.5

59.6

68

70

303

Kerala

71.4

76.3

10

13

95

Source: National Health Profile 2009

State/UT wise number of government hospitals and beds in rural and urban areas (including CHCs) in India State/UT

Rural Hospitals

Urban Hospitals

Total Hospitals

Projected Population as on reference period (In thousand)

Average Population Served Per Govt. Hospital

Average Population Served Per Govt. Hospital Bed

Reference Period

Number

Beds

Number

Beds

Number

Beds

Punjab

72

2180

159

8440

231

10620

26391

114247

2485

01.01.2008

Bihar

NA

NA

NA

NA

1717

22494

93633

54533

4163

01.09.2008

Uttar Pradesh

397

11910

528

20550

925

32460

183282

198143

5646

01.01.2007

Rajasthan

347

11850

128

20217

475

32067

63408

133491

1977

01.01.2008

Gujarat

282

9619

91

19339

373

28958

57434

153979

1983

01.01.2010

Maharashtra

376

11280

389

38299

765

49579

109553

143207

2210

01.01.2010

West Bengal

14

2399

280

52360

294

54759

87839

298772

1604

01.01.2010

Karnataka

468

8010

451

55731

919

63741

58181

63309

913

01.01.2010

Kerala

281

13756

105

17529

386

31285

34063

88246

1089

01.01.2010

Source: National Health Profile 2009

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

6

There is also a significant disparity in number of hospitals and hospital beds serving the population across states. Evidently, the average population served per government hospital bed in states such as Uttar Pradesh and Bihar is much higher when compared with Kerala or West Bengal. This indicates that the ease of availability of healthcare facilities to a person in Kerala is much greater as compared to a person in Uttar Pradesh.

Case study I: Status of healthcare in Nalanda (Bihar)

Case study II: Maternal mortality in Assam

Nalanda district, a university town of Bihar, has been in the news for its increasing number of ‘hunger deaths’.

Assam has the country's highest rate of maternal mortality10. The main reason for this is observed to be insurgency, affecting accessibility of healthcare services.

In a study of 593 districts in the country, Nalanda ranked 509 in health indicators8. In a field visit to Nalanda in May 2010, World Vision India observed9: • High out-of-pocket fees, even at public health facilities, were preventing people from accessing services. There were indications of debt bondage to landowners, due to health costs • Few families had child immunization cards • In one particular village of roughly 400 beneficiaries, inaccessible by road, there was no doctor, no private medical provider, no dais, and only 1 visiting accredited social health activist

The involvement of the government healthcare agencies and other stakeholders is also reportedly insufficient. Most northeastern women are anemic and the children are highly prone to mumps measles rubella and other infectitious diseases resulting from weak immunity. This could be likely attributed to a combination of reasons that interplay including social issues, insurgency, slow development, lack of infrastructure, inadequate manpower resources in healthcare system.

9 World Vision India – India Statistics

The World Bank estimates that India is globally ranked 2nd in the number of children suffering from malnutrition, after Bangladesh, where 47 percent of the children exhibit a degree of malnutrition11. The number of underweight children in India is among the highest in the world. Under-nutrition among children and women in Bihar is much higher than the national level with 54.4 percent children being underweight and 81 percent anemic. More than half of children (56 percent) under age five are stunted or too short for their age12. Children in rural areas are more likely to be malnourished; however, even in urban areas, almost half of children under age five years suffer from chronic under nutrition (48 percent)13. Vitamin A deficiency can contribute to a higher risk of dying from measles, diarrhea, or malaria. The Government of India recommends that children under three years receive vitamin A supplements every six months, starting at age nine months. However, only one in three last-born children age 12-35 months were given a vitamin A supplement in the six months prior to the NFHS 314.

• Virtually no access to family planning, and no involvement of adolescent girls in area welfare centers.

8 MoHFW, ’Ranking and Mapping of Districts based on socio-economic and demographic indicators’ (2006)

Case study III: Malnutrition in India

10 National Health Profile 2009

13 World Vision India- India statistics

11 World Vision India – India Statistics

14 National Family Health Survey (NFHS-3, 2005-06)

12 World Vision India- India statistics- Bihar fact sheet

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

7

State of public healthcare infrastructure In a developing country like India, the public sector has a critical role in ensuring healthcare delivery to all sections of the society. According to the Planning Commission, outpatient services are 20-54 percent costlier and inpatient services 100-740 percent costlier than public healthcare. Hence, the role of the public sector in ensuring accessibility cannot be emphasized enough. However, the current status of healthcare infrastructure in India and the huge regional disparity can be

primarily attributed to the poor healthcare expenditure by the government. The public sector accounts for a mere 26 percent of the total healthcare expenditure1. India’s public health spending has increased from 0.22 percent of GDP in 1950-51 to 1.05 percent during the mid 1980s and stagnated at a mere 1 percent of the GDP in the recent years2. The per capita government spending is significantly lower than the other BRIC nations.

Indicator

India

US

UK

Japan

Brazil

Russia

China

Total expenditure on health as a percent of GDP (2007)

4.1

15.7

8.4

8

8.4

5.4

4.3

Government expenditure as a percent of total health expenditure (2007)

26.2

45.5

81.7

81.3

41.6

64.2

44.7

Private expenditure as a percent of total health expenditure (2007)

73.8

54.5

18.3

18.7

58.4

35.8

55.3

Per capita total expenditure on health (PPP int. USD)

109

7285

2992

2696

837

797

233

Per capita government expenditure on health at average exchange rate (USD 2007)

11

3317

3161

2237

252

316

49

Per capita government expenditure on health (PPP int. USD 2007)

29

3317

2446

2193

348

512

104

Source: World Health Statistics 2010

However, the government of India aims to increase healthcare expenditure to 3 percent of GDP by 2012.3

1 World Health Statistics 2010 2 National Health Profile 2009, World Health Statistics 2010 3 Department of Health and Family Welfare Annual Report FY10 © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Primary healthcare infrastructure The primary healthcare infrastructure has a three tier system with Sub Centers, Primary Health Centers (PHCs) and Community Health Centers (CHCs) spread across rural and semiurban areas. The tertiary care comprising multi-specialty hospitals and medical colleges are located almost exclusively in urban regions.

The Sub Center is the most peripheral contact point between the Primary Healthcare System and the community. Hence, manpower is an important prerequisite for the efficient functioning of this set-up. However, as per the table below, there is a significant shortage of healthcare manpower in sub centers and primary health centers.

Shortfall - Percentage of shortfall as compared to requirement based on existing infrastructure at Sub Centers and PHCs (As on March, 2008) 60 56.8

Percenrage

50 40

39.1

30

29.1

20 10

15.1

12.4

0 Health Worker (Female)/ Auxiliary Nurse Midwife

Health Worker (Male)

Lady Health Visitor/ Health Assistants (Female)

Health Assistant (Male)

Doctors at PHC

Source: NRHM Document 2009 on Rural Healthcare System in India

Vacancy position - percentage of sanctioned post vacant at PHCs (as on March, 2008) 30 28.3

27.6

Percentahe

25 20

18.8 15 13.4 10 5

6.1

0 Health Worker (Female)/ Auxiliary Nurse Midwife

Health Worker (Male)

Lady Health Visitor/ Health Assistants (Female)

Health Assistant (Male)

Doctors at PHC

Source: NRHM Document 2009 on Rural Healthcare System in India

Even out of the sanctioned posts, a considerable percentage of posts are vacant across all the levels.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Need for standardization of healthcare infrastructure The lack of standardization of healthcare infrastructure raises serious concerns about quality. It is observed that the standard of service in terms of cost, diagnostic procedures and therapeutic treatments differs with different providers. This disparity increases with the urban-rural and interstate divide, resulting in low customer satisfaction, unethical practices such as longer hospital stays, expensive treatments and drugs. One of the most effective approaches to cope with this disparity is to bring in standardization of protocols as well as costs through accreditation. Accreditation offers several advantages such as providing higher efficiency, accountability, and better governance. It can potentially greatly benefit patients and their safety due to increased credibility. It encourages continuous improvement of the hard infrastructure as well as upgradation of the medical and para-medical staff.

In India, the National Accreditation Board for Hospitals and Healthcare Providers (NABH), a constituent board of Quality Council of India (QCI) set up with the cooperation of the Ministry of Health & Family Welfare and the Indian industry, sets standards for hospitals. A complete set of standards have been drafted by Technical Committee of the NABH for evaluation of hospitals for grant of accreditation4.

To further encourage application for accreditation, India can consider offering attractive fiscal incentives, like several developed countries.

Although accreditation in India is voluntary, several Indian hospitals are increasingly seeking accreditation from national as well as global agencies.

No. of Indian Hospitals - Accredited and Applicants National Accreditation Board for Hospital and Healthcare Providers NABH Accredited

51

NABH Applicants

358

Joint Commission International Accredited

16

Source: http://www.qcin.org, http://www.jointcommissioninternational.org/JCI-Accredited-Organizations/

4 Quality Control of India Website

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

10

Need to use information technology The use of Information Technology (IT) can play a very important role in enhancing the healthcare delivery mechanisms. While IT applications in the healthcare space have been increasing in India, they are still quite limited when compared with developed countries. Some areas where technology is being applied are hospital management systems, decision support systems that improve diagnosis and treatment, telemedicine and Picture Archiving and Communication System (PACS). Telemedicine, which is the use of IT for delivering health services and information over distances, has a substantial scope for growth in India. The use of telemedicine can greatly aid in dealing with the shortage of healthcare staff and improving the penetration of healthcare infrastructure and resources in the underserved semiurban and particularly rural areas. Various private hospitals have adopted

telemedicine services while some have also developed PPPs for the same; these include Apollo, AIIMS, Arvind Hospitals, etc. Organizations such as Asian Heart Institute (AHI) and Indian Space Research Organization (ISRO) have plans in this space5. However, the current healthcare scenario in the country calls for the implementation of a large scale / nationwide telemedicine programme with a specific focus on the underserved states. Use of IT in healthcare improves patient care by enabling systems and processes to be introduced and monitored repeatedly. However, lack of standardization and regulations in the sector have been the major roadblocks in adopting IT solutions. Also, the fragmented nature of the Indian healthcare system has considerably slowed down the adoption of IT in the sector.

Need to upgrade medical education infrastructure Despite rapid development of medical education infrastructure, the demandsupply gap of medical professionals continues to widen. Medical education infrastructure in the country has witnessed rapid growth during the last 19 years. The number of medical colleges in India has been growing at a very high rate rate, and has more than doubled between FY92 and FY106. Correspondingly, the number of medical admissions (Bachelor of Medicine and Bachelor of Surgery) has increased by around 2.8 times7. As of FY10, India had approximately 300 medical colleges, 290 colleges for Bachelor of Dental Surgery and 140 colleges for Master of Dental Surgery admitting 34,595, 23520 and 2,644 students annually respectively.

5 Netscribes Hospital Market-India, February 2009 6 National Health Profile 2009

However, despite this rapid growth, this supply of medical personnel is grossly insufficent to meet the estimated requirement of doctors as seen in the table below. Category

Current

Required

Physicians

757377

1200000

Dental surgeons

93332

300000

There is also a shortage of nurses in the country. It is expected that, to meet the global average of 2.56 nurses per 1000 population in the coming 15 years, India needs to add 1500 nursing colleges10.

Source: National Health Profile 2009

Further, estimates indicate that around 10 percent of medical graduates go abroad in pursuit of post graduation courses8.It is also estimated that approximately 60,000 Indian physicians work in countries like US, UK and Australia9.

7 National Health Profile 2009, KPMG Analysis 8 The Hindu, Medicine for medical education, November 16, 2009

9 The Times of India, India short of 6 lakh doctors, 2008 10 World health report 2006

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

11

Medical personnel concentrated in urban areas The demand-supply gap of medical resources is more prominent in rural areas. Around 74 percent of the graduate doctors in India work in urban settlements which account for only 28 percent of the population. Hence, the population in rural areas remains largely unserved11. Moreover the skewed countrywide distribution of these institutes results in widening this gap even further. Sixty one percent of the medical colleges are in the six states of Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh and Puducherry, while only 11 percent are in Bihar, Jharkhand, Orissa and West Bengal and the north-eastern states12. The students studying in more developed states are unlikely to serve their semi-urban or rural areas after graduation where the potential of fee income is lower as compared with urban areas. Further, the benefits of healthcare in a tertiary care setting at reasonable prices is available only to those patients who lie within the catchment area of the medical colleges, most of which are set up in the urban areas12. Lastly, almost 70 percent of the medical colleges set up in the last five years are in the private sector12, where the economic motivation is overbearing other social objective and fees are higher and unaffordable.

Lack of qualified faculty base The quality of medical education is defined by the availability and quality of teachers. The shortage of teachers is estimated at approximately 30-40 percent in medical colleges12. The growth in the number of teachers has not been commensurate to the surge in the number of medical institutions over the last few years, thereby bringing down the teacher-student ratio. The shortage is more severe in the preclinical and para-clinical areas. Besides this, there is also the quality aspect that cannot be ignored. There are limited formal teacher training programmes and the absence of a monitoring mechanism for faculty learning. As a result, most medical college teachers remain untrained in

modern teaching methods. All this emulates into a static medical education system. Therefore, strengthening faculty development programmes is critical for capacity building in medical education in India. It is important to note that all these challenges require a massive expansion of the education facilities with a continuous focus on upgrading the quality of existing infrastructure. It therefore requires concerted efforts of the public as well private sector.

billion by FY1515. The growth of the market is being driven by the improving socioeconomic and demographic environment, favorable regulatory environment as well as significant marketing push by insurance companies. However, the growth will also depend on the ability of the key stakeholders viz. government, regulators, healthcare providers, insurance companies, NGOs/SHGs, TPAs, distribution channel partners, health centers and the media to strengthen the industry.

Need for health insurance penetration With limited public healthcare funding, out-of-pocket spending has been forced and become the only option for India. As already stated earlier, the public sector plays a small role in healthcare financing. Hence, the private sector has a pivotal role in financing the healthcare expenditure in India, with out-of-pocket expenditure accounting for a disproportionate 90 percent funding of the private expenditure on health. Thus, the spending on healthcare is largely determined by an increase in the purchasing power of people. This makes healthcare elusive for the lower and middle income group, which accounts for a majority section of the total population. Therefore, health insurance has a critical role in improving access to healthcare services in India. Increasing penetration of medical insurance would also result in an increased demand for quality healthcare services. The penetration of health insurance is increasing over the years. The health insurance industry is the fastest growing segment in non-life insurance segments. The Indian health insurance industry is valued at INR 51 billion and has grown at a compounded annual growth rate of around 37 percent (between FY02 and FY08).13 In spite of this, the coverage of health insurance in India is merely around 10 percent of the total population.14 Overall, the health insurance industry in India is expected to grow at a CAGR of 25-30 percent till FY15 to reach the market size of approximately INR 280

11 Task Force on Medical Education for the National Rural Health Mission 12 The National Medical Journal of India Vol. 23, No. 3, 2010 13 CII KPMG Health Insurance Summit 2008 Report 14 Crisil Research Annual Hospital Review 2009 15 CII KPMG Health Insurance Summit 2008 Report

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

12

Conclusion Public-Private Partnership – The all inclusive way forward In light of the current status of healthcare in India, a Public-Private Partnership (PPP) approach appears as probably the only all inclusive way forward that will address all the issues stated in this background note. A PPP is a synergistic model to bring together the social objectives (of the government) of universal healthcare access and affordability and the business objective of running a profitable healthcare facility (industry). While the public sector contributes in terms of infrastructure development, land acquisition, financing, etc., the private party brings in its knowledge and expertise of project management and operational efficiency. Public-private partnerships have distinct advantages and help to achieve desired health outcomes.

1. Creating competition: a. Competition between the PPP initiative facilities with other healthcare providers would make even the private facilities available to the poor through reduction in their costs b. Greater choice of services would be available to the poor c. Better quality of services can be achieved by setting up of standard guidelines for the initiative participants. Thus a basic minimum level of quality of healthcare services would be maintained. The competing private healthcare providers would try to improve the quality as well, to increase/ retain their clientele In summary, through this initiative, the private providers may have to compete with public sector providers to act as agents for providing public healthcare to the poor.

2. Achieve economies of scale and possible cost reduction by standardizing the services throughout the initiative 3. Utilizing the existing capacity of the system: It is thus much faster to implement, as very little infrastructure development is needed (in many instances). The effort is to make use of the existing facilities, wherever feasible 4. Create synergy between the public and private systems thereby reducing the duplication of efforts and wastage of funds 5. Targeting the poor: By focusing more on the primary care aspect of healthcare and making available good quality healthcare services at affordable prices, it is possible to provide acceptable and sustainable public healthcare even to the poorest 6. Flexibility in action: The country is passing through a phase of health and demographic transition. However, this transition of health is not uniform throughout the country. While a few states are in early stages of demographic transition, and still have a high birth rate, low utilization of public healthcare, etc., few states on the other end of the spectrum, have already reached replacement level of population growth, having efficient public healthcare delivery services, etc. Thus by developing models involving PPP and taking into cognizance the specific needs of the states, it is possible to address the disparity in healthcare needs

Through the partnerships, it is possible to provide the public with good quality, high-tech care at affordable prices.

The areas where private sector contribution can prove very beneficial are: 1 Infrastructure Development Development and strengthening of healthcare infrastructure that is evenly distributed geographically and at all levels of care 2 Management and Operations Management and operation of healthcare facilities for technical efficiency, operational economy and quality 3 Capacity Building and Training Capacity building for formal, informal and continuing education of professional, para-professional and ancillary staff engaged in the delivery of healthcare 4 Financing Mechanism - Creation of voluntary as well as mandated thirdparty financing mechanisms 5 IT Infrastructure - Establishment of national and regional IT backbones and health data repositories for ready access to clinical information 6 Materials Management Development of a maintenance and supply chain for ready availability of serviceable equipment and appliances, and medical supplies and sundries at the point of care.

7. The demographic transition has also been accompanied by a technological revolution in the country with newer techniques, instruments and expertise available for healthcare service delivery.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

13

Implementation of public-private partnership: Case studies About the Project

Initiative Name Ayush Graham Bhawali Project, Nainital

• Run the project on Build -Operate-Transfer (BOT) mode • Government will provide land measuring 10 acres to set up the Ayush Gram at Bhawali, Nainital • Emami Limited, will be responsible for:

Telemedicine initiative by Narayana Hrudayalaya in Karnataka

Emergency Ambulance Services scheme in Tamil Nadu

-

Managing Out-Patient and In-Patient Departments

-

Interacting with local community in growing and managing the herbal garden

-

Installing a latest version of any licensed hospital management application software

-

Installing a latest version of any licensed drug manufacturing unit application software

-

Maintaining detailed records of medicinal plants in Herbal Garden

• With connections by satellite, this project functions in the Coronary Care Units (CCU) of selected district hospitals that are linked with Narayana Hrudayalaya hospital

• Conceived by the Government of Uttarakhand, it is the first of its kind in India, to provide Ayurvedic, Unani and Homeopathy services, cultivation center for herbs and also as center for health tourism in the form of Wellness Centers • Will also aid in maximizing service availability and reduction of operations and management cost for the government

• Provides access to underserved or unserved areas

• Each CCU is connected to the main hospital to facilitate investigation by specialists after ordinary doctors have examined patients

• Improve access to specialty care and reduce both time and cost for rural and semi-urban patients

• If a patient requires an operation, s/he is referred to the main hospital in Bangalore; otherwise s/he is admitted to a CCU for consultation and treatment

• Facilitate in timely diagnosis and treatment

• This scheme is part of the World Bank aided health system development project in Tamil Nadu

• The major cause for the high maternal mortality is a non-medical cause - the lack of adequate transport facilities to carry pregnant women to health institutions for childbirth, especially in the tribal areas

• Seva Nilayam has been selected as the potential non-governmental partner in the scheme • This scheme is self-supporting through the collection of user charges • Government supports the scheme only by supplying the vehicles • Seva Nilayam recruits the drivers, train the staff, maintain the vehicles, operate the program and report to the government -

Community Health Insurance scheme in Karnataka

How will it help?

• The scheme is designed to reduce the maternal mortality rate in the rural areas of Tamil Nadu

It bears the entire operating cost of the project including communications, equipment and medicine, and publicizing the service in the villages, particularly the telephone number of the ambulance service.

• Karuna Trust in collaboration with the National Health Insurance Company and Government of Karnataka has launched a community health insurance scheme. • It covers the Yelundur and Narasipuram Taluks • Scheme is fully subsidized for Scheduled Castes and Scheduled Tribes who are below the poverty line and partially subsidized for non-SC/ST BPL

• Improve access and utilization of health services, to prevent impoverishment of rural poor due to hospitalization and health related issues • Establish insurance coverage for outpatient care by the people themselves.

• Poor patients are identified by field workers and health workers who visit door-to-door to make people aware of the scheme • Auxillary Nurse Midwives and health workers visiting a village collect its insurance premiums and deposit them in the bank • Annual premium is INR 22, less than INR 2 a month • If admitted to any government hospital for treatment, an insured member gets INR 100 per day during hospitalization –INR 50 for bedcharges and medicine and INR 50 as compensation for loss of wages – up to a maximum of INR 2500 within a 25-day limit • Extra payment is possible for surgery.

Source: CII-KPMG Report on 'The Emerging Role of PPP in Indian Healthcare Sector, 2008’ © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Contacts Vikram Utamsingh Executive Director and Head of Markets e-Mail: [email protected] Tel: +91 22 3090 2320 Ramesh Srinivas Executive Director Business Performance Services e-Mail: [email protected] Tel: +91 80 3065 4300 kpmg.com/in

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.