Private healthcare organisations will have to plan strategies factoring in policies and agendas of individual state governments, as well as Central diktats like the AB-NHPM
Even as the operating profitability margin of the six listed healthcare organisations in India declined from 13 per cent in FY2017 to 11.4 per cent in FY2018, the lowest in more than six years, India’s corporate healthcare leaders met for their annual rendezvous at Healthcare Senate, held last month in Delhi.
With most of our speakers and panelists flitting between our conference venue and closed door meetings with various policy makers who are putting together Ayushman Bharat-the National Health Protection Mission (AB-NHPM), corridor conversations were interesting to say the least! With speakers like Chief Guest Shri Ashwini Kumar Choubey, Minister of State, Ministry of Health and Family Welfare, Government of India; Guest of Honour Shri Satyendra Jain, State Health Minister, Government of Delhi; the Valedictory Address by Dr Vinod K Paul, Member, NITI Aayog it was but natural that there were many heated discussions on the sidelines of the conference.
To join or not to join AB-NHPM seems to be the question, but going by a recent ICRA report, inspite of many apprehensions, private healthcare players will have no choice but to sign up. ICRA’s sample set of six healthcare entities, (Apollo Hospitals Enterprise, Fortis Healthcare, Narayana Hrudalaya, Healthcare Global Enterprises, Max India and Shalby) have faced the brunt of many factors during CY2017. The inability to claim input tax credit made the Goods and Services Tax (GST) a major drag on their balance sheets, even as patients rejoiced that hospital services are now exempt from GST.
It would be fair to assume that the performance of this sample set more or less reflects that of most healthcare facilities across the country, barring a few fortunate ones who have managed to squeeze out better margins. While AB-NHPM represents a new avenue to leverage existing capacity, the approved package rates have put off most entities. At Healthcare Senate, the most cited example of one such package was that under AB-NHPM, Caesarean deliveries have to performed within `9000. Many industry bodies and associations representing private hospitals are therefore trying to negotiate for increases in package rates for hospitals under AB-NHPM.
The ICRA report also cites the cap on prices of stents and knee implants by the National Pharmaceutical Pricing Authority (NPPA) and stiff regulatory actions by certain states, including putting restrictions on procedure rates, levying penalties and placing operational limitations on erring hospitals as further cause of the lack lustre performance of this sample set. These factors negated the fact that the aggregate revenues of these entities actually grew by nine per cent, from `132.6 billion in FY2017 to `144.9 billion in FY2018. In the same vein, the operating profit before interest, tax, depreciation and amortisation (OPBITDA) dropped by approximately four per cent, from `17.3 billion to `16.6 billion, this being the first fall in aggregate OPBITDA in the last six years. Hospitals in the National Capital Region (NCR), previously money spinners, registered the sharpest dip in the OPBITDA (up to 21 per cent) due to additional government restrictions placed on certain players, following reports on alleged cases of medical negligence and overcharging.
The bad news is that there will be no respite from these headwinds. The NPPA has already published two office memorandums in CY2018 which indicate additional pricing restrictions. Private healthcare organisations will have to plan strategies factoring in policies and agendas of individual state governments, as well as Central diktats like the AB-NHPM. For instance, while West Bengal and Karnataka have implemented the Clinical Establishment Acts in 2017, the Government of National Capital Territory of Delhi (GNCTD) has also proposed ‘sweeping changes.’
There are thus many hopes riding on Prime Minister Modi’s Independence Day address, when he is expected to formally launch AB-NHPM. Will the scheme become yet another tug of war between the States and the Centre? How will next year’s general election as well as state elections impact the roll out of the scheme? And how do private healthcare players improve operating margins while participating in AB-NHPM? But the larger question is, can AB-NHPM be the first step towards ‘Building the DNA for a Healthier Nation?’ That’s the theme of the fourth edition of Healthcare Sabha, our public health focused event, in October. Do write in for details.
VIVEKA ROYCHOWDHURY, Editor