Kshama V Kaushik, Director and Rosanna M Vetticad, Principal Consultant, Thought Arbitrage Research Institute give a detailed analysis on the Indian healthcare industry and stress on the need for sustainability to plug the loopholes in vital areas including infrastructure, medical insurance and human resources
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| Kshama V Kaushik |
The Indian healthcare sector is the second largest and fastest growing services sector in the country with estimated revenues of around $30 billion constituting five per cent of GDP and employing around four million people. By 2025, the Indian population is estimated to reach 1.4 billion with about 45 per cent urban adults (15 years+). To cater to this demographic change, the healthcare sector will have to be about $100 billion in size contributing nearly 8 to 10 per cent of the then GDP (according to CII).
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| Rosanna M Vetticad |
PwC estimates that the industry is growing at a CAGR of 15 per cent and is expected to touch $250 billion by 2020. The key drivers of this growth are increasing population, increasing disposable income, increasing lifestyle health disorders, cheaper treatments, thrust on medical tourism, improving health insurance penetration, government initiatives and focus on public private partnerships, advances in science, using the knowledge of biosciences and genomics to deliver safer, more personalised, preventive and cost-effective healthcare.
Background
In spite of the growth in the healthcare industry indicated above the country faces a number of challenges, including significant shortage of beds, doctors and nurses, as depicted in the table below.
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Table 1: Shortage of beds/ doctors
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| Particulars* |
2010
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WHO Std
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| Hospital Bed Density (per 1,000) |
1.3
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3.5
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| Doctor & Nurse Density (per 1,000) |
2.2
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2.5
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| *”India Healthcare: Inspiring possibilities, challenging journey” a McKinsey & CII report of Dec 2012 | ||
It is relevant to note here that actual doctor and nurse density falls to 1.9 per 1,000 due to the high proportion of inactive nurses and registered practitioners, and AYUSH doctors and rural practitioners not actively involved in the formal sector.
While public spending on healthcare has increased (although not at the same pace as the GDP) out-of-pocket expenditure continues to be high. Healthcare infrastructure has also not kept pace with the growing population. Healthcare reforms prompted by continuing rapid economic growth has resulted in increased investments in emerging markets like diagnostic chains and medical device manufacturing units.
The 12th Five Year Plan seeks to strengthen initiatives taken in the 11th plan to expand the reach of healthcare and work towards the long-term objective of establishing a system of Universal Health Coverage (UHC) in the country. The plan intends to work towards national health outcome goals which target health indicators, some of which are common to UN’s Millennium Development Goals (MDG) [viz. reduction of infant mortality rate (IMR), reduction of maternal mortality ratio (MMR)] and others such as: reduction of poor households’ out-of-pocket expenditure, reduction of total fertility rate (TFR), prevention, and reduction of under-nutrition in children below three years, raising the child sex ratio from 914 to 950, etc.
The Indian healthcare industry is under the charge of the Ministry of Health and Family Welfare (MoHFW). It functions with four departments, the Department of Health and Family Welfare, the Department of Ayush (deals with Ayurveda, yoga and naturopathy, unani, siddha, homoeopathy and other alternative systems of medicine), the Department of Health Research and the Department of Aids Control.
Challenges in the hospital industry
With the rapidly growing population and economic development, the Indian hospital industry faces many challenges primarily with regard to making healthcare affordable and accessible to all citizens. To ensure sustainable growth and development of this industry, these challenges need to be met head on. They primarily include:
Infrastructure gaps: As mentioned earlier, the hospital bed density (per 1000) in India stands at 1.3 in 2010. There are 11,993 hospitals with 784,940 beds in the country; out of these 7,347 hospitals are in rural areas with 160,862 beds and 4,146 hospitals are in urban areas with 618,664 beds (National Health Profile 2011). This excludes the 148,124 sub-centers, 23,887 primary health centres and 4,809 community health centres in India as on March 2011. In order to meet the global average of around three beds per 1000 population, India needs approximately three million more beds. To achieve quality standards set forth in the 12th Five Year Plan a minimum norm of 500 beds per 10 lakh population in an average district would be required.
Human resources in health sector: The country faces an acute shortage of medical and paramedical professionals. According to the National Health Profile 2011 there are 97,648 government allopathic doctors and 3,875 dental surgeons serving an average population of 12,005 and 302,530 respectively. The number of doctors possessing recognised medical qualifications (under I.M.C Act) registered with state medical councils/ Medical Council of India up to 31 December 2011 was 922,177 and the number of dental surgeons was 117,825. The number of registered nurses (ANMs) and pharmacists in India were 603,131 (as on 31 December 2010) and 657,230 (as on 31 December 2011) respectively. To reach the ratio of one doctor per 1,000 individuals by 2025, the country needs approximately 700,000 more additional doctors. According to the 12th Five Year Plan at the start of the 11th Plan, the number of doctors per lakh of population was only 45, whereas, the desirable number is 85 per lakh population. Similarly, the number of nurses and auxiliary nurse and midwifes (ANMs) available was only 75 per lakh population whereas the desirable number is 255. Rural areas are especially poorly served.
Expenditure: In India, about 70 per cent of the healthcare delivery system is dominated by the private sector. While government expenditure and plan outlays have been increasing in absolute numbers over successive five year plans, the proportion of government expenditure to private expenditure is rather wide. According to the National Health Accounts (NHA-2009) the total expenditure on healthcare, taking public, private and household out-of- pocket (OOP) expenditure was about 4.1 per cent of the GDP in 2008–09, which is broadly comparable to other developing countries, at similar levels of per capita income. Public expenditure on health however was at dismal low of about 27 per cent of the total in 2008–09 (NHA, 2009). The budgetary support for the 12th Five Year Plan (2012-17) for the various departments of the MoHFW has increased by 335 per cent from Rs 89,756 crores in the 11th Five Year Plan to Rs 300,018. Total public funding on core health therefore is being increased from 1.04 per cent of the GDP in 2011-12 to 1.87 per cent of the GDP by the end of the 12th Plan.
Education faculty and underutilisation: There is an acute shortage of faculty in medical colleges in India.
In order to sustain the projected growth of the industry, availability of a well-trained work force is of paramount importance. This includes not just doctors and nurses, but also paramedic staff, lab technicians, OT attendants, radiologists and pharmacists. Capacity building on this front may be enhanced through public private partnerships.
Increasing costs: The increasing cost of healthcare especially tertiary care is a major problem for a majority of the population. Public healthcare services are limited and inadequately funded pushing large numbers of people to incur heavy OOP on services purchased from the private sector. OOP expenditure arises even in public sector hospitals, since lack of medicines means that patients have to buy them. This results in a very high financial burden on families in case of severe illness.
Technology & retention of work force: Technological up gradation is one of the big challenges of the sector. At a conference in Washington in 2012 (organised jointly by CII and the Center for Strategic and International Studies (CSIS)), Dr. Prathap Reddy, Chairman of the Apollo Group of Hospitals emphasised the need for new tools to transform healthcare delivery, such as through information technology (IT) and lauded the ongoing efforts in the US to digitise healthcare data through Electronic Medical Records. As part of the 12th Five Year Plan, computer with internet connectivity would be ensured in every PHC and all higher level health facilities. Connectivity can be extended to sub-centres either through computers or through cell phones, depending on state of readiness and the skill-set of functionaries. All district hospitals would be linked by tele-medicine channels to leading tertiary care centres, and all intra-district hospitals would be linked to the district hospital and optionally to higher centres. The role of the MoHFW would be to lay IT system standards. States will be funded for their initiatives in this field at primary or secondary levels through the National Health Mission.
Retaining the medical/ healthcare work-force has been a problem in India for long. The big challenge is to develop an environment conducive to attracting talent back to India. Incentivising those who chose to remain in India and study further or practice is also extremely important – for this, the government needs to improve infrastructure and increase emoluments. Medical professionals find rural postings unattractive as these areas lack facilities in terms of poor living conditions, low pay scales and professional satisfaction.
| BIOMEDICAL WASTE DISPOSAL – CASES REPORTED IN THE RECENT PAST |
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Poor bio-medical waste (BMW) disposal practices
According to the World Health Organisation (WHO) waste generated by healthcare activities includes a broad range of materials, from used needles and syringes to soiled dressings, body parts, diagnostic samples, blood, chemicals, pharmaceuticals, medical devices and radioactive materials. Poor management of healthcare waste potentially exposes healthcare workers, waste handlers, patients and the community at large to infection, toxic effects and injuries, and risks polluting the environment. For this purpose it is essential that all medical waste materials are segregated at the point of generation, appropriately treated and disposed off safely. In some circumstances they are incinerated and dioxins and furans and other toxic air pollutants may be produced as emissions. Exposure to dioxins and furans may lead to the impairment of the immune system, the impairment of the development of the nervous system, the endocrine system and the reproductive functions. WHO has established a Provisional Tolerable Monthly Intake for dioxins, furans, and polychlorinated biphenyls. The unsafe disposal of health-care waste (for example, contaminated syringes and needles) poses public health risks. WHO estimated that, in the year 2000, injections with contaminated syringes caused 21 million hepatitis B virus infections (32 per cent of all new infections), two million hepatitis C virus infections (40 per cent of all new infections) and at least 260,000 HIV infections (five per cent of all new infections). Failure to safely dispose of syringes may lead to dangerous recycling and repackaging which leads to unsafe reuse. A 2002 assessment done by WHO in 22 developing nations found that 18 to 64 per cent of healthcare facilities do not use proper waste disposal methods.
Disposal of medical waste therefore requires close attention to avoid diseases associated with poor management of such waste, these include use of incinerators (mostly used in the developing world) and more advanced systems like autoclave, shredder or microwave. Irrespective of the method/technology used, best practices should be followed starting from effective reduction of waste and proper segregation.
In India the following rules and guidelines exist:
Bio-medical Waste (Management & Handling) Rules 1998 notified by Ministry of Environment and Forests, Government. of India to provide a regulatory framework for segregation, transportation, storage, treatment and disposal of bio-medical waste generated from the healthcare facilities (HCFs) in the country so as to avoid adverse impact on human health and environment.
The National Guidelines on Hospital Waste Management based on these rules released by MoHFW and distributed to all States/Union Territories in 2002 for implementation.
National Policy document and Operational Guidelines for Community Health Centres, Primary Health Centres and Sub-centres developed by Ministry of Health and Family Welfare has been released for proper bio-medical waste management under implementation of Infection Management and Environment Plan (IMEP)
The Central Pollution Control Board (CPCB) has prescribed guidelines for Common Bio-Medical Waste Treatment Facilities as well as for design and construction of Incinerators.
However, health being a state subject, it is the responsibility of the concerned State Government to take necessary steps to monitor the disposal of biomedical wastes through the State Pollution Control Boards (SPCBs)/ Pollution Control Committees (PCCs) in the Union Territories, as per the provisions made under Bio-medical Waste (Management & Handling) Rules, 1998, as amended in the years 2000 and 2003. The State Pollution Control Boards (SPCBs)/ Pollution Control Committees (PCCs) are the prescribed authorities to grant authorisation for the BMW Management. They are empowered to ensure the compliance of provisions of these rules.
Despite the existence of strict guidelines for the disposal of BMW, numerous instances of improper management, illegal dumping of medical waste and even sale of waste (rather than appropriate disposal) continue to be reported.
Box 1 shows that improper disposal of medical waste is still quite rampant, in spite of strict laws in place for the past 15 years. The main challenge lies in segregating waste. Segregation should start at the source of waste generation and end at its disposal. According to WHO, management and operational problems with incinerators, including inadequate training of operators, waste segregation problems, and poor maintenance, are the critical issues that should be addressed in assessment and waste management plans. The state pollution control boards need to follow a no-tolerance policy and appropriately reprimand generators of medical waste for flouting norms and not obtaining licenses. Best practices should also be adopted/adapted to develop a sound system of disposal. Recently King George’s Medical University (KGMU) received a Special Recognition Award from the United Nations Development Programme (UNDP) and the WHO in Lucknow recognising the outstanding work of KGMU medical staff in transforming the hospital over two and a half years from an institution without any effective waste management programme into a regional model institution for sound bio-medical waste management practices.
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Table 2: Selected Companies – Hospitals & Medical Services
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Company Name
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Location
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Net Sales (Rs Crores)
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| Apollo Hospitals Enterprise Limited | Chennai |
2800.07
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| Opto Circuits (India) Limited | Bengaluru |
669.74
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| Indraprastha Medical Corporation Limited | New Delhi |
502.97
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| Fortis Health care Limited | New Delhi |
281.09
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| Kovai Medical Center and Hospital Ltd | Coimbatore |
222.37
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| Poly Medicure Limited | New Delhi |
208.84
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| Dr. Agarwal’s Eye Hospital Limited | Chennai |
103.50
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| Fortis Malar Hospitals Limited | Chennai |
94.80
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| Span Diagnostic s Limited | Surat |
58.54
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| Noida Medicare | Noida |
58.49
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Sustainability reporting practices in the hospital industry
Indian companies: For the purpose of this report we selected the top ten companies in the hospitals and medical services sector, in terms of net sales based on their latest available financial statements Based on our review, we found that none of these companies prepares a separate sustainability report. We therefore reviewed the Annual Reports or websites of these companies. The annual report of Noida Medicare was not available. The purpose of reviewing the Annual Reports/websites was to ascertain the nature (if any) of disclosures with relation to sustainability or corporate social responsibility (CSR).
CSR disclosures: Four of the companies in our sample had detailed disclosures on their CSR activities. CSR activities were mainly of the nature of various health related programmes conducted by these companies targeting specific diseases or sections of the population. Two companies only had a brief note stating essentially that they conduct business in a sustainable and socially responsible manner focusing on health and safety of employees, environment protection and quality of life. Three companies had no disclosures on CSR activities (if any) at all in their annual reports.
The nature of some the detailed disclosures are: mother and child health programmes for pregnant women and new born especially in rural areas; organising free surgeries and health check-up camps, imparting education, awareness building activities on health and environmental concerns; health insurance for the differently abled and lifesaving surgeries; lectures, educational programmes and training sessions on occupational health hazards; training people in basic life support an cardiac pulmonary resuscitation; HIV/AIDS awareness programmes; congenital heart issues in children; free subsidised cancer treatment to patients and cancer awareness programmes; Blood donation camps and awareness campaigns on organ donation; Mobile healthcare schemes and monthly clinics.
The only specific disclosures related to the environment were those related to energy conservation, that are made to comply with the requirements of the Companies Act, 1956 – all nine companies (whose annual reports were available) made these disclosures.
One company touched upon improving the supply chain management; another discussed developing cost effective and environment friendly processes for manufacturing quality medical devices; while two referred to infection control.
Apollo Hospitals had a rather detailed discussion on what they call ‘clinical governance’ aimed at continuously improving the safety and quality of clinical care rendered to patients. It is noteworthy here that while management and disposal of biomedical waste is a huge issue for the hospital industry as discussed earlier, none of the companies in the sample has deliberated on this subject at all.
Risks identified: The following chart shows the nature of the risks identified in the annual reports by companies in our sample. As mentioned earlier, the annual report of one company was not publicly available, hence the graph below represents reporting by nine companies. The most common risk identified by all but three companies was the acute shortage of trained and qualified medical professionals, from doctors and nurses to paramedics. 56 per cent (five companies) considered inflationary pressures, rising input costs and the competitive environment as risks. While three companies considered the highly capital intensive nature of the industry and obsolescence of medical equipment as a risk only two identified inadequate quality education for paramedics as a risk.
| Table 3: List of Global Healthcare Services Companies | ||||
| Rank | Company | Country | Sales | Nature of Busines |
| 170 | Express Scripts | United States | $93.9 B | Healthcare management & administration services |
| 352 | HCA Holdings | United States | $33 B | Operates hospitals and related health care entities |
| 810 | DaVita | United States | $8.2 B | Provider of dialysis services in the United States for patients suffering from chronic kidney failure |
| 1090 | Quest Diagnostics | United States | $7.4 B | A provider of diagnostic testing, information and services |
| 1282 | LabCorp | United States | $5.7 B | A clinical laboratory company |
| 1299 | Community Health Systems | United States | $14.5 B | Operates hospitals in the United States. |
| 1365 | Universal Health Services Inc. | United States | $13.9 B | Operating acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers |
| 1397 | Catamaran | United States | $9.9 B | Provider of pharmacy benefit management (PBM) services and healthcare information technology (HCIT) solutions to the healthcare benefit management industry |
| 1423 | Cerner Corporation | United States | $2.7 B | Supplier of healthcare information technology solutions, services, devices and hardware |
| 1441 | Celesio | Germany | $28.6 B | Pharmaceutical distribution holding company |
Global companies
To understand the extent of reporting vis-à-vis companies in the same industry across the globe, we selected the top ten companies in the ‘Healthcare services’ sector from the latest Forbes 2000 list published in April 2013.
Sustainability disclosures: A majority of the companies did not have any report or information available on sustainability. Four companies either had separate sustainability or corporate responsibility reports or a page on their websites dedicated to the subject. They did not report using any recognised reporting framework. Two of the four operate hospital/similar services, one company provides diagnostic services and the remaining company is engaged in pharma distribution. Discussions in these reports/pages range from transparency, product life management and diversity, to commitment to the society (including patient and employee safety and satisfaction), environment (including waste disposal, energy and water conservation) and the economy. Community health systems has a rather detailed discussion on waste and management of hazardous and non-hazardous waste, including medical waste, laboratory solvents, asbestos, ethylene oxide (used for a variety of sterilisation purposes) and pharma waste.
Risk factors: Risks are not discussed in the sustainability/corporate responsibility reports or web pages dedicated to the matter, therefore we scrutinised the annual reports of these companies to ascertain the nature of the risks they have identified. The risk factors identified by global companies are quite different from those identified by Indian companies. The common risk factors are the risk of recruiting and retaining qualified staff and the competitive market that nine out of the 10 companies in our sample have identified. Apart from this all companies have identified risk related to compliance with the regulatory environment, mergers and acquisitions and pending/ future litigations. Security of technology infrastructure and system failures and uncertain economic conditions have been identified as risk factors by nine companies.
Health insurance industry
Only about 25 per cent of the Indian population has some sort of insurance coverage. The potential in the health insurance market is therefore huge. A CII-McKinsey report estimates the number of insurable lives at 315 million with a potential of $ 7,700 million in health insurance premium by 2015. None of the major insurance companies in India is a listed company which would require them to follow certain minimum standards of reporting and demonstrate responsible behaviour. Interestingly, most large insurance companies currently operating in India (other than LIC of India) are joint ventures between an Indian partner and a large foreign insurance company who would be subject to stricter rules of reporting in their own countries.
Lack of penetration of insurance
The 12th Five Year Plan strategy is to move towards universal health care. Until the 11th Five Year Plan, health insurance was available only to government employees and workers in the organised sector and although private health insurance has been in operation for several years, its coverage has been limited and the poor did not have access to any insurance in in-patient care. The percentage of the total population estimated to be covered under these schemes was only 16 per cent. In 2007 however (11th Five Year Plan) the ‘Rashtriya Swasthya Bima Yojana’ (RSBY), was introduced, designed to meet the health insurance needs of the poor. As of now, there are three central government health insurance schemes run by two ministries (CGHS by the Ministry of Health and Family Welfare) and (ESIS and RSBY administered by the Ministry of Employment and Labour) that independently facilitate healthcare treatment for different sets of population whereas levels of care differ. A research study prepared by Public Health Foundation of India (PHFI) in January 2011 sponsored by the Planning Commission recommends organising all three schemes under one umbrella and integrating them to achieve value for money thus ensuring efficient allocation and utilisation of funds. The large network of underutilised hospitals and dispensaries under the ESIS scheme can be thrown open to CGHS and RSBY beneficiaries. State sponsored schemes have also increased the span of coverage. The figure adjacent shows a better representation of the extent of penetration. As indicated above, only 25 per cent of the total population has any sort of health insurance coverage, with the state schemes in Andhra Pradesh, Tamil Nadu and Goa appearing to be the most successful.
Nexus between healthcare stakeholders
The chances of fraud in the health insurance industry are likely to be higher, primarily due to lack of strong vigilance. Most cases of fraud relate to collusion between providers and patients. Currently the significant thrust of health insurance cover is on in-patient care. The research study referred to above prepared by Public Health Foundation of India (A Critical Assessment of the Existing Health Insurance Models in India) states that one of the prime reasons for excluding drugs and out-patient coverage under insurance schemes is the influence of all stakeholders (i.e. patients, pharmacists, physicians etc.) on the outcome. While physicians have the incentive to increase the number of visits of patients, prescribers and pharmacists would be encouraged to prescribe unnecessary and expensive medicines. Insurers on their part could influence outpatient visits by levying a high deductible on the patients. In addition, the administrative cost of managing drug reimbursement could be a nightmare for insurers, as it involves low-value, high-frequency transactions. Thus, though desirable in principal, practical implementation and the associated problems of enforcing medicine reimbursement to patients would be a stupendous task and could fiscally strain the coffers of the government.
Identifying frauds is the first step towards eliminating or reducing fraudulent activity. One of the ways to detect it is to analyse deviations in behaviour through the use of statistical tools and information technology. insurers and third party administrators (TPA) should also not shy away from questioning medical practitioners about the best course of medical treatment. For this, the insurers and TPAs would also need medical teams that are well versed with best practices and treatment protocols. Once it has been detected, the course of action needs to be determined, which in most cases would be rejection of a claim and/or removing a provider from the insurers network.
Fraud detection is always difficult in spite of the most fool proof safeguards, because those committing fraud tend to rationalise it. The PHFI study shows that 20-30 per cent customers overstate figures of incurred expenditure, as they believe that insurance companies will always pay lesser than what has been claimed even if claims are accurate. There is also a general belief among a section of policy holders that there is nothing wrong in making a claim after the premiums have been paid for a few years. In case of health insurance it is particularly challenging to detect or manage the fraud as the sheer cost of monitoring individual claims and hospitals on a regular basis is so high that it would increase the overall cost of insurance. A fraud detection system should therefore be devised involving all stakeholders viz. insurance and medical regulators and a strong vigilance mechanism will go a long way in identifying and preventing fraud. Towards this end, in December 2012 the Insurance Regulatory and Development Authority (IRDA) invited requests for proposals from organisations for finding a solution to fraud in the health insurance segment. The IRDA said in its notice that to reduce the cost of insurance inflicted by fraud, it is proposed to build advanced detection and prevention systems at industry level to identify fraudulent claims before payment occurs and to improve the accuracy of fraud detection
Conclusion
Availability, affordability and quality are the cornerstones of inclusive healthcare. A dichotomy exists in India – while we face a shortage of finances, beds and healthcare professionals (providers and academia), we are also home to world class facilities, due to which India ranks amongst the top 5 medical tourism destinations in the world. Thus in order to achieve the long term objective of universal healthcare for all set out in the 12th Plan, the government will have to engage with all stakeholders to ensure sustainable development, as the public sector alone will not be able to cater to the healthcare requirements of the entire population. While providing affordable healthcare is a formidable challenge it is also a huge opportunity available for the industry to tap. Opportunities present itself to the hospital industry, pharma industry, health insurance, research companies, medical devices and equipment as well as education and information technology sectors. Sustained efforts should also be made to reduce the environmental impact of the industry by repeated emphasis and enforcement of biomedical waste management systems.
References:
1. http://www.cii.in/Sectors.aspx?enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNu2yMtqEr4D408mSsgiIyM/
2. http://www.pwc.in/industries/healthcare.jhtml
3. Central Bureau of Health Intelligence
4. Global Infrastructure: Trend Monitor Indian Healthcare Edition: Outlook 2009–2013 (A KPMG Report)
5. Health Financial Indicators- National Health Profile (NHP) of India – 2011
6. http://www.who.int/topics/medical_waste/en/
7. http://tinyurl.com/cc9xgj3
8. www.moneycontrol.com/stocks/top-companies-in-india/net-sales-bse/hospitals-medical-services.html
9. http://www.forbes.com/global2000/#page:1_sort:0_direction:asc_search:_filter:Healthcare%20Services_filter:All%20countries_filter:All%20states
10. Twelfth Five Year Plan (2012–2017) Social Sectors
11. A Critical Assessment of the Existing Health Insurance Models in India, Public Health Foundation of India
12. Donald R. Cressey’s Fraud triangle hypothesis
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