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Updated: February 15, 2010 15:39 IST

Priority areas in healthcare

D. Murali
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Pradip Kanakia, Executive Director, KPMG India
Special Arrangement
Pradip Kanakia, Executive Director, KPMG India

Universal accessibility, affordability and quality care are the main themes in healthcare on which the union Budget should focus, says Pradip Kanakia, Executive Director, KPMG India.

“These themes have been talked about for more than a decade now and the Government needs to show courage to put in motion an implementable action plan with milestones, timelines and accountability,” he adds, during a recent pre-Budget email interaction with Business Line.

Excerpts from the interview, in which Kanakia discusses priority areas such as public-private partnership (PPP) for the creation/ upgradation of healthcare infrastructure, capacity building in medical manpower, health insurance, and quality standards.


Public-private partnership (PPP) has been a mantra and rhetoric you hear from Government officials all the time and yet, the basic building blocks for stimulating private investment have not been put in place. We need to put in place a basic PPP framework so that there is clarity of roles, responsibility and pricing mechanism.

There are well-established frameworks from countries such as the UK, Australia and more notably from South Africa (a country which mirrors our situation more closely) that can be used as a guide to develop an Indian healthcare PPP framework.

Given that the subject of healthcare straddles across the Centre, the State and the Local governments, there is a need to appoint one nodal agency to address and implement all aspects of PPP in healthcare.

South Africa has made good progress in encouraging private participation in healthcare by appointing National Treasury as the nodal agency and India can learn from the South Africa model.

It is also imperative that the healthcare industry, and particularly the healthcare PPP projects, should be accorded infrastructure or priority status – a long-standing demand of the industry – and the necessary fiscal benefits should be given to promote active private sector participation that can facilitate in bringing international standards of quality in the sector.

The infrastructure status can facilitate hospitals in getting funds at preferential interest rates to expand operations. In return, the Government should regulate the operations of hospitals and make the private sector accountable for treating Government-nominated patients at discounted rates, which could be claimed through insurance arranged largely through the Government funding.

It is anticipated that the Government’s role in PPP projects would be that of a stakeholder (by contributing land at a subsidised price thereby making it cashless for the Government), a facilitator of business and a regulator for ensuring minimum quality standards.

On capacity building

A major aspect to be considered is the capacity building of healthcare skill sets by relaxing norms for establishing medical colleges and capacity expansion for nursing and other paramedics.

There is an urgent need to at least double the number of seats for medical education from the current level. This can be effectively achieved by reducing the land requirement from 25 acres to, say, 10 acres. Further, the requirement that only a person owning and managing a hospital of at least 300 beds qualifies for setting up a medical college needs to be eased by allowing that person to be affiliated with other qualifying private and public hospitals. Such measures will go a long way in building badly needed capacities in the sector.

On tax issues

In order to make locally manufactured medical equipment and speciality medical devices accessible to a larger section of the society, the indirect taxes levied on such equipments, devices and consumables should be completely removed or reduced, at least for a defined period of time.

The healthcare sector has also demanded an increase in the tax depreciation rate from 15 per cent to 40 per cent for life-saving medical equipment. These measures will stimulate indigenous manufacturing of medical devices, and export to other emerging countries that reflect needs and business environment similar to India’s.

On health insurance

While the National Rural Health Mission continues to reap good results, the time has come to initiate and announce a similar policy for the economically weaker sections of urban society. Today 80 per cent of healthcare spend in India is out-of-pocket which brings untold financial burden and hardship to the common man.

To facilitate accessibility and affordability, the Government should look for ways to provide health insurance for critical diseases for BPL families, on the lines provided by Andhra Pradesh Government under the Arogya Sri scheme.

On quality standards for healthcare delivery

In order to ensure that the healthcare industry delivers quality healthcare to all, an internationally acceptable and credible accreditation system is a necessary prerequisite. Private providers in India are largely unregulated and practise without minimum standards or treatment levels.

The existing regulations in the form of Indian Medical Council Act (1956), Nursing Home Registration Act, Consumer Protection Act (1986), and Drugs (Control) Act, 1950 have narrow scope or coverage and do not ensure provider standards and treatment levels at national level. Even healthcare insurance industry cannot gain momentum without accreditation.

The creation of consensus-based guidelines and benchmarks would encompass registration of all medical facilities, minimum standard of healthcare infrastructure and manpower and a standard format of patient healthcare records.

This urgently calls for the formation of an autonomous body of all stakeholders (providers, users, payers, academicians and regulators) to define and legislate minimum standards that can be enforced by regulatory authorities at state and local level.

Such steps would improve the quality of care for patients, create a healthy competition between providers, and foster the growth of insurance due to greater consumer confidence in the provider base.

On a meaningful role for the Government

Finally, the Government needs to reform its own role as a stakeholder, payer or provider. The Government is currently playing the role of payer and provider (e.g. running hospitals under the Government ESI scheme), which adversely affects the quality and efficiency of healthcare delivery.

Further, by playing the dual role as payer and provider the Government promotes complacency as there is no incentive for Government hospitals to improve quality of care or standards of performance. The recommended model would be for the Government to split the payer and provider roles and enable an explicit contractual arrangement between those responsible for healthcare delivery (i.e. the provider) and those funding for the delivery (i.e. the payer) so that their respective objectives can be met.

As a key sector that contributes more than 5 per cent of GDP and that employs more than 5 million people, healthcare industry has the potential to double its size in the next 10 years, given appropriate regulatory support and a spurt in private investment.

The growth of the healthcare sector will also spur investment in medical education as health infrastructure (i.e. hospitals) and medical colleges typically go hand in hand. The sector also provides an ideal platform for the Government to achieve universal and inclusive growth and should therefore be the top priority of the Government in the forthcoming Budget.


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