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Fiscally Fit: An eye on your wallet

Healthcare in India is projected to grow rapidly over the next decade, but at what cost remains to be seen.

January 29, 2011 05:29 pm | Updated November 13, 2021 09:49 am IST

Too many tests for simple afflictions... Photo: K. Murali Kumar

Too many tests for simple afflictions... Photo: K. Murali Kumar

I happened to browse through a newly released equity research report on the prospect of companies operating in the Healthcare sector in India. No prizes for guessing what the recommendation was — ‘Strong Buy'. Apparently, healthcare is a sunrise “play” that lies at the forefront of the India growth “story”. Now don't embarrass me by asking what plays and stories are doing in an equity research report. The crux of the story is a bar (graph) that shows that for every dollar spent by an average American family on healthcare, the Indian family spends only a fraction of a cent. The report goes on to conclude with a profound statement — ‘The potential for growth in the Indian healthcare industry is huge, as the players will continue to grab a larger share of consumer spend'!

Removing my investor hat, I wonder — is it a good thing that healthcare has become a consumer spend item and that the providers have attained an industry status? Why are we benchmarking ourselves with Americans who have the world's most complex and expensive healthcare system?

Revenue streams

Here's is the situation on the ground. Starting from our nationwide private hospital chains to the neighbourhood clinic, the “industry” is rapidly latching on to the multi-dimensional revenue potential of healthcare, and there seems to be no stopping in sight. It all starts with the parking charges when you enter. Then there is the hefty one time registration fee merely to create an entry for you in the hospital's database and give you a cheap paper file. Don't be surprised if you are asked to pay the registration fee again, if you visit an alternate branch of the same hospital chain. After a long wait you get to the doctor, and the first question he asks you is, “Where do you work?”. You may think, “Wow, this is a nice doctor doing small talk to make me comfortable before investigating my health problems”. However, I recently discovered that this could also be a trick question to assess your payment potential or corporate health insurance coverage.

Recently, a relative of mine visited a local hospital to remove a small boil that just wouldn't go away. He expected to walk out in half-hour, but ended up spending half a day and stepped out with a bill of Rs. 15,000! That's the cost of a battery of tests, x-rays, biopsy and a couple of stitches — all part of the procedure to remove a zit. The lady at the bill desk reassured him that she will give him a bill in a ready-made template, which would show as if he was admitted for a day, so that he could claim the entire amount with his health insurer. What a relief!

One could argue that it is better to be safe than sorry — after all even a zit could lead to cancer. What bothers me is that such exaggerated treatment and diagnostic process seems to be on the rising trend, especially for those who can afford it. Would a common Joe be subject to the same treatment for getting a zit removed? Does the size of wallet take precedence over the patient's real need, in determining the level of treatment? Are patients becoming a conduit for doctors to bilk money from insurance companies?

It appears to me that the healthcare industry is creating a growing web of moral hazards. The consultation fee charged from the patient is merely one of the many revenue streams for hospitals and doctors. Revenue from pharmacies, diagnostic labs, surgery, boarding and lodging contribute a much larger share of the pie. While large hospitals that can offer everything in-house directly earn revenue from all the above sources, smaller clinics earn referral bonuses. The doctor, who is the key to unlocking the revenue potential from a patient, is increasingly incentivised to maximize revenue per patient. Some hospitals measure doctors, who are on their rolls, based on conversion ratio (i.e. O/P to I/P), bed occupancy, surgery room occupancy, diagnostic lab billing, CT-scan utilisation etc... This could get worse as more healthcare providers become answerable to shareholders and are pressurized to show quarterly growth in earnings. In an increasingly businesslike world of healthcare, where does doing justice to patients figure?

Changing perceptions

I had a chat with a doctor friend of mine about my concerns, and here's what he had to say. As the earning potential and general awareness level of the middle class society is increasing (thanks to IT/ITES), people want access to the best quality healthcare. Global mobility has allowed Indians to witness the grand manner in which even minor ailments are attended to in developed countries. This has given the impression to individuals that unless one is prescribed a battery of tests, the diagnosis is somehow shoddy and incomplete. Instead of questioning the unreasonably complex and hyped approach to healthcare adopted by countries such as the U.S, our people are seduced by all the hoopla and are turning themselves into hypochondriacs. Regular full body checkups are finding their place in the to-do list of 30 year olds and are considered akin to annual automobile service! What is to follow next — annual colonoscopy?

My doctor friend's point of view is that although the healthcare industry may well have one eye on the wallet, it is merely catering to consumer demand and its growth is entirely dependent on us. What say you? Write in with your views.

The writer is a finance specialist. He can be reached at shyamscolumn@gmail.com or www.shyamscolumn.com.

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