Invest heavily to build a robust healthcare system

India's healthcare sector is awaiting a heavy dose of investment. If the country were to achieve the target of two beds per 1,000 people by 2025, it needs an additional 1.8 million beds.

If we continue to spend the usual 1% of the GDP on healthcare, that target may just remain on the paper, say top industry officials and analysts.

Hospitals are the major component of the healthcare sector, comprising nearly 70% of total industry revenues. However, the wide demand-supply mismatch in healthcare coupled with a low public spending on health and high out-of-pocket payments (over 70%) are some of the major concerns. Although the government has proposed to increase its total health expenditure to 2.5% of the GDP by the end of the 12th Five Year Plan, the industry feels it is not sufficient for growth.

Shobana Kamineni, executive vice chairperson, Apollo Healthcare Enterprise, said, "The government currently spends only 1% of the GDP on healthcare, which is pitifully low. I believe the ideal figure should be close to about 6% if we have to bring the health parameters of the country comparable to Western levels."

India needs to add at least 650,000 beds by 2017 to meet the 12th FYP target.

Sumit Jamuar, chairman, Global Gene Corporation, said, "Despite being one of the world's largest economies, India's healthcare ranking is among the lowest in the world. India's health expenditure has stayed at the same level for the past seven years."

According to India Ratings and Research, a Fitch Group company, the sector's growth is underpinned by a wide gap between demand and supply in healthcare services with key demand drivers being increasing lifestyle-related health problems, improving medical insurance penetration, increasing health awareness and disposable income.

"The strong demand drivers have helped the industry to attract investments across value chain, including hospital beds, allied industries such as medical technologies, diagnostics, etc. However, credit profiles of industry players have remained stressed due to high gestation period of investments, long break-even period of new capex and high manpower costs," it said.

While the global healthcare sector has been driven by strong insurance penetration, India's healthcare spending, still to a large extent, depends on out-of-pocket expenses, with insurance contributing around 20-25% of the expenses. Despite increasing investments in setting up of new medical colleges in the country, India has a dismal ratio of 6.5 doctors per 10,000 people against the world median of 14.2.

Kamineni said, "The Indian healthcare system is characterised by vast discrepancies between urban and rural areas. Out-of-pocket expenditure remains very high at 60%. A huge number of patients slip into poverty each year, trying to meet the cost of treatment from their own resources. Low health parameters of the country deteriorate the quality of life of people, harming economic development. We need to popularise health insurance and increase healthcare awareness among the masses."

Daksha Baxi, executive director of Khaitan & Co, a legal firm, believes that minimum alternate tax (MAT) should be abolished in the health insurance sector, along the lines of the life insurance sector.

"Increase in public expenditure on healthcare would also increase the reach of National Rural Health Mission and the Rashtriya Swasthya Bima Yojana, measures which were introduced by the government to achieve its stated aim of universal health coverage," Baxi said.

Shashank ND, chief executive officer and co-founder, Practo.com, which runs a network of doctors and hospitals online, said, "Investments are required in technology and infrastructure to enable basic access.

There is a need to declare healthcare as a priority sector as this is one of the fundamental sectors that has a large effect on the common man."

Among the many changing trends is the rising threat of non-communicable diseases, which account for 53% of deaths. The treatment costs for non-communicable diseases are nearly double that of other conditions and illnesses.

"There is a lack of sustained and sizeable investment into technologies of the future such as genetics that can have wide range of disruptive impact on provision of healthcare and shape health policy," said Jamuar.

Most of the investments in the last decade were made by the private sector, with the central government expenditure on health as a percentage of total expenditure being at 31% as against the world median of 61%, according to World Health Organization data.

Sudarshan Ballal, medical director & chairman – medical advisory board, Manipal Health Enterprises, said, "Over the next five years, the healthcare spends should increase to at least 5% of the GDP.

Revamping healthcare infrastructure should also be the focus along with upgrading primary healthcare systems to provide preventive and primary healthcare with the government taking more of the insurer's role in the tertiary and quaternary healthcare."

The medical device industry has put forward their demands.

The Advanced Medical Technology Association (AdvaMed) said there is a need for R&D grants and subsidies in the medical technology space to promote domestic innovation initiatives.

"The medical device industry suggests that incentives in the form of Income tax write-offs for up to 250% of the value of investment for R&D and innovation of medical instruments, diagnostics instruments, consumables, devices, etc should be offered," said Abby Pratt, vice-president, AdvaMed.