'Industry' status for healthcare sector

The decision will help the sector grow in the tier-2 and tier-3 cities, besides helping private hospitals access land or projects and funding.

By PB Jayakumar  
Tuesday, January 15, 2019

The struggling private healthcare in India is going to be benefitted by the decision of the government to accord 'industry status', a long pending demand of the sector. The decision will help the sector grow in the tier-2 and tier-3 cities, besides helping private hospitals access land or projects and funding.

As per the broad guidelines for private investments for setting up hospitals in Tier 2 and Tier 3 cities under the Ayushman Bharat health insurance scheme, the government is targeting to help and develop three categories of hospitals -- doctor-owned (30-50 beds) hospitals, doctor manager partnership-multispecialty (100 beds) hospitals and multispecialty hospitals with 100 or more beds. In this public-private partnership model, the government will incentivise setting up of private hospitals by allotting unencumbered land for new private hospitals on lease or through bidding.

Another offer is to provide funding for resurrecting unviable projects or projects that are in limbo. The guidelines promise speedy clearances through special windows with specific timelines, compulsory empanelment of the hospitals for Pradhan Mantri Jan Arogya Yojana (PMJAY) and other government schemes and ensure timely payments for services. But more than that, the government will provide viability gap funding (VGF) for private hospitals in sectors like infrastructure, of up to 40 per cent of the total cost of the project, and will also provide gap funding of up to 50 per cent of tax on capital cost. Further, these hospitals have to do compulsory empanelment for PMJAY and other government schemes.

Also Read: India can save Rs 77,000 crore annually with Aadhaar, run three schemes like Ayushman Bharat with it: Arun Jaitley

So far, private hospitals and medical colleges have worked largely on a "trust model", wherein a trust owns the hospital or a company manages the hospital via the trust for getting incentives, notes Dr KK Agarwal, former Indian Medical Association (IMA) president. Sources note so far private sector, including organised players, were dependent on banks and private equity institutions for raising funds for expansion. Constant expansion has strained balance sheets of most corporate hospitals, which post either losses or meager profits year after year.  

Industry sources say the move will help to significantly increase India's woefully short hospital bed capacity and open up new avenues in public-private partnership and spreading health insurance for the needy. Sangita Reddy, Senior VP, FICCI and Joint MD, Apollo Hospitals Enterprise notes that in India, 70 per cent of the new bed capacity additions were in the private sector in the last decade. That caters to 70 per cent of in-patient and 60 per cent of out-patient healthcare services in the country. But there was a skewed distribution of hospital beds, with their heavy concentration in the metros has long been a challenge in reaching the last mile with quality healthcare provision.

Industry body like FICCI says the new hospitals, which will be mandated to empanel under PMJAY, should be allowed to charge other patients who can afford to pay as per market rates, as the current PMJAY package rates may not be sustainable to set up and run operations in such remote locations.

It is estimated that India needs three million doctors and 3.6 million hospital beds by 2034. The Indian healthcare delivery system, which roughly added a lakh odd beds in the last decade, will need to add 3.6 million beds, three million doctors and six million nurses over the next 20 years, says a PricewaterhouseCoopers (PwC) study. The current move, if properly implemented, can not only create new bed capacities, but can also improve the public sector funding for healthcare.

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