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Resource centre on India's rural distress
 
 

Health care in bad health by Bhupesh Bhandari


The prolonged monsoon and the diseases that come with it have really tested Delhi’s health-care infrastructure. There is a huge shortage of beds in government as well as private hospitals. You can find patients wreathing in fever in the corridors, emergency wards, everywhere. Why aren’t there enough hospitals around? Contrast this with the media: Nowhere in the world will you find so many newspapers, magazines and television channels than India. The reason is that there are no entry barriers. It takes little to set up a television channel and even lesser to start a newspaper.

Hospitals seem to be a different story. There are 1.37 million beds in the country: 833,000 in private hospitals and 540,000 in government hospitals. This means, there is about one bed for every 1,000 Indians — pretty bad even by emerging market standards. But that’s not the full story. According to Technopak Advisors, only 60 per cent or so of these beds are functional and relevant. That makes the average worse. And, 40 per cent of these beds are in the top-20 cities where about 10 per cent of the country’s population resides.

If this doesn’t scare you, look at some of the other numbers collated by Technopak Advisors: More than 46 per cent patients travel over 100 km for proper medical care. The average distance travelled for oncology is 500 km in the country, and 100 km for neurology and cardiology. There is an urgent need for 1.9 million hospital beds, 900,000 doctors and 1.8 million nurses if we want Indian health care to become what it ought to be.

Now look at it from the other end of the pipe. There is a huge upside to the hospital business in the country. Lifestyle disorders are on the rise; 16 per cent of the country’s population has some form of medical cover, which means well over 190 million can afford proper treatment. Every 1 per cent of population that enters the “prosperous” category means 12 million possible customers. So, why aren’t hospitals coming up with the same rapidity as news channels? Industry estimates say the growth in hospital beds will be as low as 4 per cent per annum over the next five years — a depressing thought. Not that the policy environment is adverse. A five-year tax holiday is on offer, 100 per cent foreign direct investment is allowed, and budget allocations are on the rise.

Hospital chains say there are still sizeable entry barriers. One, the investments required can be substantial. A secondary-care hospital in a Tier-1 city today costs at least Rs 45 lakh per bed. So, a 200-bed hospital can cost Rs 90 crore in capital expenditure alone. The annual recurring expense on the facility is another 2-2.5 per cent. According to Fortis Healthcare President Daljit Singh, it can take six or even seven years for full payback, provided the hospital is run efficiently. And banks, financial institutions and private equity funds are not too hot because they have still not fully understood the business model of a hospital. Singh says he meets investors and analysts regularly, but finds that they still struggle to figure out how the model works.

Land, of course, is a huge issue. In the past, state governments would give land at concessional prices to hospitals, provided they set aside 10 per cent of the beds for the poor. But this doesn’t happen any longer. Yes, in a new township, the state may still allocate land for a hospital at lower rates but such opportunities are few. That’s why one finds many takeovers in the hospital business, and not too many greenfield projects.

The other big challenge is doctors. As a breed, they are paranoid about their reputation. So, most of them want to be associated with only those hospitals which have state-of-the-art technology — there is, therefore, really no scope for cutting corners in the business. And any new hospital needs these doctors to build its brand equity. Topnotch doctors now cost as much as the CEO of a company: Up to a million dollars. If that is the scarcity, why hasn’t the law of demand and supply taken over? Why does India not produce armies of doctors?