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Healthbizinsight

August Issue 2019

CENTER STAGE

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Center-stage

A Mixed Bag – Union Health Budget

A budget is taken as a roadmap and intention of the government of the day for its tenure in office. The people of India have given this government another tenure with a sound majority. It is with this background that the people were looking forward to a progressive healthcare budget. It must be remembered that only a "Healthy India" can become a Trillion Dollar economy. However, whenever healthcare in India is discussed, preventive and promotive aspects are always overlooked. The reality is that India is faced with both lifestyle and infectious diseases burden even after 72 years of independence


By: Neelam Jhangiani

Healthcare system in India is severely strained in terms of infrastructure and services. A paucity of trained healthcare providers hampers not just the delivery of standardised quality, but also the access to healthcare services for a majority of the population. The industry was expecting some substantial announcements related to tax exemptions to attract investment for healthcare infrastructure development given the huge demand-supply gap. National Priority Status and long-term financing options for healthcare, the key demands of the healthcare industry, have still not been met by the government. The proposed reforms for long-term financing in the Union Budget 2019-20 is a welcome step, however, there is a need for specific focus on financing for healthcare sector.
Implementation of Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) would require approximately 0.64 million additional beds with an investment of INR 3 trillion (USD 44 billion) over next 10 years. The private sector has been providing nearly 60% of in-patient care and has contributed to 70% of bed capacity expansion in the last decade and will continue to support. However, for strategic and planned growth as per the national vision, it is imperative that appropriate tax incentives are provided particularly for expansion of 50-bed hospitals for NCD treatment in tier 2 and 3 cities, training and skill development, adoption of EHR, use of advanced remote care technologies and securing accreditation for healthcare facilities, which can help in enhancing the quality and access to care.
The projected allocations for the health sector indicate that addressing issues on public health infrastructure is slowing. A number of services are not available at public health facilities due to the low level of public expenditure on health. "Moreover, the quality of services available at public health facilities is in poor state, which results in patients using private health facilities and ultimately increased out-of-pocket expenditure," says Dr. Rajeev Boudhankar, CEO, Bhatia Hospital. Also, with the introduction of user fees at public health facilities, it no longer remains free-of-cost. In fact, out-of-pocket expenditure in India has increased by 16% between 2014 and 2016, according to data from the World Health Organization. Considering these facts, the government has done injustice to the healthcare sector in terms of allocation of resources, say experts in the industry. Also, policies which will boost the healthcare sector, especially private sector, have not been addressed in the budget. e.g. there is no PPP model template for healthcare, which exists for PPP infrastructure projects.


The import of finished medical devices attract a custom duty of 0-20% while import of raw materials to manufacture attracts 20-30% of customer duty. This adds further strain on having domestically-made devices commercially viable


The positives & the negatives

The maiden Union Budget by Honourable Finance Minister, Mrs. Nirmala Sitharaman, the first woman minister to present the budget, has focused on the overall development of the economy. The budget addressed what is the need of the hour for the country. In the healthcare sector, the Finance Minister mentioned about healthy society – Ayushman Bharat, well-nourished women & children is a positive for the sector that we operate in. Calling the double digit percentage increase in allocation in FY20 compared to FY19 a positive measure, Ameera Shah, Managing Director, Metropolis Healthcare, feels several measures have been taken by this government with a view to increase savings and promote healthcare among individuals, including senior citizens.
The fact that tertiary care programmes have been at the center stage of policymaking was also reflected in this year's budget. The allocation to these programmes saw an increase of 60% from the previous year's revised estimates. Another positive is that the Department of Health Research's allocation has gone up to Rs. 1,900 crore, an increase of 9% compared to previous year.
As per Siddhartha Bhattacharya, Secretary General, NATHEALTH, "The sector's long pending demand for priority sector's status has not been met this year too. We hope that the government would revisit such unfinished agendas for smooth credit flow, mandatory universal health insurance, tax incentives for capacity building, creation of a dedicated infrastructure and innovation fund."
Healthcare industry is of mixed view towards the budget, while some experts laud the budget, other players are of the opinion that the budget has not covered healthcare the way it should have been. The focus should have been on increasing the government healthcare spend to reach at least 3% of GDP for current year, with a goal of at least 6-7% by 2024.
However, the current government surely has promised to strengthen infrastructure and provide wider access to medical facilities especially in rural India. The country needs thousands of Primary Health Centres and sub-centres as well as community centres.
The monetary boost to PMJAY in the budget is a big step in providing secondary and tertiary care to the impoverished. The social impact of such a scheme is beyond doubt. Besides, the allocation for the National Health Mission (NHM) has been increased by 8%, mainly towards health and wellness centres. This will help in improving the penetration of primary healthcare across the country. "The interim budget has brought hope of a brighter future for healthcare sector," says Dr. H.S Chhabra, Medical Director, Indian Spinal Injuries Centre. However, the lack of clarity in the formal budget is disappointing. It leaves to speculation the future of both Ayushman Bharat and the Indian healthcare sector as a whole.
"What is positive is the increased 15% allocation to Department of Health and Family Welfare to Rs. 62,659 crore. The message is clear from the government that steps are being taken in the right direction towards building a healthy society. The allocation for NRHM is increased to Rs. 27,039 crore, which is a 7.11% hike. Focus on tertiary care programs have been at the centre stage of policymaking and was reflected in this year's budget too. It is critical that our focus on primary and preventive healthcare is enhanced substantially, as they provide the foundation for any UHC program," says Shobha Mishra Ghosh, Assistant Secretary General, FICCI.
Although the Health and Wellness Centres have been given approximately Rs. 1600 crore, 33% higher allocation under NHM this time, this may not be enough considering that approximately INR 17 lakh is required to upgrade one sub-centre/PHC to a Health & Wellness Centre (HWC). Further, the most important prerequisite for delivering quality care to all the citizens is provisioning of skilled and qualified healthcare workforce in adequate numbers in the country.
Dr. Boudhankar is of the view that the budget should have provided a comprehensive resolution to the Angel tax issue being faced by start-ups, especially the ones based on generating intellectual property like medical technology start-ups. "Raising capital for start-ups working on affordable healthcare is already difficult, it is made more so by this Angel tax, which is effectively a tax on Indian innovation."

The medical device angle

Medical device sector is one of the industries, which has been awaiting the budget as expectations were pegged on shaping the industry to be globally sustaining. "The key area that needed specific consideration was the inverse duty structure," says Dr. Boudhankar. The import of finished medical devices attract a custom duty of 0-20% while import of raw materials to manufacture attracts 20-30% of customer duty. This adds further strain on having domestically-made devices commercially viable. Hence, in this regard, the budget should have looked into the customs duty on medical devices, which is being considered to increase by 15-20% to promote indigenous manufacturing of medical devices, he further adds. With the prevalence of GST, imported devices cost lesser and hence competition with imported devices especially Chinese imports pose a looming deterrent to cater for the people of India. With India levying the lowest import duty on medical devices and duties through GST, a domestic manufacturer and importer have the same platform, which often puts the domestic player at a testing disadvantage and hence a possible lost competitiveness. The government needs to address India's 70-90% import dependence on medical devices for making India a global manufacturing hub of medical devices.

Implementation framework and concessionaire agreements for PPPs for screening and management of NCDs, enhancing trauma and emergency care as well as setting up of Health & Wellness Centers need to be strengthened and taken on priority for effective implementation of Ayushman Bharat

What about diagnostics?

The diagnostic industry in our country is by far less regulated say experts in the field, with minimal/optimal rules and laws mandated by the government over decades. Now is the time to get the wheels rolling for the diagnostic sector. Recently, government has initiated/ proposed several policy changes but the indigenous diagnostics sector is still facing several challenges.
It seems, a representative body is taking up several issues and discussions are at various stages. Government policy needs to address the key risks in the diagnostics business: highly-competitive and fragmented industry, limitation of trained human resource availability, vulnerability to technological advancements, challenge in entering new geographies, capability to launch new tests, pricing pressures, capability to optimise operational expenditures, and more. Ms. Shah of Metropolis points out top three recommendations, 'Firstly, focus on quality, the diagnostics space is largely unorganised and fragmented and quality or specialisation or accuracy has never been a priority with unorganised players. Secondly, need for self-regulation backed by international & domestic accreditations and lastly, organised industry's views to be taken by the government bodies on all new policy initiatives."

Role of home healthcare

Home healthcare is an apt solution for critical, long-term care as well as post-operative care. According to industry estimates, home care services can reduce the hospital costs by 20% and hospital visits by up to 65%. However, for proper utilisation of home care services and their effective integration into the healthcare ecosystem, it is crucial that they are included in the UHC program. With its entry into Ayushman Bharat, where government doctors will/can motivate patients to avail home healthcare services, it would provide the much-needed impetus to the industry. Now the players feel that the government should provide an enabling environment for this sector to grow. "Only a few insurers offer insurance for domiciliary treatment and some of the services currently under OPD, day-care treatments and pre- & post- hospitalisation," says Ms. Mishra.
Although, big healthcare providers have started working closely with home healthcare and insurance companies to ensure that continuum of care for their patients are provided with a significantly better turnaround time from disease diagnosis to recovery of patients with the confidence that the treatment protocol will get executed.
AB-PMJAY, which is said to be one of the largest health insurance worldwide adds to the positivity for the sector. It is estimated that this sector will be one of the most disruptive trends in the next decade. With advances in digital technologies, telemedicine and telehealth; effective usage of mobiles, wearables, sensors as well as artificial intelligence and cognitive computing in healthcare, it is expected that we will see a tremendous rise in ambulatory and home healthcare in the country. This will not only reduce the burden on our tertiary care facilities, which are already inadequate, but will also reduce the cost burden on the entire system.

Budget analysis

In order to make distress-free healthcare a reality by 2030 along with a functional and comprehensive wellness system for all, both the government as well as the private sector stakeholders need to formulate financing models, which are not only innovative in nature but can also assist in increasing the overall investment scale of the sector.
One of the critical components in which the allocation has gone south is the transformation of district hospitals to medical colleges. "Contrary to the revised estimates of last fiscal, a decrease of 36% has taken place, with the component being allocated Rs. 2,000 crore in 2019," says Mr. Bhattacharya. This is a remarkable step as the government recently


The Reality of Indian Healthcare

• The current government promised to address roadblocks in the healthcare sector including a shortage in infrastructure, access to medical facilities and inexpensive treatments. However, the current status of healthcare in India portrays a completely different picture.
• According to Rural Health Statistics Bulletin 2017-18, the country is short of 32,900 sub-centres (catering to a population of 5,000), 6,430 primary health centres (PHCs, catering to 30,000 people) and 2,188 community health centres that are supposed to address the health needs of 80,000-120,000 people in rural areas, as on March 31, 2018.
• In fact, only 7% of the sub-centres, 12% of primary health centres and 13% of the CHCs are functioning, according to Indian Public Health Standards (IPHS). The situation is much worse in tribal areas as it is short of 5,935 sub-centres, 1,187 PHCs and 275 CHCs, said the RHS 2017-18.
• The population-doctor ratio in government hospitals is 25 times lower in India than the ratio recommended by the World Health Organisation.
• The WHO places India's healthcare spends behind Iraq and Venezuela.
• The current pace of slow increase in the healthcare budget will make it difficult for India to achieve targets like reducing the maternal mortality rate to 100 in 2018-20 and infant mortality to 28 deaths per 1000 live births by 2019.
• Even after the implementation of Swachh Bharat Mission (Clean India Mission), 42% sub-centres, 18% PHCs and 12% CHCs do not have toilets.
• The shortfalls of sanctioned positions of para-medical staff both at the district and sub-divisional hospitals were reported to be 3,011 and 7,456, respectively.
• There are regional disparities in health infrastructure as well: Although more than two-third of the population (69%) live in rural areas, availability of bed is more (151,585) in urban hospitals compared to rural hospitals, according to data from the National Health Profile.


announced it would convert another 75 district colleges to medical colleges and hospitals.
However, the overall increased allocation in Ayushman Bharat will ensure smoother execution of the activities augmented by better infrastructure and an increased pool of trained human resources. "Together with the increased allocation in NHM, we can hope that a holistic growth of healthcare delivery is in the offing," says Dr. Chhabra. Implementation framework and concessionaire agreements for PPPs for screening and management of NCDs, enhancing trauma and emergency care as well as setting up of HWCs need to be strengthened and taken on priority for effective implementation of Ayushman Bharat. The government has also announced its intention to invest Rs. 100 lakh crore in infrastructure over the next 5 years – we can hope that the healthcare sector can leverage a part of it to improve healthcare delivery systems.