Healthcare has been touted as the ‘Next Big Thing’ for some time now. However, it somehow hasn’t yet become that, thanks largely to a combination of archaic laws, inadequate regulation, opaque balance sheets and the reluctance of the government to give healthcare industry and infrastructure status.This in turn has meant poor returns for investors, and their disinclination to bring in the big bucks that are desperately needed to develop private healthcare. Last fortnight’s 1st India Healthcare Conclave held in Mumbai touched upon these issues. At a BT Technopak roundtable, investors, promoters and CEOs from some of the best global hospitals discussed what made India attractive and ready for big investments, and also the barriers that have been keeping the billions away. The panel comprised Dr Prathap C. Reddy, Chairman, Apollo Hospitals; Shivinder M. Singh, CEO & MD, Fortis Healthcare; Steve J. Thompson, Vice Chairman, Johns Hopkins Medicine International; Curtis J. Schroeder, Group CEO, Bumrungrad International; Michael Neeb, President & Chief Executive, International Operations, HCA International; Dr Jack Shevel, President, Global Healthcare and Investments Solutions; and Arvind K. Singhal, Chairman, Technopak. BT’s Executive Editor Brian Carvalho moderated the discussion.
BT: Infrastructure-creation is pretty much the flavour of the season today in India. However, when it comes to building hospitals, which one would assume is also infrastructure, there’s not much to be heard on that front.
BT: What should the government be doing to make private healthcare more attractive for investors?
You need tax incentives to build hospitals, you need tax incentives to ensure people take up insurance, you need tax incentives in support of medical research so that you can continue to train staff and have a world-class research centre in India. I think it’s possible to do all this very quickly; it’s probably the worst example (because its population is a fraction of that of India), but if you look at Ireland—a country that we looked at investing in for a while—it took a decision five-six years ago that the government hospital system was overstretched. So, it passed very strong legislations to provide tax incentives. As a result they’ve been able to more than double the capacity of private hospitals within the last four-five years.
BT: India is touted to be well-placed to ride a boom in medical tourism. But is it only about being low cost? Mr Schroeder could perhaps throw some light on this via his and his hospital’s experience in Thailand.
BT: Mr Singh, you’ve been busy acquiring hospitals. Is consolidation one way to make private healthcare more organised?
BT: Dr Reddy, the middle class is doubtless an attractive market for private healthcare. But should players like you also be focussing on the bottom of the pyramid, where the needs and the population are huge?
Reddy: I believe everybody needs healthcare. We can’t discriminate on the basis of where one is born, or whether one is poor or middleclass. But (to serve the poor) we need the government’s support. We’ve been asking the government to introduce the concept of universal insurance. One of the suggestions submitted by the Indian Health Care Federation to the government is the concept of Bharat Swasth, whereby a lower middleclass person could pay an X amount (for insurance). For example, 2 million farmers in Karnataka pay Rs 150 (as annual premium) for which they get care up to Rs 2-3 lakh. The police in Andhra Pradesh have introduced a similar scheme— one of the constable’s sons had a bone marrow transplant done that cost Rs 16 lakh. We need some basic coverage for such people. Today Andhra Pradesh has taken the lead via a scheme that will cover 50 million—which is about twothirds of the state’s population. But to ask a (private) hospital to do corporate social responsibility is not sustainable. I can do some amount of it, but it is not sustainable. The President of Sri Lanka invited me over and said: ‘Dr Reddy I want Apollo here.’ My reaction was: ‘How can I start Apollo here?’ The President then asked me: ‘What is it that you need, and what are the problems?’ At the end of the evening she said: ‘I will give you land (in the heart of the city), you pay for it in 25 years; you pay no taxes for the first five years; and you can have customs duty exemptions (on imported equipment).’ Today, we have six more hospitals in Sri Lanka. Similarly, in Dhaka the Prime Minister gave us permission to start our first hospital. Today there are 10 others that have come up because of the incentives that government has given. What such governments derive by giving incentives is much much greater (than the incentives they give). For example, it is proven that you can increase GDP (per capita) by 0.5 per cent by prolonging a person’s life for five years. According to me, if you develop hospitals and increase those employed in this sector, from 3.9 million to 30 million, you’re going to be contributing in a big way to GDP growth. Indirectly too we can employ another 30 million people. To be able to do this, we are asking the government not for donations but to alter some regulations.
Schroeder: Governments’ requests for free care are relatively unique to healthcare. You very seldom see them going to the shopping malls and saying: ‘Give people free rice because they need to eat.’ Nobody goes to proprietary house-building companies and tells them: 30 per cent of your houses need to be free. That would never be considered acceptable. Somehow in many countries— China, India, Laos, Cambodia, Vietnam—we have to deal with the same issue: That there must be some percentage given back. And that is only unique to healthcare. And I don’t see why. You don’t see any other necessities like food or shelter that are treated this way.
Singh: We’re looking at getting into the business of medical colleges. We did our research to find out how long it would take to break even given the current format of medical education. We took land as free, and a 30 per cent discount on the cheapest way we knew to build a building: It will still take us 12 years to get a payback. Singhal: The majority of our hospitals today are trust facilities. There should be a mechanism to convert them from a trust to a private, forprofit enterprise. That will at least make consolidation a bit easier. Singh: We need to kick-start (health) insurance—if you don’t get money in the hands of the people, they can’t spend it, it’s simple. Second is regulation. We want regulation because 99 per cent of the country’s hospitals need to be regulated. That’s because there’s no transparency, no clinical governance. So, we’re competing against a mirage. That’s tough to work against. Regulation will ensure that patients get healthcare according to what they pay. The whole country’s system is malpractised today— whether it is suppliers conjoined with the doctors, whether it is kickbacks between doctors for sending patients, or procedures not done but charged for—there is a whole bucket of issues.