View: India needs hospital, not hospitality, industry

The announcement of Bengaluru-based Columbia Asia Hospitals being acquired by its bigger peer, Manipal Hospitals, earlier this month points to a worrisome trend in Indian healthcare industry. Of late, corporate hospital chains have been becoming bigger through buying out smaller chains or stand-alone hospitals, effectually widening their footprint, improving their scale and reducing their cost of operations. These large healthcare set-ups typically have diagnostics, outpatient department services, pharmacies and intensive care units (ICUs) all under one umbrella. However, the growth of such structures has a far-reaching impact on access and affordability of healthcare services in the country.In the US, a slew of mergers and acquisitions involving health insurance giants, doctor clinics, retail pharmacy chains, pharmacy benefit managers, surgical centres and supermarkets have snowballed into giant integrated corporate healthcare outfits. However, the growth of such for-profit healthcare has not helped improving healthcare outcomes there. Such facilities are often located in high-income areas where there is no pressing need for additional facilities, and are found to be pushing excessive use of needless healthcare services to earn more revenues.Increasing corporatisation in Indian healthcare is resulting in fewer and stronger players with a formidable bargaining power. To be sure, consolidation brought standardisation of services, improved the quality of patient experience and attracted medical tourists. It has helped large acquiring hospital companies to achieve economies of scale, thereby reducing operational costs. However, large hospital chains increase the overall cost of accessing quality healthcare. Small stand-alone hospitals and nursing homes find it difficult to survive in a rapidly institutionalising healthcare market.Little wonder that the growth of large hospital chains has coincided with the gradual disappearance of the neighbourhood family doctor’s clinics in metros.India needs investment in its primary healthcare services, both in its cities and villages. Instead, most of the fresh investment is happening in the high-margin tertiary and quaternary services, that too only in the metros. The already served areas are having hospitals that are growing bigger, while the underserved regions continue to face the dearth of basic healthcare services. For instance, the latest acquisition will catapult Manipal Hospitals to becoming the second-largest hospital company in India after Apollo Hospitals. The combined entity will have 27 hospitals across 15 cities with 7,200 beds, and a combined pool of over 4,000 doctors. Till now, the second position was commanded by Fortis Healthcare that is backed by Malaysian-Singaporean healthcare major IHH.Brownfield expansion in the hospital business tends to be easier and less of a hassle in India, compared to greenfield development that involves high cost of land and red tape in seeking regulatory licences and approvals leading to delays and cost escalations. Besides, profitable hospital companies often get an easy supply of growth capital from private equity players. This year, for instance, witnessed the listing of Max Healthcare that was earlier acquired by global investment company KKR-invested Radiant Life Care.Private equity players are clinical, with a clear vision on growth and profitability. The focus on profit, however, becomes tricky in a business whose objective of saving lives is supposed to trump over chasing profit targets. The Covid-19 pandemic has brought to the fore several instances of hospitals overpricing for critical services, and medical consumables like masks and personal protection equipment (PPE) kits and seeking needless diagnostic tests to be conducted.In such cases, the administrative response of imposing price caps on products and procedures, and making it mandatory to reserve a proportion of beds for providing subsidised services, comes across as autocratic and against free-market principles.There is a gap waiting to be filled for an affordable primary healthcare business model to become functional across India, operated either by the private sector or through public private partnership (PPP). However, the lack of major financial incentive prevents the existing healthcare players from investing in the space. It is up to policymakers to chalk out win-win propositions to bolster affordable and quality healthcare infrastructure and prevent Indian healthcare going the US way.Untitled Carousel 78993654 79204385
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