Rural healthcare as biz opportunity

Absence of a viable business modelprevents conversion of the huge rural expenditure on health into an economicactivity that generates incomes and dethrones India as the world’s diseasechampion.

The World Health Statistics 2010 released by WHO has placedIndia in an unenviable position. India has the highest number of tuberculosis(23% of world’s patients), diphtheria (86% of world’s patients),leprosy (54% of world’s patients ), pertussis (29% of world’spatients ), polio (42% of world’s patients), tetanus (22% of world’scases) and malaria (55% of world’s patients) cases.

It is thesecond highest in measles, the fourth highest in Japanese encephalitis and the14th highest in cholera. It has the highest percentage of underweight childrenbelow the age of five years (43.5%). This is all far in excess of the percentageof the world’s population (17%) that India supports. To no other countrygoes the dubious distinction of being first in so many arenas.

Across almost all indicators like life expectancy at birth, healthyaverage life expectancy, low birth-weight babies , neonatal mortality rate,<5 yrs mortality rate and MMR, India consistently performs below thesouth-east Asian region (SEAR) and the global averages despite health being theavowed priority of successive governments. Contrary to popular perception, thisis not necessarily due to less number of doctors or nurses.

Thedensity of doctors per 10,000 of population is about six, while the average forSEAR is only five. The global average is 14. Similarly, the density ofnurses/mid-wives is 13 per 10,000 population compared with the SEAR average of11 and the global average of 28. Lack of availability of human resources is nota cause of poor healthcare but a result of lower healthcare expenditure. In thepharmaceutical field, manpower at a density of six per 10,000 people beats theSEAR and global average of four. This is because almost 75% of health careexpenditure is on drugs.

Decoding the reasons of our healthsituation is a complex exercise. Though well below global averages, India spendshigher at 4.1% of its GDP on healthcare compared with 3.6% in SEAR. Inpurchasing power parity terms, per capita annual expenditure on healthcare isabout $109 in India compared with $104 of SEAR. So, our health indices shouldhave been better.

Evidently, the issue is not about the money; it isabout how and where the money is spent, especially in the rural areas where over70% of India resides. Intriguingly, there is a gross urban bias in governmentexpenditure on district hospitals and urban tertiary centres.

Thelatest National Health Accounts (NHA) 2004-05 places the government expenditureon rural healthcare services and family welfare at . 52,970 million , the urbancounterpart getting the lion’s share at . 92,408 million. It is around .71 per capita for rural against a far higher . 289 for urban people. Privateout-of-pocket expenditure (OOPE) works out to . 777 per capita for rural and .1,099 for urban people in that year. The ambitious National Rural Health Mission(NRHM) has done precious little to improve the rural plight.

NRHM ismore of a repackaged version rather than a new initiative as the NationalInstitute of Health & Family Welfare’s website says. It is but acombination of the existing programmes with some additionalities. For 2009-10 ,the additions to the pre-existing programmes under NRHM were . 22,427 million,which is about . 27 per capita.

If the Budget 2009-10 is 113% morethan the 2004-05 Budget, the expenditure target on rural healthcare should havebeen much higher with normal increments alone and without NRHM. Of course, thisdoes not presuppose that NRHM is useless or without focus. It merely underlinesthat the expenditure on real rural healthcare has not significantly improved.

So, if the government spend is not really benefiting the ruralpopulation, then how does one cure the vast disease-riddled areas of thecountry?

Clearly, the private OOPE of rural people estimated by NHA,at . 777 per capita in 2004-05 , would climb to . 1,500 in 2010-11 , assumingthat the 12% growth trend. The OOPE indicates a spend of . 21 crore per ruralblock per annum (with a population of 1,40,000 at an average). This expenditurewould enable a viable rural private healthcare sector. Factor in the RashtriyaSwastha Bima Yojana (RSBY) and you have a much more viable system. The expansionof RSBY/social health insurance programmes is a more viable public healthstrategy in the situation.

But RSBY is not serving a meaningfulpurpose now because there are no hospitals in rural areas. This brings in thequestion of functional healthcare facilities in rural areas. Currently, apartfrom dysfunctional public healthcare facilities , there are only ownerenterprises (single doctor/quack-run dispensaries) without beds in most ruralareas. For hospitalisation, most go to nursing homes and small units in theperiphery of urban areas or local healers/quacks for OPD services.

But if the total out-of-pocket expenditure is so high, properlymanaged private rural hospitals are financially viable and will actually reducethe expenditure of people due to travel, boarding and lodging. Health insuranceexpansion in tandem, in a meaningful and organic way, would be a necessity toreduce catastrophic OOPE.

Most private sector health businesses havestill to learn how to create a viable model. These operate on a cost-plus or apay per procedure model, which only increases expenditure without a commensuratebenefit to either patients or hospitals. Such a cost-plus model works only forthe input suppliers like the pharmaceutical industry or medical devicesmanufacturers and that too maybe only in the short term.

For everyplayer in the ecosystem, it is better that sustainable and long-term modelsemerge. People actually pay enough for sustainable privately funded healthcare.

(The author is a medical doctor and former IAS officer)