'Indian private sector hospitals provide quality healthcare at a fraction of the global cost.'
Healthcare industry stakeholders have raised concerns over the proposed capping of private hospital room rates at the average price of nearby three-star hotels, saying the move could make "quality healthcare financially unsustainable and undermine efforts to achieve better clinical outcomes".
Early this month, a parliamentary committee on health recommended capping room charges at hospitals in major cities at the average tariff of three-star hotels in the area around the hospital.
The recommendation is part of a report on the affordability and accessibility of healthcare in India.
Key Points
- Private hospitals say capping room rates at nearby three-star hotel tariffs could make quality healthcare financially unsustainable.
- Apollo Hospitals warned the proposal could slow hospital expansion as India already has only 0.7 beds per 1,000 people.
- Nathealth said hospitals face over 25,000 compliance requirements and higher structural costs than the hospitality sector.
Room Rate Cap Proposal
A senior executive at Apollo Hospitals said the move could have an impact on healthcare expansion in India.
"Indian private sector hospitals provide quality healthcare at a fraction of the global cost. More importantly, authorities should understand that India has 2 million hospital beds, but this is only 0.7 beds per 1,000 people, compared with four beds per 1,000 in developed countries and the World Health Organization average of 2.5," said Madhu Sasidhar, president and chief executive officer of the hospitals division at Apollo Hospitals.
"There is a lot of capacity that is going to be required," Sasidahar added, calling for greater penetration of the insurance sector.
"We appreciate price transparency for sure. However, that requires a lot of insurance penetration in the country as well. Also, both public and private healthcare will have to coexist," he added.
Apollo Warns Expansion Risk
Siddhartha Bhattacharya, secretary-general of healthcare industry body Nathealth, said imposing rates without understanding the economics of healthcare would make quality healthcare financially unsustainable and undermine efforts to achieve better clinical outcomes.
For healthcare providers, he said, costs begin well before a patient enters a facility.
"This includes building and operating a hospital, which requires large investments in land, infrastructure, equipment and technology, along with expenditure on doctors, nurses, and other human resources," Bhattacharya added.
Healthcare Cost Pressures
Hospitals also have to comply with multiple regulatory and operational requirements, adding to the cost of establishing and running facilities, he said.
"The healthcare industry faces more than 25,000 compliances, most of which are very expensive to undertake. The parliamentary report asks for standardisation of hospital room rates in line with three-star hotel rooms," he added.
"However, even the hospitality industry does not face so many compliances," Bhattacharya said.
As an example, he observed that until very recently, hospital buildings over 30 metres in height could not be built, while hotels do not face such restrictions.
"If you are taking a building on the same land, you will have fewer rooms in a 30-metre hospital than in a hotel that can go up to 100 metres," Bhattacharya said, adding that the government must look beyond fixing rates and address the structural costs faced by healthcare providers in delivering quality outcomes.
Nathealth Seeks Reforms
Bhattacharya called for reducing structural barriers that add costs without impacting outcomes and rationalising the sector's direct and indirect tax burdens, while promoting scale, efficiency, and exports.
He also advocated longer-term, lower-cost financing for the healthcare sector by giving it infrastructure status and providing loans for 20-25 years at subsidised interest rates of 6-8 per cent.
Any comparison with costs in government healthcare facilities, he said, would not be fair.
Government facilities receive subsidies for their operations, a factor that is not available to private facilities, Bhattacharya said.
According to a Nathealth report on health financing, hospital infrastructure is inherently capital-intensive, with large upfront investments in land and construction.
'Sustaining expansion therefore requires predictable utilisation, stable reimbursement frameworks and operating margins sufficient to generate acceptable return on capital employed (RoCE),' the report said.
The report added that many hospitals must operate at earnings before interest, tax, depreciation, and amortisation margins of 30 per cent to achieve about 15 per cent RoCE, which is the bare minimum return for investors and limits the pace of capacity expansion.
However, Bhattacharya noted that the top five listed players have RoCE in the 10 to 12 per cent range, compared with 20 to 25 per cent for sectors such as fast-moving consumer goods and telecommunications.
Insurance Penetration Needed
According to Apollo Hospitals, around 70 per cent of its patients paid less than ₹2 lakh last year, while 90 per cent paid less than ₹5 lakh.
"This is one-tenth of the expenses in markets like the US," Sasidhar said. "We are providing entire hospitalisation for less than the cost of an outpatient treatment in those developed markets."
Feature Presentation: Ashish Narsale/Rediff
