Given the fragile condition of State finances, health should be put on the Concurrent List.

The Eleventh Five-Year Plan document envisaged an inclusive approach towards healthcare. It planned to improve healthcare delivery systems to make them more responsive to the evolving needs of the Indian population, particularly to improve affordability, accessibility, and quality of health services. Unfortunately, little progress has been made on these counts.

While changes in the age distribution of population, coupled with structural changes in employment pattern have led to shifts in fundamental values and citizens' attitude to healthcare (increasing propensity to pay, and growing aspiration for wellness), India's healthcare industry (estimated at $30-50 billion) primarily remains a ‘sick-care' industry, characterised by inadequate, fragmented, and disproportionately distributed infrastructure and delivery systems.

The public provision of healthcare is through a three-tier delivery system, consisting of Primary Health Centres (PHCs), Community Health Centres (CHCs) and Sub Centres (SCs). However, acute manpower shortage, crumbling infrastructure, low quality care and doctor absenteeism has rendered the network virtually unable to deliver quality services, both in rural and urban areas.

The government's expenditure for healthcare, at less than 1 per cent of GDP for the past three decades, has also meant greater dependency on private institutions and individual specialists.

India currently has one doctor per 1,700 people, and 1.6 million nurses, translating to a resource gap of 1.4 million doctors and 2.8 million nurses, as per World Health Organisation (WHO) norms for developing countries. Estimates suggest that around 41 per cent of PHCs do not have lab technicians, and about 17 per cent have no pharmacists. With lifestyle and chronic diseases on a rapid rise, particularly in Tier II and III cities, the stress on infrastructure will only increase.

Rural-urban divide

A substantial rural-urban divide is also evident in basic healthcare infrastructure. While the number of hospital beds per 1,000 population stands at 0.9 (against the world average of 3.3), it is only 0.1 in the rural areas, where imaging and pathology lab diagnostics are almost non-existent. Access to healthcare facilities for a typical villager comes at a high opportunity cost, as he/she has to travel about 10 km and spend an entire day to get medical attention, even for common ailments.

All this would suggest there is an urgent need to reassess healthcare delivery models and the policies governing them.

First, healthcare delivery has been primarily the responsibility of the State. Given the fragile condition of State finances in India, it becomes imperative that the Government treats health as a Concurrent List item, and accords it ‘priority sector' status to make it more attractive for private investments to venture into, particularly in rural healthcare.

Priority status would ensure that capital expenditure is not taxed as part of the net profits for a financial year, and may encourage private players to develop suitable business models in healthcare delivery targeting those at the bottom of the pyramid.

Second, as the income elasticity of demand for medical care is positive, it is perhaps not surprising that private providers in India are disproportionately concentrated in areas with relatively high income. Paradoxically, this has also led to a socially undesirable outcome — where increased supply and greater competition among providers has lowered the cost of accessing primary healthcare for the wealthy urban dweller as compared to the poor rural consumers.

The technology angle

Technology can be an exceptional enabler to address such failure to provide access. With the exception of ISRO's telemedicine network, and a few other similar private initiatives, there has been a lack of concerted effort on the part of public hospitals to adopt modern communication and medical technology to spread their services to the remote areas.

Barring such States as Gujarat, Maharashtra, and Tamil Nadu, investment in IT is still not considered a strategic requirement to drive business for most public healthcare providers across the majority of States. There is an urgent need to change this mindset.

Third, the government needs to create a facilitative environment to encourage social entrepreneurs to develop innovative business models in healthcare delivery. One relevant and viable model, pioneered by Dr Devi Shetty's Narayana Hrudayalaya and Apollo Hospitals, is establishing low-cost, no-frills hospitals in Tier II and III cities and towns for middle- and lower-middle-income consumers. As capital and other resource costs are likely to be low, the treatment costs will also be substantially lower than tertiary care hospitals.

Day Care hospitals, which focus on minor surgeries, and do not require overnight stay, can also be a cost-effective solution to remote healthcare delivery in India. A further push is required from the government through budgetary and other means to encourage such social entrepreneurship initiatives.

Finally, a paradigm shift is required in both public and private healthcare delivery systems; these should move forward from focusing on mere disease management to more pro-active, relatively cost-effective and holistic care strategies such as personalised prevention, prediction, early detection and treatment.

In practice, this might be difficult to achieve in rural areas as preventive services cannot be produced or demanded at optimal levels without subsidy. A suitable mechanism needs to be developed by which the Government can finance the provision of these services by means of transfer payments to the providers. Promoting health literacy will also be essential in this regard.

(Amarendu Nandy is Assistant Professor, Indian Institute of Management, Ranchi, and Santanu Kundu is a PGDM Final- Year Student, Goa Institute of Management.)

(This article was published on October 13, 2011)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.