India Government’s think Tank NITI Aayog has called for 100 per cent exemption for donations, Income Tax exemption and Single Window clearance for government reimbursements for Not-for-Profit Hospitals in India.
In its report, “Study on the Not-for-Profit Hospital Model in India”, NITI Aayog said “Income-tax exemption could be increased from the current 50 per cent exemption to 100 percent exemption for philanthropy toward the identified not-for-profit hospitals. This could be a catalyst in channelizing the much-needed funds to deserving hospitals.”
The report also called for considering the provision of working capital loans with lower interest rates, which would be more financially viable for the not-for-profit hospitals and would assist in adequate cash flows during times of need.
The report mentions that the not-for-profit hospitals account for only 1.1 per cent of treated ailments, as of June 2018. When the for-profit hospitals account for 55.3 per cent of in-patients, the not-for-profit hospitals accounted for only 2.7 per cent.
Stating that the “Not-for-Profit” Hospital Sector has provided affordable and accessible healthcare for many years, NITI Ayog member Dr. Vinod K Paul said in the forward that the private sector played a significant role in bridging the gap in healthcare. However, it usually faced the challenge of providing affordable care to a large section of the population, while ensuring its own sustenance and efficiency. “This study will facilitate policymakers in deciding how they can assist this sector to sustain, grow, and in turn, help reach the unreached sections of society,” he said.
The report specified policy interventions, which was classified into four broad categories such as Identification and Promotion, Leveraging Expertise, Human Resources and Finance. They were also classified into Short Term and Long Term.
1) Identification & Promotion
a) Develop criteria to identify these Hospitals
b) Develop Mechanisms to rank these Hospitals on a performance Index
c) Create a national level portal/ directory of these Hospitals
2) Leveraging expertise: Representatives of high-performing not-for-profit Hospitals across different geographical locations can be invited to share experiences in relevant policy making committees
3) Human Resources: Posting of Government Medical College students for their mandatory internships in these hospitals
a) 100% exemption for donations (Section 80G) (Currently 50%)
b) Extension of a lowcost credit line (Esp. Working Capital Loans)
c) Income Tax exemption for membership fees paid at Cooperative Trust Hospitals
d) -Single window clearance for Govt. Reimbursements
- Identification & Promotion: Promote top hospitals for facilitating philanthropy, investments and patient flows
- Leveraging expertise: Involving high performing Hospitals in PPP models for managing PHCs, operations of Government Facilities, PSU Hospitals
- Human Resources
- Develop a mechanism to incentivize superspecialists to work in remote areas.
- Revisiting of the compliance requirements of regulations like CEA, PNDT, Blood Bank
- Grant in Aid scheme (Similar to Gujarat Model)
- Timely allocation of unencumbered land
SOME MAJOR FINDINGS
Charge lower than for-profit hospitals
The cumulative cost of care is lesser than for-profit hospitals by about one-fourth in the in-patient department. This is reckoned by the package component of cost, which is approximately 20 per cent lower, the doctor’s or surgeon’s charges, which are approximately 36 per cent lower and the major aspect being the bed charges, which are approximately 44 per cent lower than the for-profit hospitals. The cumulative cost of OPD care is about one-third lesser than private for-profit hospitals.
Out-patient Department prices lower
When compared to the CGHS Delhi rates, the report said that the OPD index of Rural Community-based Hospital (54) is lower, while the Rural Cooperative Hospital price index (110) is comparable with CGHS Delhi rates.
With respect to normal and cesarean Deliveries, Hysterectomy, Appendectomy, Cataract, ORIF, Laparotomy and Cholecystectomy, the Rural Community-based Hospital charges are approximately 40–60 per cent lower than the CGHS Delhi NCR rates and the ABPMJAY rates.
Empanelled with state or central government healthcare schemes
Almost all of the not-for-profit hospitals are empanelled either with the State Health Schemes of their respective State, or with the Central Government Health Schemes such as the Central Government Health Scheme, Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana, Ex-servicemen Contributory Health Scheme and Employees State Insurance.
Various levers to facilitate low cost of clinical care
- Salaries of doctors are 50–75% lower than market benchmarks
- Salaries of staff are ~20–30% lower than market benchmarks
- Multitasking workforce reduces the number of total staff required
- 90–95% general ward beds
- Energy-efficient construction and judicial installation of air conditioning
- In-house manufacturing of equipment, such as beds, dental chairs
- Using high cost equipment beyond the recommended lifespan
- Scavenging for usable parts from condemned equipment
- Cross-subsidization: The revenue from patients who paid full charges were used to cross-subsidize the bills of the patients who could not pay the full charges. The revenue from departments that had high volumes and a significant margin of revenue above the cost price was used to cross-subsidize the services of other departments
- Prefer generic low-cost medicines and engaged in direct procurement from the manufacturers at lower prices.
- Spend only a minimal amount on marketing activities. No-referral commission policy.
- Almost all hospitals have no debt, as the capital expenses are mostly funded by Government grants or by donations from philanthropists. Thus, they can re-use their revenue on operational expenses
Focus on quality practices
The not-for-profit hospitals followed better quality practises. They have strong Internal Quality Assurance teams, which performed clinical audits and utilization audits regularly
- Recruitment and retention of doctors and staff
- Delayed reimbursements and long-pending amounts, despite their persistence, causing strain in their cash flows, and in turn, burdening their operations.
- Infrastructure and equipment expansions: Many of these hospitals are dependent on external funding in the form of philanthropy and grants for capital expenditure components. Some hospitals could contribute only a small amount of their operational revenue toward the purchase of much-needed new equipment, and hence, can only purchase/expand with the help of external funding.
- High compliance burden of staffing requirements of the Regulations for running a blood bank, Clinical Establishments Act, PNDT Act, and Quality standards.