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NITI Aayog: Study on 'Not-for-Profit' hospital model
Recently, the NITI Aayog has released a comprehensive study on the not-for-profit hospital model in the country and called it a step towards closing the information gap on such institutions.
India needs a not-for-profit hospital
- Lack of last-mile connectivity of healthcare services: The lack of penetration of quality healthcare, especially among the economically weaker sections of society in both urban and rural areas.
- Not-for-profit hospital provided quality healthcare to the unreached at low cost: It prompted the need for a targeted study to gain a crisp and structured understanding about the not-for-profit hospital model in India.
- Unavailability and unaffordability in healthcare services: The existing hospital beds and hospitalization services have a high level of concentration in urban areas, which in turn impact the accessibility and affordability of hospitalization services.
- Low share of not-for-profit hospital: It currently account for only a miniscule share of hospitalization cases.
- The private hospitals are largely divided into “for-profit hospitals” which account for 23.3% of treated ailments and “not-for-profit hospitals,” which account for only 1.1% of treated ailments.
- Public hospitals that offer healthcare at negligible cost are overstretched: The burden of healthcare provision shifts to private hospitals, which generally offer healthcare at a higher cost to the patient, as they must sustain themselves.
- Disparity in terms of hospitalization cases: The for-profit hospitals account for 55.3% of in-patients, while the not-for-profit hospitals account for only 2.7% of in-patients in the country.
Significance of Not-for-profit Hospital Model
- In-house funding of hospitals: A not-for-profit hospital does not make profits for its owners from the funds collected for patient services.
- The owners of these hospitals are often charitable organizations or non-profit corporations.
- The fees for service at these hospitals are generally lower than for-profit hospitals and the income from fees (above the cost of service) are reinvested in the hospital.
- Potential remedy to the challenges of unavailability and unaffordability: The infrastructure, services, and charges of these hospitals are positioned to cater to the unreached and underprivileged population of the country.
- These hospitals have managed to create a perception of goodwill in the country not only through selfless healthcare services with a social cause, but also through various community engagement programs.
- Low cost healthcare services: The cumulative cost of care at not-for-profit hospitals is lesser than for-profit hospitals by about one-fourth in the in-patient department.
- Lower operating cost of not-for-profit hospital: The cost categories such as Employee costs, Material Costs, Repair & maintenance Costs, Electricity & fuel costs are significantly lower than for-profit hospitals.
- Strong focus on Quality practices: The study found a strong focus on quality care across all categories of not-for-profit hospitals, as most of them had some form of accreditation for their services.
Challenges faced by Not-for-profit Hospital
- Recruitment and retention of doctors & staff: Most of the hospitals find it difficult to recruit and retain doctors and staff because of the following reasons:
- The lower salaries offered than the for-profit hospitals form a hindrance for recruiting specialist and super-specialist consultants.
- The remoteness of location of the hospitals in rural areas is a major challenge.
- Reimbursements for treatment of Government health scheme beneficiaries: The perennially delayed reimbursements and long-pending amounts causing strain in their cash flows burdening their operations.
- Infrastructure and equipment expansions: The hospitals could contribute only a small amount of their operational revenue toward the purchase of much-needed new equipment and can only purchase/expand with the help of external funding.
- Regulatory Challenges: The not-for-profit hospitals have reported challenges because of the high compliance burden of staffing requirements of the Regulations for running a blood bank, Clinical Establishments Act, PNDT Act, and Quality standards.
Measures to be adopted to implement Not-for-profit Hospital Model
Short-term measures
- Categorization of the prominent not-for-profit hospitals based on the premise of services and their ownership: It would be useful to understand the vision behind the establishment of these hospitals and the guiding force behind them.
- Understanding the business model of the hospitals: Its objective is to understand the operating model of these hospitals, along with the financial viability, and their dependence on donations and grants for meeting their operational needs.
- Develop mechanisms to rank these hospitals on a performance index: The creation of a rating scale based on the volume of services utilized annually, the extent of charity work done, impact on the community health indicators of the location, operational efficiency, and self-sufficiency, to rank the top few hospitals.
- Create a national level portal/directory of these hospitals: All the not-for-profit hospitals can be listed to highlight the hospital and its functions in the public domain.
- Tax exemptions on donations to these hospitals: The income-tax exemption could be increased from the current 50% exemption to 100% exemption for philanthropy toward the identified not-for-profit hospitals.
- Extension of a low-cost credit line: The Government can consider 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.
- Single window clearance for Government reimbursements: The timely release of these funds can be a substantial boost to their working capital for operations.
Long-term measures
- Promote the top hospitals for facilitating philanthropy, investments and patient flows: The Top 50 hospitals should be prominently displayed along with the amount of funding received over a specific timeline.
- Involving high performing Hospitals in PPP models: It is perceived that they can use the available infrastructure of the existing Government facilities and achieve efficient utilization to promote Health for All.
- The National Health Mission guidelines on Public Private Partnership can be used for such endeavors.
- Revisiting the compliance requirements of regulations: It is necessary to customize the mandatory manpower requirements to make them more relevant to the realities of the remote areas and making them less cumbersome for these hospitals.
- Mechanism to incentivize super-specialists to work in remote areas: The super-specialist doctors should be given some incentives and motivation to engage with hospitals in remote areas where there is a dire need for their services.
- Grant-in-Aid scheme: Other States can consider the implementation of a Grant-in-Aid scheme similar to the Gujarat Model, wherein the Government funds up to 75% of admissible costs of the not-for-profit hospitals.
- Timely allocation of unencumbered land: It will help many not-for-profit hospitals who face operational delays in their expansion plan because of permissions and regulatory clearances.
Road ahead
- India has an ever-increasing need for healthcare services with population of about 1.38 billion and counting and India’s policies and programmes are aimed at achieving Universal Health Coverage by 2030.
- The “Not-for-Profit” Hospital Sector has the reputation of providing affordable and accessible healthcare for many years because the sector has done yeoman service over the years with some institutions from even before Independence.
- It is required to ascertain and propose targeted interventions, which will not only mitigate the challenges faced operationally, but also provide insights for the overall growth of the sector from a strategic perspective.
- The representatives of high-performing not-for-profit hospitals across different geographical locations can be invited to relevant policymaking committees.
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