NITI Aayog’s Study on the ‘Not-for-Profit’ Hospital Model

In News

The NITI Aayog 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.

Key Findings

• Meagre Presence: Not-for-profit hospitals account for only 1.1% of treated ailments as of June 2018.
• Lower Charge: 
  • Most of the not-for-profit hospitals charge lower than the for-profit hospitals.
  • 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.
  • 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. 
• OPD prices: 
  • Lower for Rural Community Based Hospitals, while Rural Cooperative Hospital prices are comparable with CGHS Delhi rates.
  • The cumulative cost of OPD care in not-for-profit hospitals is about one-third lesser than in private for-profit hospitals. 
• Empanelment: Most of the Not-for-profit Hospitals are empanelled with State or Central Government Healthcare schemes
• Various Levers: The not-for-profit hospitals use various levers to facilitate their low cost of clinical care and reduced operational expenditure.
  • Human Resource levers:
    • Example – The Faith-based Hospitals and Community-based Hospitals had set a conscious ceiling limit of salaries for their senior doctors who are unanimously like-minded to serve humanity.
  • Infrastructure and equipment levers:
    • 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
  • Hospital operations levers:
    • There is 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.
  • Operational expense levers:
    • Some of the not-for-profit hospitals could engage in a mutual understanding with corporates, non-governmental organizations, and other willing donors, for funding the dues of certain non-affording patients.
    • 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.

Challenges

• Infrastructure and equipment expansions:
  • Many of these hospitals are dependent on external funding in the form of philanthropy and grants for capital expenditure components, such as infrastructural expansion, purchase of new technology, and advanced equipment. 
  • 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.
• Regulatory challenges: Some of the hospitals, especially those in remote areas, 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.
• Staff Shortage: Recruitment and retention of doctors & staff are problematic in most not-for-profit hospitals. It is difficult to use the expertise of these hospitals in managing human resources with limited finance in remote areas.
• Delayed Reimbursements: Reimbursements for treatment of Government health scheme beneficiaries are generally delayed causing a cash crunch.

Suggestions

• Working Capital: Centre 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 inadequate cash flows during times of need.
• Timely Land Allocation: This will help many not-for-profit hospitals who face operational delays in their expansion plan because of permissions and regulatory clearances.

Source: LM