Healthcare delivery capital-intensive, hospital tariffs only tip of iceberg, says NATHEALTH

Healthcare delivery is capital-intensive, investment-heavy and hospital tariffs represent only the tip of the iceberg, therefore policy discussions should address structural costs of healthcare delivery, according to industry body NATHEALTH.

Responding to a report by the Parliamentary Standing Committee on Health & Family Welfare, which, among others, recommended standardisation and capping costs of essential treatments, NATHEALTH - Healthcare Federation of India said as discussions on affordability progress, the focus should shift from healthcare rates to the cost of delivering healthcare.

"Healthcare delivery is capital-intensive and investment-heavy, and hospital tariffs represent only the tip of the iceberg," NATHEALTH Secretary General Siddhartha Bhattacharya said in a statement.

Hospitals require continuous investment in infrastructure, technology, specialised equipment, infection control, clinical talent and patient safety systems, while operating under stringent compliance requirements, he added.

"The industry believes policy discussions should address the structural costs of healthcare delivery..." Bhattacharya noted.

Structural costs of healthcare delivery, he said, include "land, capital, manpower, extensive regulatory compliance requirements running into tens of thousands of mandates, complex disease burdens requiring advanced treatment pathways, inefficient risk pooling, and working capital constraints across different stages of healthcare delivery".

Regulatory interventions may be required where there are substantial variations in pricing, Bhattacharya noted.

"However, structural regulatory changes that do not account for the economics of private healthcare will deter supply expansion, quality improvement and innovation at a time when India faces a 13-year gap between healthy life expectancy and overall life expectancy, and when non-communicable diseases and co-morbidities account for three-fourths of all serious cases requiring advanced therapies and modern treatment protocols," he added.

Bhattacharya argued that requirements of hospitals are fundamentally different from any other form of infrastructure built on comparable land and result in significantly higher costs.

Stating that India will require more than USD 300 billion in additional healthcare investment to build future capacity and meet the growing demand for quality healthcare, he said, "Sustaining this expansion requires a financially viable healthcare ecosystem, including both domestic and foreign investment, capable of attracting long-term capital."

Return on capital employed (ROCE) and return on equity in healthcare hover around 10 per cent, significantly lower than many other sectors of the economy, which often generate 1.5-2.5 times higher returns on capital, he noted.

The Parliamentary committee had observed with concern the widening cost disparity between public and private healthcare, noting that private hospitalisation averages Rs 50,508 compared to Rs 6,631 in public facilities, saying such huge disparity has triggered a deepening affordability crisis.

The panel had noted that "the rampant commercialisation of private healthcare, characterised by grievances of excessive billing, unnecessary diagnostics, and soaring costs for routine procedures like childbirth (average out-of-pocket medical expenditure of Rs 37,630 in private as compared to Rs 2,299 in public), is directly pushing vulnerable households into catastrophic debt and distress, causing asset sales".

Therefore, the committee recommended that "for the existing regulatory framework for immediate formulation of a mechanism to standardise and cap the costs of essential treatments, diagnostics, and routine procedures across all private hospitals."

Additionally, it also recommended that the government must mandate absolute price transparency prior to admission and establish a unified, fast-track grievance redressal ombudsman specifically designed to audit excessive billing and resolve insurance claim disputes in the private sector.