(Submission No: ICIF164)

A STUDY OF HEALTHCARE INFRASTRUCTURE FINANCING IN INDIA – NEW

PERSPECTIVE

Nenavath Sreenu
ABSTRACT

Purpose: The purpose of the study is to assess the financing needs of healthcare infrastructure,
and develop management model that identifies problems, a framework for implementation and
helps to evaluate dynamically performance of healthcare infrastructure service in India.
Design/methodology/approach: This study reviews the developmental problems of Indian
healthcare infrastructure system. This is principally a diagnostic study to investigate
interdisciplinary issues, including the role of social infrastructure (healthcare), continuous
improvement in healthcare infrastructure financing and performance measurement system.
Finding: The study finds causes of the current healthcare infrastructure system in India. i) The
reform will be essential to ensure that the revitialzed PHCs infrastructure is used efficiently and
accessed equitable and ii) improved delivery of quality healthcare services, accessibility and
affordability.
Research limitations/implications: This study is based on secondary data, examining current
problems in Indian’s healthcare infrastructure finance. Contribution to research on healthcare
infrastructure by the developing a comprehensive mechanism of provider-perceived healthcare
delivery system in India.
Practical implications: The proposed model can be implemented in hospital-based healthcare
services in order to improve infrastructure performance. It may also be applied to other services.
Provides a practical framework for stakeholders to develop a healthcare infrastructure
performance measurement system to rationalize resource allocation process that enhances
continuous healthcare infrastructure improvement.
Originality/value: The study suggests the adoption of an approach of management practices in
dealing with problems of Indian’s healthcare infrastructure and that some fundamental issues
found to be critical in developed countries’ experience, when striving for performance
improvement are not attained under Indian’s current healthcare system. Explores the
fundamental issues pertinent to India’s current healthcare system and the possible use of
performance measurement system for dealing with existing deficiencies
Keywords: India, healthcare infrastructure, measurement, performance, healthcare and financing
Nenavath Sreenu. Research Scholar. School of Management Studies. University of
Hyderabad, Hyderabad, A.P, India 500046. sri_cbm@yahoo.com mobile no:
9966483998
 A STUDY OF HEALTHCARE INFRASTRUCTURE FINANCING IN INDIA –
NEW PERSPECTIVE

INTRODUCTION
Economic growth in a country largely depends on the standards of its social
infrastructure. Healthcare is important areas of social infrastructure. It also covers care
of the other healthcare organization objective of which can be met through healthcare
infrastructure needs, management model that identifies problems, develops a framework
for implementation and helps to evaluate dynamically healthcare infrastructure service
performance and social security measures. There are over 2.5 lakh panchayats or rural
government bodies in the country and they hold the key for social infrastructure
development in rural areas where the challenge is formidable. Apart from the initiative of
the government and its various agencies, NGOs and corporates are other social entities
that can make valuable contribution in revamping healthcare social infrastructure
financing development. Also it is attempted to reviewed a set of public private
partnership models relevant for healthcare infrastructure financing development and
review problems and issues in different areas of social infrastructure finance (healthcare),
in the past four decades there has been a succession of different approaches to the
development of infrastructure for the delivery of healthcare services. There have been
striking similarities among these approaches in both direction-and timing in many
different countries, particularly in the developing world. This study begins with an
literature review of trends in the development of health services infrastructure in recent
decades. It precedes to analyses the implications for the organization of health services
and for resource allocation when the health services infrastructure is reviewed as part of
a health system based on primary health care. Finally Indian governments maintain that
district health systems based on primary health care provide an excellent practical model
for health development, including an appropriate health system infrastructure. Within this
Model the concerns with accelerating the application of known and effective technologies
and the concerns with strengthening of community involvement and intersectoral action
for health are both accommodated. The district health system provides a realistic setting
for professionals and non-professionals concerned with health and social development.
 The public sector is the most dominant contributor to the health services in
India. No country in the world is committed to universal health care at affordable cost
without the active participation of the government. Even the World Bank and other
supporter of the free market economy recognizes that health is one of those areas, where
public sector must continue to have a very important role because the market forces may
prevail in other sector, health is an area of market failure. Therefore public sector
continues to have a very important role but unfortunately, as we know, has not delivered
with the level of efficiency it should have. It has serious bureaucratic hurdles and
managerial inefficiencies. It also had resource constraints and therefore we have had
major issues of inadequate performance by public sector. The outreach of the services has
been very poor. With the primary health care services not being as efficient as they were
designed to be and many of the public primary health centers are not adequately staffed
resourced in terms of equipments and drugs and even emergency treatment is often not
available, even in the best of the cities. The private sector is certainly far more efficient
in its delivery mechanism and has been increasing its role and its outreach. In recent
years 80 per cent of health care expenditure in India, is out pocket expenditure and much
it goes to private health care providers. Even the poor often tend to access the private
health care providers, because they may not want to lose a working day’s wage by
queuing up in the government hospitals. The private sector however has limitations
because it is driven by profit maximization and unless there are regulatory mechanisms,
which direct and discipline the private sectors. This sector can often become abusive in
the absence of active government regulatory mechanism. The Government of India is
committed to provide high quality, affordable and accessible, preventive, curative,
primitive and comprehensive health care services to the population. But unfortunately the
performance of the states on various health parameters is not encouraging. Although an
extensive infrastructural network of Medical and Health services in the government as
well as private sectors has been created over the years, the available health infrastructure
is inadequate to meet the demand for health services in the states. The problem is more
serious in rural areas as compared to urban areas. The rural population primarily depends
on government infrastructure and on private health services providers or mainly on
quakes. The availability of physical health infrastructure in the states still lags behind the
National average. Apart from this, non availability of staff and medical services at these
health facilities is another issue of major concern As a result the state is facing a great
challenge to fight communicable and non communicable diseases, The objective of the
study is to find out the primary reason to encourage public private participation in health
care delivery system in rural area and the study Also aim to analyses states rural
healthcare perspective

INDIAN INFRASTRUCTURE HEALTHCARE FINANCING

In the Health Care segment, stagnant public spending on healthcare (less than 1 percent
of GDP) places India among the bottom 20 percent of countries. Most low-income
countries spend more than India, where current levels are far below what is needed to
provide basic health care to the population. The bulk of public spending on primary
health care has been spread too thinly to be fully effective, while the referral linkages to
secondary care have been suffered. As in other countries, preventive health services take
a back seat to curative care. Over the last five decades, India has built up a vast health
infrastructure and manpower at primary, secondary and tertiary care in government,
voluntary and private sectors. The current doctor population ratio is 1:1800. Tertiary
hospitals in major cities are in many cases, run by business houses and use corporate
business strategies and hi-tech specialization to create demand and attract those with
effective demand or the critically vulnerable at increasing costs. Standards in some of
them are truly world class and some who work there are outstanding leaders in their
areas. Public health spending accounts for 25% of aggregate expenditure, the balance
being out of pocket expenditure incurred by patients to private practitioners of various
hubes. Public spending on health in India has itself declined after liberalization from
1.3% of GDP in 1990 to 0.9% in 1999. Consider the contrast with the Bhore Committee
recommendation of 15% committed to health from the revenue expenditure budget,
against the WHO, which recommended 55% of GDP for health. The current annual per
capita public health expenditure is no more than Rs. 160and a recent World Bank review
showed that over all primary health services account for 58% f public expenditure mostly
but on salaries, and the secondary/tertiary sector for about 38%, perhaps the greater part
going to tertiary sector, including government funded medical sector.
FINANCING INDIA’S HEALTHCARE INFRASTRUCTURE NEEDS

The growing demand for quality healthcare and the absence of appropriate infrastructure
pose a challenge both to the government and private healthcare delivery providers. The
study examined the quantum of the problem and how newer modes of financing
including Private Equity infusion and Healthcare. The healthcare sector in India is today
at the point of inflection in transforming the delivery setting in terms of the formats,
quality of care, affordability and geographical access. The delivery capacity of India's
healthcare industry has not been able to match up with the burgeoning population and
socio economic changes. India needs an annual incremental addition of healthcare
facilities equivalent to almost half of what UK or France or Italy may need for their entire
populations. Against a world average of 3.96 hospital beds per 1000 population, Russia
has 9.7, Brazil has 2.6, China has 2.2, and India languishes at just over 0.7 indicating the
big gap. Just to bring the availability of the beds to 1.7 per thousand from the current
levels, it is required to create a million or more new beds, requiring substantial financial
investment.
To reach developed country healthcare norms by 2028, it will require an
astronomical US$ 1000 billion over the next 20 years. Even reaching halfway (i.e. the
current norms of China and Brazil in terms of number of beds) will entail an investment
of over US$ 500 billion (i.e. anywhere between US$ 25 billion to US$ 50 billion per year
for next 20 consecutive years). Unfortunately, unlike other sectors, healthcare delivery
cannot be priced on a cost plus basis since the payee's ability in India is severely
constrained with practically negligible penetration of health insurance. It is no surprise,
therefore, that almost all of the current organised healthcare service providers are
struggling to show any profitability at all despite carrying the tag of being "premium". In
these circumstances, it is very difficult to imagine fresh capital formation of this
magnitude anytime in the near future, since, generating adequate return on investment
under current healthcare sector dynamics is a huge challenge. Till a decade ago, health
(and the healthcare sector) was not considered a key driver of national economic
performance. Today, there is incontrovertible evidence from the world over establishing
that improved health leads to better economic performance. Poor healthcare on the other
hand can severely impact economic growth (Estimated loss due to cardiac disease &
diabetes alone in India will be US$ 236 billion in the coming decade). A fast growing
economy, rising incomes and increased urbanisation have been instrumental in changing
the perception of patients as consumers. The present day patients are more demanding,
expect better services for their money and exercises choice in choosing a facility for
reasons other than cost. The Indian consumer in choosing a facility for reasons other than
cost. The Indian consumer spend on healthcare will increase from the current 7% to as
much as 13% by 2028.
Private equity investments in India have witnessed significant growth during 2007. PE
deals have increased from US$ 7.9 billion in 2006 to US$ 19.03 billion in 2007. There
were around 53 deals of over US$ 100 million as against 11 deals in 2006. Healthcare
sector attracted over US$ 448 million in year 2007. Between 2008 and 2011, the sector is
expected to see investments of around US$ 5 billion. According to industry experts,
funds will flow from capital markets or PEs to set up Greenfield and brownfield projects.
India already has an active fund provider base supported by ICICI Ventures - one of the
largest private-equities, which allocated US$ 250 million for a dedicated healthcare
fund through I-Ven Medicare. Others include IDFC, HSBC, JP Morgan Private Equity
Fund, American International Group Inc. (AIG), Evolvence India Life Sciences Fund,
George Soros's fund Quantum and BlueRidge. The healthcare sector in India is
witnessing a surge of activity and the beginning of what is seen as a rapid phase of
growth. Emerging healthcare segments like diagnostic chains, medical device
manufactures as well as hospital chains are increasingly attracting investments from a
variety of venture capitalists. At a broader level, this trend in healthcare is often seen as a
manifestation of the overall surge in private equity and also growing interest
among private equity funds for Indian companies. Private equity is smart money because
these investors bring more to the table than just money. The capital and expertise of
private equity act as a catalyst for creating enterprise value. Healthcare is poised to be a
new driver of growth for economy. Given the geographical access required for delivering
care and the fact that infrastructure has to be spatially distributed, Rapid growth has
brought about a “health transition”, in terms of shifting demographics, socio-economic
transformations and changes in disease patterns - with increasing degenerative and
lifestyle diseases and altered health seeking behavior. Healthcare, which is a US$ 35
billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150
billion by 2017. Bulk of the investments would be made by the private sector.
TABLE: 1

India needs an immediate investment of US$ 82 billion to make up for the back-log. An
additional US$ 465 billion is needed to catch up with demographic shifts as well as
improvement in healthcare indicators in the next 10 years. The growing demand for
quality healthcare and the absence of matching delivery mechanisms pose a challenge
and certainly a great opportunity We stand at the threshold of an exciting opportunity to
design and engineer sustainable healthcare delivery systems, develop numerous
commercially viable & customizable delivery formats for the growing, demanding and
health conscious Indian population. Healthcare providers have been struggling to cope
with this exciting scenario where change is the only constant
FINANCING HEALTH CARE: THE INDIVIDUAL AND THE STATE
When the study look at the profile of diseases we can see that rural– urban differential in
the proportion of hospitalization within each ailment is negligible, except for the heart
diseases, where the proportion of hospitalization cases in the urban areas was almost
double that in the rural areas. The average medical expenditure on health for both
hospitalization and non-hospitalization cases in rural areas is lower than in urban areas.
However, household income lost per treated person is much higher in the rural areas (Rs
135) than urban (Rs 96) for non-hospitalization cases. In either scenario, private players
play a dominant role. There are demonstrated differences between the payment patterns
of the rich and the poor in both inpatient and outpatient care. the private sector does not
appear to be charging much more than public facilities. While significant user charges are
being paid by all economic segments for availing of health care services, the remains as
to who will pay for the expansion and rationalization of health care facilities to augment
physical, technical as well as human resource infrastructure to cater better to the needs of
the economically challenged sections of the society. Clearly it is not the user but the state
or the central government budget that must bear the load of this expense. While dearth of
financial resources at the state-level cannot be denied, studies can prove that states that
spend the least on health care on per capita basis also tend to be the ones that are the least
distressed financially—as in states with low per capita state budget deficit are
surprisingly spending less per capita on healthcare than states with higher per capita
budget deficits. States such as Bihar and UP have among the lowest budgetary deficit on
a per capita basis. These states also tend to have poor health indicators. And they also
spend among the lowest in health care on a per capita basis. For these states, spending
more on health care is possible. Those states that currently spend the least on health care,
can at some cost to their deficit, increase health care expenditures. Thus Bihar, Uttar
Pradesh, Chhattisgarh, Madhya Pradesh, Jharkhand, Orissa, and Assam, that spend the
least on health care on a per capita basis are also among the states that have the lowest
per capita budgetary deficit.
HEALTHCARE INFRASTRUCTURE SPENDING TO REACH $14.2 BY 2013

Expenditure on healthcare infrastructure in India is expected to touch $14.2 billion over

four years in 2013, according to a report by government of India. “Total healthcare
infrastructure expenditure for 2013 is predicted to reach $14.2 billion, a near 50%
increase on the 2006 total,” the report said. Healthcare infrastructure includes buildings,
equipment, ambulances, etc. “The main factors propelling this growth are rising income
levels, changing demographics and illness profiles with a shift from chronic to lifestyle
diseases,” the report said. Of the states and union territories, six — Maharashtra,
Rajasthan, Uttar Pradesh, West Bengal, Andhra Pradesh and Tamil Nadu — account for
more than 50% of the total healthcare infrastructure spending in the country. The report
forecast that during 2009-13, Maharashtra will spend over seven billion dollars on
healthcare infrastructure. The report said during the period, Rajasthan and West Bengal
will cumulatively spend $5 billion on healthcare infrastructure, while Uttar Pradesh,
Andhra Pradesh and Tamil Nadu will spend over $4 billion each. Maharashtra with less
than 10% of the total population accounts for around 12% of the total expenses in the
segment. It spent $1.1 billion on upgrading healthcare institutes in 2006. According to the
report, there are twelve states that spent less than $100 million each in 2006, together
representing 4.5% of the total national expenditure and 3.6% of the total population. In
terms of the per capita health infrastructure expenditure in 2006, the Andaman and
Nicobar islands led at $36 per head while Bihar lagged with lowest expenditure at $1.9
per head. This reveals an uneven distribution in terms of development of health
infrastructure in India, the report said. Himachal Pradesh, Manipur and Andaman &
Nicobar Islands were the only states, which spent over $30 per head on developing
healthcare infrastructure. Cumulatively, per head spend on healthcare infrastructure
during 2009-13 is projected to be over $250 for Andaman & Nicobar and Manipur, while
for states like Bihar, Uttar Pradesh, Chattisgarh and Jharkhand it will be less than $50

HEALTHCARE INFRASTRUCTURE EXPANSION IN INDIA

An enormous amount of private capital will be required in the coming years to enhance
and expand India’s healthcare infrastructure to meet the needs of a growing population.
Currently India has approximately 860 beds per million populations. This is only one-
fifth of the world average, which is 3,960, according to the World Health Organization. It
is estimated that 450,000 additional hospital beds will be required by 2010—an
investment estimated at $25.7 billion. The government is expected to contribute only 15-
20% of the total, providing an enormous opportunity for private players to fill the gap
Recently have seen many new investments in healthcare infrastructure facilities in India.
For instance, ICICI Venture, the country’s largest private equity fund, has invested $8.6
million in a chain of diagnostics facilities, along with Metropolis Health Services Ltd.
And in 2006, General Electric announced a $250 million investment in infrastructure and
healthcare projects in India. With the advent of private insurance and the emergence of
India as a medical tourism destination, there also has been a surge of growth in so-called
“super specialty” hospitals, which have teams of specialists, sophisticated equipment,
links to other medical centers, and the ability to treat a broad range of ailments. Some of
these new facilities, such as the Rajiv Gandhi Super Specialty Hospital, are public-private
partnerships. Government fiscal constraints are driving the growth of PPPs to help meet
India’s growing demand for healthcare infrastructure. Such partnerships have gained
legitimacy worldwide in recent years as a major strategy for health sector development.
In addition to participating in infrastructure PPPs, opportunities are emerging for foreign
companies to create super-specialty hospitals in collaboration with Indian corporations.
For instance, Wockhardt Hospitals Group has partnered with Harvard Medical
International to create a chain of super specialty hospitals in India. Two hospitals, in
Mumbai and Bangalore, are attracting large volumes of medical tourists from the UK and
US. There also is strong demand for tertiary care hospitals, which emphasize the
treatment of lifestyle diseases, focusing on specialties such as neurology, cardiology,
oncology and orthopedics. Tertiary hospitals are projected to grow faster than the overall
healthcare sector,
In addition to a deteriorating physical infrastructure, India faces a huge shortage of
trained medical personnel, including doctors, nurses and especially paramedics, who may
be more willing than doctors to live in rural areas where access to care is limited. There is
an immediate need for medical education and training, which could provide additional
opportunities for private sector providers or public-private partnerships. The
communications technology that enables telemedicine could also be used to deliver
training courses. India’s healthcare infrastructure has not kept pace with the economy’s
growth. The physical infrastructure is woefully inadequate to meet today’s healthcare
demands, much less tomorrow’s. While India has several centers of excellence in
healthcare delivery, these facilities are limited in their ability to drive healthcare
standards because of the poor condition of the infrastructure in the vast majority of the
country. Of the 15,393 hospitals in India in 2002, roughly two-thirds were public. After
years of under-funding, most public health facilities provide only basic care. With a few
exceptions, such as the All India Institute of Medical Studies (AIIMS), public health
facilities are inefficient, inadequately managed and staffed, and have poorly maintained
medical equipment. The number of public health facilities also is inadequate. For
instance, India needs 74,150 community health centers per million population but has less
than half that number. In addition, at least 11 Indian states do not have laboratories for
testing drugs, and more than half of existing laboratories are not properly equipped or
staffed. The principal responsibility for public health funding lies with the state
governments, which provide about 80% of public funding. The federal government
contributes another 15%, mostly through national health programs. However, the total
healthcare financing by the public sector is dwarfed by private sector spending. In 2003,
fee-charging private companies accounted for 82% of India’s $30.5 billion expenditure
on healthcare. This is an extremely high proportion by international standards.3 Private
firms are now thought to provide about 60% of all outpatient care in India and as much as
40% of all in-patient care. It is estimated that nearly 70% of all hospitals and 40% of
hospital beds in the country are in the private sector.
TABLE: 2
)
HEALTH INFRASTRUCTURE IN RURAL INDIA
The healthcare services are divided under State list and Concurrent list in India. While
some items such as public health and hospitals fall in the State list, others Such as
population control and family welfare, medical education, and quality control of drugs.
The Union Ministry of Health and Family Welfare (UMHFW) is the central authority
responsible for implementation of various programmes and schemes in areas offamily
welfare, prevention, and control of major diseases. In the case of health the term
infrastructure takes on a wider role than mere physical infrastructure. Healthcare centres,
dispensaries, or hospitals need to be manned by well trained staff with a service
perspective. In this chapter we include medical staff in our ambit of discussion on rural
health infrastructure. The current conditions of physical infrastructure, staff, access, and
usage are laid out here before identifying critical gaps and requirements in infrastructure
and services. Issues related to institutions, financing, and policy are discussed in the
context of these critical need gaps and the potential role of the private sector in healthcare
provisioning in villages is explored.
PUBLIC INFRASTRUCTURE
The healthcare in rural areas has been developed as a threetier structure based on
predetermined population norms . The sub-centre is the most peripheral institution and
the first contact point between the primary healthcare system and the community. Each
sub-centre is manned by one Auxiliary Nurse Midwife (ANM) and one male Multi-
purpose Worker PW(M)]. A Lady Health Worker (LHV) is in charge of six sub-centres
each of which are provided with basic drugs for minor ailments and are expected to
provide services in relation to maternal and child health, family welfare, nutrition,
immunization, diarrhea control, and control of communicable diseases. Sub-centres are
also expected to use various mediums of interpersonal communication in order to bring
about behavioural change in reproductive and hygiene practices. The sub-centres are
needed for taking care of basic health, needs of men, women and children. As per the
figures provided by the UMHFW there were 146,026 sub centres functioning. in
September 2005 about 12 per cent lower than the prescribed number as per government
norms. Primary Health Centres (PHCs) comprise the second tier in rural healthcare
structure envisaged to provide integrated curative and preventive healthcare to the rural
population with emphasis on preventive and promotive aspects. (Promotive activities
include promotion of better health and hygiene practices, tetanus inoculation of pregnant
women, intake of IFA tablets and institutional deliveries.) PHCs are established and
maintained by State Governments under the Minimum Needs Programme (MNP)/Basic
Minimum Services rogramme (BMS). A medical officer is in charge of the PHC
supported by fourteen paramedical and other staff. It acts as a referral unit for six sub-
centres. It has four to six beds for inpatients. The activities of PHC involve curative,
preventive, and Family Welfare Services. There were 23,236 PHCs functioning in
September 2005 compared to 23,109 a year earlier, according to the Ministry of Health.
Though the numbers appear to be increasing there is still a shortfall of about 16 per cent
when compared to the required norms for PHCs. Community Health Centres (CHC)
forming the uppermost tier are established and maintained by the State Government
under the MNP/BMS programme. Four medical specialists including Surgeon, Physician,
Gynaecologist, and Paediatrician supported by twenty-one paramedical and other staff
are supposed to staff each CHC. Norms require a typical CHC to have thirty in-door beds
with OT, X-ray, Labour Room, and Laboratory facilities. A CHC is a referral centre for
four PHCs within its jurisdiction, providing facilities for obstetric care and specialist
expertise. There were 3346 CHCs in the country, almost a 50 per cent shortfall. About
49.7 per cent of the sub-centres, 78.0 per cent of the PHCs and 91.5 per cent of CHCs are
located in the government buildings. The rest are located either in rented buildings or rent
free Panchayat/Voluntary Society buildings. As on September 2005, overall 60,762
buildings are required to be constructed to house sub-centres. Similarly, for PHCs 2948
and for CHCs 205 additional buildings are still required.
ACCESS TO INFRASTRUCTURE
Even if a healthcare provider is not present in a village, he/she can be reached easily,
some basic access issues would be taken care of. However, the study find many
limitations especially in the context of road connectivity and adequate transport services.
Many of the healthcare facilities, public or private,
TABLE: 3
Are not accessible throughout the year to about a third of the villages. Private and
government hospitals are relatively more accessible as they are typically located in areas
well connected by metalled roads (1) a well defined system of public healthcare provision
exists, (2) there is some shortfall in infrastructure, (3) there is a significant problem with
the adequacy of working facilities (supplies and equipment) within these centres, (4)
there is a significant lack of adequately trained staff, and (5) there continues to be a lack
of adequate access to the facilities The affects usage of the healthcare infrastructure and
therefore access to adequate healthcare, a concern we address in the detailed section on
issues related to access, where the study also introduce the important role being played by
the private sector.
GLOBAL TRENDS IN HEALTH SERVICES INFRASTRUCTURE DEVELOPMENT

The development of national health systems during the past three decades has been
marked by two major trends, which vary in their inter-relatedness from country to
country. The first was the establishment of 'vertical' programmes for the control of
specific priority health problems, each with its own specialized infrastructure staffed by
uni-purpose workers . The programmes against yaws and malaria, and the global mall
pox eradication effort are among the more successful examples of this approach . The
second was the development and expansion of general health services infrastructure
designed for the provision of curative services with a variable range of preventive
services. They were at first largeh hospital-based and often urban-oriented, but the, have
become increasingly accessible to national populations, though often still with a strong
curative orientation . The limitations of these basic health services in reaching non-urban
populations, and their weak attention to promotive and preventive health care, provided
the underlying stimulus for the development of the primary health care approach. Since
the WHO/UNICEF Conference on Primary Health Care at Alma-Ata in 1978, the trend
toward more integrated health services infrastructure has accelerated dramatically,
through the expansion and strengthening of health facilities, emphasis on priority
activities such as immunization, and especially the training of community health workers
and the involvement of communities in health efforts ; these have made it possible, more
and more, to reach unserved populations with primary health care services. Although, in
general, health decision-makers accept the idea of comprehensive primary health care
with its multiple components, there have been many difficulties in making the transition
from semiautonomous vertical programmes, alongside a general health infrastructure, to
an integrated infrastructure capable of providing both general and specialized health care
effectively to entire populations in relation to their main needs. These difficulties have
included a variety of hurdles to be overcome administrative integration of personnel.
finances, supplies and information, training and reorientation of uni-purpose workers to
carry out a broader range of activities ; ensuring the effective maintenance of desired
special programme activities ; and mediating among the various persons and groups
affected by the changing roles and power relationships caused by the integration
progress.
These operational difficulties within countries have often. been compounded by the
continued international debate on the merits and demerits of vertical and integrated
approaches to the organization of health programmes, and the continuing preference of
some donor agencies for the support of specialized programmes with autonomous
infrastructures concentrating on a single set of activities, which can be insulated from the
broader demands of the general health services. In attempt was made to review the
evolution of the health services infrastructure in a number of countries.
INDIA HEALTHCARE TRENDS 2008
The Indian healthcare industry has grown manifold during the last few years. Although
there is a yawning divide between healthcare facilities available in rural and urban India
and in the demand and supply of healthcare services across the country, overall the Indian
healthcare infrastructure is fast improving with initiatives by the government and the
private sector. The entry of private players has further spurred the development of the
healthcare sector. The striking feature of the sector is that it has the potential to grow at a
much faster rate in the foreseeable future and will present new ' sectors of opportunity'
within healthcare, which will emerge as growth drivers. With abundant opportunities for
equipment makers and service providers to invest in curative and preventive services and
possibilities of investing in medical infrastructure and medical tourism, it becomes
imperative for providers to get a feel of what’s happening in the industry to make
informed decisions on investment options. The India Healthcare Trends 2008 aims to be
an informed view of trends and drivers for the Indian Healthcare industry by delving into
how providers like hospitals and physicians conduct their business and the issues they
face in doing so, as well as dissect it in terms of what healthcare means to the end
consumer. This study reflects the opportunities that exist, the challenges faced, emerging
trends and the future scenario of the healthcare service sector in India and provides a
comprehensive understanding of the healthcare market and practices, customer attitudes
and behavior study in India. The report will serve as a market / investment guide for
healthcare providers, investors in healthcare and allied businesses.
HEALTH SYSTEM INFRASTRUCTURE IN SUPPORT OF PRIMARY HEALTH CARE
The health system infrastructure needed for primary health care is comprised of the
physical structures and the functional capacities needed to support all primary health care
activities . This includes health services infrastructure such as facilities, including
equipment; supplies and communications; health manpower, including education,
training and supervision; planning, management and evaluation. Financing systems,
including health surveillance and programme monitoring; and possibly action-oriented
research. It is the infrastructure which makes it possible to assess a population's health
problems, to extend health care to communities and to people and groups with special
needs, to ensure that manpower is deployed according to need, and to monitor the
effectiveness of programmes. In addition to the health services infrastructure, the health
system also includes health-related infrastructure of other sectors and the more informal
community infrastructure including local leaders, health committees, voluntary
organizations, and community health workers. It is the latter which through its
interaction with the health services enables communities to become fully involved in the
planning and implementation of health activities in a health system based on primary
health care. Both the health services and the community infrastructure must be
adequately developed, and working together, to provide an adequate infrastructure for
primary health care. The range of needed structures and functional capacities is as yet
only partly developed in most health systems. The possibilities of achieving health for all
depend largely. Upon further development of this infrastructure, and improvement of its
effectiveness. Infrastructure levels. A primary health care system isolated from central
policies, technical support and logistic systems cannot be expected to function effectively
. The primary health care approach was a departure from the provider-receiver approach
of the basic health services. It is a way of planning, organizing and providing health care
and is known to yield maximum gains in health. It is a people-focused approach and is
based on the principles:
1. Equitable access according to needs, particularly, for the underserved and
disadvantaged;
2. Affordability to be maintained and sustained, thus promoting self-reliance;
3. Appropriate technology - that is scientifically sound and socially acceptable;
4. Full involvement of individuals and communities;
5. Intersectoral action for health and overall social development, and
6. Emphasis on promotive and preventive aspects.
Achieving Health for All goals requires the development of a health system infrastructure
based on the principles and strategies of health for all. The system starts with individuals,
families and communities. They are linked with the first health facility and extend to the
first referral level. This is the primary level of health care which is the foundation of
health care in a country. It is the first line of health development and is the level where
maximum gains in health are realized. Appropriately trained health personnel work
closely with personnel from other sectors and with communities for the provision of
essential health care as per the local needs and overall community development. Thus,
health is pursued as an integral component of socioeconomic development. The primary
level of health care is supported by secondary and tertiary referral facilities through a
referral system for providing more specialized services.
FINDING QUALITY HEALTHCARE SOLUTIONS: PUBLIC, PRIVATE PARTNERSHIPS
Ideally the presence of public health care should take care of both the ability to pay and
ability to process information on the quality of health care. But it so happens that
especially for those residing in the smaller and far off villages, many public services are
out of reach geographically and often such consumers are left with their needs unmet.
The private sector cannot emerge in such areas because of lack of adequate scales. In
other words, more important than the price is the issue of geographical accessibility for
many rural residents. Lack of physical infrastructure and staff both contribute to this
problem of access. While economic history is full of examples of how in such situations
some market solutions emerge that are in the interests of both providers as well as
consumers, we do not have to wait for such solutions to emerge by themselves, where
there are broadly three areas where proactive policy-making can make a difference. The
first is to expand the public provision and find ways around the staff and infrastructure
constraints. Issues of regulation and pricing then are subsumed within the system. The
problem at the policy level would be to find a way to finance it. At the administrative
level, however, the study have another serious problem, as it is difficult to imagine the
government maintaining and sustaining quality health care service provision for all. An
important policy innovation could be to enable greater private sector involvement in the
sector, while directly subsidizing the poor through health care stamps etc to transfer
resources to the poorest segments. Since the private sector is already the dominant force,
the critical issue here would be to find a viable and sustainable system of monetary
transfers to the identified poorest target group. The call for public-private partnerships in
the infrastructure sector is an urgent one and the health care sector has not been left out.
A public-private partnership of sorts has been prevalent in the health care sector from the
pre-independence period where land is allocated and credit provided at submarket rates to
private players to build healthcare facilities in return for making a few services available
to the poor free or at nominal prices. Other types of public-private partnerships such as
government financing and private provision are still largely absent in India.
Any institutionalized expansion of the role of the private sector will entail some form of
least intrusive regulation, along With a strong consumer redressal mechanism. While it is
difficult enough to foresee large-scale competent governmental administration of an
expanded healthcare mechanism, it is even more difficult to foresee effective regulation
of private sector activities. The study draw a strong conclusion, that others may disagree
with and that is, there is little the state can do to effectively regulate the practices of
private practitioners, whether legal and illegal, in rural areas. Regulation costs money and
manpower resources which are already in short supply where availability of quality care
for the poor is concerned. In other words, mechanisms that involve a greater role of the
private sector typically do not guarantee either (i) assured geographical access in the
hinterlands, or (ii) effective regulation to ensure quality health care provision.
PUBLIC PRIVATE PARTNERSHIP IN HEALTH CARE DELIVERY SYSTEM AND
GOVERNMENT’S ROLE
Since independence emphasis has been put on Primary Health Care and India has worked
continuously to improve its health care system in the last several decades. Considerable
progress has been made in expanding the public system and reducing the burden of
disease. But the government funded facilities were not enough to meet to the growing
demand of population, whether it was primary, secondary or tertiary care, which
necessitated the need for alternate source of funding in the healthcare sector. It is widely
accepted that the deficiencies in the public sector health system require significant
reform. The need for India’s health sector reform has been emphasized by successive
plan document since eighth five year plan in 1992, by 2002 National Health Policy and
by international donor agencies. The World Bank emphasized that, now is the time to
carry health sector reform in India. But there is no single strategy that would be best
option. The proposed reforms are not cheap, but the cost of not reforming is even greater.
The World Health Organization defined health sector reform as, ‘…. a sustained process
Of fundamental change in policy and institutional arrangements of health sector usually
Guided by government…’ It is designed to improve the functioning and performance of
Health sector and ultimately the health status of the people.
Reform strategy include-
1. Alternative financing
2. Institutional management
3. Public sector reform
4. Collaboration with the private sector(PPP)
After reviewing the health sector of India, the World Bank (2001) and National
commission on macroeconomics and health (2003, 2005) strongly advocated the
harshening of private sector. The private sector is not only India’s unregulated sector but
also untapped sector. Although inequitable, expensive, the private sector is easily
accessible, better managed and more efficient than its public counter parts. It is assumed
that collaboration with the private sector in the form of public private partnership will
improve equity and efficiency, accountability quality and accessibility of the entire health
system. Uttar Pradesh is the country’s largest state and we have to take it on the fast track
of development. Having realized that the biggest resource for Uttar Pradesh is its 19
crores population and that there is an urgent need to invest in human capital if the state
has to improve its ranking on Human Development Index and also help the country to
attain Millennium development Goals by 2015. Now, have to speed up the pace of
development and fulfill the aspiration of the people. Infrastructure is the biggest need of
every state. We cannot achieve the desired growth rate till there is the development of
infrastructure. Improvement in the quality of life of people should be the basis of
infrastructure development. Now it has been realized that government is unable to
provide qualitative, effective and adequate health services to the huge population of UP.
As a result people lose faith in public health system and diverted to private health
providers. But we want that people of the state should have access to have health
services. The district hospitals, operation theaters are in pathetic situation, their
instruments etc. which are rusted and environment is so dirty that one wonders if it
hygienic to get operation done here. Do the people no right to get good operation theater,
even when they are willing to pay reasonable user charges? Uttar Pradesh government or
any other Government cannot transform or modernize all the hospitals over night. It
requires huge amount of money. The private sector is now capable and confident. The
time has come now, when at this juncture we can facilitate the development of the
country by giving a new dimension and a new confidence to public private partnership.
The study can invite private sector to invest and modernize these public hospitals and use
government hospital buildings for delivering health services and allow charging some
nominal fees. The involvement of private sector in health sector is a viable option, which
is being explored by a number of states such as Tamil Nadu, Gujarat, Maharashtra, west
Bengal, Rajasthan, Punjab and Delhi to mitigate the problem of adequate resources in
curative and tertiary care services. Public private partnership is becoming a popular mode
of implementing government programmes and schemes throughout the country in all the
sectors of the economy. There are various areas, where the study consider PPP. Health
services are our biggest priority. Over the last few years there have been many initiatives
to improve the efficiency, effectiveness and equity in provision of healthcare services in
the country.
SOCIAL INFRASTRUCTURE ANALYSIS FOR THE INDIAN HEALTHCARE INDUSTRY

Indians have become increasingly healthy since the mid 1990s, as is evident from the
improvements in almost all commonly used healthcare indicators such as maternal
mortality ratio (MMR), life expectancy, infant mortality, and death rate. This is mainly
due to the country’s economic and social transformation as well as a rise in the standard
and quality of medical services and its greater accessibility. The Government has been
emphasizing on the development of the healthcare industry, especially, its infrastructure.
To this end, it has collaborated with the private sector as well as initiated healthcare-
related programs such as e-Health and telemedicine. Numerous family welfare and
healthcare programs such as national disease control receive considerable funding from
several bilateral and multilateral donor agencies. The social and infrastructural
development plays a critical role in the development of this industry. General
demographic trends greatly impact this demand-driven industry and increased industry-
specific infrastructural developments provide added impetus. India is experiencing a
continuous increase in life expectancy and a decline in the birth rate. This trend is
expected to persist over the next couple of years. The increased importance given to
medical and technical education by the Government has resulted in a qualified labor
force, which bodes well for the country’s potential as a healthcare outsourcing hub. A
possible shortage in the number of hospital beds (considering the rising healthcare needs)
will compel the industry to consider the use of remote patient monitoring systems. Frost
& Sullivan’s Healthcare Country Industry Forecast provides vital inputs for evaluating
the attractiveness of a country and its healthcare industry. Besides enabling decision
makers to assess the impact of non-market forces, it also helps in identifying new market
opportunities. This service provides a strong base for preparing contingency plans. In
addition, investors can assess industry-specific risk factors as well as conduct a more in-
depth micro research.
ANALYSIS
1. Healthcare is important areas of social infrastructure. It also covers care of the
other healthcare organization objective of which can be met through healthcare
infrastructure needs, management model that identifies problems, develops a
framework for implementation and helps to evaluate dynamically healthcare
infrastructure service performance and social security measures.
2. This study begins with an literature review of trends in the development of
health services infrastructure in recent decades. It precedes to analyses the
 implications for the organization of health services and for resource allocation
when the health services infrastructure is reviewed as part of a health system
based on primary health care.
3. The Government of India is committed to provide high quality, affordable and
accessible, preventive, curative, primitive and comprehensive health care services
to the population. But unfortunately the performance of the states on various
health parameters is not encouraging. Although an extensive infrastructural
network of Medical and Health services in the government as well as private
sectors has been created over the years,
4. Public spending on health in India has itself declined after liberalization from
1.3% of GDP in 1990 to 0.9% in 1999. Consider the contrast with the Bhore
Committee recommendation of 15% committed to health from the revenue
expenditure budget, against the WHO, which recommended 55% of GDP for
health.
5. The current annual per capita public health expenditure is no more than Rs.
160and a recent World Bank review showed that over all primary health services
account for 58% f public expenditure mostly but on salaries, and the
secondary/tertiary sector for about 38%, perhaps the greater part going to tertiary
sector, including government funded medical sector.
6. The average medical expenditure on health for both hospitalization and non-
hospitalization cases in rural areas is lower than in urban areas. However,
household income lost per treated person is much higher in the rural areas (Rs
135) than urban (Rs 96) for non-hospitalization cases. In either scenario, private
players play a dominant role. There are demonstrated differences between the
payment patterns of the rich and the poor in both inpatient and outpatient care.
7. India faces a huge shortage of trained medical personnel, including doctors,
nurses and especially paramedics, who may be more willing than doctors to live
in rural areas where access to care is limited. There is an immediate need for
medical education and training, which could provide additional opportunities for
private sector providers or public-private partnerships.
 8. The health system infrastructure needed for primary health care is comprised of
the physical structures and the functional capacities needed to support all primary
health care activities . This includes health services infrastructure such as
facilities, including equipment; supplies and communications; health manpower,
9. The social and infrastructural development plays a critical role in the development
of this industry. General demographic trends greatly impact this demand-driven
industry and increased industry-specific infrastructural developments provide
added impetus. India is experiencing a continuous increase in life expectancy and
a decline in the birth rate
CONCLUSION
1. Indian governments maintain that district health systems based on primary health
care provide an excellent practical model for health development, including an
appropriate health system infrastructure. Within this model the concerns with
accelerating the application of known and effective technologies and the concerns
with strengthening of community involvement and intersectoral action for health
are both accommodated. The district health system provides a realistic setting for
professionals and non-professionals concerned with health and social
development.
2. The private sector is certainly far more efficient in its delivery mechanism and has
been increasing its role and its outreach. In recent years 80 per cent of health care
expenditure in India, is out pocket expenditure and much it goes to private health
care providers.
3. The availability of physical health infrastructure in the states still lags behind the
National average. Apart from this, non availability of staff and medical services at
these health facilities is another issue of major concern As a result the state is
facing a great challenge to fight communicable and non communicable diseases,
4. India has built up a vast health infrastructure and manpower at primary, secondary
and tertiary care in government, voluntary and private sectors. The current doctor
population ratio is 1:1800. Tertiary hospitals in major cities are in many cases,
5. The study examined the quantum of the problem and how newer modes of
financing including Private Equity infusion and Healthcare. The concept of an
 Inflection Point suggests that there are critical points in the history of an industry
or an individual company that signal permanent and enduring change.
6. Private equity investments in India have witnessed significant growth during
2007. PE deals have increased from US$ 7.9 billion in 2006 to US$ 19.03 billion
in 2007. There were around 53 deals of over US$ 100 million as against 11 deals
in 2006. Healthcare sector attracted over US$ 448 million in year 2007.
7. According to the World Health Organization. It is estimated that 450,000
additional hospital beds will be required by 2010—an investment estimated at
$25.7 billion. The government is expected to contribute only 15-20% of the total,
providing an enormous opportunity for private players to fill the gap.
8. India faces a huge shortage of trained medical personnel, including doctors,
nurses and especially paramedics, who may be more willing than doctors to live
in rural areas where access to care is limited.
9. The current conditions of physical infrastructure, staff, access, and usage are laid
out here before identifying critical gaps and requirements in infrastructure and
services. Issues related to institutions, financing, and policy are discussed in the
context of these critical need gaps and the potential role of the private sector in
healthcare provisioning in villages is explored.
10. A public-private partnership of sorts has been prevalent in the health care sector
from the pre-independence period where land is allocated and credit provided at
submarket rates to private players to build healthcare facilities in return for
making a few services available to the poor free or at nominal prices. Other types
of public-private partnerships such as government financing and private provision
are still largely absent in India.
11. The challenges the sector faces are substantial, from the need to improve physical
infrastructure to the necessity of providing health insurance and ensuring the
availability of trained medical personnel. But the opportunities are equally
compelling, from developing new infrastructure and providing medical equipment
to delivering telemedicine solutions and conducting cost-effective clinical trials.
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 TABLES
Table- 1
Healthcare Infrastructure need in India
2008 2018 2028
Additional Beds Required 1.1 million 3.1 million 2 million
Bed / 1000 Population 0.7 to 1.7 4 5
Ratio
Additional Floor Space 880 million sq. ft 2480 million sq. ft 1600 million sq. ft.
(800 sq. ft. / bed)
Additional Land Area 20,000 acres 56,400 acres 36,400 acres
(Floor Space)

Table- 2
Healthcare infrastructure expansion in india

population Beds hospitals dispensaries

Urban 178.78 3.6 3.6
Rural 9.85 0.36 1.49
Table- 3
Percentage Villages with Access to various Health Care Facilities round the Year
Infrastructure/services % villages
PHCs 68.3
Sub-centre 43.2
Govt. dispensary 67.9
Govt. hospital 79.0
Private clinic 62.7
Private hospital 76.7
Source: RCHS Round II, 2006.