The spend on healthcare infrastructure in the country is projected to grow at 5.8% annually to reach $14.2 billion by 2013, a near 50% increase over the 2006 level, according to KPMG. This forecast on the expenditure includes spends both by the government and the private sector on construction and maintenance of buildings that would house medical research, drug production or primary health care services.
Going by the 2006 data, the six large states?Maharashtra, Rajasthan, West Bengal, Uttar Pradesh, Tamil Nadu and Andhra Pradesh account for over 50% of the total expenditure on health infrastructure while 12 states combined end up spending less than 4.5% of the sum.
In fact, Maharashtra, which crossed the $1-billion mark in healthcare infra spend in 2005 individually accounts for 12% of the total expenditure, a share the state will retain even in 2013, by when the state could be spending around $1.6 billion on the healthcare infrastructure. However, when it comes to per capita spending on healthcare infrastructure all the six large states, in question, also the highest absolute spenders invest less than $15 and lag behind small states like Himachal Pradesh, Manipur and Andaman and Nicobar, the only states to have spent over $30 per capita. Also the small states, particularly the north-eastern with low bases are expected to grow the fastest with over 8% annual growth rate compared to the national average of 5.8%.
Health infrastructure is also among the healthcare sub-sectors identified by CII in a latest report that would attract large chunk of investments by private equity firms in future. The findings of these reports are also in conformity with a PwC report released in 2007 which said that 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 and an influx of medical tourists. ?Currently, India has approximately 860 beds per million population. This is only one-fifth of the world average, which is 3,960, according to the World Health Organization. It is estimated that 4,50,000 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,? the PwC report had estimated. There is a near consensus among experts that PPP is the future model to fund and operate health infrastructure.
KPMG head (markets and healthcare services) Pradip Kanakia said there is a dire need to introduce some radical reforms in the healthcare infrastructure development process-use of PPP models on a large scale, foreign investments are some which could be considered. One example of an Indian public private partnership is the Rajiv Gandhi Super Specialty Hospital at Raichur, Karnataka, which opened in 2000. This facility is the product of a partnership between the government of Karnataka and the Apollo Hospitals Group, with financial support from the Opec Fund for International Development. The objective of the PPP is to provide low-cost, super-specialty care to families below the poverty line.
The Karnataka government provided the land, hospital building and staff quarters as well as support infrastructure, such as power, water, and road connectivity. Apollo Hospitals operates the hospital with its own resources, including (among other things) medical specialists and support staff. The losses during the first three years of operation were borne by the government. Approximately 30% of the profits from the fourth year onward are to be retained by Apollo, to meet modernisation and expansion requirements. In the event there is no profit, the government is liable to pay a service charge not exceeding 3% of gross billing. Separate monthly accounts are maintained for costs incurred on patients below the poverty line.