Healthcare in India

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Healthcare:
Reaching out to the masses

PanIIT Conclave 2010

kpmg.com/in

1

Introduction
Current state of healthcare in India

Over the last few decades, there has
been a tremendous improvement in
the quality of healthcare services in
India. This is illustrated by the
significant improvement in healthcare
indicators such as life expectancy at
birth, infant mortality rates, maternal
mortality rate, etc. over this period.

Life
expectancy
at birth
(years)

1990

2008

Male

Female

Male

Female

57

58

63

66

Source: World Health Statistics 2010

Infant mortality rate
Per 1000 live births

1994

2008

74

53

Source: National Health Profile 2009

Maternal mortality ratio
Per 100000 live-births

1999-01

2004-06

327

254

Source: National Health Profile 2009

The improvement in the healthcare indicators is
a direct result of the improved penetration of
healthcare services in terms of the increase in
the number of government and private
hospitals in India. There is a noted increase in
the number of allopathic doctors with
recognized medical qualifications, who have
registered with state medical councils.

Number of
Physicians
(Allopathic)

2005

2006

2007

2008

2009

660856

682080

708043

736743

757377

Source: National Health Profile 2009

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2

It has been observed that there is a
widespread effort to improve the
accessibility of healthcare amenities to
every strata of society. The fact that a
major part of India is rural cannot be
ignored and indispensable services
such as healthcare need to be made
available to all.

In spite of this significant development,
considerable gaps continue to exist in
the demand for and supply of quality
healthcare. This paper highlights these
gaps through:
I. International benchmarking
II. Identifying the urban – semi-urban
and rural disparity
III.Identifying the inter-state disparity.

Demand and supply analysis I:
International benchmarking
India rates poorly on even the basic
healthcare indicators when
benchmarked against not just the
developed economies, but also against
the other BRIC nations. This can be
attributed to the poor healthcare
infrastructure reflected in the low bed
density ratio, low doctor density ratio,
and poor healthcare spending.

Developed Economies

Emerging Economies

Indicator

Year

India

US

UK

Japan

Brazil

Russia

China

Life expectancy at birth (years)

2008

64

78

80

83

73

68

74

Infant mortality rate (probability of dying by age
1 per 1000 live births)

2008

52

7

5

3

18

9

18

Maternal mortality rate (per 100000 births)

2000-09

254

13

7

3

77

24

34

Hospital bed density (per 10000 population)

2000-09

9

31

39

139

24

97

30

Doctor density (per 10000 population)

2000-09

6

27

21

21

17

43

14

Births attended by skilled health personnel (percent)

2000-08

47

99

NA

100

97

100

98

Source: World Health Statistics – 2010

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

3

India is facing a serious challenge in
matching the supply of healthcare
resources with the growing demand on
account of population growth,
improving socio-economic drivers, and
the increasing disease burden of
lifestyle diseases.

Further, a major fraction of the Indian
population lacks access to even basic
amenities such as clean water and
sanitation.

Developed Economies

Emerging Economies

Indicator

Year

India

US

UK

Japan

Brazil

Russia

China

Population using improved sanitation (percent)

2008

31

100

100

100

80

87

55

Source: World Health Statistics – 2010

Demand and supply analysis II: Urban –
semi-urban and rural disparity

Indicator (2007)

Rural

Urban

The following table highlights the disparity in
healthcare indicators between the rural and
urban population.

Crude death rate

8.0

6.0

Infant mortality rate

61.0

37.0

Neo-natal mortality rate

40.0

22.0

Post-natal mortality rate

20.0

16.0

Peri-natal mortality rate

41.0

24.0

Still birth rate

9.0

8.0

This can be attributed to the lack of uniformity
in healthcare resources available in rural and
urban India. This has also been dragging down
the overall India average.

Source: National Health Profile 2009

Healthcare penetration has for a long
time been concentrated in urban areas,
particularly in metropolitan cities such
as Mumbai, Delhi, Chennai and Kolkata
and other Tier I cities.
While 70 percent of the Indian
population lives in semi-urban and rural
areas, 80 percent of the healthcare
infrastructure is built in urban areas1.
For instance, there are 369,351
government beds in urban areas and a
mere 143,069 beds in rural areas2.

Some other alarming facts about status
of healthcare infrastructure in rural
areas vis-à-vis urban areas are:3
• Rural doctors to population ratio is
lower by six times
• Rural beds to population ratio is
lower by 15 times
• Seven out of ten medicines in rural
areas are substandard / counterfeit
• Sixty six percent of the rural
population lack access to critical
medicine
• Thirty one percent of the rural
population travels for over 30
kilometers for medical treatment.

The primary reasons for underdeveloped infrastructure in the semiurban and rural areas are the lack of
investment incentives for private sector
investment, inefficiencies in the public
healthcare system and lack of a quality
human resource pool and supply and
distribution infrastructure.

1 Vaatsalya Hospitals, http://vaatsalya.com/2009/
2 National Health Profile 2009
3 Healthcare in Rural India: Challenges, Rural Technology &
Business Incubator, IITM, Chennai, March 2008
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

4

Rural areas also suffer from the lack of basic
amenities such as electricity, appropriate
drainage and sewage, etc., which further
contribute to poor hygiene and increased
susceptibility to diseases.
Although there have been various government
initiatives to supply healthcare amenities to the
rural population and also the slum dwelling
urban population, these efforts are clearly not
sufficient.

1991
Distribution of households having
safe drinking water facilities in
India (percent)

2001

Rural

Urban

Rural

Urban

55.54

81.38

73.2

90

Source: National Health Profile 2009

2001
Distribution of households having
electricity in India 2001 (percent)

Rural

Urban

Total

43.53

87.58

55.85

Source: National Health Profile 2009

Hence, the National Rural Health
Mission was initiated in 20054 in order
to resolve the issues of accessibility
and affordability of healthcare to the
population below the poverty line and
the lower and middle classes, in rural
India. The primary focus of this initiative
is on 18 states that have low public
health indicators and/or inadequate
infrastructure. These include Arunachal
Pradesh, Assam, Bihar, Chhattisgarh,
Himachal Pradesh, Jharkhand, Jammu
& Kashmir, Manipur, Mizoram,
Meghalaya, Madhya Pradesh, Nagaland,
Orissa, Rajasthan, Sikkim, Tripura,
Uttaranchal and Uttar Pradesh5. Through
the Mission, the government is working
to increase the capabilities of primary
medical facilities in rural areas, and

ease the burden of tertiary care centers
in the cities by providing equipment
and training primary care physicians in
basic surgeries.

living in slums characterized by
overcrowding, poor hygiene and
sanitation and the absence of civic
services7.

The government of India is also
providing a five-year tax holiday for new
hospitals (in Tier II and III towns)
commissioned in the period April 2008
to March 2013, in the Union Budget
2008-09, in order to boost investment
in this sector6.
The National Urban Health Mission
focuses on the healthcare needs of the
urban poor, particularly the slum
dwellers in urban areas. Nearly onethird of India’s urban population (~100
million people) are estimated to be

4 Ministry of Health and Family Welfare
5 NRHM Document 2009 on Rural Healthcare
System in India
6 Union Budget 2008-09
7 Urban Health Resource Center

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

5

Demand and supply analysis II:
Inter-state disparity

States

India is a diverse country with 28 states
and seven union territories, each
receiving different densities of rainfall,
and experiencing different weather
conditions. There is also a difference in
the socio-economic status of people,
literacy levels, living conditions and
political situations. These factors play a
significant role in the difference in the
healthcare status and resources across
states.
For instance, female life expectancy in
Kerala is the highest and approximately
16 years more than that in states such
as Uttar Pradesh and Bihar. The female
infant mortality rate in Madhya Pradesh
is approximately 7.2 times more than
that in Kerala. Similarly, the maternal
mortality rate in Rajasthan is almost
thrice that in Maharashtra, as indicative
in the table.
States such as Uttar Pradesh, Bihar,
Orissa, and Madhya Pradesh rank
poorly when compared with Kerala,
Maharashtra, Tamil Nadu, Gujarat, and
Andhra Pradesh.

Life expectancy
(Years)

Infant mortality
rates (per 1000
live births)

2002-06

2008

Maternal mortality
ratio (per 100,000
live births) mortality

2004-06
Male

Female

Male

Female

Punjab

68.4

70.4

39

43

192

Bihar

62.2

60.4

53

58

312

Uttar Pradesh

60.3

59.5

64

70

440

Rajasthan

61.5

62.3

60

65

388

Gujarat

62.9

65.2

49

51

160

Maharashtra

66

68.4

33

33

130

West Bengal

64.1

65.8

34

37

141

Karnataka

63.6

67.1

44

46

213

Madhya Pradesh

58.1

57.9

68

72

335

Orissa

59.5

59.6

68

70

303

Kerala

71.4

76.3

10

13

95

Source: National Health Profile 2009

State/UT wise number of government hospitals and beds in rural and urban areas (including CHCs) in India
State/UT

Rural Hospitals

Urban Hospitals

Total Hospitals

Projected
Population
as on
reference
period (In
thousand)

Average
Population
Served Per
Govt.
Hospital

Average
Population
Served Per
Govt.
Hospital
Bed

Reference
Period

Number

Beds

Number

Beds

Number

Beds

Punjab

72

2180

159

8440

231

10620

26391

114247

2485

01.01.2008

Bihar

NA

NA

NA

NA

1717

22494

93633

54533

4163

01.09.2008

Uttar Pradesh

397

11910

528

20550

925

32460

183282

198143

5646

01.01.2007

Rajasthan

347

11850

128

20217

475

32067

63408

133491

1977

01.01.2008

Gujarat

282

9619

91

19339

373

28958

57434

153979

1983

01.01.2010

Maharashtra

376

11280

389

38299

765

49579

109553

143207

2210

01.01.2010

West Bengal

14

2399

280

52360

294

54759

87839

298772

1604

01.01.2010

Karnataka

468

8010

451

55731

919

63741

58181

63309

913

01.01.2010

Kerala

281

13756

105

17529

386

31285

34063

88246

1089

01.01.2010

Source: National Health Profile 2009

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

6

There is also a significant disparity in number of
hospitals and hospital beds serving the
population across states.
Evidently, the average population served per
government hospital bed in states such as Uttar
Pradesh and Bihar is much higher when
compared with Kerala or West Bengal. This
indicates that the ease of availability of
healthcare facilities to a person in Kerala is
much greater as compared to a person in Uttar
Pradesh.

Case study I: Status of healthcare in
Nalanda (Bihar)

Case study II: Maternal mortality in
Assam

Nalanda district, a university town of
Bihar, has been in the news for its
increasing number of ‘hunger deaths’.

Assam has the country's highest rate
of maternal mortality10. The main reason
for this is observed to be insurgency,
affecting accessibility of healthcare
services.

In a study of 593 districts in the
country, Nalanda ranked 509 in health
indicators8.
In a field visit to Nalanda in May 2010,
World Vision India observed9:
• High out-of-pocket fees, even at
public health facilities, were
preventing people from accessing
services. There were indications of
debt bondage to landowners, due to
health costs
• Few families had child immunization
cards
• In one particular village of roughly
400 beneficiaries, inaccessible by
road, there was no doctor, no private
medical provider, no dais, and only 1
visiting accredited social health
activist

The involvement of the government
healthcare agencies and other
stakeholders is also reportedly
insufficient.
Most northeastern women are anemic
and the children are highly prone to
mumps measles rubella and other
infectitious diseases resulting from
weak immunity. This could be likely
attributed to a combination of reasons
that interplay including social issues,
insurgency, slow development, lack of
infrastructure, inadequate manpower
resources in healthcare system.

9 World Vision India – India Statistics

The World Bank estimates that India is
globally ranked 2nd in the number of
children suffering from malnutrition,
after Bangladesh, where 47 percent of
the children exhibit a degree of
malnutrition11. The number of
underweight children in India is among
the highest in the world.
Under-nutrition among children and
women in Bihar is much higher than
the national level with 54.4 percent
children being underweight and 81
percent anemic. More than half of
children (56 percent) under age five are
stunted or too short for their age12.
Children in rural areas are more likely to
be malnourished; however, even in
urban areas, almost half of children
under age five years suffer from chronic
under nutrition (48 percent)13.
Vitamin A deficiency can contribute to a
higher risk of dying from measles,
diarrhea, or malaria. The Government of
India recommends that children under
three years receive vitamin A
supplements every six months, starting
at age nine months. However, only one
in three last-born children age 12-35
months were given a vitamin A
supplement in the six months prior to
the NFHS 314.

• Virtually no access to family
planning, and no involvement of
adolescent girls in area welfare
centers.

8 MoHFW, ’Ranking and Mapping of Districts
based on socio-economic and demographic
indicators’ (2006)

Case study III: Malnutrition in India

10 National Health Profile 2009

13 World Vision India- India statistics

11 World Vision India – India Statistics

14 National Family Health Survey
(NFHS-3, 2005-06)

12 World Vision India- India statistics- Bihar fact
sheet

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

7

State of public healthcare
infrastructure
In a developing country like India, the
public sector has a critical role in
ensuring healthcare delivery to all
sections of the society. According to
the Planning Commission, outpatient
services are 20-54 percent costlier and
inpatient services 100-740 percent
costlier than public healthcare. Hence,
the role of the public sector in ensuring
accessibility cannot be emphasized
enough.
However, the current status of
healthcare infrastructure in India and
the huge regional disparity can be

primarily attributed to the poor
healthcare expenditure by the
government. The public sector accounts
for a mere 26 percent of the total
healthcare expenditure1. India’s public
health spending has increased from
0.22 percent of GDP in 1950-51 to 1.05
percent during the mid 1980s and
stagnated at a mere 1 percent of the
GDP in the recent years2. The per capita
government spending is significantly
lower than the other BRIC nations.

Indicator

India

US

UK

Japan

Brazil

Russia

China

Total expenditure on health as a percent of GDP (2007)

4.1

15.7

8.4

8

8.4

5.4

4.3

Government expenditure as a percent of total health
expenditure (2007)

26.2

45.5

81.7

81.3

41.6

64.2

44.7

Private expenditure as a percent of total health
expenditure (2007)

73.8

54.5

18.3

18.7

58.4

35.8

55.3

Per capita total expenditure on health (PPP int. USD)

109

7285

2992

2696

837

797

233

Per capita government expenditure on health at average
exchange rate (USD 2007)

11

3317

3161

2237

252

316

49

Per capita government expenditure on health (PPP int.
USD 2007)

29

3317

2446

2193

348

512

104

Source: World Health Statistics 2010

However, the government of India aims to increase healthcare expenditure to 3 percent of GDP by 2012.3

1 World Health Statistics 2010
2 National Health Profile 2009, World Health
Statistics 2010
3 Department of Health and Family Welfare
Annual Report FY10
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

8

Primary healthcare infrastructure
The primary healthcare infrastructure
has a three tier system with Sub
Centers, Primary Health Centers
(PHCs) and Community Health Centers
(CHCs) spread across rural and semiurban areas. The tertiary care
comprising multi-specialty hospitals
and medical colleges are located
almost exclusively in urban regions.

The Sub Center is the most peripheral
contact point between the Primary
Healthcare System and the community.
Hence, manpower is an important
prerequisite for the efficient functioning
of this set-up. However, as per the
table below, there is a significant
shortage of healthcare manpower in
sub centers and primary health centers.

Shortfall - Percentage of shortfall as compared to requirement based on existing
infrastructure at Sub Centers and PHCs (As on March, 2008)
60
56.8

Percenrage

50
40

39.1

30

29.1

20
10

15.1

12.4

0
Health Worker
(Female)/ Auxiliary
Nurse Midwife

Health Worker
(Male)

Lady Health Visitor/
Health Assistants
(Female)

Health Assistant
(Male)

Doctors at PHC

Source: NRHM Document 2009 on Rural Healthcare System in India

Vacancy position - percentage of sanctioned post vacant at PHCs
(as on March, 2008)
30
28.3

27.6

Percentahe

25
20

18.8
15
13.4
10
5

6.1

0
Health Worker
(Female)/ Auxiliary
Nurse Midwife

Health Worker
(Male)

Lady Health Visitor/
Health Assistants
(Female)

Health Assistant
(Male)

Doctors at PHC

Source: NRHM Document 2009 on Rural Healthcare System in India

Even out of the sanctioned posts, a considerable percentage of posts are vacant across all the levels.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

9

Need for standardization of
healthcare infrastructure
The lack of standardization of
healthcare infrastructure raises serious
concerns about quality. It is observed
that the standard of service in terms of
cost, diagnostic procedures and
therapeutic treatments differs with
different providers. This disparity
increases with the urban-rural and
interstate divide, resulting in low
customer satisfaction, unethical
practices such as longer hospital stays,
expensive treatments and drugs. One
of the most effective approaches to
cope with this disparity is to bring in
standardization of protocols as well as
costs through accreditation.
Accreditation offers several advantages
such as providing higher efficiency,
accountability, and better governance. It
can potentially greatly benefit patients
and their safety due to increased
credibility. It encourages continuous
improvement of the hard infrastructure
as well as upgradation of the medical
and para-medical staff.

In India, the National Accreditation
Board for Hospitals and Healthcare
Providers (NABH), a constituent board
of Quality Council of India (QCI) set up
with the cooperation of the Ministry of
Health & Family Welfare and the Indian
industry, sets standards for hospitals. A
complete set of standards have been
drafted by Technical Committee of the
NABH for evaluation of hospitals for
grant of accreditation4.

To further encourage application for
accreditation, India can consider
offering attractive fiscal incentives, like
several developed countries.

Although accreditation in India is
voluntary, several Indian hospitals are
increasingly seeking accreditation from
national as well as global agencies.

No. of Indian Hospitals - Accredited and Applicants
National Accreditation Board for Hospital and Healthcare Providers
NABH Accredited

51

NABH Applicants

358

Joint Commission International
Accredited

16

Source: http://www.qcin.org, http://www.jointcommissioninternational.org/JCI-Accredited-Organizations/

4 Quality Control of India Website

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KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

10

Need to use information technology
The use of Information Technology (IT)
can play a very important role in
enhancing the healthcare delivery
mechanisms. While IT applications in
the healthcare space have been
increasing in India, they are still quite
limited when compared with developed
countries. Some areas where
technology is being applied are hospital
management systems, decision
support systems that improve
diagnosis and treatment, telemedicine
and Picture Archiving and
Communication System (PACS).
Telemedicine, which is the use of IT for
delivering health services and
information over distances, has a
substantial scope for growth in India.
The use of telemedicine can greatly aid
in dealing with the shortage of
healthcare staff and improving the
penetration of healthcare infrastructure
and resources in the underserved semiurban and particularly rural areas.
Various private hospitals have adopted

telemedicine services while some have
also developed PPPs for the same;
these include Apollo, AIIMS, Arvind
Hospitals, etc. Organizations such as
Asian Heart Institute (AHI) and Indian
Space Research Organization (ISRO)
have plans in this space5. However, the
current healthcare scenario in the
country calls for the implementation of
a large scale / nationwide telemedicine
programme with a specific focus on the
underserved states.
Use of IT in healthcare improves patient
care by enabling systems and
processes to be introduced and
monitored repeatedly. However, lack of
standardization and regulations in the
sector have been the major roadblocks
in adopting IT solutions. Also, the
fragmented nature of the Indian
healthcare system has considerably
slowed down the adoption of IT in the
sector.

Need to upgrade medical education
infrastructure
Despite rapid development of medical
education infrastructure, the demandsupply gap of medical professionals
continues to widen.
Medical education infrastructure in the
country has witnessed rapid growth
during the last 19 years. The number of
medical colleges in India has been
growing at a very high rate rate, and
has more than doubled between FY92
and FY106. Correspondingly, the
number of medical admissions
(Bachelor of Medicine and Bachelor of
Surgery) has increased by around 2.8
times7. As of FY10, India had
approximately 300 medical colleges,
290 colleges for Bachelor of Dental
Surgery and 140 colleges for Master of
Dental Surgery admitting 34,595,
23520 and 2,644 students annually
respectively.

5 Netscribes Hospital Market-India, February
2009
6 National Health Profile 2009

However, despite this rapid growth, this
supply of medical personnel is grossly
insufficent to meet the estimated
requirement of doctors as seen in the
table below.
Category

Current

Required

Physicians

757377

1200000

Dental surgeons

93332

300000

There is also a shortage of nurses in
the country. It is expected that, to meet
the global average of 2.56 nurses per
1000 population in the coming 15 years,
India needs to add 1500 nursing
colleges10.

Source: National Health Profile 2009

Further, estimates indicate that around
10 percent of medical graduates go
abroad in pursuit of post graduation
courses8.It is also estimated that
approximately 60,000 Indian physicians
work in countries like US, UK and
Australia9.

7 National Health Profile 2009, KPMG Analysis
8 The Hindu, Medicine for medical education,
November 16, 2009

9 The Times of India, India short of 6 lakh
doctors, 2008
10 World health report 2006

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

11

Medical personnel concentrated in
urban areas
The demand-supply gap of medical
resources is more prominent in rural
areas. Around 74 percent of the
graduate doctors in India work in urban
settlements which account for only 28
percent of the population. Hence, the
population in rural areas remains largely
unserved11. Moreover the skewed
countrywide distribution of these
institutes results in widening this gap
even further. Sixty one percent of the
medical colleges are in the six states of
Maharashtra, Karnataka, Kerala, Tamil
Nadu, Andhra Pradesh and Puducherry,
while only 11 percent are in Bihar,
Jharkhand, Orissa and West Bengal and
the north-eastern states12. The students
studying in more developed states are
unlikely to serve their semi-urban or
rural areas after graduation where the
potential of fee income is lower as
compared with urban areas.
Further, the benefits of healthcare in a
tertiary care setting at reasonable
prices is available only to those patients
who lie within the catchment area of
the medical colleges, most of which are
set up in the urban areas12.
Lastly, almost 70 percent of the
medical colleges set up in the last five
years are in the private sector12, where
the economic motivation is overbearing
other social objective and fees are
higher and unaffordable.

Lack of qualified faculty base
The quality of medical education is
defined by the availability and quality of
teachers. The shortage of teachers is
estimated at approximately 30-40
percent in medical colleges12. The
growth in the number of teachers has
not been commensurate to the surge in
the number of medical institutions over
the last few years, thereby bringing
down the teacher-student ratio. The
shortage is more severe in the preclinical and para-clinical areas. Besides
this, there is also the quality aspect
that cannot be ignored. There are
limited formal teacher training
programmes and the absence of a
monitoring mechanism for faculty
learning. As a result, most medical
college teachers remain untrained in

modern teaching methods. All this
emulates into a static medical
education system. Therefore,
strengthening faculty development
programmes is critical for capacity
building in medical education in India.
It is important to note that all these
challenges require a massive expansion
of the education facilities with a
continuous focus on upgrading the
quality of existing infrastructure. It
therefore requires concerted efforts of
the public as well private sector.

billion by FY1515. The growth of the
market is being driven by the improving
socioeconomic and demographic
environment, favorable regulatory
environment as well as significant
marketing push by insurance
companies.
However, the growth will also depend
on the ability of the key stakeholders
viz. government, regulators, healthcare
providers, insurance companies,
NGOs/SHGs, TPAs, distribution channel
partners, health centers and the media
to strengthen the industry.

Need for health insurance
penetration
With limited public healthcare funding,
out-of-pocket spending has been forced
and become the only option for India.
As already stated earlier, the public
sector plays a small role in healthcare
financing. Hence, the private sector has
a pivotal role in financing the healthcare
expenditure in India, with out-of-pocket
expenditure accounting for a
disproportionate 90 percent funding of
the private expenditure on health. Thus,
the spending on healthcare is largely
determined by an increase in the
purchasing power of people. This
makes healthcare elusive for the lower
and middle income group, which
accounts for a majority section of the
total population. Therefore, health
insurance has a critical role in improving
access to healthcare services in India.
Increasing penetration of medical
insurance would also result in an
increased demand for quality
healthcare services.
The penetration of health insurance is
increasing over the years. The health
insurance industry is the fastest
growing segment in non-life insurance
segments. The Indian health insurance
industry is valued at INR 51 billion and
has grown at a compounded annual
growth rate of around 37 percent
(between FY02 and FY08).13
In spite of this, the coverage of health
insurance in India is merely around 10
percent of the total population.14
Overall, the health insurance industry in
India is expected to grow at a CAGR of
25-30 percent till FY15 to reach the
market size of approximately INR 280

11 Task Force on Medical Education for the
National Rural Health Mission
12 The National Medical Journal of India Vol. 23,
No. 3, 2010
13 CII KPMG Health Insurance Summit 2008
Report
14 Crisil Research Annual Hospital Review 2009
15 CII KPMG Health Insurance Summit 2008
Report

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

12

Conclusion
Public-Private Partnership – The all inclusive
way forward
In light of the current status of
healthcare in India, a Public-Private
Partnership (PPP) approach appears as
probably the only all inclusive way
forward that will address all the issues
stated in this background note. A PPP
is a synergistic model to bring together
the social objectives (of the
government) of universal healthcare
access and affordability and the
business objective of running a
profitable healthcare facility (industry).
While the public sector contributes in
terms of infrastructure development,
land acquisition, financing, etc., the
private party brings in its knowledge
and expertise of project management
and operational efficiency.
Public-private partnerships have distinct
advantages and help to achieve desired
health outcomes.

1. Creating competition:
a. Competition between the PPP
initiative facilities with other
healthcare providers would make
even the private facilities available to
the poor through reduction in their
costs
b. Greater choice of services would be
available to the poor
c. Better quality of services can be
achieved by setting up of standard
guidelines for the initiative
participants. Thus a basic minimum
level of quality of healthcare services
would be maintained. The competing
private healthcare providers would
try to improve the quality as well, to
increase/ retain their clientele
In summary, through this initiative,
the private providers may have to
compete with public sector providers
to act as agents for providing public
healthcare to the poor.

2. Achieve economies of scale and
possible cost reduction by
standardizing the services
throughout the initiative
3. Utilizing the existing capacity of the
system: It is thus much faster to
implement, as very little
infrastructure development is
needed (in many instances). The
effort is to make use of the existing
facilities, wherever feasible
4. Create synergy between the public
and private systems thereby
reducing the duplication of efforts
and wastage of funds
5. Targeting the poor: By focusing more
on the primary care aspect of
healthcare and making available
good quality healthcare services at
affordable prices, it is possible to
provide acceptable and sustainable
public healthcare even to the poorest
6. Flexibility in action: The country is
passing through a phase of health
and demographic transition.
However, this transition of health is
not uniform throughout the country.
While a few states are in early
stages of demographic transition,
and still have a high birth rate, low
utilization of public healthcare, etc.,
few states on the other end of the
spectrum, have already reached
replacement level of population
growth, having efficient public
healthcare delivery services, etc.
Thus by developing models involving
PPP and taking into cognizance the
specific needs of the states, it is
possible to address the disparity in
healthcare needs

Through the partnerships, it is
possible to provide the public with
good quality, high-tech care at
affordable prices.

The areas where private sector
contribution can prove very beneficial
are:
1 Infrastructure Development Development and strengthening of
healthcare infrastructure that is
evenly distributed geographically and
at all levels of care
2 Management and Operations Management and operation of
healthcare facilities for technical
efficiency, operational economy and
quality
3 Capacity Building and Training Capacity building for formal, informal
and continuing education of
professional, para-professional and
ancillary staff engaged in the delivery
of healthcare
4 Financing Mechanism - Creation of
voluntary as well as mandated thirdparty financing mechanisms
5 IT Infrastructure - Establishment of
national and regional IT backbones
and health data repositories for
ready access to clinical information
6 Materials Management Development of a maintenance and
supply chain for ready availability of
serviceable equipment and
appliances, and medical supplies and
sundries at the point of care.

7. The demographic transition has also
been accompanied by a
technological revolution in the
country with newer techniques,
instruments and expertise available
for healthcare service delivery.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

13

Implementation of public-private partnership: Case studies
About the Project

Initiative Name
Ayush Graham
Bhawali Project,
Nainital

• Run the project on Build -Operate-Transfer (BOT) mode
• Government will provide land measuring 10 acres to set up the
Ayush Gram at Bhawali, Nainital
• Emami Limited, will be responsible for:

Telemedicine
initiative by
Narayana
Hrudayalaya in
Karnataka

Emergency
Ambulance
Services scheme in
Tamil Nadu

-

Managing Out-Patient and In-Patient Departments

-

Interacting with local community in growing and managing the
herbal garden

-

Installing a latest version of any licensed hospital management
application software

-

Installing a latest version of any licensed drug manufacturing unit
application software

-

Maintaining detailed records of medicinal plants in Herbal Garden

• With connections by satellite, this project functions in the Coronary
Care Units (CCU) of selected district hospitals that are linked with
Narayana Hrudayalaya hospital

• Conceived by the Government of
Uttarakhand, it is the first of its kind in
India, to provide Ayurvedic, Unani and
Homeopathy services, cultivation
center for herbs and also as center for
health tourism in the form of Wellness
Centers
• Will also aid in maximizing service
availability and reduction of operations
and management cost for the
government

• Provides access to underserved or unserved areas

• Each CCU is connected to the main hospital to facilitate investigation
by specialists after ordinary doctors have examined patients

• Improve access to specialty care and
reduce both time and cost for rural and
semi-urban patients

• If a patient requires an operation, s/he is referred to the main hospital
in Bangalore; otherwise s/he is admitted to a CCU for consultation
and treatment

• Facilitate in timely diagnosis and
treatment

• This scheme is part of the World Bank aided health system
development project in Tamil Nadu

• The major cause for the high maternal
mortality is a non-medical cause - the
lack of adequate transport facilities to
carry pregnant women to health
institutions for childbirth, especially in
the tribal areas

• Seva Nilayam has been selected as the potential non-governmental
partner in the scheme
• This scheme is self-supporting through the collection of user charges
• Government supports the scheme only by supplying the vehicles
• Seva Nilayam recruits the drivers, train the staff, maintain the
vehicles, operate the program and report to the government
-

Community Health
Insurance scheme
in Karnataka

How will it help?

• The scheme is designed to reduce the
maternal mortality rate in the rural
areas of Tamil Nadu

It bears the entire operating cost of the project including
communications, equipment and medicine, and publicizing the
service in the villages, particularly the telephone number of the
ambulance service.

• Karuna Trust in collaboration with the National Health Insurance
Company and Government of Karnataka has launched a community
health insurance scheme.
• It covers the Yelundur and Narasipuram Taluks
• Scheme is fully subsidized for Scheduled Castes and Scheduled
Tribes who are below the poverty line and partially subsidized for
non-SC/ST BPL

• Improve access and utilization of
health services, to prevent
impoverishment of rural poor due to
hospitalization and health related
issues
• Establish insurance coverage for outpatient care by the people themselves.

• Poor patients are identified by field workers and health workers who
visit door-to-door to make people aware of the scheme
• Auxillary Nurse Midwives and health workers visiting a village collect
its insurance premiums and deposit them in the bank
• Annual premium is INR 22, less than INR 2 a month
• If admitted to any government hospital for treatment, an insured
member gets INR 100 per day during hospitalization –INR 50 for bedcharges and medicine and INR 50 as compensation for loss of wages
– up to a maximum of INR 2500 within a 25-day limit
• Extra payment is possible for surgery.

Source: CII-KPMG Report on 'The Emerging Role of PPP in Indian Healthcare Sector, 2008’
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

14

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Contacts
Vikram Utamsingh
Executive Director and
Head of Markets
e-Mail: [email protected]
Tel: +91 22 3090 2320
Ramesh Srinivas
Executive Director
Business Performance Services
e-Mail: [email protected]
Tel: +91 80 3065 4300
kpmg.com/in

The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that
such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one
should act on such information without appropriate professional advice after a thorough examination of the particular
situation.
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss
entity.

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