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Wednesday, March 9, 2011

Misery tax

Probably India is the only country where now citizens are taxed as punishment to fall sick.
So when you get treated in a hospital you will pay 5% tax.
Though the same is only for Airconditioned hospitals, almost every hospital has airconditioning, atleast in the OT and ICU complex. The industry has been advised and encouraged since long to go in for airconditioning keeping in mind infection control and comfort of patients.
Typically the cost of aircoinditioning infrastructure does not change drastically if some units are made devoid of airconditioning. There are many hospitals now where they provide airconditioning by default even to general class and charity catagory rooms.
Healthcare in India is unfortunately looked at a money making business, both by patients and the government. Patients are not readily willing to pay in comparison to their spend on entertainment, government is not readily willing to take measures to make the  healthcare industry commercially more attractive.

Unfortunately the healthcare EBIDTAs/PAT are among the lowest among all industries. The reason why a lot PE/VC do not find it attractive to invest in healthcare and therefore the progress of healthcare infrastructure and delivery is at a snails pace.

Instead of making healthcare cheaper by eliminating taxes, surcharges, excise, import duties and allocating more in its budget, it comes out with such irrational taxes. Tax holiday on 100 beds and above for five years wont make a great difference as margins are very low in initial years.

AND yes, why should the health industry be not making money? No institution, even the charity organisations can function if it is not self sustaining. More than 80% of healthcare spend is out of pocket in India. There is a huge demand for quality health services. There is severe manpower shortage to support the healthcare delivery. Medicines are expensive, and professionals like doctors and nurses are hard to get. Instead of focusing on mitigating this deficiency, government is trying to make a quick buck on this demand, but forgetting its larger responsibility to make quality healthcare accessible to all.

I remember a colleague of mine from IT industry replying to my question: "why majority of doctors or healthcare industry does not make much money like IT industry? Pat came the reply from him : Doctors are supposed to do social work. Doctors should not think of making money. That will be unethical. They should only heal. If one has to make money then they should not become doctors." Not to mention - I was taken aback. And unfortunately this is the majority opinion of the country at large.

One should remember that there are much larger unseen consequences of running a business where margins are low. A lot of unethical practices crop up to sustain business or it shuts shop. Either way it is derogatory for the community at large.


Sincerely,
Dr Akash Rajpal
Head HOSMAC Consultancy

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