Moneycontrol Pro Panorama | Solving the hospital-insurance tangle  

The health insurance space has been a tough one.

Dear Reader,

Dr Devi Shetty-promoted Narayana Hrudayalaya has got the insurance regulator IRDAI’s permission to test out an integrated healthcare cum insurance model, or managed healthcare. This will not be the first time that a healthcare provider has dabbled in health insurance. Apollo Hospitals too had promoted an insurance business under Apollo Munich that was eventually sold to HDFC and folded under its HDFC Ergo general insurance arm. Max India sold its stake in Max Bupa to True North and the health insurance is now called Niva Bupa.

While the idea may seem an old one, the earlier ones were seen more as extensions of the group’s investments in the healthcare sector, such as diversifying into health insurance, diagnostics or pharmacy chains. These businesses would be incubated by the main holding company, but eventually have a business model independent of the parent. That is, the diagnostics and pharmacy would not necessarily be captive to the hospital chains owned by the parent. That made sense as the outside market opportunity was much larger and these businesses could become independent.

Over the years, it’s been a mixed picture. Extensions such as pharmacy chains and diagnostic chains have had to compete with stiff competition from new entrants, especially after a funding deluge saw many standalone entities emerge. The health insurance space has been a tough one anyway. But primarily, the hospitals business itself calls for significant resources, both managerial and capital. That need has increased even more, as VC/PE funds are making a beeline for the sector, investing in hospitals – chains and standalone ones. Many have exited or pared down their stakes in these ventures. The sector is seeing consolidation and hospitals are also resorting to increasing their investments in a cluster rather than spreading out to different markets.

Again, private capital’s interest in hospitals is not new, but the pace and level of investments is significant in this round. There may be a funding winter for startups, but mention hospitals and the purses open by magic. The legacy hospital chains must be wary of these developments as a well-funded competition with pressure from investors on the performance front could see more demand for the same pool of patients.

Hospitalisation costs have also risen significantly in the past 3-4 years, resulting in higher claims’ payouts being made by insurers. That, in turn, puts pressure on the health insurance companies’ performance, which then results in disputes on claims, with hapless patients caught in between. He also points out that Narayana also has a history of giving relatively affordable healthcare options, especially in its home state of Karnataka.

A managed healthcare model, as explained in an interview on the new model by Dr Shetty, published in TOI on January 8, is an innovative idea. It intends to invest Rs 150 crore in the venture and gradually onboard patients, with pre-screening and it will include coverage of pre-existing illnesses. What that means is that patients will probably need to undergo tests so that the company has a full picture of their health condition, and fix premiums accordingly, but not deny coverage in case of adverse health conditions.

But care is likely to be provided on a continuous basis and not only in the case of hospitalisation, unlike the mediclaim model, which means it could cover OPD and even investigations that can amount to a tidy sum and are not covered by health insurance unless hospitalisation takes place within a pre-determined period after the investigations were done. OPD is offered in specific policies or as an add-on in mediclaim. The claims experience under the new system should be smoother as disputes will not arise, as the hospital and insurance provider are integrated and the patient’s medical history is already documented. Premiums could also be reasonable, as a result.

These are aspects that should be attractive to patients. But there will be questions. What will the cost of such an insurance/managed healthcare package be since it’s a comprehensive coverage and not just hospitalisation insurance? Will patient acceptance be there, as it may tie them to one hospital network? What if they want to go to a different hospital for a specialised surgery? Will they need a separate health insurance policy in addition to this? What will be the co-pay amounts? Time will tell if the answers satisfy patients.

India’s healthcare problems are complex and the solutions don’t need to be a one-size-fits-all variety only. If Narayana’s initial experience proves to be good and it can be scaled up, then other healthcare institutions can follow suit with their own models. And it is likely that the medical insurance provided by general insurance companies can co-exist with this. It is also being rolled out in one of India’s affluent cities, with a large white collar population, and one that’s open to innovative solutions to traditional problems. Will Narayana crack the hospital-insurer code is the big question that patients, industry and even investors will be awaiting answers for.

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