A major study in India reveals that the average cost of a hospitalisation has grown at a CAGR of 10.1% in rural areas and 10.7% in urban areas.
IHS Life Sciences perspective | |
Significance | A major study suggests that the average cost of hospitalisation in rural and urban areas has risen faster than the rate of inflation over a 10-year period to the end of 2014. A significant difference exists between costs in urban and rural areas, with the average hospitalisation cost in the former being many times higher than in the latter. |
Implications | Higher costs in urban areas may reflect patients' ability to pay, non-communicable disease profiles, and higher operating costs. Due to challenges running a profitable private healthcare business in rural areas, patients in these areas remain reliant on deteriorating public-sector care. |
Outlook | Many pharmaceutical companies effectively treat the regions of India as countries within a country, employing different marketing strategies depending on where patients access care and their ability to pay for treatment. |
A study by the National Sample Survey Office (NSSO) on rising healthcare costs in India, cited in a report by LiveMint, found that the average cost of hospitalisation in rural areas of the country totalled INR14,935 (USD225.95) during 2014. This was significantly more than INR5,695 in 2004. The survey indicated that hospitalisation costs in rural areas rose at a compound annual growth rate (CAGR) of 10.1% over the 10-year period.
A similar pattern was seen in urban areas of India, where overall average hospitalisation costs are substantially higher than in rural ones. On average, a hospitalisation in an urban area cost INR24,436 in 2014, compared with INR8,851 in 2004. According to the study, urban hospitalisation costs increased at a CAGR of 10.7% over the period.
Although increasing numbers of patients are seeking to access private healthcare – 68% of the country's entire patient population, according to the source – the proportion of rural patients seeking to access public healthcare facilities remains near stagnant. This, the source notes, is despite government efforts to improve healthcare infrastructure in rural areas.
In terms of insurance, the source notes that 86% of rural patients do not have access to state or employee health insurance schemes. In urban areas, this proportion is 82%.
Average healthcare costs and private healthcare users | ||||
Rural | Urban | |||
State | Average cost of hospitalisation (INR) | % of patient using private healthcare facilities | Average cost of hospitalisation (INR) | % of patient using private healthcare facilities |
Andhra Pradesh | - | - | 31,242 | 78.2 |
Assam | 6,966 | 10.8 | 47,064 | 48.5 |
Delhi | 30,613 | 36.9 | 34,730 | 55 |
Haryana | 18,341 | 66.7 | 32,370 | 81.7 |
Jammu & Kashmir | 8,442 | 6.1 | 13,948 | 14.6 |
Jharkhand | 10,351 | 60.4 | 13,151 | 73.6 |
Kerala | - | - | 15,465 | 66.7 |
Maharashtra | 20,475 | 80.8 | - | - |
Odisha | 10,240 | 18.7 | 19,750 | 42 |
Punjab | 27,718 | 70.7 | - | - |
Rajasthan | - | - | 16,731 | 45.6 |
Uttar Pradesh | 18,693 | 69.8 | 31,653 | 71.7 |
Uttarakhand | 9,162 | 49.2 | - | - |
Source: LiveMint | ||||
On a state-by-state basis, there are significant differences between costs, and variations also exist between urban and rural areas in the same state. In Assam, for example, patients in urban areas paid the highest average cost for hospitalisations, at INR47,064, but the lowest average cost in rural areas, at INR6,966.
Outlook and implications
There remains a substantial difference in the quality of private healthcare facilities, with some offering healthcare of a quality comparable to that seen in Western Europe and others providing lower quality. The fact that many patients continue to access healthcare of what is at times questionable quality is perhaps unsurprising considering the decaying state of public healthcare facilities in many areas.
Despite apparent demand for private healthcare in rural areas, the fact that these are largely inhabited by poor populations makes operating a profitable business model in these markets challenging. In urban areas, the higher costs of healthcare may not be linked to demand but instead to the higher costs of operating (higher costs of land) and patients' ability to pay higher cost for treatment. Significantly, urban hospitalisations are more likely to be associated with non-communicable diseases, which are by their nature more costly to treat than communicable illnesses, which are more likely to be present at rural hospitals.
For pharmaceutical companies, gaining state-level indication of demand and healthcare costs is critical. In a country as diverse and large as India, it is difficult to use one strategy for the entire market. Indeed, each state, and rural and urban areas within these states, may require different marketing strategies targeting certain payors and care providers. Indian generics companies have already adapted to this challenge, with many of the larger domestic manufacturers marketing different brands of the same molecule in different parts of the country, reflecting patients' abilities to pay and the primary setting where they access care.