Home >News >India >Centre to tweak viability gap funding model to boost health infra funding
India will need more than 600,000 beds over the next 10 years at a hospitalization rate of 5.5%, average occupancy of 72% and average length of stays of 8 days, shows health ministry data.  (Photo: HT)
India will need more than 600,000 beds over the next 10 years at a hospitalization rate of 5.5%, average occupancy of 72% and average length of stays of 8 days, shows health ministry data. (Photo: HT)

Centre to tweak viability gap funding model to boost health infra funding

  • Government to permit states to design their own model to make the proposal more lucrative
  • New guidelines aim to boost investment in social sector infra creation via public private partnership

The Union health ministry is working to bring greater private healthcare to smaller cities by fine-tuning viability gap funding (VGF) rules as India’s healthcare infrastructure struggles against the backdrop of the coronavirus pandemic.

In May, Union finance minister Nirmala Sitharaman had announced an enhanced viability gap support of 30% for building hospitals in tier-2 and tier-3 cities, up from the previous 20%.

The government set aside a total of 8,100 crore for VGF in the social sector. Under VGF, critical projects that are not financially viable get a capital subsidy from the government. Soon after VGF announcement, the health ministry indicated to the department of economic affairs that the scheme was still unattractive for the private sector.

“VGF has been successful for roads, highways and metro, but in healthcare, there have been no takers. We are collecting information about the shortfall of hospitals in tier-2 and tier-3 cities as covid-19 treatment should be widely available there as well," said Alok Saxena, joint secretary in the health ministry.

The health ministry has proposed earmarking and providing sufficient unencumbered land on lease or through bidding, facilitating permissions and clearances through special windows, compulsory empanelment of hospitals for Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and other government schemes, timely payments for services provided, and restoration of status of hospitals as industry for private hospitals being set up in tier-2 and 3 towns.

“A fully functional hospital needs quality medical equipment, maintenance, manpower, oxygen beds, nursing stations and much more. It should also have a profitable aspect with ensured patients who can pay. We have to make the guidelines lucrative for private sector to invest," Saxena said. The health ministry now plans to permit states to design their own models to make the process easier and proposal lucrative. The guidelines aim to boost private sector investment in social sector infrastructure creation under public-private partnership.

The health ministry estimates India will need 600,000 beds more over the next 10 years at a hospitalization rate of 5.5%, average occupancy of 72% and average length of stay of eight days.

“The government has offered VGF only for capital expenditure, while the healthcare sector needs funding support for operational expenditures too. Further, the high cost of manpower, poor availability of quality manpower and low paying capabilities are prime reasons that hospitals do not invest in smaller towns and cities," said Dr Alok Roy, chair, Federation of Indian Chambers of Commerce and Industry (FICCI) Health Services Committee.

“At 30% rate, VGF can invite funding of 27,000 crore. If we put this entire money into health sector, it can create 50,000 beds (considering 50 lakh for each bed). We also want to help during the health crisis, if our concerns are addressed," said Girdhar Gyani, director general, Association of Healthcare Providers-India.

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