NITI Aayog proposes 100% tax exemption for philanthropy towards non-profit hospitals

Government’s policy think tank NITI Aayog has proposed provision of working capital loans with lower interest rates and 100% income-tax exemption for philanthropy towards not-for-profit hospitals for boosting healthcare infrastructure in India.

Releasing a comprehensive study on the not-for-profit hospital model in the country, on Tuesday, NITI Aayog proposed short- and long-term policy interventions—such as developing criteria to identify these hospitals, ranking them through a performance index, and promoting top hospitals for practising philanthropy, among others.

“Income-tax exemption could be increased from the current 50% exemption to 100% exemption for philanthropy toward the identified not-for-profit hospitals. This could be a catalyst in channelizing the much-needed funds to deserving hospitals,” the report said.

NITI Aayog said that the Government can consider the provision of working capital loans with lower interest rates, which would be more financially viable for the not-for-profit hospitals and would assist in adequate cash flows during times of need. “To enable higher membership at Cooperative Trust Hospitals, enabling them to achieve their goal of self-sufficiency in healthcare through self-participation, Income-tax exemption can be given for membership fees paid at Cooperative Trust Hospitals,” said the report.

The report highlighted that most of the not-for-profit hospitals reported long-pending reimbursements for the treatments of Government scheme beneficiaries, which remain uncleared despite persistent follow-ups. The timely release of these funds can be a substantial boost to their working capital for operations, the think tank said.

The report also highlights the need to use the expertise of these hospitals in managing human resources with limited finance in remote areas. “There has been relatively low investment in the expansion of the health sector in the private domain. The stimulus announced yesterday provides us an opportunity to change this situation. The report on the not-for-profit sector is a small step in that direction,” said Dr VK Paul, Member (Health), NITI Aayog.

Pointing out that not-for-profit hospitals currently account for only a small share of hospitalization cases, the report highlighted public hospitals that offer healthcare at negligible cost, are overstretched. “The burden of healthcare provision shifts to private hospitals, which generally offer healthcare at a higher cost to the patient, as they must sustain themselves,” the report said.

The study provides insights into the operation model of not-for-profit hospitals. It presents research-based findings on such hospitals—categorized under ownership and premise of service—and makes subsequent comparisons with private hospitals and health schemes of the Union government.

According to the report, private hospitals are largely divided into 'for-profit hospitals', which account for 23.3% of treated ailments, and 'not-for-profit hospitals' which account for only 1.1% of treated ailments, as of June 2018. The report highlighted that the disparity is further revealed in terms of hospitalization cases wherein for-profit hospitals account for 55.3% of in-patients, while not-for-profit hospitals account for only 2.7% of in-patients in the country, according to the findings of the NSS 75th round survey on Health in India.

Citing the survey, the report also said the cumulative cost of care at not-for-profit hospitals is lesser than for-profit hospitals by about one-fourth in the in-patient department. "This is reckoned by the package component of cost, which is approximately 20% lower, the doctor's or surgeon's charges, which are approximately 36% lower, and the major aspect being the bed charges, which are approximately 44% lower than the for-profit hospitals," it said.

NITI Aayog has been extensively studying the private-sector healthcare-delivery landscape in the country. While there exists adequate information on for-profit healthcare providers and institutions, there is a dearth of reliable and structured information on their not-for-profit counterparts, known for their tireless service in making quality healthcare accessible and affordable to everyone.

The not-for-profit hospital sector provides not only curative but also preventive healthcare. It links healthcare with social reform, community engagement, and education. It uses government resources and grants to provide cost-effective healthcare to people without being concerned about profits. However, over the years, this sector has remained understudied.

In a big-ticket economic package to tackle the anticipated third wave of covid-19, Finance minister Nirmala Sitharaman on Monday announced ₹50,000 crores coverage for health sector alone under a ₹1.1 lakh crore loan guarantee scheme for covid-19 affected sectors.

While ₹60,000 crores have been allocated for other sectors, the significant investment towards health is aimed at upscaling medical infrastructure targeting underserved areas. There will be a guarantee cover for expansion and new projects related to health and medical infrastructure in cities other than 8 metropolitan cities. The guarantee coverage will have 50% for expansion and 75% for new projects, the government announced.