The hospital market in Brazil
Despite the fact that hospital expenditure consumes more than two thirds of the Brazilian Government's entire healthcare budget, the quality and efficiency of the nation's hospital sector has up until now been relatively neglected. According to IMS, the last five years have seen much discussion on reforms but few concrete policy initiatives to support them. It seems unlikely also that the Lula administration will implement any significant developments.
The inability of many poor patients to pay for primary healthcare is expected to continue to hamper efforts to improve the early diagnosis and effective management of chronic health conditions in Brazil. Its public hospital system remains under-funded and inefficient, with pay levels in the sector often low and staff shortages common.
Drugs and equipment are also often in short supply while overcrowding is a problem in many public hospitals. As a result, patients who can afford private hospital treatment do so to avoid long queues and poor conditions.
Brazil therefore has a substantial private hospital market, while a range of not-for-profit and public/private models also exist in the secondary care sector. According to IMS only a third of the country's 7,200 hospitals are publicly owned and administered, which means government hospitals contain less than a quarter of the overall national hospital bed capacity. As a result, Secondary-Uses Service patients are widely treated in privately run facilities on a contract basis.
IMS says it believes poor coordination is a major problem in Brazil's public hospital sector. The existing system reportedly offers little scope for managers to implement financial or administrative improvements. Several reforms discussed recently include the introduction of greater autonomy at hospital level, which would offer hospitals more control over funding and administration. Following this, policies have also been discussed that would address issues of quality and efficiency, namely through the implementation of a diagnosis-related group (DRG) reimbursement system.
Over the last ten years, leading hospital companies have increased their stakes in the Brazilian market. IMS anticipates few new entrants to the sector, but believes further consolidation is likely, particularly though corporations purchasing smaller independent facilities and investing in the construction of new clinics and hospitals. Tighter regulation of private providers is also viewed as a strong driver towards consolidation.
Drug and prescribing trends vary widely between the public sector and the top end of the private hospital sector, which is a reflection of the financial status of respective patient populations and the impact of private health insurance. This trend, however, is beginning to change in the private sector as a result of in-house cost-containment strategies.
The hospital market in China
Between 2009 and 2011, China plans to construct 2,000 country hospitals and 29,000 health stations in rural areas. Such plans were announced in early 2009 as part of the government goal to have at least one hospital of "national standard" in each county. To put these figures in context, in 2007 China reportedly had 19,853 hospitals – 67.4% of which were general hospitals, 16.5% were specialised hospitals and 13.7% were traditional Chinese medicine hospitals.
According to IMS, providing affordable healthcare is one of the main challenges to China's hospital sector. Medicine for the severely ill on low income remains limited and access to expensive brands continues to depend on an individual's purchasing power.
A new funding system was introduced in 2009 aimed at reducing the public hospital sectors reliance on income from drug sales, medical supplies and examination fees. To compensate for this shortfall in income, a "compensatory mechanism" has been implemented which includes government subsidies.
For decades hospitals in China have suffered from underfunding and many are already in debt to banks for loans to invest in new facilities and equipment. The latest funding system, which erodes their income base, may therefore place hospitals under increased financial pressure and could have repercussions for distributors and eventually manufacturers.
To ensure hospitals do not compensate for this through providing unnecessary or excessive medical interventions, a pilot diagnosis-related groups-prospective payment system (DRGs-PPS) will be implemented in larger hospitals in major cities such as Beijing. The central government also appears to be considering the concept of DRGs among various proposals to improve hospital payment methods.
In stark comparison to Brazil, just 5.3% of hospital beds in China in 2007 reportedly derived from private institutions. Higher taxes and utility fees have tended to act as a disincentive for the private sector and establishing fair competition between public and private hospitals is seen as a prerequisite for promoting private hospitals. According to IMS, clearer definitions of for-profit and public service hospitals are also needed.
Foreign investment in China's hospitals has also been limited. The first joint venture hospital was opened in 1997 in Beijing by Chindex International – a US healthcare company that has since been establishing the United Family Hospitals and Clinics (UFH) network in China. A further two full-service 50 bed hospitals and five outpatient clinics have now been opened by the company, while a new 125-bed hospital in Guangzhou and a second hospital in Beijing are expected to open in 2010. The facilities are targeted at the growing affluent Chinese populations in major urban centres as well as expatriates.
IMS has also identified that Taiwanese investors are exploring opportunities in the private hospital sector in China. A new 2,000-bed hospital, for instance, has been recently opened in Xiamen by the Formosa Plastics Group, an investor in Taiwan's leading Chang Gung hospitals.
A sure factor behind such developments is China's decision to allow Taiwanese doctors with at least five years of experience to work on the mainland.
By encouraging the development of private and foreign investment in China's hospital sector, however, the nation runs the risk of losing the public sector workforce to the more attractive salaries offered at private hospitals. To counteract this, the government plans to allow doctors working in the public sector to also work in a private hospital or clinic.
The hospital market in India
India's secondary and tertiary care, especially in terms of the private sector, is primarily concentrated in urban areas. While no accurate up-to-date statistics are available, as of 2005 the nation had over 15,900 hospitals containing 875,000 beds. More than 70% of secondary care facilities derive from private hospitals, which contain 40% of the country's hospital beds. Half of all the nation's hospital admissions are the responsibility of private hospitals.
Between 2000 and 2006, public hospitals rose by more than two thirds from less than 4,600 to over 7,660. During that period, bed capacity in government-run facilities rose by a modest 14%, reaching just over 430,000 in 2006. According to IMS, the disparity between the two figures can be attributed to efforts to broaden the country's hospital sector, particular through establishing more small community and district inpatient facilities.
Similar to the situation in Brazil and China, India's primary care sector suffers from shortages of staff, equipment and supplies. Overcrowding and poor facilities means many middle income patients seek an initial diagnosis in public hospitals before opting for treatment in private facilities in spite of the obvious financial implications. Efforts are, however, being made to address some of these issues and in particular quality standards were introduced to help drive improvements. IMS has identified that mechanisms which penalise poor performers and reward those providing good quality are badly needed.
Public private partnerships (PPP) are being targeted as a means of improving India's public hospital management. According to IMS, government hospitals are increasingly contracting private operators to manage their facilities, and this is a trend which looks set to continue. Critics, however, claim patients face more substantial payments in PPP-managed facilities while the involvement of private players is also likely to have an impact on hospital procurement strategies, which will begin to affect manufacturers supplying the public hospital sector.
A scheme supported by the World Health Organization aims to bridge the gap between primary health centres and large city-based public hospitals in India by developing a network of 100-bed facilities in smaller towns. Yet again, recruiting and retaining qualified staff has proved a major problem to the progress of the scheme and IMS expects a shortage of fully trained health professionals will continue to prevent improvements to healthcare outside major cities.
Aware of the public hospital sector's shortcomings, successive Indian governments have actively promoted the expansion of the private hospital sector, which has also been strongly driven by the nation's growing middle class. IMS predicts this growth will continue in the long term.
A range of tax exemptions from central and state governments has allowed private providers to purchase land at preferential rates in return for commitments to meet quotas for free treatment of poor outpatients
and inpatients. Private hospitals also provide treatment to central state government employees and their families, which is substantially reimbursed under government-backed health insurance programmes for public sector workers.
Leading hospital chains have already invested heavily in expansion programmes in India, particularly by establishing speciality and tertiary care facilities in major metros and tier I cities and constructing new facilities in tier II cities. Some of the most prominent private hospital chains operating in India include Apollo, Fortis, the Global Hospitals Group and Manipal Health Systems. While such leading hospital chains operate to world-class standards, the standards of practice in private facilities elsewhere in India vary widely.
According to IMS, tighter regulations on private providers could trigger a restructuring of the private hospital market and force the closure of smaller poor quality facilities. At state levels, initiatives are currently being pursued that are designed to regulate private providers but draft legislation aimed at imposing minimum standards at national level is still on its way through parliament.