How online procurement platforms can lead to a value-based healthcare system in India

Adoption of online procurement can bring about equality in terms of setting up healthcare facilities in such locations and ensuring smooth and regular medical supplies for serving the underserved in such locations. An insight by Medikabazaar

How online procurement platforms can lead to a value-based healthcare system in India

In India, access, quality and affordability of healthcare is a prime concern. As per a report “Medical Technology, Shaping Healthcare For All In India” by Deloitte and Confederation of Indian Industry (CII), there is a lack of spending by the government in the healthcare sector. India spends 1.3% of its GDP on healthcare, much lower than the global average of 6%. Also, just 15% of India’s population is under health insurance coverage.  Healthcare is still an out-of-pocket (OOP) expenditure, a personal expenditure borne by the people out of their own pocket. 70% of the total healthcare expenditure in India is borne by the consumers themselves as OOP.

As per the Healthcare Access and Quality (HAQ) Index 2016, India scored just 41.2 which is low in comparison to a global average of 54.4 points. Basic indicators of maternal and child mortality clearly establish this fact. Despite bearing high medical expenses the patients are not getting their desired medical outcomes and that clearly shows a lack of value in the healthcare system.

Regardless, the healthcare industry in India is projected to grow at a rate of 15% by 2020 and the industry size is expected to reach $280 billion. On charts, the Indian healthcare industry seems to be growing positively. But the question is, are we on a mission to make healthcare accessible and affordable in India? Let’s take a deeper look and identify whether there is a solution which can lead to a value-based healthcare system.

Healthcare system in India is a highly complex structure comprising of both public and private sectors, geographic diversity, and disease burdens. Also, the medical supply industry is highly fragmented and this results in faulty healthcare supply chains. One of the major costs incurred by the hospitals and medical establishments is towards the procurement of medical supplies.

Many healthcare providers are still operating through an offline procurement system, an operation which has a lot of limitations. Due to limited channels of information on products, brands, and substitutes, the hospitals are unable to take an informed decision on capital expenditure and operations expenditure purchases thus resulting in wrong purchases and massive revenue leakages. Lack of communication with medical supplies manufacturers coupled with high turnaround times or no availability for order fulfillment in tier 2, 3 and remote locations of India are some of the disadvantages of an offline procurement system.

Offline procurement platforms don’t allow hospitals to compare products. Hence, many a time, medical healthcare centers end up buying mediocre quality medical supplies at high prices adding to their bottom line which, in turn, affects patient care and finances alike. All put together, this increases the total cost of operations (TCO) for a healthcare establishment and patients bearing high medical expenditures.

To achieve parity between desired medical outcomes and medical expenses, or in other words, bring about a positive change in terms of value-based healthcare in India, healthcare providers can look at bringing down their total cost of operations. Medical supplies constitute 1/3rd of the total cost of operations in any hospital or medical establishment. By switching the medical supplies procurement process from a complex offline process to an online one, hospitals can bring about 25% efficiency in their operations expenditure.

In an online procurement platform, the customers (hospitals and medical establishments) can search for different brands selling similar products, compare prices and other features and then make an informed decision on what to purchase. Whereas in an offline system, the customers have to communicate with multiple vendors for procuring medical supplies, ask for quotations and negotiate, which makes the whole process slow and taxing.  Online procurement makes the whole process self- serving, more streamlined and transparent.

One of the biggest advantages of an Internet-based procurement platform is its ability to reach beyond geographical boundaries. Medical establishments in remote areas can also search and order medical supplies online and can receive doorstep delivery. Online procurement platforms also offer a transparent communication line with the supplier and they also consolidate essential details such as past purchases, in-process orders, and frequently bought products and give reminders to purchase well in time. All these features allow the customer to make informed choices and ultimately take a decision which is based on detailed analysis. Some online medical supplies procurement platforms have also started to provide consultation services where customers can interact with product specialists who offer recommendations and advice.

The healthcare sector has acknowledged technology and has integrated the same, which has resulted in quality and advanced diagnostic and clinical systems. However, it should be noted that these developments are only concentrated in the urban metropolitan areas of India where multi-specialty medical establishments are providing their services to a population who can afford to pay heavy medical bills.

The other side paints a very different picture. Tier 2, 3 cities and the rural areas in India are not at all benefiting from the above-mentioned developments. According to a 2017 news report, there is only 1 allopathic government doctor for 10,189 people, 1 government hospital bed for every 2,046 people and only 1 state hospital for every 90,343 people. Fewer numbers of healthcare facilities coupled with a poor doctor-patient ratio and substandard infrastructures has resulted in people getting ill more frequently and high mortality.

Adoption of online procurement can bring about equality in terms of setting up healthcare facilities in such locations and ensuring smooth and regular medical supplies for serving the underserved in such locations. By making use of such platforms, hospitals will be able to procure quality medical supplies, at the right time and right price anytime and anywhere in India, which will not only reduce revenue leakages and bring down TCOs, but also bridge the healthcare divide.

Due to a domino effect, as TCOs go down, the patients will benefit as they will pay lower medical bills and still receive quality medical service anywhere across India, thus achieving the final objective of a value-based healthcare system in India.

The article was published in the August 2018 edition of Express Healthcare

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