Niti moots 100% tax exemption for donations to not-for-profit hospitals

Government think tank Niti Aayog has suggested 100 per cent income tax exemption for donations and  provision of working capital loans with lower interest rates for not-for-profit hospitals to strengthen healthcare services in India.

In a report titled 'Not-for-Profit Hospital Model in India', the Aayog also pitched for involving high performing hospitals in public private partnership (PPP) models for managing primary health care (PHCs), operations of government facilities and PSU hospitals.

"Income-tax exemption could be increased from the current 50 per cent exemption to 100 per cent exemption for philanthropy toward the identified not-for-profit hospitals.

"This could be a catalyst in channelizing the much-needed funds to deserving hospitals." it said.

According to the report, the government can consider the provision of working capital loans with lower interest rates, which would be more financially viable for not-for-profit hospitals and would assist in adequate cash flows during times of need.

It also pointed out that  most of the not-for-profit hospitals reported long-pending reimbursements for the treatment 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 report said.

It also suggested developing a mechanism to incentivise super-specialists to work in remote areas.

It pitched for formulating objective criteria such as type, size, location, level of care offered and their ownership, infrastructure and equipment expansion initiatives, community engagement initiatives along with their latest photographs/videos, and so on.

The report also stressed on need for developing mechanisms to rank not-for-profit hospitals on a performance index, creation of a rating scale based on the volume of services utilised annually, the extent of charity work done, impact on the community health indicators of the location, operational efficiency, and self-sufficiency.

"Create a national level portal/directory of these hospitals in the public domain, wherein all the not-for-profit hospitals can be listed to highlight the hospital and its functions in the public domain," it suggested.

Despite economic growth and modernization, India continues to face significant challenges of unavailability and unaffordability in healthcare services, the report said adding ,"This is substantiated by the fact that India has a lower bed density than the rest of the world."

Noting that the not-for-profit hospitals currently account for only a miniscule share of hospitalization cases, the report said 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, it added.

According to the report, private hospitals are largely divided into 'for-profit hospitals', which account for 23.3 per cent of treated ailments and 'not-for-profit hospitals' which account for only 1.1 per cent of treated ailments, as of June 2018.

It said  disparity is further revealed in terms of hospitalization cases  wherein for-profit hospitals account for 55.3 per cent of in-patients, while not-for-profit hospitals account for only 2.7 per cent 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 per cent lower, the doctor's or surgeon's charges, which are approximately 36 per cent lower and the major aspect being the bed charges, which are approximately 44 per cent lower than the for-profit hospitals,”  it said.

Speaking at the release of the report, Niti Aayog member (health) V K Paul  said investment in the expansion of the health sector in private domain has been relatively low and the recent stimulus announced by the government provides the country an opportunity to change this situation.

Finance Minister Nirmala Sitharaman on Monday announced Rs 1.5 lakh crore of additional credit for small and medium businesses, more funds for the healthcare sector, loans to tourism agencies and guides, and waiver of visa fee for foreign tourists as part of a package to support the pandemic-hit economy.

The government will also provide Rs 23,220 crore of additional funding for setting up children and paediatric care/beds at hospitals to prepare them for any emergency arising out of a possible third wave of COVID.

"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," Paul said.

The report  also highlights the need to use the expertise of these hospitals in managing human resources with limited finance in remote areas.

Photograph: PTI Photo