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Demonetization: Its Impact and Opportunity in Indian Healthcare Ecosystem The country is on the cusp of witnessing a revolution where the healthcare system would go cashless. The payment industry is in a state of flux, owing to the socio, economic, political and demographic changes driving the market.

By Dr. Nagarjun Mishra

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1946, 1978 & 2016 would go to the watershed of history, for bringing about a revolution in the Indian economy through demonetization. On the eve of 8th November 2016, the Government of India made an ingenious attempt to strike the black money hoarders and counterfeit currency suppliers. The Prime Minister made a national announcement that 500 and 1000 rupee notes would cease to be legal tender money from midnight, thereby nullifying 86% of Indian currency. As much as it did enrage a minor part of the population, it was largely considered a welcome move. Despite struggling with the cash crunch, long ATM queues and a staggering fall in the economy, the vox populi claim it to be a "masterstroke' by the government. The compatriots have an official assurance of 50 days to restore the economic equilibrium after the mighty storm of demonetization.

Healthcare businesses and organizations are contending with extraordinarily new financial, demographic, and regulatory pressures. A challenging global economy continues to strain the bottom lines of providers, payers, and pharmaceutical companies - not to mention the businesses and taxpayers who ultimately foot the bill. Tighter finances and thinning margins have made cost cutting and operational efficiency a top priority across the healthcare supply chain. It has also fuelled innovation, without compromising the end goal: patient care.

The National Sample Survey reveals that over 80% of Indian population is not covered by health insurance. Private Doctors are a one-man army, taking up the majority cases in both rural and urban areas. A Forbes report stated that the per capita healthcare expenditure in India is about $60, which is significantly less amongst the BRIC nations and trivial compared to the developed countries, considering that USA spends over $8600. The alarming fact here is that over 90% of healthcare expenditure in India is out of pocket.

Moreover, the health insurance products primarily cater to the inpatient needs, i.e., patients admitted into the hospital, whereas over 60% of healthcare expenditure and majority of healthcare transactions are out patient. In case of insurance cover, the payment is done to the Hospital in cashless manner and to the insured via reimbursement. In both the cases the instrument of transaction is NEFT or in certain cases cheque and there is no handholding of currency. Since the number of insured citizens is handful, the country did face an initial crisis during demonetization in situations wherein people did not have insurance or bank accounts. This need was well addressed to by the Government in accepting demonetized currency in Hospitals and pharmacies until 24th November 2016. Subsequent to this cut-off date, the sector, which was certainly affected, was the outpatient, wherein the Doctors and clinics were not equipped to handle digital transactions.

Since the medical facilities are cheaper compared to the other developed nations, India is a growing country in terms of medical tourism. In October 2015, India's medical tourism sector was estimated to be worth US$3 billion. It is projected to grow to $7–8 billion by 2020. These patients in super specialty hospitals have been caught in the crossfire of demonetization. The foreign nationals claim that the move has brought a catastrophic change since the Hospitals have refused to accept old currency. Being foreign nationals, they don't have an Indian account to exchange the old currency. However, this is a short-term chaos before setting the long-term order. The situation should ease out in the next quarter while the system is better equipped to handle digital transactions.

Projected outcome:

Digitization: In India, at any given point of time, there are close to 50 million people under some form of medical treatment, however, there is minimal digitization, negligible coding and no integration of data. With the need of digitizing payments, healthcare providers are looking at taking up technology empowering them with holistic solutions for better control, connectivity and understanding of their patients' health. The government is doing its bit by integrating healthcare delivery with Aadhaar card. With the ease in data availability, it would be a breeze to derive trends in healthcare industry, draw suitable analytics and strategies to optimize healthcare delivery at a macro level and ensure improved treatment outcomes at a micro level. With data at their disposal, the healthcare industry will not have to break a sweat to formulate policies and diversify their services.

Opportunity for innovation and Startups: The country is on the cusp of witnessing a revolution where the healthcare system would go cashless. The payment industry is in a state of flux, owing to the socio, economic, political and demographic changes driving the market. The industry is witnessing innovations in value chain thereby making it more fragmented. Growth spurt in the adoption of digital payments, entry of non-traditional players, technological innovations and proliferation of immediate payments are largely driving the healthcare technology industry while attempting to create a 360-degree healthcare ecosystem. More e-commerce players like wallet providers; web aggregators and online retail portals are coming into the field of distributing health products and services.

Improved insurance penetration: In India, 47% of rural citizens and 37% of urban ones borrow money or sell assets to pay medical bills. Medical cost is one of the most common reasons for rural bankruptcy. One of the reasons for saving surplus currency in certain households was to cater to unforeseen medical emergencies. Thus, we believe, that the under-penetrated health insurance sector already growing at a CAGR of 23% would receive a major push due to demonetization. The better the penetration, the more economical the cost of insurance for the end consumer, thus driving further growth of the sector.

Better reserves for Government to spend: In India, the percentage of GDP expenditure on healthcare is 4%, which is shocking, since it is lesser than certain underdeveloped countries. With more financial reserves at government's disposal due to digitization of payments and less hoarding of paper money, while the percentage expenditure on healthcare may not be altered, the overall quantum of the money spent would certainly increase. This would eventually lead to better quality Government healthcare services.

Overall, demonetization should not be considered in isolation. Now that the economy is cashless and people are learning and adapting the digital modes of payment, with Internet reaching every nook and corner of the country, India would witness a phenomenal movement in overall healthcare ecosystem, touching every citizen positively over time.

Dr. Nagarjun Mishra

CBO & CSO (Chief officer - Business and Strategy ), PurpleHealth

An Emergency Physician by education, Dr. Nagarjun comes with a wealth of experience in the Healthcare and Wellness sector. 

Prior to joining, Dr. Nagarjun was leading Health & Wellness teams of top Indian insurance companies such as Reliance General Insurance and ICICI Lombard. In addition, Dr. Nagarjun helped found one of India's first healthcare portals,

Dr. Nagarjun is an alumnus of Hyderabad Public School and pursued Emergency Medicine through Apollo Hospitals, Hyderabad.

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