Indian healthcare value chain – status quo not a sustainable solution
| Date | 12 December 2017 |
| Pages | 481-506 |
| Published date | 12 December 2017 |
| DOI | https://doi.org/10.1108/JABS-09-2015-0154 |
| Author | Gopalakrishnan Narayanamurthy,Roger Moser,Yves Sutter,G. Shainesh |
| Subject Matter | Strategy,International business |
Indian healthcare value chain – status
quo not a sustainable solution
Gopalakrishnan Narayanamurthy, Roger Moser, Yves Sutter and G. Shainesh
Gopalakrishnan
Narayanamurthy is based
at the Department of
Quantitative Methods and
Operations Management,
Indian Institute of
Management, Kozhikode,
India. Roger Moser is
Director, ASIA CONNECT
Center at Research
Institute for International
Management, University
of St. Gallen, St Gallen,
Switzerland. Yves Sutter
is based at the University
of St. Gallen, St. Gallen,
Switzerland. G. Shainesh
is a Professor at the
Department of Marketing,
Indian Institute of
Management Bangalore,
Bangalore, India.
Abstract
Purpose –Indian healthcare system, especially in rural regions, faces several problems that prevent it
from achieving universal and sustainable healthcare coverage. The purpose of this paper is to capture
such problems through expert opinions and provide solution concepts that are derived from other
similar scenarios.
Design/methodology/approach –Delphi study has been conducted with 38 experts from diverse
areas related to the Indian healthcare sector. Nineteen theses were formulated based on the discussion
with experts and were reconfirmed through intensive desktop research. Finally, theses were subjected
to expert panel member’s evaluation.
Findings –The pool of arguments provided by the participating experts included 415 written
statements explaining the (dis-)agreement with the theses. The experts achieved consensus in six
theses with interquartile ranges smaller or equal to 20. The written arguments provided by experts were
summarized into five different categories, namely interrelations/dependencies in healthcare,
inequalities in healthcare, lack of proactive measures, importance of healthcare personnel and role of
government in healthcare. Finally, a framework is proposed mapping the issues identified at different
stages of the healthcare value chain. Problem-based cost allocation and hub-and-spoke model are
discussed as potential solutions for the issues identified.
Research limitations/implications –Lack of empirical and statistical data on the effective cost arising
from the present issues suggests future research to determine these expenses and therefore examine
the feasibility of applying the problem-based cost allocation framework discussed in this study.
Practical implications –Results show that merely targeting the supply side of healthcare falls short of
the mark, especially in a country, such as India, with large socio-economic differentials. Healthcare
system, hence, should be viewed from a market perspective, taking both forces of supply and demand
into consideration.
Originality/value –This study intends to allow for a comprehensive approach to identify the issues in
Indian healthcare system by reviewing the existing key studies in literature and validating it through
empirical inputs from experts in the domain. Based on the validation, a framework is proposed mapping
the issues identified at different stages of the healthcare value chain.
Keywords India, Sustainability, Base of the pyramid, Affordability, Healthcare value chain
Paper type Research paper
1. Introduction
Despite a comparatively high annual gross domestic product (GDP) growth rate and a
substantial improvement in the health situation of the Indian population since
independence, much of the developing world performs better than India in key health
parameters (Reddy et al., 2011;D’Silva, 2013;Aitken et al., 2013). The total healthcare
expenditure as a percentage of GDP is approximately 4.1 per cent in India, which is low
when compared to a global average of 10.2 per cent in 2012 (The World Bank, 2014;
Bansal and Purohit, 2013). India’s GDP has grown at a faster rate than the country’s
healthcare expenditure, which in turn is an expression of the struggle to keep pace with the
rapidly growing healthcare demand (Prinja et al., 2012). Contrary to the obligation of the
Indian state to ensure free access to healthcare, the private healthcare sector is extensively
Received 2 September 2015
Revised 12 March 2016
28 July 2016
16 September 2016
Accepted 1 October 2016
DOI 10.1108/JABS-09-2015-0154 VOL. 11 NO. 4 2017, pp. 481-506, © Emerald Publishing Limited, ISSN 1558-7894 JOURNAL OF ASIA BUSINESS STUDIES PAGE 481
involved in the provision of quality healthcare (Singh, 2013;Planning Commission
Government of India, 2013). High quality in private healthcare sector in India has led to
tremendous growth in medical tourism sector compared to those of other Asian countries
(Sarkar et al., 2016). Therefore, the Indian healthcare value chain relies heavily on a
fragmented private sector and out-of-pocket expenditure (Das et al., 2012). Srinivasan and
Chandwani (2014) forecast an increasing privatization of Indian healthcare sector which in
turn conveys that the status quo is clearly not an option to be considered for the future
(Gudwani et al., 2012). In this study, we define healthcare value chain as an entire service
chain from the input of people with symptoms to the output of cured patients with strong
post-discharge care (adapted from the value chain definition of Porter (1980)). Nodes and
supporting units that combine together to form this value chain are insurance providers,
government, hospitals, physicians, nurses, patients and manufacturers (includes
pharmaceutical, medical device and equipment).
Wide parts of the population are left with four alternatives in attaining healthcare
(Esposito et al., 2012): seeking healthcare in large private hospitals whose services are
too expensive for the Base of the Pyramid (BoP) segment, accessing health services in
public hospitals with restricted resources, choosing small private nursing homes
lacking transparent pricing schemes and quality offerings, and consulting medical
quacks without proper medical training. Numerous barriers in these four different
alternatives deny the access to healthcare, and most of the barriers are comparatively
higher for the people living at the BoP. Even though governmental initiatives like the
“National Rural Health Mission” have proven to be a success in lowering the infant and
maternal mortality rates in India (D’Silva, 2013), the operationalization of such initiatives
faces many barriers. The inadequate healthcare infrastructure, mainly nonexistent
social security and widespread distrust in public healthcare facilities, drive millions into
the medical poverty trap and further aggravate the existing disparities within the Indian
population (Chatterjee and Srinivasan, 2013;Govindarajan and Ramamurti, 2013). The
highly privatized healthcare system of India poses a major obstacle in ensuring
sustainable, universal and equitable healthcare coverage. According to Peer (2013),
the conflicting profit orientation of the private sector and the social aspects of
healthcare leads to an ethical dilemma.
In addition to the extreme poverty, there are other prevalent market imperfections that act
as barriers in Indian healthcare. Most rural markets do not have access to common
channels of information and are considered media dark (Prahalad, 2010). The low
educational background, diverse social and cultural beliefs as well as linguistic barriers
influence the purchase decisions and often result in irrational judgment. The lack of
transport infrastructure in combination with the geographical remoteness and low
population densities further limit the availability of basic necessities. Despite the low
income and higher likelihood of illness, there is a severe scarcity of formal financial
infrastructure and health insurances in BoP of India (RNHCP, 2010;Esposito et al., 2012,
Prahalad, 2010;Viswanathan et al., 2007).
The high complexity of the BoP and healthcare itself complicates the identification of the
most serious issues. Therefore, the current study attempts to identify the issues that the
Indian healthcare value chain has to overcome to ensure universal healthcare (UHC)
coverage, especially against the background of large low-income segments (BoP). To
arrive at a conceptual framework for the Delphi study, a detailed review of the relevant
literature was carried out (Section 2). Issues were then identified and discussed more
broadly and systematically by conducting a Delphi study (Sections 3 and 4). Finally, this
paper discusses possible solution concepts and lists the plausible recommendations
(Section 5). Limitations and research implications of the current study are presented in the
conclusion section (Section 6).
PAGE 482 JOURNAL OF ASIA BUSINESS STUDIES VOL. 11 NO. 4 2017
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