Effect of Demonetization on Healthcare

Demonetization is a master stroke by PM Modi. It has done to Healthcare what all Transformation consultants put together couldn't achieve in 75 years.

These are few of my observations. Maybe isolated incidents and may not represent a wider trend; But this is what I saw...'pratyaksh athwa pramanit'.

1. Cash payments in Hospitals have gone Digital! Patients come and say 'cash nahin hai saab ji'. Hence acting as a filter between need and want. Will pay Digitally for only what is required and not what can be postponed. What was under the table has come overboard. Only 5% of the GDP is spent on health and 80% of this is in the form of out of pocket expenditure. Almost all of this out of pocket was cash; out of which I think 70% will get converted to Digital that will show in the books and attract relevant tax. Over 80% bed utilization is usually considered profitable. However I have seen bed utilization falling by 30% in the demonetization period. I think this could be a short term shock effect, hope not a long term trend!
2. The biggest impact is on Doctors in private practice for primary and secondary Healthcare. They can no longer hide some of the cash payments. Their cut practice will stop or be washed overboard. Labs, Pharmacy, Specialists, Hospitals have stopped paying cash [cuts] back to the practitioner. 'aap ko pata hai, cash to ab hai hi nahin Doc saab'. As per some estimates cut practice forms 80% of their income but hidden from income tax. About 60% of total health expenditure in India was paid by the common man from his own pocket. Almost all of this out of pocket was cash, out of which I think 70% will get converted to Digital that will show in the books and attract relevant tax. 
3. Sales of OPD prescriptions and OTC has become Digital! Pharmacies were already geared for Digital payments but now the % of Cash payments has gone down to minimal. This is a good thing because now the traceability of the sale has gone up. Each transaction has a unique number and can be traced by batch number. Out of all health expenditure, 72% in rural and 68% in urban areas is for buying medicines for non-hospitalised treatment. Almost all of this was cash, out of which I think 70% will get converted to Digital that will show in the books and attract relevant tax. 
4. IPD Medicines are fully Digital now. Whatever came through the HIS was Digital anyways. Now the medicines being bought directly by the patient are also Digital. Soon Pharma companies will have access to reliable Digital data for forecasting, which was a struggle thus far. Organised retail Pharmacy stores can handsomely monetize this Digital data.
5. Hospital consumables and materials are about 30% of the operations cost; where the procurement has gone Digital! Where is the cash to pay for all the material supplies? Hence forced to do direct funds transfer to the bank.
6. Medical consumables and material supplies to primary care and secondary care sector were all cash transactions. Now becoming cashless online payment. Small material suppliers risk getting wiped out as their business margin [< 8%] is lesser than the total tax liability!
7. Although P&C/Gen Insurance saw heavy FDI inflow after the amended law last year; but same didn't happen to Health Insurance thus far. This is because the Actuaries can't calculate the risk when the Indian Healthcare relies on hidden cash transactions and under the table deals. It's happening now because of demonetization. Insurance feels more comfortable dealing with claims that have a Digital footprint. i.e. Insurance is more comfortable reimbursing a Digital expense because it reduces the chances of fraud and abuse. From a Actuarial perspective the risk comes down. Full traceability. Hence I saw a large Healthcare group offering OPD Insurance cover. Now that is a commendable change! Thus far private Health Insurance coverage is between 3-5% and total Health Insurance coverage is between 14-18% of India's population; this is expected to grow exponentially because insurance becomes attractive in a clean business environment.
8. MNC Medical device OEM want to sell directly in India now. Not through dealers because the payments have become Digital and 100% FDI is allowed and overboard. As per FICCI the Medical Devices and Equipment industry, valued at US$ 2.5 billion contributes only 6% of India’s US$ 40 billion healthcare sector. It was growing at a annual rate of 15%. The need for Digital records, Digital payments and with IoT coming in, I expect it to grow @ over 20% annually.
9. Labs were already Digital ahead of other Healthcare stakeholders. Now thinking of leapfrogging to SMAC, IoT, Automation and AI in a big way. LOINC standardsapproved and notified for India! International Lab chains eyeing India as a viable market.
10. Radiology business is falling. Unnecessary imaging is going down. Traceability and transparency is reducing repeat tests. Obviously Patient benefit and Insurance wins.
11. Drug counterfeit market that was expected to be 50% of the market in India has been hit badly as it was all cash market. Pretty much struggling to survive. Obviously plugging such a leak is a huge benefit for all. Recognised Pharma companies should be celebrating. The total yearly drug spend of US$ 36.7 billion currently should see a huge jump this year as the market spend shifts from counterfeit to genuine drugs. It will be interesting to watch if this shift will benefit generic or patented drugs!
12. All the ad-hoc or lower level staff were daily wagers and are on daily or weekly cash payments. No one really knew if these daily wagers were real or existed only on paper. Salary payments under 30K per month did not attract TDS and hence were mostly used as a buffer or to siphon the black money. Now the ordinance of all Salary to be paid Digital brings all this out in the open! Going forward 'Ram lal 1, Ram lal 2, Babu Ram x, Babu Ram y' will no longer exist.
13. National Health Protection Scheme - Health Insurance cover of up to INR 1 Lakh per family for the poor and BPL has been hanging fire for a year now; But PM Modi announcing INR 6K direct benefit transfer [DBT] for every pregnant woman in the country is the last straw on the corrupt public healthcare systems back. The Govt will need to establish unique Digital Identifiers and registries for Services, Patient, Provider and Facility; hence EHR v2 and MDDS Standards notified. Where the DBT will be done by Jandhan, AADHAAR and mBanking [JAM]. This is start of the Public Health Transformation!
14. Real estate use for Healthcare is suddenly in demand! The dealers and builders are calling me and offering spaces at 75% discounted rentals, the same were unwilling to talk because they could get higher prices elsewhere. Now I tell them I dont have the cash to rent/buy.
15. Didn't you wonder - !! - when the balance sheets of large hospital/healthcare chains were showing losses year-on-year? Obviously this was a siphon going on. Demonetization wiped out the [black?] cash stores of HNI and traditional Indian business houses. Hence Demonetization has given a major blow to the investment confidence in green field and brown field hospitals and other capital intensive Healthcare businesses. Soon these siphon businesses will start getting sold out or wiped out of the game. Hence democratisation of funds creates a level playing field for new age digital healthcare business to compete with the old boys club. Let's bet on the winning horse now!
16. 80% of healthcare infrastructure is in public sector whereas 80% of healthcare spend is in the private sector. Majority of the spend in private sector was in cash. These cash based revenue sources for private Hospitals have taken a big hit. Value of volumes from Govt Insurance programs like CGHS, ECHS etc. have gone up. With demonetization and Digital payments the corruption is expected to come down significantly. Hence the public sector hospital functioning is expected to improve and give private sector hospitals a run for their money. Nalayak beta bhi ab layak ho gaya ;-)
17. India sovereign is now ready to become probably one of the largest Reinsurers in the world. Banking system is flush with unprecedented funds. Insurance companies will be fools to not notice! Health Insurance is no exception. Hence sets the stage for rolling out one of the world's largest Universal Health Coverage [UHC]. The number of Indians falling below the poverty line [BPL] every year due to health spending is anything between 2 to 7% of the nation’s population, and this total is on the rise. Hopefully UHC will stem this.

India's demographics playing in favor of shift to Digital payments. About 70% of India now is below the age of 40. Over 900 Million mobile phones in India. Over 60% are smart phones. AADHAAR has crossed over 1 Billion mark; its coverage is now at 93 percent among adults, 67 in children in the 5-18 age group and 20 percent of those aged zero to 5. Massive spread of Jan Dhan accounts, RuPay Cards in rural India, BHIM payment platform, Tax incentives for Digital payments, India's own GPS [NAVIC] are all preparations for the Digital onslaught on traditional lala and cash ka dhanda.

This year all balance sheets will show huge jump in revenue, assets and tax! win win for all. India will be soon ready for Universal Health Coverage! All the Healthcare MNC big boys are already eyeing India as it emerges from the shadows.

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Healthcare will have to learn Cashless Business! CBDT as per Amended Sec 285BA read with Rule 114E of The IT Rules 1962: has made it mandatory to report on Cash Transactions recorded on or after 01st April, 2016.

1. Tax Assessees (covered under the Tax Audit Norms) have to mandatorily report to the Authorities " Receipt of Cash Payments exceeding Rs. 2 Lacs for sale of goods or services of any Nature".

2. The FINANCIAL INSTITUTION must report cash Deposit or Cash Withdrawal (including through bearer cheques) aggregating valued to Rs. 50 Lacs or more in one F.Y. in one or more Current Account of any person."

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