Mode 3 in healthcare exports can help India address challenges in other modes

Dr Rupa Chanda, Professor, Indian Institute of Management, Bangalore, talks about the prospects of India as a healthcare hub post-COVID, and which modes will be most promising. In her view, Mode 3 and alternative healthcare are key areas for a thrust. Simultaneously, India should also focus on identifying key markets and assessing restrictions hampering medical tourism growth.

India Business & Trade: How do you see the healthcare ecosystem, pre and post-pandemic? What would you define as the major changes in the way governments and hospitals now approach healthcare in the global context?

Dr Rupa Chanda: There are many changes, but I think the fundamental shift would be in the comfort level in terms of using digital health. The pandemic forced people to do a lot more of telemedicine, telehealth, online diagnostics, use of digital platforms for electronic health records, surveillance, monitoring, tracking, etc. There lies huge opportunity to integrate digitalization in healthcare, maybe through National Health Systems Records and others. The pandemic gave a push to that.

This is one area where I potentially see a big change, both in terms of behavioural change on the demand side, and change in management of the healthcare system via the use of digitalization.

The second, of course, is that people have understood the multi-sectorality of health with many other verticals, line ministries or other stakeholders. For example, look at how the pandemic threw up the importance of supply chains in healthcare, like production of pharmaceutical products, or even simple things like PPE kits. Linkages between trade and healthcare products were perhaps not as well appreciated before. But now, I think that people value this as part of preparedness and response, ensuring smoother & more resilient supply chains, diversification of production, looking at internal possibilities and so on.

More generally, trade and logistics of healthcare within the whole gamut of supply chain has become crucial. I don’t think that people appreciated the whole supply chain required for a single product. Even the government has understood that better now. The third change, I would say, is manpower. While we faced bottlenecks in terms of supply of diagnostics, equipment and vaccines, the importance of adequate and well-trained manpower was realized as well.

And perhaps, we also realised how to draw upon a larger reservoir of allied health workers. It got us thinking more about the capacity of our own health workforce. We’ve always been aware of it; always known that quality is an issue and it’s very non-uniform across the country. But how do we scale up with quality?

“Even more generally, health management, supply chain management, and hospital management have evolved. Now, it’s more about becoming explicitly conscious that if you don’t have these systems in place – health records, health management, use of digital facilities, manpower, supply chain, etc., the system will collapse.”

Does that mean some more investment in terms of medical education, bringing more diversity in education providers by including healthcare establishments, hospitals, etc? I think the pandemic has pushed us to think about all these and more. It’s speeded up the process that was already there for a while.

Even more generally, health management, supply chain management, and hospital management have evolved. Now, it’s more about becoming explicitly conscious that if you don’t have these systems in place – health records, health management, use of digital facilities, manpower, supply chain, etc., the system will collapse. I think it’s really made us look at the entire health sector, in a very holistic way. It’s been a rude awakening call in many senses.

India Business & Trade: How do you juxtapose this contrast where on one end, we have such deficiencies in manpower, supplies, etc., and yet India is also a leading exporter of healthcare services?

Dr Rupa Chanda: This has always been a conflict. We talk about exporting manpower and yet, if you look at the WHO’s numbers, India is actually classified as a critical shortage country. So is the Philippines, which is a big exporter of health manpower. It’s ironic, of course. India has argued that the way they do their threshold calculations for shortage is not correct. If you bring in ASHA workers, the figure is much more in synch with the demand.

But clearly, you know, the way I look at it, we don’t have to look at the two as sort of, one at the expense of other. We are already an exporter, and you cannot stop natural forces.

But if you want to be an exporter in future, regardless of that, you have to invest in the domestic health workforce, both in scale, as well as quality. That way, you benefit both the domestic and the export market. I think it is also important to see how you look at many more classes of healthcare workers, and this is also highlighted by the pandemic.

You don’t have to just talk about traditional exports of nurses and doctors. There are many other categories of healthcare workers, where there are huge opportunities to export. Many of the allied health professionals or less qualified categories of health workers can explore such opportunities, because of the demographics in other countries. So I think we need to look at these other opportunity areas, along with the overall scaling up of the domestic capacity and quality of healthcare workers. Then, it will be a win-win in both senses.

Alongside that, what is important is why are people leaving today? I think we need to look at that issue. It is not just the usual economic forces, a large part of it is also poor management of health systems, lack of career advancement and opportunities, exposure, training and so on.

And once people go, even if they just go temporarily, they don’t come back and find those opportunities. The skills they’ve acquired are not given value, so that they may be absorbed back into the system. So, there are larger things that we have to look into in terms of human resource management practices and the development of our workforce.

So, there’s homework to do here, but that doesn’t mean we cannot talk of exporting. I personally think that a lot of the export that happens today, is because people are being pushed out of the system. They are choosing to go because things don’t work that well here. So, it is not just economics driving the move. If the other factors in play could be improved with more investment in the health system, you would probably have exports. But you also wouldn’t necessarily be cutting into the best quality health workers here.

India Business & Trade: India is often seen as the final frontier for medical tourism, because everybody else is facing shortages. Also, India is unique due to its potential scalability. Is India looking at a huge opportunity in this arena and what should it be doing to achieve it?

Dr Rupa Chanda: To be honest, yes, there is an opportunity, but when you ask big hospitals and so on, do they really gear up in a big way for medical tourism? Yes, they have dedicated means, you can go to Fortis, Max and so on, you’d have super wards for foreign patients and all. We have done many kinds of surveys, but because the domestic market is so large, affluence levels are rising, and insurance coverage is also gradually picking up, more people can afford this kind of super specialty care.

Actually, their focus is not on the foreign patient. It’s very different from what I’m seeing here in Thailand, which I would say is a much more attractive medical tourist destination for specific domains like cosmetic surgery and so on. India is not the go-to-place necessarily, for medical tourism from across the world. It is there for South Asia, to some extent, but even there, we have competition from Thailand in particular. We have opportunity in Central Asia, East Africa and countries like Afghanistan.

India used to be an attractive option for the Middle East, but the latter itself is becoming a medical tourism hub. And since they have affluence, they can afford treatment in other countries. Therefore, it’s not as huge a medical tourism destination, as we think. Partly, the reason is the very size of the domestic market. We get enough from that itself.

And the differential in terms of fees is not going to make such a huge difference, unless you have large numbers. So, I differ a bit on this medical tourism thing, I think it’s an opportunity but it will never be the big thing for India’s medical exports. Mode 4 is bigger but not in the traditional sense. Most people go and settle there, so it’s not Mode 4 ultimately.

In fact, Mode 2 is a bigger opportunity, but it has not grown to the extent people think. There are other issues, as Mode 2 comes with its own complications too. This is because most of it will be out-of-pocket paying patients, but if you really want to scale this up and get the big ticket value, then it’s the insurance part that you have to get. So there’ll be issues of cross-border liability and recognition. Unless you have mutual recognition and insurance providers recognise treatments, they will not be covered.

Then there are restrictions in many countries like flying time restrictions. So, you will not be able to tap a particular market, until you can get into G2G arrangements, get some governments to recognise treatments here and accredit certain tiers of institutions where people come for various procedures.

India Business & Trade: How do you think we can make India a more attractive destination? What can we learn from competitors like Thailand?

Dr Rupa Chanda: Medical tourism goes a lot with perception. Firstly, I think the perception of India as a safe, clean, tourist-friendly place has to be well established. When I did my surveys, I found that this general perception is missing. The cost difference is large, but still, sometimes people choose not to come here just because it’s not seen as an easy country to come and get your treatment done compared to many others.

“We need to be more strategic in terms of target markets and look at particular barriers affecting the flow of patients from these countries. Maybe we can have some sort of referral arrangements – private sector establishments are already doing that.”

A lot of related facilities for visitors, families, etc, have to be improved to ensure a supportive ecosystem. I’ve heard people going through the hoops to get tourism visas for medical purposes, and so on. So people don’t report. When I talk to hospitals, they say that you have to show reason and proof. Which sick person will go through the hoops, doing all of that? So a lot of times, we don’t even know accurately what they’re putting as purpose of visit.

Thus, I think we need to be more strategic in terms of target markets and look at particular barriers affecting the flow of patients from these countries. Maybe we can have some sort of referral arrangements – private sector establishments are already doing that. I think some sort of incentives or benefits are required from the government’s side to give this more of a push. Otherwise, the industry by itself is not going to go all out and try to become a medical tourism hub. They are just inundated with enough demand in the domestic market.

India Business & Trade: Do you think Indian healthcare can effectively leverage digitisation or Mode 1 to ramp up its capabilities or overcome barriers of infrastructure for its own domestic market?

Dr Rupa Chanda: Digital health exports are always a possibility, but again, the first and foremost prerequisite is infrastructure. I always believe that unless you do the domestic capacity building, there is no basis for you to be doing exports. It will happen only in an adhoc way. So, yes, if we put more focus, especially after COVID, on the entire telehealth mission nationally and leverage some of the infrastructure created in recent years, I think it is a possibility.

In fact, I would start with just cross-border exports, in neighbouring countries. I think there is a lot of scope within the region with countries like Bhutan and Nepal. They may not be very big revenue items, but it is a start.

With cross-border telehealth, again you have regulatory issues, because unless you have mutual recognition, a doctor’s diagnosis from here will not be validated there. So, basically the person will be given a ghost diagnosis and over there, someone else will have to read the thing and sign off on it. So, you need another certification. Thus, it comes back to recognition of qualifications.

Presently, what happens with telemedicine establishments is, only those who have those qualifications can directly sign off and diagnose. This has been a bit of a challenge, actually. Then there is the liability in case of a mistake in terms of reading and diagnosis. Where do you then try out, for any mistake or malpractice? It’s a legal issue in medical tourism and in telehealth.

This basically means if you want to export more health, you need to have complementary issues addressed on the legal, insurance and logistics side. It comes back to creating that ecosystem overall.

India Business & Trade: Among the modes, which one is the most promising for India, at present?

Dr Rupa Chanda: After COVID-19, if alternatives really were to pick up in a big way, people have become much more aware of wellness and alternative therapies. If India could really put a big push on it, and this is not an area that gets covered normally anyway, by insurance, it’s a certain class of patients. This is an opportunity, I think, where we have a niche. I would actually push that and package it along with overall wellness tourism.

“To be honest, one area that doesn’t get talked about enough is Mode 3. I think that India actually has an opportunity to address many of the challenges in Modes 1, 2 and 4, if it could do more of Mode 3 exports.”

However, medical tourism after COVID-19 is also a challenge, because of the way travel restrictions come into play. But alternatives is a niche within the medical field. I think digitalization is perhaps an area, which will possibly grow more. But as I said, to start with, it will not be with a large range of markets. There has been some work but we’ve not been able to scale it up. That will require special arrangements with countries.

To be honest, one area that doesn’t get talked about enough is Mode 3. I think that India actually has an opportunity to address many of the challenges in Modes 1, 2 and 4, if it could do more of Mode 3 exports. Once you set up establishments, maybe partly locally employed, you create hubs in other places, which you then use. Of course, it’s not your direct Mode 2 export, but it actually can have a lot of spinoffs in terms of bringing patients from there, doing telehealth exports from here and Mode 4 opportunities on a real temporary basis.

But it is not as easy, because for setting up establishments, you need joint ventures, you need to know the local market and there is usually resistance from local bodies as well. We’ve seen that in Sri Lanka, for instance.

But I think there are opportunities in some of the markets, especially in Africa. If you look clearly, India is very well-appreciated for its role in healthcare and education. And in these areas, combined with telehealth as well as FDI in health, hospitals, diagnostics, etc., we could actually do a lot.

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Dr Rupa Chanda has been a faculty member in the Economics and Social Sciences Area at IIM Bangalore since 1997. She teaches Macroeconomics` and International Trade. She is currently the RBI Chair Professor in Economics and Head of the Economics and Social Sciences Area. In 2018, she briefly served as the Head, UNESCAP Sub-regional Office for South and South-West Asia, New Delhi.

She received her PhD in Economics from Columbia University and her B.A. from Harvard University. She is a recipient of several teaching awards and distinctions. Before joining IIMB, she worked as an Economist at the IMF in Washington, DC.

Her research interests concern the WTO, international trade in services, regional integration and migration. She has received research grants and has undertaken assignments for organizations such as the ILO, WHO, UNDP, UNCTAD, OECD, World Bank, ADB, and South Centre. She has served as a member of several industry and government expert committees in India and was a member of the WHO’s Expert Committee on International Health Regulations in 2015-16 and the WHO’s Expert Advisory Group, International Recruitment of Health Personnel in 2019-20. Prof. Chanda has published extensively, including books, journal articles, book chapters, and reports.