case study on finance and accounts department at columbia asia referral hospital by rijo stephen...

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The Columbia Asia Hospital at Brigade Gateway Interview with Dr Nandakumar Jairam

What follows is a more detailed version of the interview with Dr Nandakumar Jairam, Chairman of Columbia Asia Hospital that appeared in the latest issue of Brigade Insight. The interview was conducted by Viswa Pratap Desu (Sr. General Manager—Marketing) and Mathew Abraham (Manager—Corporate Communications) of Brigade Enterprises Ltd, on 17 December. We would like to know a little about Columbia Asia Hospital—its origin, history and how it’s come to India. Columbia Asia is an international company—currently with operations and developments in Malaysia and Vietnam. And it was about three years ago that Columbia Asia decided to come to India. We have facilities opening almost simultaneously in Delhi and Kolkata, and are expanding to the other metros and Class A cities of this country. Within a couple of years, the name Columbia Asia will be seen through the length and breadth of this country. Yes, but why India—and why specifically Bangalore? Basically, India has a rapidly emerging middle class population—one that always has a certain ‘splurge’ capacity and increase in the need for healthcare of a different kind.

In the developing and the not-so-developed countries, healthcare generally takes the shape of governmental or social methods of healthcare provisions: that is, through government hospitals or subsidised healthcare. But as the population becomes more affluent, and aspects such as health insurance and a better paying group of patients emerge, the quality of life improves and the need for cleaner, better surroundings come up. Columbia Asia witnessed this in Malaysia—and is sure it will happen in India very soon. Bangalore is a rapidly growing city with an equally vibrant and growing population. But the distribution of hospitals in Bangalore is not even. South Bangalore has a lot of hospitals, but North Bangalore is medically under-served. And so Columbia Asia decided to open its first hospital in the north of Bangalore. Subsequently of course, it has decided on starting hospitals in various other locations in India as well. How many branches of Columbia Asia hospitals do we have in Bangalore at the moment?

We have one running facility (which was Columbia Asia’s first in India) at Hebbal. The second is coming up in the Brigade Gateway project; the third and fourth are in the east and south of Bangalore—and expected to be operational in about a year’s time or so.

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How different will Columbia Asia at Gateway be from other hospitals? The Columbia Asia model is very different from other models. We always believe in keeping our beds at small numbers. All our community hospitals, like Hebbal, would be around 100 beds (of course, the hospital in Brigade Gateway is different, and I will speak about that separately.)

Now when we restrict to a 100 beds, we find that we are able to provide medical care at costs which are extremely competitive, because the investment is less and the hospital is easier to manage. In present day medical care, a large portion of the care is moving away from hospitals into the domiciliary form, so we can reduce the number of days the patient spends in the hospital. Seen as a model, this has profound relevance: we can offer healthcare at value for money. In fact, we can use the word affordable, within the realms of corporate healthcare. We also provide “evidence based” medicine. Now what is evidence based medicine? It is information collated from throughout the world to decide the method of investigation and treatment of every perceived illness. This is based on journals, text books and also other institutions which provide such information—to add to all this, we also keep the local situation in view, since what is done in the US or Europe may not be applicable to the current Indian situation at all. I am proud to say we follow this system. I am also we are proud to say that from the day of our inception, we are almost paperless. We have got a seamless electronic mechanism which takes care of not only billing and other financial requirements but also almost every aspect of patient information.

Patients are treated differently in Columbia Asia…here, the patient sees the treatment and then pays; not vice-versa. And there are no queues: people are seated, people are escorted…it’s a different feeling!

I have a few more points to add: All rooms at Columbia Asia have natural light. When you are sick, you are already depressed and if you are in a cold room with no light it adds to the depression. Plus our interiors are not like a hospital. We believe in vibrant colours. We also have ample parking and our location is strategic: on a broad road where people can come quickly into the hospital. So these are some of our differences.

One of the biggest problems of Indian hospitals throughout the country is high rates of hospital related infection. This adds to the morbidity. By morbidity we mean delayed improvement and mortality which means death of patients who come in with problem. This is a world wide problem but the percentage of hospital related infection is conventionally quite high in India. We have, I am proud to say, bought that down to extremely good levels, in keeping with international standards. For example, the air conditioning and the engineering standards of the operating rooms in our hospitals are based on American standards which are excellent.

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You mentioned, at the beginning, that all the hospitals are 100 beds but Gateway is different because I think it is 200 plus… Gateway is an entirely different model. Now in the community hospitals we take care of the routine problems that a patient has, whatever it may be: it could be to do with the heart, lungs, with babies being born, with broken bones…whatever. But some of the high level care—such as heart operations, interventional cardiology and so on—is not available in abundance in some of the other hospitals that we have started, which we refer to as referral hospitals.

Columbia Asia at Brigade Gateway has the complete complement of medical services. It is therefore double the size of our other hospitals. What are the key areas of specializations Columbia Asia will have at Brigade Gateway? Like any other hospital, will have internal medicine, general surgery, orthopedics, neurology and pediatric surgery, state-of-the-art diagnostic facilities including radiology, labs and so on.

Apart from this, we will have some very unique departments. One of these will be emergency medicine, which would provide care at your doorstep (it’s a method of treating people from the time they report sick rather than lose precious time by waiting for them to come to the hospital). We will also specialize in neurosciences, trauma and orthopedics, high risk pregnancies, critical care, transplants, gastro intestinal surgery, minimal invasive surgery, entire internals of cardiology and bypass surgery, endocrinology, bariatric surgery (for obesity and overweight) and neo-natal care ( infants and small children). We have an excellent team of people to provide all this. Have you already recruited or is the process in progress?

We have begun recruitment…it commenced soon after the foundation was laid by Brigade. Hospitals require a combination of the best infrastructure and the best skills, and I feel proud to say that the people that I have gathered—doctors, administrators and non-medical people—are indeed unique. I have people relocating directly from the United States, United Kingdom and the best of institutions in this country to serve our people. There have been recent reports on associations with the upcoming international airport…

Yes…that’s true, and we are privileged that BIA have chosen us from among all the healthcare providers in the city. We have signed an agreement with them to provide not just medical care for the people in the airport terminal, but also for the passengers who arrive at or depart from the terminal. We are also prepared for a mass disaster management—an eventuality every airport has to be prepared for.

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With the opening of medical tourism, Bangalore being one of the destinations, I am sure this definitely would be …..

While we will not say no to others, serving the world and not serving our own people is not what we want to do. Our priority is the Indian population. The hospital aims to deliver efficient and affordable healthcare in a hygienic and caring environment with the belief that every citizen has the right to proper medical facilities. We have to serve our people first. Is the “integrated enclave” concept the reason for choosing Brigade Gateway as one of the locations? For Columbia Asia, strategic locations are of high importance. As far as possible, we do not believe in starting a healthcare facility in congested areas of the city where approach and movement would be difficult. Outskirts of cities, where people are medically under-served, are our preferred locations to set up a facility.

In this light, Brigade Gateway is extremely strategic in its location—considering the amount of open space that is existent in the centre of the city. It is at the junction of three large areas of Bangalore—Yeshwanthpur, Malleshwaram and Rajajinagar—so it was an obvious choice.

People today have the ability to choose and live well; they look at cleanliness in the environment, infrastructure which they would like to have...Unfortunately in the centre of the city you cannot get all that you would like. See you may get a nice house but you may not get good surroundings, you may get a nice house but not a school close by, so on and so forth.

But an enclave provides all this. Enclaves are an emerging concept, and a place of that nature in the heart of the city is more precious than gold. I think enclaves are the way of the future and I would probably be correct in saying that we are one of the lucky few to have found such an area within the heart of the city How large a patient base will it be? Ideally, as in the case of a community hospital like Hebbal, we look at people within half an hour of driving distance from the hospital. But with Brigade Gateway, we think really far and wide. One last question: would you have some special facility for the Gateway residents? We will definitely have to involve them. We shall see what best we can do.

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Table of Contents

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METHODS OF FINANCE............................................................................................................................ 2 FINANCIAL OBJECTIVES........................................................................................................................... 2 FUNDS REQUIRED .................................................................................................................................... 3 FINANCIAL PLANNING ............................................................................................................................ 3 Policies influencing financial plan........................................................................................................ 3 Implementation of the Financial Plan................................................................................................... 3 Administrator ............................................................................................................................................................3 Finance Officer (finance controller/treasurer) ........................................................................................................4 Department head .......................................................................................................................................................4

BUDGETING .............................................................................................................................................. 4 OPERATING REVENUE BUDGET. .............................................................................................................. 5 OPERATING EXPENDITURE FORECAST.................................................................................................... 6 Salaries and wages ................................................................................................................................ 6 Supplies................................................................................................................................................. 6 Utilities ................................................................................................................................................. 7

CAPITAL BUDGET..................................................................................................................................... 7 CASH BUDGET .......................................................................................................................................... 7 CATEGORIES OF EXPENDITURE ............................................................................................................... 8 Capital vs Recurring (Revenue) ........................................................................................................... 8 Fixed vs Variable .................................................................................................................................. 8 Direct vs Indirect .................................................................................................................................. 8

FACTORS AFFECTING HOSPITAL EXPENDITURES .................................................................................. 8 Size of the Hospital ............................................................................................................................... 9 Volume of Activity................................................................................................................................ 9 Competition .......................................................................................................................................... 9 Service Intensity ................................................................................................................................... 9 Degree of Investment ............................................................................................................................ 9 Efficiency .............................................................................................................................................. 9 Design of the Hospital .......................................................................................................................... 9 Reimbursement Pattern ........................................................................................................................ 9

EXPENDITURE CONTAINMENT .............................................................................................................. 10 Cost Awareness................................................................................................................................... 10 Cost Monitoring ................................................................................................................................. 10 Cost Management ............................................................................................................................... 10

STRATEGIES FOR EXPENDITURE CONTROL .......................................................................................... 10 Decrease the cost of Inputs relative to Outputs .................................................................................. 10 Increase Output Relative to Input ...................................................................................................... 11 After the Technology........................................................................................................................... 11 Other Economy Measures................................................................................................................... 11

RATE SETTING........................................................................................................................................ 11 COST FACTORS......................................................................................................................................... 12 DETERMINING RATES............................................................................................................................ 12 Relative Values ................................................................................................................................... 12 Cost plus a percentage ........................................................................................................................ 12

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Hourly Rates....................................................................................................................................... 12 Routine Services ................................................................................................................................. 12

DEPRECIATION ....................................................................................................................................... 13 Straight line method ........................................................................................................................... 14 Accelerated Rate of Depreciation ........................................................................................................ 14

INTERNAL CONTROL.............................................................................................................................. 14 FINANCIAL INFORMATION SYSTEM ..................................................................................................... 15 INTERNAL CONTROL.............................................................................................................................. 15 REPORTS AND STATEMENTS FOR EFFECTIVE MANAGEMENT ............................................................ 15 Daily Reports ...................................................................................................................................... 15 Monthly Reports ................................................................................................................................. 15 Quarterly Reports ............................................................................................................................... 15 Half yearly Reports ............................................................................................................................. 15 Yearly Reports .................................................................................................................................... 16

REQUIREMENTS OF A CONTROL SYSTEM ............................................................................................. 16 PREPARATION OF INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET. .......................... 16 INCOME................................................................................................................................................... 17 Routine Services ................................................................................................................................. 17 Special Professional Services .............................................................................................................. 17 Free Care and Concessional Services .................................................................................................. 17 Other Income ...................................................................................................................................... 17 Non-Operating Income ....................................................................................................................... 17

EXPENDITURE ......................................................................................................................................... 18 Operating Expenditure ....................................................................................................................... 18 Other Expenses ................................................................................................................................... 18 Non-Operating Expenses.................................................................................................................... 18

BALANCE SHEET..................................................................................................................................... 18 PREPARING A BALANCE SHEET............................................................................................................. 18 Fixed Assets ........................................................................................................................................ 18 Current Assets .................................................................................................................................... 19 Specific Purpose Fund cash and Investment....................................................................................... 19 Other assets......................................................................................................................................... 19

LIABILITIES ............................................................................................................................................. 19 Current Liabilities............................................................................................................................... 19 Long term liabilities ............................................................................................................................ 20 Specific Purpose Fund ........................................................................................................................ 20

CAPITAL .................................................................................................................................................. 20

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INTRODUCTION TO THE HOSPITAL ......................................................................................................22 WHO THEY ARE...................................................................................................................................... 22 The Columbia Asia Difference ............................................................................................................ 23 Advanced technology .......................................................................................................................... 23 Excellence and trust............................................................................................................................ 23 Affordability........................................................................................................................................ 23 Proximity ............................................................................................................................................ 24 Patient focused .................................................................................................................................... 24 Specialties and Services ...................................................................................................................... 24 Facilities .............................................................................................................................................. 24 Partnerships........................................................................................................................................ 25 Some of the current ventures .............................................................................................................. 26

THE LOCATION OF THE DEPARTMENT .................................................................................................. 26 FIGURE: THE PHYSICAL STRUCTURE OF THE FINANCE BACK OFFICE ............................................... 27

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THE ORGANIZATIONAL STRUCTURE.................................................................................................... 27 FIGURE: ORGANIZATIONAL STRUCTURE ............................................................................................. 28 TECHNOLOGY USED .............................................................................................................................. 29 THE FUNCTIONS OF THE DEPARTMENT ................................................................................................ 29 Insurance Clients ................................................................................................................................ 30 Cash Clients ........................................................................................................................................ 30 Corporate Clients ................................................................................................................................ 30

ACCOUNTS PAYABLES ........................................................................................................................... 30 TREASURY ............................................................................................................................................... 31 CORPORATE ACCOUNTS........................................................................................................................ 31 PURCHASE AND STORES ........................................................................................................................ 31 INSURANCE............................................................................................................................................. 31 Public Insurance Companies .............................................................................................................. 32 Private Insurance companies .............................................................................................................. 32 Types of Health Insurance .................................................................................................................. 32 General Conditions in individual policy............................................................................................. 33 Other General conditions which are not covered under Insurance policy .......................................... 33 TPA’S who are tied-up with Columbia Asia Hospital........................................................................ 34 How to avail cashless Hospitalization at the hospital? ....................................................................... 34 What are documents required to lodge claims with TPA for reimbursement? ................................... 34 What are the standard Billing Protocols? ........................................................................................... 35 Do’s for hospital insurance coordinator while serving Insurance Patients ........................................ 35 Don’ts for hospital insurance coordinator while serving Insurance Patients..................................... 36 What are the points one must note while getting hospitalized under cashless access scheme? .......... 36 How does one get Reimbursement for pre and post hospitalization expenses under this scheme? ..... 37 What happens when patient have to undergo a treatment like dialysis, cataract when discharged on the same day?...................................................................................................................................... 37 What are Non-Medical items?............................................................................................................ 38 Few more points to be verified while dispatching the bills.................................................................. 38

CORPORATE CLIENTS ............................................................................................................................ 39 CASH MANAGEMENT ............................................................................................................................ 39 METHODS OF FINANCE.......................................................................................................................... 39 FUNDS REQUIRED .................................................................................................................................. 39 FINANCIAL PLANNING .......................................................................................................................... 39 Pre-Operations.................................................................................................................................... 39 Post-Commissioning........................................................................................................................... 40

THE BUSINESS PLAN SUBMITTED TO ASIAN DEVELOPMENT BANK FOR FUNDING BY THE

PROMOTERS OF COLUMBIA ASIA HOSPITALS (INDIA) ....................................................................... 40 I. THE PROPOSAL ................................................................................................................................... 46 II. BACKGROUND ................................................................................................................................... 46

A. Health Sector in India ................................................................................................................ 46 B. Government Policies and Plans ................................................................................................ 49 C. ADB’s Operations ....................................................................................................................... 50

1. ADB's Country Strategy ................................................................................................................................51 2. ADB's Sector Strategy ....................................................................................................................................51

III. THE BORROWER AND THE SPONSOR............................................................................................. 51 A. Background .................................................................................................................................. 51

IV. THE PROPOSED PROJECT ................................................................................................................ 52 A. Project Description ..................................................................................................................... 52 Table 1: Project Details................................................................................................................... 53 B. Project Implementation Arrangements.................................................................................... 55

1. Project Management.......................................................................................................................................55 2. Construction Management ...........................................................................................................................55 3. Project Operational Arrangements.............................................................................................................55

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C. Environmental Aspects and Social Dimensions ..................................................................... 56 D. Development Impacts................................................................................................................. 57

1. Impact, Outcome, and Output .....................................................................................................................57 2. Development Effectiveness..........................................................................................................................57

V. THE PROPOSED ASSISTANCE ........................................................................................................... 58 A. Loan .............................................................................................................................................. 58 B. Justification for ADB's Assistance ........................................................................................... 58 C. Anticorruption Policy, and Combating Money Laundering and the Financing of Terrorism ........................................................................................................................................... 60

VI. ASSURANCES.................................................................................................................................... 60 VII. RECOMMENDATION....................................................................................................................... 60

Design and Monitoring and Development Effectiveness Frameworks .................................... 62 Table A1.1: Design and Monitoring Framework..................................................................................................62 Table A1.2: Development Effectiveness Framework .............................................................................................65

Summary of Initial Environmental Examination ....................................................................... 68 A. Introduction.....................................................................................................................................................68 B. Project Description.........................................................................................................................................69 1. Project Components ......................................................................................................................................69 Table A2.1: Project Details ..........................................................................................................................69 2. Status of Compliance with Environmental Laws and Regulations ...........................................................70 3. Biomedical Waste and Liquid Wastes Management Practices...................................................................70 Table A2.2: Daily Waste Generation at Hospital in Hebbal ..........................................................................71

C. Description of the Environment.................................................................................................................72 1. General Environmental Conditions .............................................................................................................72 a. Yeshwanthpur, Bangalore...................................................................................................................72 b. Hebbal, Bangalore.................................................................................................................................73 c. Gurgaon District, National Capital Region, Delhi .........................................................................73 d. Patiala City, Punjab ..............................................................................................................................73 e. Mysore City, Karnataka .......................................................................................................................73 f. Chandigarh City, Punjab......................................................................................................................74 g. Lucknow City, Uttar Pradesh.............................................................................................................74 h. Pune City, Maharashtra.......................................................................................................................74 i. Ghaziabad, National Capital Region, Delhi .....................................................................................75 j. Ahmedabad City, Gujarat ....................................................................................................................75

2. Specific Baseline Environmental Conditions for Hospital in Yeshwanthpur ...........................................75 a. Topography, Soil and Land Use ........................................................................................................76 b. Climate ....................................................................................................................................................76 c. Air Quality ..............................................................................................................................................76 d. Noise Level.............................................................................................................................................77 e. Water Quality.........................................................................................................................................77

3. Biological Environment ................................................................................................................................77 4. Socioeconomic Environment.........................................................................................................................77

D. Anticipated Environmental Impacts and Mitigation Measures........................................................78 1. Impacts during construction ........................................................................................................................78 2. Impacts during Operations...........................................................................................................................79 a. Air and Noise Quality ..........................................................................................................................79 b. Water and Wastewater Quality .........................................................................................................79 c. Terrestrial Environment.......................................................................................................................80 d. Biomedical and Domestic Waste Management..............................................................................80

E. Institutional Requirements and Environmental Management Plan ................................................81 1. Environmental Management Plan...............................................................................................................81

F. Public Consultation and Disclosure ..........................................................................................................82 G. Findings and Recommendations ...............................................................................................................82 H. Conclusion .......................................................................................................................................................82

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Introduction One of the biggest headaches for a hospital administrator is finance. Health services used to be labour intensive. Now it ahs become both capital and labour intensive, with escalating costs, the act of balancing income and expenditure had become difficult. The demand for expenses always seems to be far higher than the income generated. The professionals and public demand costly and newer tests and equipment. The real importance of finance is often not understood till there is a serious breakdown in financial operation, just as the importance of health is not thought of till the person becomes ill. Methods of Finance

These vary depending on the type of ownership. In government hospitals these are derived almost wholly from taxes. The same is true for hospitals run my municipal or local bodies. Grants are the main sources. Very little is received by way of patient charges. In the private sector it is usually fee for service. The fees are relatively less in the non-profit voluntary hospitals whereas they tend to be high for corporate hospitals and nursing homes. There may be varying amounts of donations from philanthropic persons or organizations often for capital expenditure and sometimes for the treatment of the poor and the needy. Those still vary small insurance schemes are building up whether it be social insurance or voluntary Insurance. As a hospital administrator you have the responsibility to see that sufficient income is generated and that the income is use wisely to provide the best possible care at the lowest possible cost. Cost consciousness is almost a must for all health care organizations. Health care institutions irrespective of ownership need an adequate system of financial planning and control for better utilization of the scarce resources and to curb the rising cost of medical care. Better trained and experienced finance officers and accountants are required. Continuous support from the top administration is always a pre-requisite. Financial Objectives In Financial planning process the foremost task is to determine the financial objectives. 1. Provide financial resources for all essential services and then for other desirable activities.

2. Maintain the services within the reach of the people served by your hospital including free or concession care for the poor and the needy.

3. Improve employee satisfaction by increasing benefits such as salaries, provident fund, gratuity, pension, housing, training, loans etc.,

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4. Reduce dependency on grants, donations or contributed service. 5. Provide for the community health development work in the neighborhood if that is an institutional objective.

Funds Required 1. Regular operating income to meet salaries and wages, maintenance, materials and labour costs and other routine expenses.

2. Reserve (emergency or sinking fund) 3. Funds for training personnel. If research is the objective of the institution, funds for research.

In order to have financial stability and to maintain the basic character of the hospital, you would do well to have a fairly large endowment fund. The above do not include capital (nonrecurring) funds for building, equipment etc., Financial Planning Hospitals need both long term and short term planning. Majority of the hospitals don’t have long term (5 yrs or more) plans. A few may have often they have done as formality rather than based on analysis of trend, projection of data and evaluation of past performance and future requirements. Financial planning must be based on analysis of hospital activities, both in terms of quantity and quality of services. The most important (and difficult) Factor is to find a reasonable basis of projection of future activities. The short term plan (annual) should fall in line with the objectives of the long term plan. Policies influencing financial plan. 1. Service mix and decisions regarding specialization. 2. Pricing. 3. Free and concession care. 4. Community health and involvement in social developmental activities. 5. Training and research. 6. Growth, Expansion and Modernization

Implementation of the Financial Plan Many persons play important roles in an effective planning system Administrator

1. Assumes responsibility for implementing the plans and policies approves by the governing board/ Government/ Higher authorities.

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2. Meets with the heads of departments and others concerned to discuss the plans, policies and strategies.

3. Appoints a budget committee or designates a budget officer (generally the finance officer).

4. Assumes responsibility for the development, applying the corrections needed, control and execution of the plan within a timeframe.

Finance Officer (finance controller/treasurer) 1. Provides information about costs experience and historical trend. 2. Translates the effect of change in hospital activities – addition or modification of facilities and services.

3. Provides data on environment – population changes in the hospital service area, price trend, changes in regulations such as taxes, provident fund contributions and gratuity.

4. Translates the effect of changes in the policy, such as pay scales, allowances and perquisites

5. Compiles and collates data generated by departmental heads. 6. Provides information about financial performance variances. 7. Advices on investments and endowments. 8. Coordinates annual budget, does cash flow budgeting. 9. Monitors budgetary – actual variances.

Department head

1. Accepts responsibility for the departmental portion of the budget 2. Analyses the financial and statistical data generated by the department or supplied to him/her.

3. Studies critically the departmental operations and performances. 4. Develops indices for planning and control. 5. Assesses the operation of the department in relation to the total plans and cooperates with the total plan of the hospital.

6. Monitors and controls income and expenditure related to the departments.

Budgeting Budgeting is an important financial procedure, which must receive full attention by the administrator. Many administrators don’t like budgeting. To them budgeting represents restrictions. But well thought out budgets bring about guidance, stability, balance and direction. The administrator should not only understand full the budgeting process but also give whole hearted support to it. A Budget expresses the plan of the hospital to provide optimum care at reasonable cost in financial terms. A budget is a financial plan. It is usually a short term (annual) plan. In order to be an effective tool to 1. Provide for a

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quantitative expression of the plans of the hospital, 2. Evaluate financial performance in accordance with the plans and 3. Control costs. The budget must be planned and prepared well. Often, the tendency is to take the financial performance for the previous eight or nine months for which accounts are available, add pro – rata for the succeeding three or four months and an adhoc percentage ( say 10 to 20 %) to the total to offset inflation and make a forecast. Another method suggested is zero based budgeting. This has not caught on. Budgeting is an opportunity to consider better performance by the hospital. While planning a budget we must apply our minds to think in terms of improved quality and quantity of care. All departments and sections must cooperate in the preparation of the budget. The individual plans of the departments and sections must fit into the overall plan of the hospital. The plans must be realistic so that they can be implemented. There can be different kinds of budget. 1. Appropriation. 2. Forecast. 3. Flexible.

Government hospitals usually have appropriation budgets. They provide for a certain level of spending. Normally this level cannot be exceeded. If it becomes essential, a supplementary appropriation has to be made available. Forecast budgets are more flexible which is seen fully in the flexible budgets. It provides for variations in the level of activity. Flexibility pre-supposes, realistic standards to measure activity. Budget can be divided into 1. The operating budget. 2. The capital budget.

Operating revenue budget. In order to have a proper revenue budget, we must have full statistical data. The prediction of revenues is somewhat speculative, even with good quality data. It is related to the volume of work anticipated. Any change in work load will affect revenues. It also depends on the rate or schedule of charges. The revenue comes form the activities of the hospital. 1. Patient services. 2. Activities incidental to patient services.

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3. Income from investments. 4. Other income – donations, grants etc.,

The income from patient services represents the largest part of revenue for voluntary and private hospitals. It consists of two parts. 1. Daily service charges (room, nursing care, diet etc.,) This varies with the daily census, mix of accommodation and type of service. There may be fees for Out patient registration and / or consultation.

2. Special services ( operative procedures, investigations etc.,) There may be some deductions, such as free and concession care

Operating Expenditure forecast

Recurrent (operating) costs are required for the operation or maintenance of facilities and services. The more important costs are for salaries and wages, supplies like drugs, dressings, reagents, fuel etc., Utilities including electricity, water, telephone etc., and equipment maintenance and purchase of spare parts. And often neglected item is the budgeting for on the job training. Salaries and wages

Once we know the work load for each service unit, the staff requirement could be easily projected. From the analysis of past years data we know

• Doctor : Patient ratio • Nurse : Patient ratio

• Lab technician : Tests ratio • X-Ray technician : Examination ratio

In this manner detailed indices could be developed. The trend could be analyzed, over staffing could be avoided. The salaries have to be fixed for all the personnel. In fixing the salaries, consideration must be given to the requirements of qualifications, experience and skills, nature of work, fatigue, prevailing salaries in similar nearby hospitals etc., For certain categories the minimum wages have been fixed statutorily. These have to be implemented. In addition to salaries (Pay and allowances, as per scale), provision has to be made for provident fund contributions, Gratuity and other benefits. Supplies

Supply indices could be developed for various services, working our per OPD visit, IP day, normal and abnormal delivery, various types of operation, laboratory tests, radiograph, meals housekeeping etc.,

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Utilities There is need to know the expenditure on utilities of high consuming areas like X-Ray, Central AC, CSSD, Laundry, Kitchen and others. Maintenance Expenditure To a considerable extent it could be projected in advance Capital Budget Funds should be available for expenditure on capital (nonrecurring items). These are required for 1. Growth with new facilities being provided and 2. Replacement of obsolete, worn out equipment, furniture and machinery.

The new facilities may be by way of buildings, plant and machinery or equipment. There will be many competing requirements. Funds are never available to meet all the demands. Choice has to be made. The needs may be classified as essential and desirable. Some of the demands for those for replacement of inefficient life saving equipment have to be met. Others may be cost saving proposals. Yet others may improve conveniences and comfort. Hospital T had a number of proposals. 1. A communication system, replacing the old inefficient telephone system, 2. New building for the casuality and 3. Image intensifier. The hospital decided to install the new communication system which was given top priority. The hospital also decided to put up the building for casuality because a philanthropist offered to meet one half of the cost. The purchase of image intensifier was postponed. Cash Budget

Enough cash must be available to meet the obligations as and when they arise. There is need to maintain the right flow of cash. Yet unnecessary cash in hand must be avoided. It must be invested to yield optimum returns. This is done by cash planning. Cash receipts and disbursements must be estimated: amounts and time. Among the receipts will be the revenue for the patient services. Some of these will be paid when the bills are presented. Other bills may take time. This is so for credit bills, especially those for services rendered to employees of companies and firms,

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who have arrangements for payment. It is also true for payment form insurance organizations. Estimates should be made of other revenues. Interest on investments will fall due at certain times of the year. Investments can be so made that the flow of returns is smooth spread over, as thought best to meet the demands. The major item among disbursements is pay roll. Salaries have to be paid on the pay day. Along with salaries, other items like contributions to the provident fund have to be met. Payments have to be made for electricity and water so also insurance premiums, taxes on vehicles and property, and service contracts. Payments have to be made for supplies and expenses. Most of these payments are usually made at the beginning of the month. Good planning wil help in an even flow of cash as required. Categories of Expenditure

The hospital expenditures can be classified into the following three categories: Capital vs Recurring (Revenue) Capital costs are initial one time expenses to make available a particular service. These include expenses on building, equipment, instruments, fixtures and furniture. Recurring Costs are incurred on a continuing/ periodical annual basis. They include salaries, consumables and supplies, water, electricity, maintenance and contingent expenditures. Fixed vs Variable Fixed costs are expenditures incurred irrespective of the quantum of workload. When fixed costs are high, average cost per procedure can be brought down by increasing the number of procedures. Overheads are then shares output base, resulting in lower unit costs. Variable costs include the portion of operating costs which vary in proportion to the volume of work (number of patients serves; type and number of services provided) Direct vs Indirect Direct costs can be apportioned directly to the particular activity or procedure. Indirect costs include those miscellaneous costs which are incurred but which cannot be wholly or conventionally linked to one particular procedure. Factors Affecting Hospital Expenditures

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Size of the Hospital There is an optimum size of each type of hospital and the area it serves. As the size of the hospital increases, the range of comprehensiveness of services increase, resulting usually in a higher cost per patient per day. Volume of Activity Higher the patient turnover, higher the number of staff required and greater the total number of procedures carried out. This leads to higher total operating costs; the unit cost may be lower. Competition Competition between hospitals usually does not lower the charges to the patient. It often results in higher costs but more facilities and conveniences are provided by the more competitive hospitals. Service Intensity

Specialization leads to higher cost per patient day. High technology care warrants sophisticated, costly equipment, expensive procedures, greater use of consumables and supplies and more skilled staff. Degree of Investment Higher operating costs result when capital and fixed costs are high. Availability of costly equipments and facilities lead to greater use and higher costs to patient. Efficiency

With an efficient management system, manpower and material resources are deployed economically, resulting in a better output to input ratio. Design of the Hospital The age, location, architecture, layout type of building material and facilities provided have a bearing on maintenance costs, number of staff employed, work flow etc., and thus affect hospital expenditures. Reimbursement Pattern

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Payment of hospitalization bills by the third parties often results in rising hospital costs. Beneficiaries want to be hospitalized, even where ambulant treatment might have been sufficient or tend to remain longer in hospital. Not feeling the pinch, to play safe or to increase their revenue, might administer more procedures than necessary. Expenditure Containment There are many elements in an expenditure containment program: Cost Awareness Intensify awareness of all hospital personnel what the costs (direct and indirect) are, how can they be manages and the processes available to contain them. Cost Monitoring

Provide a mechanism to identify report and analyze actual expenditures, against budgets and standards. What are the reasons for major variations? Contrast against workload for a period. Focus on where, how much and why excess money is spent. Cost Management

Establish a responsibility system for communicating and controlling the attainment of plans, strategies, and programs involving expenditure containment. Focus on what can be done to contain costs and by whom. Motivate all personnel to contain expenditures. Strategies for Expenditure Control Decrease the cost of Inputs relative to Outputs a. Materials: All suggestions given under “Materials Management” must be followed. These include standardization, demand forecasts, inventory control, centralized and group purchases, purchase contract, periodical and preventive maintenance and avoiding pilferage. Carry out a value analysis to use lower priced and more durable substitutes of equivalent quality, which fulfill the same objective. Every effort must be made at all levels to utilize supplies in the most conscientious manner; avoid any form of wastage. Monitor consumption. Relate monthly supply – usage reports with the workload.

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b. Manpower: Periodical appraisals of job positions should review the need for existing posts, their contribution to overall objectives and possibility of amalgamation of jobs currently assigned to different individuals. Identify which category of staff can perform the tasks at an optimum of quality and cost. Allot the work to the personnel at the lower skill level, satisfying the requirements. Sometimes personnel may not be kept fully occupied but it is necessary to have them on hand. Identify ways and means of sharing the services of such an individual across departments and task. Leave should be planned to coincide with periods when the patient census is low. Increase Output Relative to Input a. Scheduling: Ensure proper scheduling of procedures. Remove bottlenecks at service areas. Smooth flow of services can lead to higher turnover without altering the inputs. b. Automation: Higher output can result from the use of automated equipment. This involves initial capital expenditure but the costs can more than be offset by savings. c. Sharing: Expensive equipment and facilities can be shared between departments of a hospital and between hospitals. This results in decreased capital investment and lower operational costs. After the Technology a. Focus on promotive and preventive care, in preference to curative services. b. Preference for ambulant care instead of hospitalization. An extension of this would be the provision of a day-care centre. c. Narrow the service mix to increase efficiency and reduce the cost per patient. Other Economy Measures

Depending on the situation, there will be many ways of increasing output and reducing costs. With good management, the Hospital Administrator can control expenditure, without compromising quality. Rate Setting

An important administrative function is to determine the schedule of charges for the services rendered. The charges must be reasonable; yet sufficient income

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must be generated. The first requirement is to find the actual total cost for providing each of the services. The fixing of rates would depend on Cost Factors There are direct and indirect costs. The direct costs include salaries and wages (including employee benefits) and cost of supplies. The indirect costs are many and have to be apportioned equitably – electricity and water, housekeeping and maintenance, depreciation and overheads. Non – cost Factors They include the philosophy of the hospitals in general and with respect to a particular service (e.g. rehabilitation), and comparison with rates in vogue in other similar hospitals in the neighborhood. Cost finding is complex. Determining the cost to the hospital of any test procedure is important though not done usually. Most often, the charges are fixed comparing the charges levied by neighboring hospitals or diagnostic centers. Not ascertaining the real cost to the hospital can lead to loss. Determining Rates

There are many methods of affixing rates. Relative Values The rates may be fixed on the basis of time and skill involved as also considering the cost of supplies. This procedure is usually adopted in fixing rates for operative and other procedures. The total cost for laboratory tests can be determined and then, the rate fixed. Cost plus a percentage

This is usually done in the pharmacy. The rate fixed must be within the maximum retail price determined by the government. Hourly Rates This method is often used to determine charges for the use of operating rooms, anesthesia and use of ventilators. Costing operating room charges by the hour is often criticized. Different surgeons operate at different speeds. Routine Services

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Room charges (including nursing care) are fixed based on the type of accommodation and facilities provided – general wards and semi – private rooms. Often the charges are fixed on a differential/ graded basis, depending on whether the patient is in the general ward or special ward. Philosophical, moral and economical issues stem such differential charges. Is it right to charge different rates for the same service provided? Is it ethical to charge higher rates, just because it is presumed that the person in the special ward can afford to pay more to offset the inability of the inability of the person in the general ward, who cannot afford to pay actual cost? The general consequences are, given the conditions in the country, it is perfectly valid to charge the richer client a little more to offset the inability of the poorer patient to pay the full charge. Rate setting is important for many purposes, including budgeting. IT should be such as to ensure adequate income for the operating and capital budgets. Rates must be revised periodically, based on changes in the cost and other factors. Depreciation Buildings, machinery, equipments, furniture, vehicles and other assets are acquired by making sizable investment. Each of these assets has limited life span and shall be unusable and obsolete after carrying periods. Depreciation accounts for that part of value of capital assets which are considered “used up” during the accounting year. It has a number of important implications. Although it is considered as expenditure, there is no ‘cash shield’. As such, while analyzing the sources and uses of funds or cash flow it adds up to the flow of cash toll such time the amount is invested as depreciation fund. Depreciation was considered as a provision to replace the assets which become unusable over a period of time. For this to occur, the amount has to be funded. The more modern view is that the assets can be imagined as a ‘bundle of future services”, to be used over a period of their usefulness. Accordingly, the process of charging depreciation is the mode of recovering the cost of expiration of the asset over a period. Depreciation is the allocation of depreciable amount of an asset over its estimates useful life. Depreciable assets are assets which

• Are expected to be used during more than one accounting period; • Have a limited useful life; and

• Are held for use in the production or supply of gods and services. Depreciated amount of a depreciable asset is its historical cost less residual value. There are many ways of calculating depreciation.

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Straight line method The asset value is depreciated by a fixed equal annual amount for the entire life span of the asset. This method has two distinct disadvantages. First, the cost of repair and maintenance of an asset is negligible during the initial years and keeps on increasing during the later years. By following the straight line method, for the same equipment and same use, the expenditure is low in the initial years and grows gradually during later years. Secondly, the replacement cost of the equipment will always be higher than the initial cost due to inflation as well as technological changes. Accelerated Rate of Depreciation A higher rate of depreciation is charges in the initial year. The amount of depreciation gradually goes down, usually on a percentage basis. Once larger amounts are invested in the earlier years, they could generate additional returns to meet the replacement cost of the machine at a later date. For taxable and profit making institutions, it provides a larger ‘tax shield’. Generally, for assets like building, plant and machinery, furniture and fittings, etc., depreciation is charged on straight line method. But the high value medical and surgical equipments which have higher rate of obsolescence due to change in technology, accelerated rate of depreciation is preferable. The administrator should draw up a policy, with the approval of the management, for application of the method of depreciation as well as fixing the rate of depreciation. The rate of depreciation should be within the limits fixed by the government. Internal Control

It is mandatory for the Administrator to have a control over the finances of the hospital. Unfortunately, this is an area which many Administrators skim over leaving it to the Finance Manager/ Accounts officer to deal with. The administrator must be conversant with what is the financial status, day to day, month to month, year to year and in the long perspective. Adequate accounting system should be instituted for all income, expenditure assets and liabilities. The Finance Manager / Accounts Officer will not be discharging his duties fully, if he doesn’t explain the situation and provide reports in a manner understandable by the administrator and the Governing Body. They have a right to know how the money is received and used. Organizational structure should provide appropriate segregation of functional responsibilities and a system of authorization and recording, adequate to provide accounting control on assets, liabilities, revenue and expensed.

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Financial Information System Financial Information System is designed to economically collect, carefully organize, properly process and selectively transmit financial data to designated points in the organization. The focus is on the flow of information. It presents a network of information of information required for management decisions. Internal Control Assets Liabilities Revenue Expenditure

Land and build Accounts payable Patient Revenue Salaries & Wages

Major Fixed Equipment

Long term loan Accounts Receivable

Supplies and expenses

Minor Equipment Specific Purpose Fund

Grants & Donations

Repair & Maintenance

Cash Capital Income from property

Plant operation

Investments Other Income Utilities, Admin Expenses

Inventory Research, Training and Development

Reports and Statements for Effective Management Daily Reports 1. Daily Cash Collection and Cash Disbursement 2. Daily Census Report 3. Daily Bank / Cash Position

Monthly Reports 1. Monthly Financial Report (income and expenditure statements), with departmental breakup in budget format

2. Free and Concessional Care Quarterly Reports

Budget Performance – Comparative Statement of all major departments. Half yearly Reports 1. Revenue/ Expense summary with comparative analysis. 2. Balance Sheet(if possible). If Balance Sheet drawn, following ratios also could be calculated a. Current Ratio b. Working Capital

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c. Inventory Turnover d. Collection period e. Payables Outstanding

Yearly Reports

1. Comparative Balance Sheet 2. Analysis of Departmental income and balance sheet 3. Cost Analysis – broken down by departments and further broken down to give unit costs of service

4. How much does it cost to patient, General/ Semi-private/ Private, service wise?

5. Salary and Wages Content (includes pay and allowances, wages and all employee benefits like Provident Fund, Gratuity, Pension, Uniform, etc.,)

Requirements of a Control System

a. A functional chart of account with detailed explanatory note on each account head.

b. A well drafted “Accounting Manual” containing detailed system and procedure for cash handling; payment; purchase, storage and issue of items of supply (medical, surgical and others); inventory control; asset accounting; condemnation and replacement.

c. Detailed procedure for the of long term plan, annual operating budget, cash budget, and budgetary control.

d. Procedure for cost analysis; segregation, accumulation, grouping and analysis of required financial and service data for identification of direct cost and allocation of indirect cost and use of cost data for decision making and control.

e. A detailed procedure for internal audit and internal control. f. System and procedure for periodical review, evaluation and corrective action.

g. Financial reporting system for internal control, external reporting, evaluation of financial performance by the governing body/ council or authorities.

Preparation of Income and Expenditure Account and Balance Sheet.

Hospital accounting is a special branch of accounting. The majority of finance managers and auditors, responsible for the preparation of financial statements, are not familiar with the special requirements of hospitals. It is high time for the management and administrator to discuss and decide their own format and ask the auditor to follow the format.

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Separate OPD income and expenditure from inpatient income and expenditure. Depending on the size of the hospital, the income and expenditure of various departments are required to be worked out and shown department wise. Departmentalized income and expenditure help in evaluating the financial performance of each department, allocation of resources and also in the determination of cost of providing each of these services. Income Routine Services

• Room, medical care, nursing care, food etc.,

• OPD services like registration, consultation, dressing, injection, minor operation, and other procedures.

• Casuality Services

• Nursery /Neonatal care services Special Professional Services

• Operation Theatre • Delivery Room

• Intensive Care Unit • Medical and Surgical units – wards • Clinical Pathology

• Radiology • Pharmacy

• Physiotherapy Free Care and Concessional Services These should be shown as a deduction from the operating income Other Income

• Fees for training programs – school of nursing, laboratory training, radiographers training others.

• Recoveries from staff for accommodation, food electricity water etc., • Income from ambulance, canteen, parking lot etc.,

Non-Operating Income

• Donation • Grants

• Bank Interest

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• Property Income

• Investment returns • Sale of Assets.

Expenditure Operating Expenditure

• Salaries and wages including employee benefits like provident fund gratuity,

• Supplies and expenses

• Utilities • Maintenance • Administrative expenses

Other Expenses

• Training Programs – School of Nursing Training, Laboratory training • Community health and community development.

Non-Operating Expenses

• Depreciation

• Amortization • Fund raising – internal and external • Property management / upkeep

If there is departmentalized income and expenses, the income and expenditure summery shall include the heads mentioned above and complete department break-up needs to be shown in the attaches schedule. Balance Sheet Balance sheet is a snap shot picture of the assets and liabilities of an institution on a particular date. It is very important to use a proper format for preparation of balance sheet without which financial analysis becomes very difficult. Preparing a Balance Sheet Assets (what the hospital owns) Fixed Assets These are intended for use over a long period.

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• Land and improvements to land

• Building – value of hospital building, residential building, nursing school and other buildings should be available separately in the schedule together with accumulated depreciation.

• Plant and equipments – Laundry equipments, large Sterilizers, Central air conditioning, Boilers, piped oxygen, suction, lifts etc.,

• Furniture and Fittings – General furniture could be separated from special hospital furniture.

• Medical and surgical equipments.

• Vehicles. Current Assets They vary from day to day

• Cash in hand and at the bank • Investment

• Accounts and notes receivable • Prepaid expenses

• Other receivables • Inventories

Specific Purpose Fund cash and Investment

• Cash in hand

• Cash in bank • Investment

Other assets

• Properties

• Farms • Buildings on rent which are not normally located within the same premises/campus

Liabilities Current Liabilities

• Salaries and wages payable • Accounts and notes payable

• Accrued expenses • Taxes payable

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• Secured liabilities Long term liabilities

• Bank Loans

• Long term notes • Mortgages

• Bonds Specific Purpose Fund Emergency Fund, Contingency Fund, Scholarship Fund, Training Fund, Endowment and free care. Capital Capital shall be divided into two parts: a. Original capital plus additions by capital, grants and donations b. Summery of Income and Expenditure.

Each year’s excess of income over expenditure or excess expenditure over income is required to be adjusted in the summery account and the net capital or net worth worked out. This will help to find out the original amount that was invested as capital (fund investment) and subsequent additions to it.

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Introduction to the Hospital

Who They Are

Columbia Asia is a consortium of healthcare companies operating across the Asian continent, with hospitals in India, Malaysia, Vietnam and Indonesia. There are 13 Columbia Asia facilities in operation, 14 under construction and the land purchased for another 12. Most of the growth will be in the company's largest market - India.. The companies share a common name, common operating systems, common building designs and a common business strategy. The Columbia Asia name, proprietary operating software and building designs are protected worldwide. The strategic business unit of the consortium, located in Kuala Lumpur, Malaysia, provides infrastructure development, including software operating systems, management of financing, reporting and auditing for all of the companies in the system. Columbia Asia's management is based in Bangalore, India, and Kuala Lumpur and provides ongoing supervision of operating hospitals and construction activities. The general ledgers of the companies, including payroll and accounting requirements, are centralized at the management offices.

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The Columbia Asia Difference Columbia Asia facilities provide trusted affordable care with an emphasis on the most prevalent medical issues of a region, from births and children's health to waterborne illnesses, broken bones, diabetes and other health challenges. The clean, modern facilities have many qualities that set them apart and make them the preferred choice for businesses, workers and their families: Advanced technology All the group hospitals are connected by a common software operating system that allows for seamless record-keeping, diagnostics and billing. "The designs are a result of their belief that hospitals in the 21st century were going to be much smaller than those built in the past, and that they would rely heavily on computer systems," said Rick Evans, chairman of Columbia Asia. "There are more computers in their community hospitals than there are inpatient beds." Excellence and trust

Every hospital is staffed with highly trained doctors recruited from and working in their native country to provide care that is compatible with the culture of the region. Each facility also has its own pharmacy where patients can trust that they receive safe, quality medications that are not outdated, tampered with or contaminated. "At Columbia Asia the practice is in accordance with medical by-laws that require the highest ethical standards in medicine," said Dr. Nandakumar Jairam, Medical Director of Columbia Asia Hospitals Pvt. Ltd - India. Affordability The emphasis on efficient administration, accurate diagnosis and effective care helps keep costs affordable for patients. With fewer beds, their community hospitals can offer higher quality care and allow patients to return home sooner. The average stay at a community hospital is less than two days. The price of delivering a child at one of their Malaysia facilities, including overnight stays, doctor fees, and other charges, is less than US$500. The cost at our Indian hospitals is even lower.

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Proximity Each facility is located close to patients and is right-sized to become a true community health center where people receive care in their own neighborhoods. Patient focused Every waiting room is equipped with a plasma display screen to tell every patient exactly how many people are ahead of them and when they will be seen. Specialties and Services Anesthesiology, Cardiology, Dermatology, Ear, Nose and Throat, General Surgery, Internal Medicine, Maxillofacial Surgery, Obstetrics and Gynecology, Ophthalmology, Orthopedic Surgery, Pediatrics, Psychiatry, Urology Facilities CAH has 13 facilities open and providing care, will has 14 more under construction by this fall and have the land purchased for another 12. The most common type of facility is a community hospital, providing primary and secondary medical services. They usually have no more than 100 beds and are staffed by as many as 250 people, including as many as 150 nurses and 30 doctors. These facilities are usually two stories and include inpatient rooms on the top floor, operating rooms, emergency room and pharmacy on the ground floor and a basement for parking. The second type is a tertiary facility, which performs the procedures not done at the community hospitals. These include invasive cardiology procedures, organ transplants and other procedures that require a hospital stay of at least four days. The building is designed to be four to six stories, with 150 beds and six operating rooms. The first completed tertiary facility is in Bangalore and just opened earlier this year. The third type is a neighborhood hospital, which has about 25 beds and is built to serve smaller markets. It offers most of the services provided by a community

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hospital and includes two operating rooms, two birthing rooms and clinics for six specialists. The first neighborhood hospital is under construction in Bintulu, Malaysia. Goals and Objectives (&Purpose) of the department. Importance - to understand and analyze in detail the subject considered with in the scope. Structure – Physical structure and social / organization structure. (Outline drawing / hierarchy – staffs nos.) Technology available in the department – major equipments and minor equipments (gross description- company’s name, make, model and the sensitivity details if any. Systems and procedure (systematic outline on the functions at the department level, records and registers to be maintained for smooth functioning Performance analysis – Optimal capacity of working standard. Partnerships Columbia Asia is looking for joint ventures with other enterprises that have an interest in the booming Asian healthcare market. The emerging middle-income group in India, Indonesia, Malaysia and Vietnam is generating a huge demand for quality medical care. India's private healthcare system generates about $34 billion a year and is growing 16 percent annually. The country's 1.1 billion people account for one-sixth of the world's population, and India is expected to overtake China as the world's most populous nation by 2030. Indonesia, Malaysia and Vietnam also have some of the fastest growing economies in the world. Each country has a multibillion-dollar private healthcare market, with a middle-income group that is greatly underserved. All of Columbia Asia's facilities are expected to operate around full capacity, though the demand in these countries will continue to grow. We expect each new hospital to create positive cash flow within 12-18 months of opening. For a fraction of what it costs for care in many Western countries, employers can provide branded quality care to workers and their families.

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Large business operations may be in need of co-location opportunities to provide quality health care to their employees and attract a healthy workforce. We are open to partnerships ranging from real estate to employee care. Some of the current ventures Our Gleni International Hospital in Medan, Indonesia includes a nursing school that will help meet the need for an additional 7,000 nurses at our hospitals and other healthcare facilities over the next few years. We will own the hospital through a partnership with the Employee Provident Fund of Malaysia. In Vietnam one of our larger customers is Tokyo Fire and Marine, which insures Japanese expatriates. Under a contract with the new Bangalore International Airport, we developed and now operate a healthcare clinic for airport travelers. The location of the department The Finance department of the Columbia Asia Hospital is located very close to the entrance and behind the main reception area. There are two cash collection centers, one at the ER entrance and the other along the main reception line. The ER has once cash counter and the main reception has 2 cash counters. Since the Hospital has a policy of pay after availing all services, the cash collection area with two counters is sufficient. The back office is located behind the Reception and has a single entrance. The safe is located at the corner of the back office. The layout of the back office is as shown in the figure below. The management and project office are centralized and are located in different buildings respectively. These offices cater to all the group hospitals.

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Figure: The Physical Structure of the Finance Back Office

The Organizational Structure The Finance department of the Columbia Asia has a unique and empowered organizational structure. Starting from the General Manager – Ms. Uma Nambiar, we have the Finance

Manager – Mr. Dinesh Mishra – Who has been pivotal in me doing this case study successfully. His department has 8 key members empowered to handle 8 key aspects of the Finance department Accounts receivables, Accounts Payables, Treasury, Corporate Accounts, Purchase and Stores, Insurance, Corporate Clients and Cash Management. Additionally the Front office staff is also part of his department. They are 8 in number, with two of them in cash.

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Figure: Organizational Structure

Of the Finance Department at CAH

CFO at CAH Management Office, Indiranagar

GM at CAH - Hebbal GM at CAH Yeshwanthpur

Finance Manager at CAH Yeshwanthpur

Accounts receivables

Accounts Payables

Treasury

Corporate Accounts

Purchase and Stores

Corporate Clients

Cash Management

Front Office Staff

Cashiers

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Technology Used The department is well illuminated, and as seen on the layout map is adequately spacious enough for handling the present capacity of the hospital. The internal ambience is also very good. The Finance Department at Columbia Asia Hospital is fully computerized. All practically possible points where paper can be eliminated has been done. The entire operations of CAH are controlled using CARE 21 Software. The Finance Module of this software application fully facilitates for all of the Documentation, Computation and Reporting requirements of the finance department. A common multi tray laser printer has been provided at a convenient location. Phones have been provided at all desks and general outgoing enabled on people who handle external communications. There is a communications desk, from where the incoming calls are answered. Paper file storage racks are also in place. There is a documents and currency chest in the far corner of the room where there is limited access. Stationary stocks are sufficient at all times and every one has adequate supply of office stationary. The functions of the department The Finance department of the Columbia Asia Hospital independently handles following functions 1. Accounts receivables 2. Accounts Payables 3. Treasury 4. Corporate Accounts 5. Purchase and Stores 6. Insurance 7. Corporate Clients 8. Cash Management

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Accounts receivables mainly deals with the collection of payments for the services rendered. The clients here may be classified as 1. Insurance Clients 2. Cash Paying clients 3. Corporate clients whose payments are made by the companies

Insurance Clients The Insurance clients form 70% of the client base at Columbia Asia Hospital. The process of Medical Insurance is detailed in later in this section. Generally Insurance claim settlements take about 45 days from the date of service. The companies process the claims and then send the payment cheque by courier. The responsibility of the in charge is to get the approved eligibility for any insurance patient on the limits available and then process the admission of the patient. Then regularly follow up with the insurance clients for the claim processing status and settlements. Cash Clients The cash paying clients contribute to 25% of the client base. They either make the payment using credit card or hard cash. Major portion of the cash clients are OPD clients. For credit card payments, the hospital incurs an excess service charge of 1.5% as transaction charges. However this charge is presently not transferred to the clients. Corporate Clients These are patients coming from the corporate client companies whose medical bills would be settled by the companies. Companies like ISRO, BEL etc. The payment would be settled against each patient or monthly with a 45 days credit period etc., depending upon the type of MOU signed mutually. Presently they contribute to about 5% of the client base as the corporate tie-ups have just started. Accounts Payables The payables are for all the materials and services procured. The process followed here is that they create an excel sheet with all the payment particulars for which they have been billed. This excel sheet even contains the payment due date as moist payments are on 45 days credit. This excel sheet is sent to the

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management office monthly. Then based on the data available, the resource will follow up with the management office for the release of the payments. The CARE21 software has a provision to directly take the feed on the accounts payable. However, since the software is not fully integrated, the excel sheet was being used. However, When I had been to study about the process of how accounts payable is handled, they had just then got the information that the software module was fully integrated and they need to start using the accounts payable module of the CARE21 Software. Treasury

The treasury in charge handles all the interactions related to bank. The treasury persons responsibility is to monitor and verify the realizations of the cheques deposited, the credit card payments made etc., Corporate Accounts These are patients coming from the corporate client companies whose medical bills would be settled by the companies. Companies like ISRO, BEL etc. The payment would be settled against each patient or monthly with a 45 days credit period etc., depending upon the type of MOU signed mutually. Presently they contribute to about 5% of the client base as the corporate tie-ups have just started. Purchase and Stores

All Clinical and Non-clinical as well as Services are handled by a single person from the finance team. The procurement board comprising mainly of Purchase Manager, Finance Manager, Medical Director and General Manager decides on the quality and brands of implants, and other major procurement decisions. Once the items are approved, it goes for budget approval to the management office. Once the budget allocation is through, items are ordered and then the normal accounts payable procedure is followed. Insurance Mediclaim Insurance is a hospitalization benefit policy offered by general insurance companies. The policy takes care of medical expenses following Hospitalization/Domiciliary Hospitalization of the insured in respect of the following situations:

• In case of sudden illness,

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• In case of an accident • In case of any surgery which is required in respect of any disease which has arisen during the policy period

Medical insurance in India is provided by the following Insurance Companies Public Insurance Companies

• National Insurance Company • Oriental Insurance Company • United India Insurance Company • New India Assurance Company

Private Insurance companies

• ICICI Lombard • Reliance • Bajaj Allianz • Royal Sundaram • Cholamandalam GIC • Apollo DKV • Tata AIG

Types of Health Insurance Individual Insurance - If an individual directly take’s insurance policy for himself and his family. Corporate Insurance - When a company takes group insurance for the staff working in the corporate. Third Party Administrator (TPA) - The concept of TPA or the THIRD PARTY ADMINISTRATOR has been introduced by IRDA (Insurance Regulatory and Development Authority) for the benefit of both the insured and the insurer. While the insured is benefited by quicker & better service, insurers are benefited by reduction in their administrative costs, fraudulent claims and ultimately bringing down the claim ratios. In brief, the job of the TPA is to maintain databases of policyholders and issue them identity cards with unique identification numbers and handle all the post policy issues including claim settlements. In terms of infrastructure, the TPA is expected to run a 24-hour toll-free number, which can be accessed from anywhere in the country. And they are expected to have full-time medical practitioners under their employment and are expected to take a decision on whether the ailment is covered under the policy or not.

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Conditions for Individual insurances

General Conditions in individual policy

• 30 days waiting period: No admission will be covered in the first 30days after taking the policy. However any hospitalization that occurs due to accident will be covered.

• 1st, 2nd and 4th year exclusions are not covered which are mentioned in the policy conditions. Ex: Cataract, Hernia, Sinusitis, Hemorrhoids, Fistula & Fissures, Hysterectomy due to fibroids, BPH & other few conditions.

• Pre Existing Diseases & Complications arising from PED are not covered. • Maternity is not covered. • OPD treatment is not covered

Other General conditions which are not covered under Insurance policy

• Routine medical examinations, General check-up, Screening, Convalescence or rest care.

• Any treatment or test which is not related to a specific symptom and/or disease.

• Professional charges for second opinion of a doctor not in the hospital's panel of doctors.

• Pregnancy, Miscarriage and Childbirth if “Maternity is not covered. • Voluntary medical termination of pregnancy during the first 12 weeks from the date of conception.

• Eye surgeries for the sole purpose of correcting refractive errors. • Cosmetic dental treatment. • Treatment with alternative medicines and pathies like acupuncture, acupressure, homeopathy, osteopathy, naturopathy, chiropractic, reflexology, aromatherapy and like.

• Overseas Treatment outside the geographical area of coverage. • Diseases, illness, accident or injuries directly or indirectly caused by or contributed to by nuclear weapons/materials or contributed to by or arising from ionizing radiation or contamination by radioactivity by any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel.

• War, whether declared or undeclared, strikes, riots, civil commotion, hostilities, mutiny, terrorist activities (including biological weapons & chemical warfare), rebellion, insurrection, conspiracy, civil war, revolutions or any warlike operation.

• Companion Charges and Expenses and other Non- Medical expenses.

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TPA’S who are tied-up with Columbia Asia Hospital

• MEDIASSIST • UNITED HEALTH CARE • FHPL • RAKSHA • E-MEDITEK • DEDICATED HEALTH CARE SERVICES • GHPL • VIPUL MEDCORP • MD INDIA • BAJAJ ALLIANZ • APPOLLO DKV • STAR HEALTH • CHOLAMANDALAM GIC • TTK (Case to Case basis) •

How to avail cashless Hospitalization at the hospital?

• Step 1. For availing cashless treatment at Hospital the member/dependant approaches hospital with TPA ID card.

• Step 2. For planned admission, the hospital will forward the Initial Intimation Letter (IIL) along with a copy of TPA ID card to respective TPA, 3 – 4 days prior to the hospitalization.

• Step 3. For emergency admission, the hospital will forward Initial Intimation Letter along with a copy of TPA ID card within 24 hours of hospitalization to TPA.

• Step 4. TPA will issue an authorization letter for the covered services within the eligibility limits as per the policy.

• Step 5. Hospital extends credit treatment to the patients for the authorized services.

• Step 6. At the time of discharge Member / dependant leaves all the original documents with the hospital after signing on all the claim documents.

• Step 7. If any unauthorized treatment for the ailment/disease, which is not covered under the terms and conditions of the policy, is taken by the patient, she/he will have to make the payment to the hospital directly at the time of discharge from the hospital.

• Step 8. All the original claim documents will be submitted to TPA office after the member’s discharge from the hospital for reimbursement

What are documents required to lodge claims with TPA for reimbursement?

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• Copy of Member ID card with the member’s details. • Copy of the policy papers if any. • Copy of pre-authorization letter • Original detailed discharge summary. • Original Hospital summary bill and with detail breakup with the patients signature on it.

• Pharmacy bills and breakup. • Original investigation reports.

What are the standard Billing Protocols?

• Points to be remembered for credit billing, before forwarding the documents to TPA, kindly keep the following points in mind –

• Consolidated Bill for the entire amount raised for the member towards his treatment.

• Itemized bill break up for all the details mentioned in the consolidated bill.

• Breakup for room rent • Surgeon fee / Anesthetist fee / Asst doctor fee • Pharmacy bill Break up • OT consumables and disposable break up • Break up of all lab charges

Do’s for hospital insurance coordinator while serving Insurance Patients

• Check the member’s identification (ID card / pre – authorization letter) before extending cashless treatment in the hospital.

• Counsel the patient (attender’s) about the process, exclusions & the payment if insurance is denied.

• Intimate TPA regarding the admission of member through the Initial intimation letter (IIL).

• Intimate TPA at least 3–4 days prior to admission for all pre elective cases. • Intimate TPA within 24 hours of admission for all emergency cases. • Fill the IIL completely and duly signed by the treating doctor and by the patient (or attender) before sending (faxing) to TPA.

• Mention the plan of treatment, probable duration of stay and estimated amount for the treatment in the IIL.

• Update the information to the TPA in case of any change in the plan of treatment.

• Obtain re-approval for the changed plan of treatment. • Intimate TPA regarding approval for extension of authorized coverage amount at least 24 hours prior to discharge time.

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• In case timely pre-authorization is not received from TPA, kindly intimate the same to the TPA to obtain the authorization letter.

• Extend the cashless treatment as per the authorized guidelines by TPA authorization letter.

• Collect the over and above the authorized amount directly from the member at the time of discharge.

• Ensure to get the signature of the patient on the Final Summary Bill. • Collect the amount billed for non-medical items and co-payment if mentioned in authorization letter which are not payable under the insurance scheme

Don’ts for hospital insurance coordinator while serving Insurance Patients

• Do not hide relevant and factual information regarding the past and present medical history of the member.

• Do not extend credit treatment to unauthorized ailments / procedures. • Do not hand over the original documents like discharge summary, reports, bills etc to the member at the time of discharge.

• Do not extend cashless treatment to all outpatient services unless authorized by TPA.

• Do not insist TPA to authorize cashless admission for only diagnostic services, health checkups and investigation and evaluations.

• Do not extend credit to over and above the authorized limits and services

What are the points one must note while getting hospitalized under cashless access scheme?

In order to secure admission on the appointed day, you are advised to register your name with the hospital well in advance.

• Contact the admission desk of the Hospital. • Show your TPA identity card and the Authorization letter given by TPA. The hospital will check the ID card and authorization letter.

• Hospital will charge you registration fees/ admission fees etc. These will have to be paid by the policyholder. These expenses are not reimbursable under your policy.

• In case the amount approved is less than the estimate given by the hospital you may be required to make arrangements for the difference. In addition to the above, the patient will also have to pay expenses towards Non-medical items, Co-payment, telephone charges, ambulance charges etc.

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How does one get Reimbursement for pre and post hospitalization expenses under this scheme? The Mediclaim Policy allows reimbursement of medical expenses incurred towards the ailment/ disease for which hospitalization was necessitated prior to hospitalization and up to a certain number of days after discharge. This is subject to the limits as described in the policy. The medical expenses incurred prior to Hospitalization are called pre- hospitalization expenses and those incurred subsequent to discharge as post Hospitalization expenses. Send all bills in original with supporting documents along with a copy of the discharge summary and a copy of the authorization letter to the TPA. TPA will scrutinize the claim and settle the bills subject to the overall limit of the policy. What happens when patient have to undergo a treatment like dialysis, cataract when discharged on the same day? When treatment such as Dialysis, Chemotherapy, Radiotherapy, DJ –Stent removal, cataract & CAG (Coronary Angiogram) etc is taken in the Hospital and the insured person-patient is discharged on the same day, the treatment will be considered to be taken under Hospitalization Benefit Scheme. Can a request for Authorization for cashless be declined? Yes, a request for authorization for cash less access may be declined if,

• Inadequate/wrong information is provided and the TPA is unable to get access to further information. •The ailment/ disease for which hospitalization is required and not covered by insurance. •The person does not have adequate insured amount left to cover the hospitalization costs. Routine medical examinations, General check-up, Screening, Convalescence or rest care.

• Voluntary medical termination of pregnancy. • Cosmetic dental treatment. • Congenital Disorders. • Eye surgeries for the sole purpose of correcting refractive errors. • Treatment arising from or connected with Alcohol, Drug or substance abuse/addiction.

• Mental or Nervous disorders; Psychiatric, Psychological or Psycho-neurotic illness and treatment unless necessitates hospitalization.

• This only means that cashless access is declined, and is in no way to be construed as denial of treatment. The policy holder must obtain the treatment as per his/ her treating doctor’s advice.

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• The denial of pre-authorization letter shall not be construed to mean that the policyholder cannot claim under the terms, exclusions and conditions of the policy from TPA.

• In such cases patient’s are advised to file the claim for reimbursement and TPA will settle the claim as per the policy terms and conditions.

What are Non-Medical items?

• Products / substances not considered as medicines, cosmetic related products, products not considered as prescription drugs such as mouthwash, toothpaste, lozenges, and antiseptic solutions like dettol, savlon, milk formulas, skin care products and diapers.

• Prostheses, corrective devices, equipment and medical appliances including optical aids (such as glasses, frames, lenses- external or implanted) hearing aids, walking aids, supports, braces, artificial limbs, slings, bandages, breast pumps, nebulizers, air chambers, surgeon gowns, masks, etc.

Few more points to be verified while dispatching the bills

• The D.O.A & D.O.D should be similar in both Discharge summary & Main Bill.

• The Name & Age should be same as it is available in the TPA card. • The Admission & discharge time should be verified and confirmed so that it is more than 24hrs.

• There should be no discrepancy in details given in the pre-authorization and in the discharge summary especially in the duration of ailments like DM, HTN, CAD.

• There should not be more than four consultations per day. • All the radiological investigations should be specified clearly ( X-Ray chest, CT abdomen, MRI Brain)

• The consultation dates should coincide with the dates of room rent charges & ICU charges

• All lab investigations should be clearly defined & breakup should be given for all the lab charges above Rs.1000/-.

• The bills should reach the TPA’s within 7days after the discharge of the patient.

• The short fall or Insufficient records should be submitted with in a week after getting intimation from TPA

• All the RTA claims should be supported with MLC copy. • When the patient is on oral medications and observation final confirmation should be taken by sending the discharge summary and pharmacy breakup to the TPA

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• Discharge medications should not be included in the final bill. • Don’t discharge the insurance patient’s on Sunday’s and during National Holiday’s as it is not possible to get the final approval.

Corporate Clients Cash Management All the cash collected during the days billing is stored in the safe situated in the back office just behind the cash collection counter. The cash is transferred to bank through an outsourced private cash collection agency authorized by the bank. They have secured vans and come and count cash and then transfer it into their safe’s and then transport it to the bank. The responsibility of the finance department on the cash ends once the cash collection agency acknowledges the cash received through their receipt. Methods of Finance Columbia Asia Referral Hospital, Yeshwanthpur was projected to be built at a cost of 564 Million INR and when complete, it would be a 160 Bedded hospital tertiary care hospital. The funds for the project is partly equity and partly loan. Since this is a part of the 10 hospitals planned by the group in India, I will be incorporating later in this study, the business plan submitted by the group to Asian Development Bank for raising an amount of 1642 Million INR. Funds Required The total Investment of Columbia Asia Hospitals in India would be 6567 Million INR for building and operating 10 Hospitals across India. The equity from the promoters is 3612 Million INR, Loan from ADB is 1642 Million INR and Borrowings from Co Lenders is 1313 Million INR. Of this amount the budgeted fund allocation for Columbia Asia Referral Hospital, Yeshwanthpur is 564 Million INR. Financial Planning

Pre-Operations All of the Columbia Asia Hospital’s Financial Planning pre-operations is done from the project management office Located at ‘India The Icon, #8, 80 Feet Road, HAL 3rd Stage Indiranagar, Bangalore 560 075, India, Tel: 91 80 4021 1000’ This

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office is pivotal in the complete life cycle of building the hospitals – Hospital Planning, Budgeting, Capital Budget, Cash Budget, Land Identification and acquisition, Construction and Infrastructure development. As we know presently there are 13 facilities in operation, 14 more under construction by this fall and a total of 39 facilities are expected to be open by 2010, Post-Commissioning All of the Columbia Asia Hospital’s Financial Planning Post-Commissioning is done from the management office at ‘Salarpuria Palladium, 3rd Floor, #2021, 100 Feet Road, HAL 2nd Stage, Indiranagar, Bangalore 560038, India, Tel: 91 80 4126 9701’. This office manages and controls the day to day functions of all the community hospitals in India. The functions of financial planning, budgeting, operating revenue budgeting, operating expenditure forecast, strategies for expenditure control, etc., are managed from this office. The Business Plan submitted to Asian Development Bank for Funding by the promoters of Columbia Asia Hospitals (India)

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Report and Recommendation of the President to the Board of Directors Project Number: 41949 September 2008

Proposed Loan Columbia Asia Hospitals Development Project (India) In accordance with ADB’s public communications policy (PCP, 2005), this abbreviated version of the RRP excludes confidential information and ADB’s assessment of project or transaction risk as well as other information referred to in paragraph 126 of the PCP.

Asian Development Bank

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CURRENCY EQUIVALENTS (as of 1 August 2008) Currency Unit – Indian rupee/s (Re/Rs) Re1.00 = $0.02353 $1.00 = Rs42.49 ABBREVIATIONS

ADB Asian Development Bank

ALOS Average length of stay BPL below poverty families CAG Columbia Asia Group

CAH Columbia Asia Hospitals Pvt. Ltd CAHM Columbia Asia Health Care Sendirian Berhad

CPS country partnership strategy CSP country strategy and program

DSCR debt service coverage ratio

EBITDA earnings before interest, tax, depreciation, and amortization

EBM evidence-based medicine EIRR economic internal rate of return

FIRR financial internal rate of return ICM International Columbia 2004 ICU International Columbia US, LLC

IEE initial environmental examination

NABH National Accreditation Board for Hospitals and Health Care

Providers O&M operation and maintenance

PAT profit after tax PBT profit before tax

PRC People’s Republic of China SHE safety, health, and environment

SOP standard operating procedure TPA third party administrators TRAA trust and retention account agreement

WACC weighted average cost of capital

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NOTES (i) The fiscal year (FY) of the Government of India, Columbia Asia Hospitals Private Limited (CAH) and Columbia Asia Healthcare Sendirian Berhad (CAHM) ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 31 March 2008. (ii) In this report, “$” refers to US dollars. Vice-President B. N. Lohani, Vice-President-in-Charge, Operations 1

Director General P. Erquiaga, Private Sector Operations Department (PSOD)

Director M. Barrow, Infrastructure Finance Division 1, PSOD Team leader S. Gupta, Senior Economist, Operations Coordination

Unit, PSOD Team members A. Akanda, Head, Operations Coordination Unit,

PSOD P. Bailet, Counsel, Office of the General Counsel J. Munsayac, Operations Coordination Unit, PSOD M. Pascua, Operations Coordination Unit, PSOD A. Sagar, Principal Investment Specialist, India Resident Mission, PSOD S. Tu, Senior Environment Specialist, Operations Coordination Unit, PSOD

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Contents

MAP I. THE PROPOSAL II. BACKGROUND A. Health Sector in India B. Government Policies and Plans C. ADB’s Operations III. THE BORROWER AND THE SPONSOR A. Background IV. THE PROPOSED PROJECT A. Project Description B. Project Implementation Arrangements C. Environmental Aspects and Social Dimensions D. Development Impacts V. THE PROPOSED ASSISTANCE A. Loan B. Justification for ADB's Assistance C. Anticorruption Policy, and Combating Money Laundering and the Financing of Terrorism VI. ASSURANCES VII. RECOMMENDATION Appendix 1. Design and Monitoring and Development Effectiveness Frameworks 2. Summary Initial Environmental Examination 3. Summary Poverty Reduction and Social Strategy

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I. The Proposal 1. I submit for your approval the following report and recommendation on a proposed loan without government guarantee to Columbia Asia Hospitals Private Limited (CAH) of up to Rs1,642 million ($38.6 million equivalent), to develop 10 hospitals in India. The hospitals will be in the cities of Bangalore (where two will be developed), Ahmedabad, Chandigarh, Ghaziabad, Gurgaon, Lucknow, Mysore, Patiala, and Pune. The 10 projects are collectively referred to as the Project. The design and monitoring framework and the development effectiveness framework are in Appendix 1.

II. Background 2. Human capital is often the only asset of the poor, and its development is of fundamental importance in poverty reduction.1 Investment in health care is an investment in human capital necessary to ensure higher productivity and efficient participation of its human resources in the economy’s development and growth. Adequate levels of expenditure on health care are also necessary to ensure improvements in life expectancy. Econometric evidence indicates that a 5-year gain in life expectancy is associated with a 0.06–0.58 percentage point increase in the gross domestic product (GDP) per capita.2 3. The share of public resources devoted to health care spending in India was only 1.2% of GDP in 2003.3 As a result; the available public health care infrastructure is overcrowded, lacks adequate medical equipment and resources, and is poorly managed. As resources are stretched, there is inadequate implementation of regulatory and monitoring systems for medical services, resulting in a wide discrepancy in the quality of services provided. Improving the standard of health care services in India is of vital importance to ensuring an efficient investment in human capital thereby ensuring economic development and a better quality of life. A. Health Sector in India

4. India has made significant progress in improving the health conditions of its population and its health-related statistics have improved over the last 50 years. Since the 1960s, female life expectancy has improved from 41 years in 1961 to 59 years in 1990 and 64 in 2005. Infant mortality rates have improved from 84 per 1,000 live births in 1990 to 56 in 2005. However, compared with other countries in Asia, India lags behind. The People’s Republic of China (PRC), for example, had a female life expectancy of 74 in 2005 and an

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infant mortality rate of 23, and for Indonesia the estimate for female life expectancy was 70 in 2005 and for the infant mortality rate it was 28. 5. Demand for health care services is increasing, with the economy projected to grow at over 8% per annum. Consumer expenditure on health is expected to increase from $43 billion in 2006 to $92 billion by 2011.4 Health care spending on a per capita basis in 2006 was $41 in India compared with an average of $226 for Asia and Australasia. Health care is gaining in importance and becoming a vital driver of growth. Indicator scores in business ranking models put the health of the Indian workforce over the period 2002–2006 at 1, which is much lower than the regional average of 3.2 (footnote 4).5 For India to sustain its growth and to attract private and foreign investors, the productivity of the workforce has to improve. A reliable and widespread health care infrastructure is a key factor in achieving higher labor productivity. The existing medical facilities and services are inadequate to meet the rising demand for health services. 6. In India the number of hospital beds is 0.7 per thousand compared with 2.6 in the PRC and the global average of 3.2.6 A limited supply of health care services and infrastructure has prevented India from achieving better health standards and there remains significant scope for improvement. 7. The national epidemiological profile is changing due to economic growth, demographic changes, access to health insurance, and urbanization. Economic growth is leading to an expansion of the middle class, which is looking beyond the basic requirements and demands better preventive health care services. With the increase in life expectancy, the number of older people in the population is also increasing. In 2001 the percentage of the population over 60 years of age was 6.9%, this increased to 7.5% in 2006 and is projected to increase to 8.3% by 2011. This section of society has greater need for medical services. It is estimated that fewer than 50 million Indians have health insurance although this is expected to increase to 160 million by 2010. Corporations and other employers are instituting health insurance and preventive health care measures to improve labor productivity and working conditions for their employees. Demand for health care services is also increasing given changes in lifestyles, especially in an urban environment as individuals become more inclined toward preventive health care. This is reflected by an increase in the percentage of private expenditure on health, which increased from 3.5% in 1993 to 5.5% in 2000. All these factors will further increase the shortfall between health care services available and required. The size of the health care industry is estimated to be $37.5 billion in 2007 (which was about 3.3% of the GDP) and is expected to increase at a compound annual growth rate of 15% over the next 5 years reaching $75 billion by 2012.7

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8. Both the public and private sectors have a role to play in the delivery of health care in India; however, public expenditure on health is lower than in other developing countries and hence, the health care industry is dominated by the private sector. Historically, the Government was the main provider of health services; however, with demand far exceeding supply of such services, the private sector has been increasingly filling the gap. At present it is estimated that the private sector operates 93% of all the hospitals and provides 64% of the hospital beds nationwide. In the absence of a significant increase in public resources for health care, public resources alone are inadequate for developing a satisfactory health care infrastructure. Further, the scarce public health facilities are used by the high and middle income groups limiting access of the poor to these. 9. The private health care sector includes private, for-profit and non-profit, health care providers. Their range of practice varies from solo practice and small nursing homes (inpatient facilities with usually fewer than 30 beds) to large corporate hospitals. It is estimated that over 90% of private health care is being serviced by the unorganized sector.8 The large share of the unorganized and unregulated sector has implications for the quality of care provided as the infrastructure is mostly substandard and attracts low-quality or untrained staff. In the absence of a mandatory central quality protocol for health care providers, unorganized and unregulated health care units have mushroomed all over the country, especially those providing secondary health care services. 10. The organized sector refers to bigger hospitals with 100 or more beds which are usually non-profit charitable hospitals or corporate hospitals. This size of a hospital attracts proper planning and investments, modern technology and high-quality staff to promote optimum utilization of resources. Such hospitals are mostly concentrated in metropolitan centers. The absence of such infrastructure in smaller towns provides a big opportunity for investment in the sector. Surveys on the use of health services indicate that over 80% of people use the private sector for outpatient curative services as a first line of treatment in both urban and rural areas and over 58% of the rural population prefers to undergo treatment at private hospitals. The primary reasons for the shift in usage towards private health care are the inadequate availability of medical and non-medical personnel at the public health establishments, and archaic infrastructure with obsolete or redundant technology. With few exceptions, there have been negligible investments in the public health system for expansion or upgrading. 11. Access to high-quality health care in the private sector has been limited by the high cost for the vast majority of India’s population. However, this is changing and health insurance is becoming a preferred tool to finance most health care expenditures. The insurance industry is regulated by the Insurance Regulatory

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Development Authority (IRDA). The IRDA has the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. With the IRDA stipulating that 5% of insurance companies’ business should be from the rural sector, a slew of innovative schemes and better coverage is emerging. Community health insurance schemes are slowly penetrating the rural market and at present there are more than 25 schemes covering over 8 million people all over India. 12. The health insurance companies work in conjunction with third party administrators (TPAs) to administer health policies. These are intermediaries that coordinate insurance companies and hospitals. While the insured benefit from better service, insurers benefit from a reduction in their administrative costs by outsourcing their management and administrative activities, including settlement of claims. Both the TPAs and the insurance companies come under the purview of the IRDA. Because of their large volumes of patients, the TPAs can negotiate competitive prices from the health service providers and prevent providers from overcharging. 9 To some extent, the existence of health insurance companies and TPAs mitigates the lack of adequate regulation and monitoring of the health care sector. 13. The Ministry of Health and Family Welfare, Government of India and the Indian health industry has established the National Accreditation Board for Hospitals and Health Care Providers (NABH), a constituent board of the Quality Council of India. NABH accreditation of facilities confirms quality assurance and its standards focus on patient safety and the quality of patient care. NABH standards have been based on a comparative analysis of various aspects of health care, including the standards in Australia, Thailand, the United Kingdom, and United States, which have been customized to the Indian health care setting. NABH standards also include all the 49 applicable licenses and statutory obligations required under Indian law. The cost and timelines incurred in acquiring NABH accreditation are less than those of other international accreditations. NABH is now an institutional member of the International Society for Quality in Health Care, an independent international umbrella health care accreditation organization which grants approval to health care accreditation bodies as a mark of equivalence of accreditation programs of member countries.10 B. Government Policies and Plans 14. Given the large gap in the supply of health care infrastructure and the limited availability of public resources, the Government is attempting to attract private investors through investor friendly policies and tax incentives. The Government is using

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its own resources to focus on delivery of effective and affordable health care services to the vulnerable sections of population residing in rural areas through its common minimum program and national rural health mission, while encouraging the private sector to provide the health care infrastructure for urban middle and high-income categories. 15. To promote private investment in health care and bridge the gap between supply and demand, steps taken by the Government include according infrastructure status to hospitals, permitting 100% foreign direct investment for all health-related services, and allowing lower tariffs and higher depreciation on medical equipment. The Government has also amended the Income Tax Act and proposed a 5-year tax holiday for new hospitals located in non-metropolitan areas11 effective from April 2009. 16. The Government realizes the significance of the health care industry for achieving sustainable growth and as an important service industry and recognizes its own constraints in providing adequate services. Therefore, its focus has been primarily on public health programs such as immunization programs, medical education, primary health care, and sustaining the existing infrastructure. Realizing their inability to provide adequate health care infrastructure and services, some state governments have recently started exploring the possibility of purchasing health insurance for below poverty families (BPL) as an alternative to its role in health care delivery. This in turn will empower the less privileged classes to choose health care service providers including private providers. In support of this, the federal Government announced the Rashtriya Swasthaya Bima Yojna, a new health insurance scheme for BPL families, on 15 August 2007. About 75% of the financing is provided by the Government of India, while the remainder is paid by the state government. BPL families are entitled to more than 700 inpatient medical procedures with a cost of up to 30,000 rupees per annum for a nominal registration fee of 30 rupees. Coverage allows for pre-existing medical conditions, and there is no age limit. It is a cashless service in case of hospitalization, and outpatient consultation is free. By 1 April 2008, almost every large state government had expressed its intention of joining the scheme and fifteen states (Delhi, Rajasthan, Gujarat, Haryana, Bihar, Uttrakhand, Kerala, Punjab, Chhattisgarh, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh, West Bengal, and Jharkhand) have already issued advertisements announcing the scheme. The Government’s plans are in line with the long-term objectives of the CAH initiative. The CAH model of decentralized and affordable community health care has potential spin-offs for health care in semi-urban and rural areas in the future. C. ADB’s Operations

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1. ADB's Country Strategy

17. Private sector development is an integral part of ADB's draft country partnership strategy (CPS) for India for 2008–2012. The CPS identifies private sector investments for physical infrastructure for health care. It encourages greater private investment by ADB, particularly as a complement to public investment in easing critical infrastructure constraints. The Project will help address major health care infrastructure supply shortages by expanding access to medical services of international quality to a large population across the country. 2. ADB's Sector Strategy

18. The Project is consistent with ADB's health sector policy, 12 which recognizes the importance of the private sector in health care and supports increased private provision of health care services. Assisting the health sector in developing member countries provides a means to achieve ADB's key strategic development objectives of economic growth and poverty reduction. Improvements in health support economic growth through (i) increased work productivity, (ii) increased returns to investments in education, (iii) increased returns to other factors of production, and (iv) freeing up financial resources by preventing diseases. It recognizes that private sector interest in health care is already growing rapidly in the region and accounts for the majority of health expenditures. ADB’s long-term strategic framework 2008– 2020 (Strategy 2020)13 confirms that health is vital to development, productivity, social inclusion, and gender equity and that ADB engages in well defined partnerships with specialized agencies. It also recognizes the relevance of access to affordable health care to achieving the Millennium Development Goals. ADB’s draft operational plan for improving health access and outcomes under Strategy 202014 recommends health care investments when these are included in the CPS and are private sector operations. CAH is a private sector entity with specialized experience and expertise in providing efficient and high quality health care services at affordable prices.

III. The Borrower and The Sponsor A. Background

19. The Borrower. CAH, a limited liability company owned by ICU, is incorporated in India under the Companies Act, 1956 and its registered office is in the state of Karnataka, India. Further to its charter, CAH is to establish, construct, maintain, develop, acquire and operate hospitals, dispensaries, clinics, pathological laboratories, and other associated facilities. The Project is a key part of its overall business.

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20. Columbia Asia Group. ICU also owns 99.9% of Columbia Asia Healthcare Sendirian Berhad (CAHM), a company incorporated in Malaysia which owns, operates, and manages its operations in Indonesia, Malaysia, and Viet Nam. CAH and CAHM are collectively referred to as the Columbia Asia Group (CAG). CAG currently has three medical facilities in operation in India, four in Malaysia, and two in Viet Nam. Its first community hospital was built and completed in 2000, in Seremban, Malaysia, and has been the model for future hospitals to be designed and operated by the group. 21. Experienced Management Team. CAH has an experienced management team headed by Dr. Nandakumar Jairam, who has over 30 years of national and international experience. CAH also draws on the international experience of the group and three of the seven board members are non-Indians closely associated with the CAG’s international activity. This mix on the Board is an optimal blend of Indian and international expertise and knowledge of the industry. 22. In addition to the 10 hospitals under the Project, CAH has a facility at the new airport in Bangalore. It is a single-bed emergency center with a nurse and doctor available 24 hours all days of the year and a pharmacy attached. The medical center at the airport is responsible for emergency medical services in the event of a disaster. CAH was selected by the developers of the airport in recognition of its capacity to provide quality services and because the CAH Hebbal facility is the closest hospital to the airport.

IV. The Proposed Project

A. Project Description 23. The Project will establish an integrated network of medical facilities consisting of nine secondary hospitals and one tertiary hospital. The Project will be a systematic implementation of a new business model in the health care sector offering high-quality and affordable health services to the middle-income category. In the absence of such projects, the middle income groups would access public hospitals which would redirect health financing for the poor to the better off. The Project enables government resources to focus on the provision of health care needs in rural areas and for the lower income categories. The nine secondary hospitals are located at Bangalore (Hebbal), Gurgaon, Patiala, Mysore, Chandigarh, Lucknow, Pune, Ghaziabad, and Ahmedabad. 24. The CAH model represents a paradigm shift in the delivery of secondary care. CAH is institutionalizing the practice of secondary health care that was hitherto delivered predominantly in nursing homes. The CAH model typically

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has about 100 inpatient beds and provides secondary care health care services focusing on specialties such as internal medicine, surgery, obstetrics and gynecology, pediatrics, orthopedics, and ear, nose, throat (ENT), with basic laboratory and diagnostic facilities and operating theaters. Each secondary medical center will offer 24-hour pharmacy and pathology services. The secondary hospitals will function as community hospitals and cater to a population within a radius of 10 kilometers. The tertiary hospital will offer outpatient consultations and specialty surgeries. It is a 160-bed multispecialty hospital and will focus on providing services in cardiology, neurosurgery, gastroenterology, oncology, cardiothoracic vascular surgery, and transplants. It has high-end diagnostic facilities such as computerized tomography scanning and magnetic resonance imaging. 25. The 100-bed secondary care hospital model is considered to be the optimum size for delivery of a well-defined set of products and services that meet about 85% of the medical requirements of any ordinary Indian family. This model can be replicated easily and optimizes operational management. A 100-bed hospital can be established more quickly than a comparable 350-bed multi-specialty hospital, with lower capital expenditure, without compromising on the quality of services. This model is less likely to run the risk of asset underutilization than a bigger facility. The hospital fits well with the image of a community or neighborhood hospital catering to a catchments area of 5–10 kilometers in radius. 26. Of the 10 facilities being considered under the Project, 3 have been completed and are operational, 2 are under construction (Mysore and Patiala), and for the other 5 land has been procured and detailed designing is in various stages for the different sites. All construction will be completed by July 2010 (Table 1).

Table 1: Project Details

Project Ownership

Number of Floors

Beds Cost (Rs million)

Construction Completion (date/status)

Hebbal, Bangalore

Land and building on lease

B+G+1 81 218 In operation since July 2005

Yeshwantpur, Bangalore (tertiary hospital)

Land and building on lease


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Gurgaon Land and

Building owned


Patiala Land on Lease Building owned

B+G+2 100 528 Construction ends July 2009

Mysore Land and Building owned


Chandigarh Land and Building owned

B+G+2 100 707 Construction ends October 2009

Lucknow Land and Building owned

B+G+3 100 605 Construction ends April 2010

Pune Land and Building owned

B+G+2 100 709 Construction ends April 2010

Ghaziabad Land and Building owned


Ahmedabad Land and Building owned


B = basement, G = ground. Source: Columbia Asia Hospitals Private Limited. 27. The group owns the architectural and engineering plans for its hospital models, and utilizes proprietary operating software and service. All services of the group adhere to international standard medical procedures and evidence-based medicine. CAG recommends, where possible, non-invasive treatment using advanced medical technologies. This is effective and safe, resulting in shorter hospital stays and cost savings. CAH will also save costs by centralizing

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back-office operations such as accounting and reporting, procurement and purchasing, project management, and by using recent technology for tele-imaging. B. Project Implementation Arrangements 1. Project Management

28. CAH has engaged reputed and experienced professionals with extensive private sector health care and hospital industry experience in its key senior positions. These include the chairman, the chief executive officer and the chief finance officer, as well as managers for each facility. In addition it draws on its international pool of expertise for hospital management.’ 2. Construction Management

29. CAH has two specialized project management teams, one for the construction of the new facilities and the other for the procurement of medical equipment. Members of the project management team have extensive experience in project and construction management. The construction contracts, including detailed designs, are tendered competitively to pre-qualified local companies, thus ensuring a competitive cost. CAH will award contracts to a single principal contractor on a fixed-cost, date-certain basis, and the construction cost will have adequate penalties for delay. 30. CAH has appointed different project management service providers for its various facilities. The CAH team and the project management contractors (PMC) constantly monitor the progress of work and the contractor has to submit weekly updates and monthly progress reports. 3. Project Operational Arrangements

31. CAH has set up a number of committees to improve the quality of medical service.15 The required and applicable standard operating procedures for the entire hospital, hospital administration, human resource department, intensive care unit, blood bank, and the operation theater complex established for CAH were reviewed by the technical consultants and were found to be NABH-compliant. The hospital management at each CAH hospital constitutes a team with the requisite skill sets in hospital administration, nursing management, infection control procedures, medical record management and biomedical waste disposal to oversee implementation and compliance with the requisite standards. This helps in streamlining procedures and protocols in the facility.

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32. The CAH guidelines will ensure quality of service, standard pricing, and the most effective medicine prescribed in all facilities. All the physicians and medical staff of CAH are required to follow the clinical guidelines and standard operating procedures. To cover potential liabilities for medical malpractice, all medical facilities as well as doctors and medical staff of CAH will be insured with medical malpractice insurance. The performance of all consultants will be evaluated every month. Underperforming medical personnel will be referred for retraining and, if the problem persists, the contract will be terminated. 33. All the facilities of CAH are linked through a hospital management information system using CAH’s own software, CARE21. The hospital information system stores patients' records electronically and these can be accessed at any CAH medical facility. CAH has established a number of operational targets to improve its services, e.g., on consultation time, and maintains records of its consultants’ performance. These targets are also monitored regularly by the software. CAH will be the first medical entity in India to have a fully integrated electronic medical records and management system. 34. CAH has obtained NABH accreditation for its Hebbal, Bangalore hospital and is in the process of obtaining accreditation for Gurgaon and the tertiary hospital in Bangalore. Although NABH certification is not required, CAH plans to get all its facilities accredited and to obtain the relevant certifications of the International Organization for Standardization. C. Environmental Aspects and Social Dimensions 35. The Project has been classified as category B because it is unlikely to create any significant environmental impacts during the construction and operation of the hospitals. An initial environmental examination was undertaken in accordance with the environmental assessment requirements of ADB and its summary included a generic environmental management plan with mitigation measures and monitoring program. The Project does not expect to adversely affect natural resources, and the facilities are not located in or near any ecologically sensitive or cultural and/or historic sites. A limited number of specific environmental impacts resulting from project implementation are anticipated. However, such impacts are temporary and will be mitigated by the Project’s environmental management plan implementation. The summary initial environmental examination is attached as Appendix 2. 36. A comprehensive program of storing, transporting, and disposing of biomedical wastes for the project hospitals is in place, following international best practices and Indian rules and standards laid down by the National

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Accreditation Board of Hospitals (NABH) and with clearance from the state pollution control boards (SPCBs). The audit conducted for operating hospitals found the program and its implementation adequate. 37. The Project is classified as category C for involuntary resettlement. Land and/or buildings required for the Project were either purchased or leased from private owners on a willing-buyer/lessee-to-willing-seller/lessor basis and at prices negotiated at market rates. The construction of the hospitals will not cause any involuntary resettlement, affect any physical structures, or lead to loss of livelihoods. The Project will have socioeconomic benefits; including providing limited employment to people living near the hospitals. The most direct socioeconomic benefit will be the smooth access to quality, reliable and affordable medical services. 38. The 10 hospitals are located in developed areas in urban centers. There are no indigenous peoples living close to or within the 10 project sites; hence, the Project is classified as category C for indigenous people. D. Development Impacts 1. Impact, Outcome, and Output 39. The Project contributes to human development and increased productivity of the workforce in India by improving the health care services. The Project will institutionalize secondary health care based on international best practices and provide community health services at affordable prices. Private sector provision of these services will allow the Government to use its limited resources for primary health care and for meeting the needs of low-income categories and people living in remote rural areas that are not attractive to the private sector. The Project’s output will be a network of secondary hospitals, a tertiary hospital, the practice of efficient medical protocols and evidenced-based medicine and the promotion of preventive health care. The Project will raise the standards for the healthcare industry, implement a new business model of low cost, high quality health care which in future can be replicated in semi-urban and rural areas, and create employment opportunities and train local medical personnel in international best practice. Corporatization of hospital care supported by this Project will indirectly assist in strengthening self regulation of quality of care, support deepening of insurance markets, and in accelerating public-private partnerships in the sector. The Project’s design and monitoring framework is in Appendix 1. 2. Development Effectiveness

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40. The development effectiveness of the Project will be assessed in terms of private sector development, business success, and economic sustainability as per the guidelines for implementing the Good Practice Standards for Evaluation of Private Sector Investment Operations,17 prepared by the Evaluation Cooperation Group of the multilateral development banks. The Project will lead to the development of high-quality health care services in the private sector and will set an international quality standard for other private sector operators. Catastrophic hospital expenditures are one of the main reasons for households regressing into poverty due to the poor penetration of health insurance. One of the main barriers to deepening of health insurance markets is the high level of fragmentation of hospital care segment and weak institutional support. The Project, by accelerating the Corporatization of hospital care will assist in deepening of health insurance markets in India, and indirectly assist in reducing the incidence of poverty. Corporatization of hospital care can also assist in new forms of public-private partnerships and lead to outsourcing of health care by the government to the private sector. Corporate hospitals can train more paramedical and nursing staff in high quality health care services. The Project is financially and economically sustainable, and adopts environmentally sound operational and waste disposal practices. The Project’s development effectiveness framework is provided in Appendix 1.

V. The Proposed Assistance A. Loan

41. ADB will provide a local currency loan of up to Rs1,642 million from its ordinary capital resources without a government guarantee. Proceeds from the loan will be used for eligible expenditures by CAH for the purposes of one tertiary and nine secondary hospitals in India.. B. Justification for ADB's Assistance

42. ADB's assistance for the Project is justified for the following reasons:

(i) The proposed loan is consistent with ADB’s draft country partnership strategy (CPS) 2008–2012 for India, which emphasizes private sector participation in physical infrastructure development. The CPS recommends public– private partnerships for the health sector and underscores that private sector (ii) Developing the private health care infrastructure and services for the middle-income category releases public resources for policy and

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regulatory work and allows public resources to focus better on the needs of the rural and poorer sections of society. India’s middle-income group is growing rapidly and its demand for health care services is expanding. Public sector resources are stretched and committed to the minimum needs program for delivering affordable health services to the vulnerable sections of the population. The Project will support private sector investment for the development of quality and affordable health care services in India for the middle-income population, freeing public resources for treatment of the poor. (iii) Private health care development has so far focused on tertiary health care. The provision of institutionalized secondary health care is relatively new in India. The presence of ADB has catalyzed financing in this transaction among local banks. Availability of long-term fixed-interest rate credit will increase the stability of the Project’s financing plan, reduce its financing uncertainty, and ultimately contribute to providing affordable health care services. (iv The Project is consistent with ADB's paper Policy for the Health Sector, 18 which promotes the private provision of hospital services. It is also consistent with the current draft of An Operational Plan for Improving health Access and Outcomes under Strategy 2020. (v) The proposed loan addresses the short supply of affordable and high-quality health care services to the middle-income class in India. This will lead to an improvement in the productivity of the workforce and reduce incidence of morbidity. (vi) The Project will contribute to sustainable economic growth in India by expanding access to international standard medical services and improving the productivity and quality of the workforce. Improved health and productivity of the workforce through the provision of modern medical services will accelerate efficient economic growth and also induce foreign direct investment. The Project will indirectly contribute to poverty reduction through economic growth. (vii) ADB's participation in the Project will demonstrate that commercially viable private health care projects can be undertaken through long-term project finance. The Project’s successful implementation will provide a new business model for India and other developing member countries. (viii) The Project is expected to be the source of best practices for the industry by instituting professional health care, management and training. The Project will be a showcase of

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modern medical practices and will therefore have a beneficial effect on the entire health sector and raise the overall standard of medical practice in India. (ix) The Project will provide employment for over 5,600 staff by the end of its third year of operation, and will help train local medical staff as per international standards, thus increasing the supply of highly-qualified local medical professionals. (x) ADB’s participation in the Project will ensure that it is implemented with due consideration for safeguard aspects (especially environmental), there are well designed countermeasures for any adverse impacts, and such measures are properly implemented and monitored.

C. Anticorruption Policy, and Combating Money Laundering and the Financing of Terrorism

43. CAH was advised of ADB’s Anticorruption Policy (1998, as amended to date) and policy relating to the Combating of Money Laundering and the Financing of Terrorism (2003). Consistent with its commitment to good governance, accountability, and transparency, ADB will require CAH to institute, maintain, and comply with internal procedures and controls following international best practice standards for the purpose of preventing corruption or money laundering activities or the financing of terrorism and covenant with ADB to refrain from engaging in such activities. The financing documentation between ADB and CAH will further allow ADB to investigate any violation or potential violation of these undertakings.

VI. Assurances 44. No-Objection Letter. Consistent with the Agreement Establishing the Asian Development Bank, the Government of India will be requested to confirm that it has no objection to the proposed assistance to CAH. No funding will be disbursed until ADB receives such confirmation. 45. Documentation. ADB will enter into suitable documentation, in form and substance satisfactory to ADB, following approval of the proposed financing by ADB’s Board of Directors.

VII. Recommendation 46. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the

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Board approve the loan of up to Rs1,642,000,000, without a government guarantee, to Columbia Asia Hospitals Private Limited for the Columbia Asia Hospitals Development Project from ADB’s ordinary capital resources on terms and conditions as are substantially in accordance with those set forth in this report, and as may be reported to the Board. 18 September 2008 Haruhiko Kuroda

President 1 ADB. 2004. Enhancing the Fight Against Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank. Manila. 2 Government of India. 2005. Report of the National Commission on Macroeconomics and Health, Ministry of Health and Family Welfare. New Delhi. 3 World Health Organization. 2006. World Health Report 2006. Geneva. 4 Economic Intelligence Unit. 2007. India Country Forecast. London (August). 5 The business ranking model measures the attractiveness of the business environment based on ten separate categories. Each category has indicators which are scored on a scale of 1 (very bad for business) to 5 (very good for business). Health of the workforce is 1 of the 12 indicators for the labor market category and is measured on a quantitative basis. 6 World Health Organization. 2007. World Health Statistics 2007. Geneva. 7 Technopak. 2008. Ten industry trends. Health Care Outlook. Volume 4. 8 The unorganized sector refers to nursing homes, for-profit or not-for-profit hospitals, most of which have fewer than 30 beds. 9 There are at present 27 TPAs registered under IRDA (as of 31 August 2007). 10 Joint Commission International, a well known international accreditation agency, and NABH are both members of the International Society for Quality in Health Care. 11 The excluded areas are the urban agglomerations of Ahmedabad, Bangalore, Chennai, Delhi, Greater Mumbai, Hyderabad, and Kolkata, and the districts of Faridabad, Gandhinagar, Gautam BudhNagar, Ghaziabad, Gurgaon, and Secunderabad. 12 ADB. 1999. Policy for the Health Sector. Manila. 13 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008–2020. Manila. 14 ADB 2008. Operational Plan for Improving Health Access and Outcomes under Strategy 2020. Manila (draft). 15 These include a drugs committee, an intensive care unit committee, a medical practices community, a quality assurance and safety committee, a medical records committee, an operation theater committee, and an infection control committee. 16 Medical protocols refer to a set of rules followed by health care providers for a medical treatment. They include a treatment plan and summarized consensus statements, and they address practical issues. Medical protocols are a superset of clinical treatment guidelines and clinical processes as they often carry the weight of law. 17 Multilateral Development Banks Evaluation Cooperation Group. 2006. Good Practice Standards for Evaluation of Private Sector Investment Operations – Third Edition. 18 ADB. 1999. Policy for the Health Sector. Manila.

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Appendix 1

Design and Monitoring and Development Effectiveness Frameworks

Table A1.1: Design and Monitoring Framework

Design Summary Performance Targets and/or Indicators

Data Sources and/or Reporting Mechanisms

Assumptions and Risks

Impact � Improved health and human development of the people in India

� India’s indicator for health of the workforce increases from 1 for 2002–2006 (compared with a regional average of 3.2) to 2 in 2011 � Life expectancy in India increases above 64 for females and 62 for males

� Economic Intelligence Unit’s country assessments and forecasts � National demographic data

Assumptions � Continued macroeconomic and political stability � Alleviates congestion in government and public hospitals � Releases government resources for rural areas and low-income categories Risk � Government health insurance coverage for the below poverty line is not effective

Outcome � High-quality and improved health care provided at affordable prices in selected cities in India

� CAH operates the proposed 8 facilities in phase 2 of its expansion � Private sector hospital beds increase by at least 20% by 2014

� CAH’s operating reports � Reports of health care insurance regulators � Government reports

Assumptions � The Project (phase 1) is completed in a timely manner. � Improved implementation of regulatory policies for the health care

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� Corporate hospitals support an annual growth of 10% in health care insurance till 2012

sector � Continued Government support for the health care industry Risk � Health insurance industry is not an effective implicit regulator

Outputs 1. Network of affordable, international quality secondary hospitals across India 2. Establishment of a competitive state of the art tertiary hospital 3. Practice of evidence based medicine and efficient medical protocols increases 4. Promotion of preventive health care 5. Generates employment and a group of professionals

� Hospitals reach 50% occupancy after 1 year of operation and 75% after 3 years of operation � Between 3-15 health sector third party administrators/ insurance companies enter in to agreements with CAH for each facility � Medico-legal claims against CAH are less than 3 per hospital per year which is lower than the industry norm for similar sized hospitals since operations

� CAH reports � Statistics and information disclosure by the NABH � NABH reports

Assumptions � Construction contractors perform in a timely manner and in accordance with guaranteed performance standards as per respective contracts � CAH is able to attract qualified medical personnel. � CAH rates are competitive. Risk � CAH is not able to replicate a high quality second tier management at all facilities

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trained according to international standards

� All facilities are accredited by QCI approved NABH in the first 6 months of their operation. � Annual increase of 10% in the number preventive health care check-ups by CAH till 2015 � The CAH hospitals provide over 3,600 professionals (doctors, nurses, administrators, and paramedics) direct employment and indirect employment to at least 2,000 people through outsourced services

Activities with Milestones Inputs 1.0 Opening of secondary hospitals 1.1 Opening of Hebbal, Bangalore hospital – July 2005 1.2 Opening of Palamvihar, Gurgaon hospital – July 2008 1.3 Opening of Patiala hospital – July 2009 1.4 Opening of Mysore hospital – October 2009 1.5 Opening of Chandigarh hospital – April 2010 1.6 Opening of Lucknow hospital – April 2010 1.7 Opening of Pune hospital – July 2010 1.8 Opening of Ghaziabad hospital – July 2010 1.9 Opening of Ahmedabad hospital – July 2010 2.0 Opening of tertiary hospital in Yeshwanthpur, Bangalore– July 2008

Inputs Equity from CAH � Rs3.612 billion ADB loan � Rs1.642 billion Other co-lenders � Rs1.313 billion

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3.0 Medical protocols and CAH operating procedures are adopted at all facilities on commencement of operations 4.0 Marketing strategy is implemented 2 months before launch of operations for each facility 5.0 Recruitment of personnel commences 3 months prior to completion of construction ADB = Asian Development Bank, CAH = Columbia Asia Hospitals Private Limited, QCI = Quality Council of India, NABH = National Accreditation Board for Hospitals and Health Care Providers.

Table A1.2: Development Effectiveness Framework

Objective Impact Performance Targets

Measurements

Private Sector Development

Project Company Impact � CAH establishes its brand in India through the implementation of international standards in health care � CAH demonstrates the practice of evidence based medicine and efficient medical protocols � CAH provides community health care services at affordable prices by implementing its prototype model Impact Beyond the Company

� NABH accreditation � CAH is able to attract qualified and capable personnel due to its superior work environment � High occupancy ratios in CAH hospitals, reaching 75% after 3 years of operation � Outpatients reach 80% of the capacity after 4 years of operation of each facility. � At least 3-15

� CAH’s operating, financial and environmental performance reports � CAH’s success in implementing phase 2 of its operations and establishing 8 more hospitals. � NABH reports

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� Project raises the benchmark for secondary health care services across the country �Project Provides training and exposure to local medical and non-medical personnel to international best practices in India � Project demonstrates effective implementation of environment and sector regulations

third party administrators/ insurance companies for the health sector enter in agreements with CAH � At least 3,600 medical personnel, (doctors, nurses, and paramedics) trained in international medical best practices.

Business Success

�Financially profitable and sustainable Separations

�Timely repayment of debt �Satisfactory financial internal rate of return (greater than weighted average cost of capital)

�Amortization of loans �Financial internal rate of return � CAH financial reports

Objective Impact Performance Targets

Measurements

Economic Sustainability

�Contributes to economic growth through mitigation of shortages in

�Economic internal rate of return greater than 12%

� Economic rate of return � Increase in preventive health care programs by

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health care services. � Contributes in improving the health of the workforce. � Reduces pressure on public hospitals and allows better access by the poor � Deepening of health insurance market due to Corporatization of secondary health care

� Increase in the number of corporate employers that register for health care programs � Government outsource health care services for its employees and below poverty line families � 10% annual growth rate in health care insurance till 2012

10% per year � Government reports

ADB = Asian Development Bank, CAH = Columbia Asia Hospitals Private Limited, NABH = National Accreditation Board for Hospitals and Health Care Providers.

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Appendix 2

Summary of Initial Environmental Examination

A. Introduction 1. Columbia Asia Hospitals Private Limited (CAH) a subsidiary of Columbia Asia Group (CAG)1 has requested support from the Asian Development Bank (ADB) for the development and operation of 10 hospitals in India (the Project). The tertiary2 hospital is located at Yeshwanthpur in Bangalore while the nine secondary3 hospitals are located at Hebbal in Bangalore, Gurgaon, Patiala, Mysore, Chandigarh, Lucknow, Pune, Ghaziabad, and Ahmedabad. This aims to provide affordable international standard health care to the growing middle-income class of India by delivering quality health care service. 2. CAH carried out an environmental analysis as part of the market, financial and operational due diligence of the Project through a consultant, Technopak Advisors Private Limited for the 10 operational and upcoming hospitals. Environmental due diligence also included a detailed waste management practice study in one operational secondary hospital through consultant EPTRI and an initial environmental examination (IEE) through a staff consultant for the tertiary hospital. In accordance with ADB’s Environment Policy (2002) and Environmental Assessment Guidelines (2003), this summary initial environment examination (SIEE) is prepared in line with the environmental assessment requirements for environmental category B4 project. The SIEE covers the general assessment of the anticipated environmental impacts of the Project in consideration of common design criteria, performance standards and guidelines, general and specific features such as environmental, social and economic settings, permitting requirements and status, and the environmental and waste management practices of the operational and upcoming CAH hospitals. A generic environmental management plan (EMP) for the Project was also prepared, based on the IEE for the tertiary hospital at Brigades Gateway, Yeshwanthpur, Bangalore, Karnataka State, in which impacts and appropriate mitigating measures were identified. 3. A comprehensive program of storing, transporting, and disposing of biomedical wastes for the project hospitals is in place, following international best practices and Indian rules and standards laid down by the National Accreditation Board of Hospitals (NABH) and with clearances from the state pollution control boards (SPCB). The audit conducted for operating hospitals found the program and its implementation to be adequate. 5

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4. The Project does not expect to adversely affect natural resources, and the facilities are not located in or near any ecologically sensitive or cultural and/or historic sites. A limited number of specific environmental impacts resulting from project implementation are anticipated. However, such impacts are temporary and will be avoided or mitigated by adhering to the Project’s EMP implementation. B. Project Description 1. Project Components 5. The Project will establish an integrated network of medical facilities consisting of a tertiary hospital and nine secondary hospitals. Three of these are operational and seven are in various stages of design and construction. The Project components and details are summarized in Table A2.1.

Table A2.1: Project Details

Project Locations

Plot Area (sq meters)

Number of Floors

Beds Cost (Rs million)

Status

Tertiary Hospital

Yeshwanthpur 8,255 B+G+4 160 564 In operation since July 2008

Secondary Hospitals

Hebbal 7,648 B+G+1 81 218 In operation since July 2005

Gurgaon 10,158 B+G+1 90 588 In operation since July 2008

Patiala 6,932 B+G+2 100 528 Construction ends July 2009

Mysore 8,129 B+G+1 84 637 Construction ends July 2009

Chandigarh 6,635 B+G+2 100 707 Construction ends October 2009

Lucknow 8,363 B+G+3 100 605 Construction ends April 2010

Pune 6,812 B+G+2 100 709 Construction ends April 2010

Ghaziabad 6,161 B+G+2 100 673 Construction ends July 2010

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Ahmedabad 4,978 B+G+2 100 707 Construction ends July 2010

B = Basement; G = Ground. Source: ADB Staff compilation. 6. Forthcoming hospitals will follow the typical CAH secondary model design: (i) 100 inpatient beds; (ii) secondary care multispecialty hospital focusing on specialties such as medicine, surgery, obstetrics and gynecology, pediatrics, orthopedics, ear nose throat (ENT) with basic laboratory and diagnostic facilities; (iii) internationally accepted standard policies and procedures; (iv) proprietary operating software and electronic medical records; (v) unique, modern and efficient design and; (vi) modern medical equipment. These hospitals are in various stages of design and construction and are being planned to follow the same design and operational benchmarks as the existing facilities. 2. Status of Compliance with Environmental Laws and Regulations 7. The environmental clearances and environmentally related permits have been issued for CAH’s operational hospitals and are being processed and/or will be obtained for the forthcoming hospitals from the respective State Pollution Control Boards (SPCBs). Environmentally related permits include the Consent for Establishment (CFE), the Consent for Operation (CFO), the annual Water Consent as per the Water Pollution Control and Prevention Act, 1974 and Air Consent as per the Air Pollution Control and Prevention Act 1981, and the No Objection Certificate (NOC) as per Ministry of Environment and Forests (MoEF) notified Biomedical Waste Management and Handling Rules, 1998. 3. Biomedical Waste and Liquid Wastes Management Practices 8. The biomedical wastes generated at CAH operational facilities are collected, segregated, stored and disposed off at a common biomedical waste treatment facility. The operational hospitals at Hebbal and Yeshwanthpur outsource biomedical waste management services to M/s Semb Ramky Environmental Management, an authorized agency by Karnataka State Pollution Control Board, while the hospital at Gurgaon outsources services to Vulcan Waste Management Company. 9. A detailed waste management study was carried out for the hospital in Hebbal to assess its waste management practices and environmental measures. The hospital follows the MoEF notified Biomedical Waste Management and Handling Rules, 1998 with respect to waste segregation, collection, following the color coding norms for collecting different categories of waste and usage of symbols on the collection containers, internal transportation and storing of the

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waste. The hospital separates the infectious waste from the noninfectious waste and the waste is collected in color-coded bags by housekeeping in three shifts; morning, afternoon, and evening or as required when a waste bin or sharps bin is 75% full. Mobile garbage bins are used. Housekeeping staff wear heavy duty gloves, masks and rubber boots while collecting waste. The quantities of waste generated per day are presented in Table A2.2.

Table A2.2: Daily Waste Generation at Hospital in Hebbal

Color Container Category

Quantity of waste generated /day (in kilograms)

Blue Infectious (Non biodegradable)

Blue plastic bag in plastic bin

Tubing’s, catheters, IV tubes, blood bags, drains, gloves, aprons and endotracheal tubes

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Red Infectious (Biodegradable)

Red plastic bag in plastic bin

Cotton, gauze, bandages, plaster, dressing.

46

Yellow (Organ and tissue waste)

Yellow plastic bag in plastic bin

Human tissues, organs, body parts, placenta, pathological and surgical waste, microbiology and biotechnology waste

3

Black

Black bag in plastic bin

General paper waste; and also kitchen waste, that is disposed separately.

40

IV = intravenous. Source: Due Diligence Report, Technopak Advisors Private Limited, 2008.

10. The biomedical wastes are weighed and stored in the air-conditioned waste holding room before they are taken by the contracted agency for treatment and disposal at the common biomedical waste treatment facility. The segregation and

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disposal of biomedical waste is recorded and log books are maintained on a day to day basis. 11. The hospital has a biomedical waste management protocol with trained staff in hospital waste management. A maintenance engineer, with mechanical engineering background looks after the overall biomedical waste management and other environmental aspects. The practice for the biomedical waste disposal conforms to the prescribed requirements and the biomedical waste management protocol. 12. The liquid wastes generated from the hospital wards and the sewage from cafeteria and toilets are combined and treated in a sewage treatment plant. The total quantity of wastewater entering the facility is 39 kiloliters per day (KLD); 31 KLD of domestic wastewater and 8 KLD of chemical wastewater from different wards. The treated water is reused for gardening within the premises. CAH follows a typical design for its hospitals, replicating the liquid waste management and design of the sewage treatment plant. C. Description of the Environment 13. General and specific descriptions of the environment for the purpose of overall impact assessment and development of a generic environmental plan for the Project are provided below. 1. General Environmental Conditions

a. Yeshwanthpur, Bangalore

14. The town of Yeshwanthpur, which is located in the northern region of Bangalore, is a planned area with a mix of industries and residential colonies. It is adjoining the Peenya industrial area and hosts over a dozen industries, including Bharat Heavy Electronics, Mysore Lamps, Chandan Chemical Corporation, Karnataka Government Soap Factory, Mafatlal Plywood, Suryodaya Industries and Kirlosker Batteries. The town is crossed by a railway line, with industries on one side and residential colonies on the other. The renowned Indian Institute of Science is in the heart of Yeshwanthpur and is considered a green area. The ISKCON temple is on the outskirts of town. The hospital in Yeshwanthpur is inside a self-contained, integrated township called Brigades Gateway. This complex is about 5 km from the central business district of Bangalore, 15 km from the airport, 4 km from the main railway station, and near the satellite Yeshwanthpur railway terminal. It is also well connected by the National Highway 4 and via the outer Ring road to many residential areas.

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b. Hebbal, Bangalore

15. Hebbal is an area north of Bangalore which hosts various industries as well as educational institutions. These include government-run organizations such as the Karnataka Agro Industries Corporation, Institute of Veterinary Biologicals, University of Agricultural Sciences, Veterinary College, Mahatma Gandhi Polytechnic and office of Directorate of Biological Control. The Geetha Nursing home and 200-bed Baptist hospital are the other medical establishments in this area. The opening of the Bangalore International Airport (BIAL) in 2008 has ensured that Hebbal will become an important location in terms or real estate value, economic development, and urbanization. The hospital in Hebbal is at Kirloskar Business Park Bellary Road. The hospital is not located in or near any ecologically sensitive or cultural and/or historic sites. c. Gurgaon District, National Capital Region, Delhi 16. Gurgaon is a district in the National Capital Region (NCR) of Delhi which hosts a large number of corporate organizations. NCR is the fastest growing urban conglomerate in the country. The hospital in Gurgaon is strategically located in Palam Vihar, a prime residential area. The hospital site is about 5 km from the City Railway Station and 6 km away from National Highway 8. The domestic and international airport of New Delhi is 10 km away from the hospital site. The hospital is not located in or near any ecologically sensitive or cultural and/or historic sites. d. Patiala City, Punjab 17. Patiala is fast emerging as an important industrial growth center in Punjab. Besides traditional goods, other products manufactured in the area include cutting tools, power cables, Vanaspati ghee, bicycles, and agriculture implements including harvester combines and threshers, milk products, and pesticides. The industrial units are scattered all over the district mainly at Rajpura, Dera bassi, Patiala, Samana and Nabha. The hospital site is located near Thapar University and is easily accessible by road, railway and bus. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. e. Mysore City, Karnataka 18. While tourism is the major industry in Mysore City, the growth of information technology has resulted in the city emerging as the second largest software exporter in the state of Karnataka, after Bangalore. Infosys has established one of the largest technical training centers in the world and Wipro has established its Global Service Management Center (GSMC) at Mysore. In the

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eastern part of the city there is a huge residential area. The hospital in Mysore City is located on the Bangalore–Mysore Highway about 7 km from Mysore city center and in close proximity to IT Parks. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. f. Chandigarh City, Punjab 19. Chandigarh City serves as the capital of two states, Punjab and Haryana, and is a union territory of India. The hospital in Chandigarh is located in Baltana Village, Dera Bassi (Mohali). The area is about 600 meters from Zirakpur City Center, along Zirakpur Kalka Highway and near the Kalka-Shimla, Chandigarh, Delhi Ambala roads. The hospital site is about 5 km from the airport and 4.6 km from the nearest Chandigarh railway station. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. g. Lucknow City, Uttar Pradesh 20. Lucknow is among the top 10 fastest growing non-major-metropolitan cities in India. It is the second largest city in Uttar Pradesh state. The population is mostly upper middle class and middle class. Big oil marketing companies such as Indian Oil Corporation, Hindustan Petroleum, Bharat Petroleum, and Reliance have their offices in Lucknow. Leading information technology (IT) companies such as TCS and IBM are also operating in Lucknow. Biotechnology and information technology are the two focus areas promoting economic development in and around the city. The Ministry of Science and Technology is setting up a biotech park in the city. The hospital site is a prime city location, facing the Faizabad Road, and is adjacent to government facilities and educational institutions. The hospital site is near the National Highway 28 (main Faizabad Road), and Hindustan Aeronautics Road. It is accessible by all modes of public transport. It is 6 kilometers from Hazratganj, the city center, 16 km from the Amausi Airport. The nearest railway station is Badshah Nagar. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. h. Pune City, Maharashtra 21. Pune is one of the fastest growing cities in the country, as large national and international corporations are making it the center of their corporate activities. The area where the hospital will be located, Magarpatta, is one of the prime focuses of major economic and residential developments mostly for the middle-class population and new settlers coming in the city for employment. Magarpatta is one of the biggest residential and commercial development areas in the city. The hospital land plot is attached to the Nayati Empire, a residential colony with

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7000– 8000 apartments that have been built or are planned at the site. The EON free zone IT SEZ, a special economic zone, is about 2 km from the site. The area is not well connected by local transport. Koregain Park, the city center, is about 4 km from the hospital site. The airport is 11.5 km away, while the nearest railway station is 7.5 km away. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. i. Ghaziabad, National Capital Region, Delhi

22. Ghaziabad is a part of the National Capital Region (NCR). The hospital in Ghaziabad is located on the National Highway 24, which is the focus of all economic, residential and commercial developments in Ghaziabad. The schedule for the hospital commissioning in July 2010 is expected to coincide with residential developments in the vicinity. The city center is 5 km away, New Delhi airport 50 km away and the nearest railway station is located 5 km away. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. j. Ahmedabad City, Gujarat 23. Ahmedabad City also known as Ahmedabad Municipal Corporation is the seventh largest city in India with a population of 3.5 million. It is the largest city in the state of Gujarat. It has had great importance in the economy of Gujarat because of the large concentration of economic activities, high growth rates and productivity. The city established itself as the home of a booming textile industry, which earned it the nickname "the Manchester of the East." The city also has a thriving chemicals and pharmaceuticals industry. In recent years, the Gujarat government has increased investment in the modernization of the city’s infrastructure, providing for the construction of larger roads and improvements to water supply, electricity, and communication. The information technology industry has also developed significantly in recent years. The city is among the largest exporter of gems and jewellery in India. The city’s educational and industrial institutions have attracted students and young skilled workers from the rest of India. The hospital site in Thaltej, near the Thaltej crossroads area, and is about 1 km from the Sarkhej–Gandhinagar highway, toward the west of the city. It lies between two parallel roads. The plot is in the midst of high-end residential areas, surrounded by more than 50 residential housing villages including Thaltej, Bodakdev, Sola, Memnagar, Jodhpur and Ambli. All these areas fall in Ahmedabad Urban Development Authority’s residential zone and have been developed in the last 10 to 15 years. The hospital will not be located in or near any ecologically sensitive or cultural and/or historic sites. 2. Specific Baseline Environmental Conditions for Hospital in Yeshwanthpur

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24. A specific description of the existing environmental conditions is provided below for the tertiary hospital in Yeshwanthpur, Bangalore. Although these conditions are specific to Yeshwanthpur, the urban setting in which the facility is located can be considered general to all project hospitals. a. Topography, Soil and Land Use 25. The hospital site is relatively flat and sparsely covered with trees and vegetation. The soil is generally red with yellow clayey silty sand down to a depth of 5 meters (m) followed by silty sand strata which is highly disintegrated rock down to a depth of 10 m reaching stable strata. 26. The present land use pattern in the immediate surroundings of the project site is a mixture of commercial and residential areas with very little or no farming activities. b. Climate 27. The mean monthly wind speed values for a 4-year period during 2000–2003 recorded at the India Meteorological Department (IMD) station at Bangalore showed that the highest wind speed of 9.8 kilometers per hour (km/hr) was recorded in June 2001 and lowest at 2.9 km/hr in October 2000. In the middle months of the year the prevailing wind direction is westerly, while it is easterly in the remaining months, which are influenced by the southwest and northeast monsoon, respectively. 28. The site in Bangalore has an equitable temperature regime. The hottest months are March, April and May, with monthly mean maximum temperatures ranging from 32.4 degrees centigrade (0C) to 32.70C followed by a perceptible drop of nearly 4.50C in the month of June, signaling the onset of monsoon season. The monthly mean temperatures for these months are in the range 260C–27.50C. The coolest month is December with mean maximum temperature between 160C. 29. Average annual rainfall in Bangalore over the 30-year period from 1951 to 1980 is 970 millimeters (mm), with 60 days of rainfall. The wettest months are September and October, while the driest period is between January and March. In recent years the city received significantly less average rainfall, e.g., 767 mm in 2002 and 727 mm in 2003. c. Air Quality

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30. There are no industries near the hospital site. The source of air pollution can be attributed to the movement of vehicles. Records of ambient air quality within a 3-km radius from the project site indicate that values of suspended particulate matter ranging from 50 micrograms per cubic meter (µg/m3) to 150 µg/m3, sulfur dioxide from 7 to 23 µg/m3, and oxides of nitrogen from 4.5 to 23.5 µg/m3 are within the National Ambient Air Quality Monitoring standards prescribed by Central Pollution Control Board.6 d. Noise Level 31. Data on the ambient noise levels gathered from the 10 locations near the hospital site indicate a high value due to considerable human, commercial and vehicular activities in the surrounding areas. The day-time maximum noise levels around the project site range from 57.80 decibels, (dB(A)) to 97.90 dB(A). Noise levels at the project site are in the range of 58.7 dB(A) to 60.6 dB(A).7 e. Water Quality 32. There are no significant surface water bodies in the vicinity, except the Sankey Tank and the Bangalore Water Supply and Sewerage Board (BWSSB) open sewer (Arkavathy valley) which are at some distance from the hospital site. Groundwater around the hospital site has no objectionable odor, has good taste and color, and is within the permissible limit of 5 Hazen units prescribed for potable water. The maximum total dissolved solids (TDS) levels are in the range of 850 to 950 milligrams per liter (mg/L) and nitrate levels are in the range of 100 to116 mg/L8. 3. Biological Environment

33. The hospital site and immediate surroundings have been thoroughly urbanized. Habitats for flora and fauna are very limited due to the intensive commercial and residential development. No wildlife sanctuary or game reserve is located in the vicinity of the study area. 34. The hospital area has no vegetation cover and/or forest lands nor environmentally sensitive or protected areas. 4. Socioeconomic Environment

35. The population is considered totally urban with no farming or agricultural activities of commercial scale. Education facilities such as colleges and technical training institutes are well established. Telecommunication, power, water supply and transportation facilities are available and adequate.

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36. There are no settlements or residences at the hospital site. Therefore, no resettlement is required. 37. No archaeological, historical and religious sites exist in the hospital area. No indigenous group of people was identified. D. Anticipated Environmental Impacts and Mitigation Measures 38. An assessment of the potential environmental impacts and identification of mitigating measures was carried out for the tertiary hospital in Yeshwanthpur to prepare a generic environmental management plan (EMP) for the all project hospitals. 39. There are no significant differences in the potential impacts and mitigation measures of the different hospitals, nor between the tertiary and the secondary hospitals. The anticipated impacts and mitigation measures are considered relevant and are essentially the same, if of larger scale, for the remaining project hospitals. The key environmental issues associated with the hospitals and impacts on various environmental components and the appropriate mitigating measures have been assessed for construction and operational phases. 1. Impacts during construction 40. The Project will build hospitals, including facilities such as the water system and sewage treatment plants. The construction activities would create the environmental disturbance normally 8 Based on Drinking Water Quality Standards (IS:10500) the permissible limit for total dissolved solids (TDS) is 2,000 milligrams per liter (mg/L) and for nitrate 100 mg/L as NO3. Appendix 2 25 associated with major construction works, such as dust, noise, exhaust emissions from construction equipment and vehicles, and waste generation. As construction will be confined to the hospital compound and there are no nearby settlements, the impacts of such environmental disturbances will be insignificant. The Project and its Contractors will comply with applicable government environmental legislative requirements. 41. Dust generated during construction is expected to have some impact on air quality. However, this will be mitigated by regular spraying paths of heavy vehicles with water, and controlling the speed and limiting movement of construction equipment and vehicles. All equipment and vehicles will undergo routine maintenance to reduce engine emissions. Vehicles transporting construction materials will be covered with tarpaulin to avoid spills.

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42. Noise will be generated during construction. Construction activities will be planned to avoid noisy operations. Efforts will be made to limit the sound of powered mechanical equipment such as bulldozers, air compressors, concrete pumps, excavators, and concrete mixers. Protective devices will be provided to workers to minimize the effects of high noise levels. Specific mitigation measures and appropriate techniques for the control of noise will include (i) siting fixed pieces of equipment, such as generators, away from settlements; (ii) fitting pneumatic tools operated near settlements with effective air exhaust ports; (iii) fixing noise labels to air compressors; (iv) maintaining noise suppression devices on construction vehicles and equipment; (v) notifying landowners of intended work and duration if noise from construction activities is likely, and (vi) considering construction works schedules to mitigate noise emission impacts during the day and night time. 43. Solid wastes generated during construction include trash and scrap metal (which will be reused and recycled if possible). During the peak of the construction phase, laborers will be employed locally and temporary construction camps will be established. Sewage from construction camps and wastewater from the contractor’s workshop and equipment washing yard will be generated. Labor camps will be provided with adequate sanitation infrastructure and amenities. Sewer drains will lead to an onsite disposal area for treatment or holding in septic tanks with leach fields. 2. Impacts during Operations a. Air and Noise Quality 44. One source of likely air pollution will be the operation of diesel generators. To reduce pollution, the fuel to be used for the diesel generators will have a low sulfur content (less than 0.05%) and diesel generators will be used during emergencies and power shortages only. The expected emission of SO2 and particulate matters will be mitigated by installing an exhaust chimney with height to be prescribed by respective State Pollution Control Boards (SPCBs). 45. The noise impact on the surrounding areas because of the commissioning of the hospital will be insignificant. The diesel generators will be the only major noise generating sources in the project hospitals. Adequate precautions will be taken to prevent noise and vibration at the source by proper acoustic treatment, anti-vibration mountings, and acoustic enclosure to keep noise levels within the stipulated limits.9

b. Water and Wastewater Quality

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46. Potable water will be sourced from local water companies and from existing bore wells within the hospital site. The water requirement of 10,000 liters (10 m3) per day will not have a severe impact on groundwater resource (such as depletion or subsidence). 47. The wastewater to be generated from the wards, kitchen, cafeteria, toilets, and other parts of the hospital will be combined and treated in an onsite sewage treatment plant. The treated water will be reused for gardening within the hospital premises. 48. The sewage treatment plant will conduct primary and secondary treatment with an aeration system followed by filtration through pressure sand filters and an activated carbon column and finally with chlorination. Rooftop rain water harvesting, coupled with storm water harvesting and impoundment in an artificially created water body, will help to recharge the groundwater table near the hospital. c. Terrestrial Environment 49. No major impacts on the terrestrial environment are anticipated. Each tree that is cut to give way for the development of the forthcoming hospitals will be replaced by planting a minimum of two trees or saplings. A green belt along the periphery of the hospital sites will be implemented to enhance the aesthetics at the same time as a measure to reduce air and noise pollution. 50. To avoid soil or land contamination, the general standards prescribed for treated effluents for discharging on land for irrigation10 will be met before they are reused on land for lawns, gardening, and plantations. d. Biomedical and Domestic Waste Management 51. The process of biomedical waste management in India has been well established under the Ministry of Environment and Forests (MoEF) Biomedical Management and Handling Rules 1998. The guidelines required all health care establishments to undertake the proper method of segregation, storage, treatment and disposal. The types of containers, color coding and the labels to be used for segregation and storage are defined in the guidelines. The sources of hospital wastes include the emergency room, pharmacy, laboratory, day care, Operation Theater, dialysis section, and radiology division. Infectious and noninfectious wastes must be segregated and placed in color coded bags properly labeled and stored in the waste holding room before collection, treatment, and disposal to a common biomedical waste treatment facility. The waste holding room must have proper storage and temperature control facilities.

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Wastes should be stored at 4oC in the holding room in case they have to be stored for more than 48 hours before collection for final treatment and disposal by waste management firms. There are specialized waste management firms in all states, registered with SPCBs. These have to collect and process waste for disposal at government-approved sites as a precondition for establishing any hospital and as part of the environment clearance process. These rules will be strictly followed by the project hospital management. This ensures that the impacts and risks will be minimal, and will be strictly monitored. 52. Domestic waste generated by the hospital staff and patients will be collected separately from the biomedical waste. It will be collected by municipal waste corporations for further treatment and final disposal. E. Institutional Requirements and Environmental Management Plan

1. Environmental Management Plan

53. The Project’s environmental management plan (EMP) is formulated as a generic one that can be applicable to all project hospitals. CAH has committed to update the EMP as part of the IEEs for the remaining project hospitals and the environmental clearance process. CAH will provide adequate staff and budget to ensure EMP implementation in the project hospitals. ADB will review the IEEs, including the site-specific EMPs, of the remaining hospitals when available. 54. The generic EMP commits CAH to manage and mitigate the environmental impacts of the project hospitals. It provides the actions to be undertaken during the preconstruction, construction, and operation phases as well as the responsible entities for implementation (in Appendix 1 of the EMP). 55. Environmental monitoring will be undertaken. All project hospitals will have a mini-laboratory exclusively for regular monitoring and testing of the quality of the treated wastewater to ensure that it is suitable for reuse for plantation. The mini-laboratory will handle basic parameters such as pH, total suspended solids, dissolved oxygen, chemical oxygen demand (COD) and biochemical oxygen demand (BOD). 56. All project hospitals will have a maintenance engineer with a mechanical engineering background who will look after the overall biomedical waste management and other environmental aspects. The engineer will also carry out the periodic monitoring of the emissions from the chimneys, ensure the smooth operation of the sewage treatment plant, and prepare reports that are statutory requirements of the respective SPCBs. Annual environmental monitoring reports will be submitted to ADB.

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F. Public Consultation and Disclosure 57. CAH undertook a comprehensive market and feasibility study, including informal discussions with officials of the major cities, before deciding on the location of the hospitals. Project sites are either part of property development that has been ongoing for several years, are part of an overall town planning exercise, or are on industrial estates sold by the government to private developers. 58. The hospital in Yeshwanthpur is inside a self-contained integrated township, Brigades Gateway, under a lease agreement with Brigade Enterprises. Public consultation was carried out as part of the township development phase and it included discussion on social services that would be provided as part of the complex, including health facilities such as a hospital. Township residents have expressed strong support for the hospital as it would generate employment and contribute to local and regional economic development by ensuring a healthy workforce. G. Findings and Recommendations 59. A comprehensive program of storing, transporting, and disposing of biomedical wastes for the project hospitals is in place, following international best practices and Indian standards, laid down by the National Accreditation Board of Hospitals (NABH), with clearances from the respective State Pollution Control Boards. The audit conducted on the three operating hospitals found the program and its implementation adequate. 60. The biomedical waste management guidelines as stipulated and required by MoEF will be strictly followed by management in each hospital. All biomedical wastes generated will be sent to a common biomedical waste treatment and disposal facility operated by a private agency approved by the respective SPCBs. 61. No significant environmental impacts are expected during construction and operation because of the nature of the Project and the hospitals’ location. The generic EMP to mitigate potential environmental impacts, including air and water quality, has been prepared and will be updated if necessary, and will be strictly implemented during the construction and operation phases of each project hospital. H. Conclusion

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62. The Project will support private sector investment in the development of quality and affordable health care services in India for the urban middle-income categories. 63. The Project’s potential environmental impacts can be mitigated effectively provided the mitigating measures are implemented properly. The maintenance engineer designated by the Project will oversee and monitor all environmental activities. The engineer will ensure that national and local regulatory requirements (on air, water quality and biomedical waste management) are properly handled and complied with. 64. The IEE suffices as the environmental assessment of the Project. Potential environmental impacts are well understood. The Project’s environmental management plan is a generic one that can be applied to all project hospitals. CAH has committed to update the generic EMP as part of the IEEs for the remaining project hospitals and the environmental clearance process. CAH will provide adequate staff and budget to ensure EMP implementation in the Project hospitals. ADB will review the IEEs, including the site-specific EMPs of the remaining Project hospitals when they become available. No further environmental investigation is necessary.

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Table A2.3: Environmental Management Plan

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1 Columbia Asia Group (CAG) is a regional health care company with medical centers in Malaysia, Viet Nam, Indonesia, and India providing multispecialty health care facilities including out patient and inpatient services. 2 A tertiary health care hospital provides multispecialty services in cardiology, neurosurgery, gastroenterology, oncology, cardiothoracic vascular surgery and transplants and has high end diagnostic facilities like computerized tomography scan and magnetic resonance imaging. 3 A secondary health care hospital provides services focusing on specialties like medicine, surgery, obstetrics and gynecology, pediatrics, orthopedics, and ear nose throat (ENT), with basic laboratory and diagnostic facilities and operating theaters. 4 A project is classified as category B if its potential adverse environmental impacts on human populations or environmentally sensitive areas are less adverse than those of category A projects. 5 The audit was carried out at the hospital in Hebbal to: (i) assess existing systems and processes; (ii) determine compliance level as per standards prescribed by the hospital management; (iii) benchmark existing standards and processes with national level quality guidelines and best practices; and (iv) recommend corrective and preventive actions to streamline and improve the processes. The methodology included direct observations of process flows, patient flows, departments and facility as a whole, mapping of systems and processes with NABH standards by means of a checklist, interviews of staff, patients and visitors, and analysis of documents. 6 Based on Environment (Protection) Rules (1986), ambient air standards for residential, rural and other areas are 140 - 200 microgram per cubic meter (µg/m3) for suspended particulate matter (SPM) and 60–80 µg/m3 for both sulfur dioxide (SO2) and oxides of nitrogen (NO2). 7 Based on Noise Pollution (Regulation and Control) Rules (2000), noise limits for residential areas are 55 dB(A) for day time (6:00 am to 10:00 pm) and 45 dB(A) for night time (10:00 pm to 6:00 am). 9 Based on Noise Pollution (Regulation and Control) Rules (2000), noise limits for silence zone, e.g., hospital are 50 dB(A) for day time (6:00 am–10:00 pm) and 40 dB(A) for night time (10:00 pm–6:00 am). 10 Standards for treated effluents for discharging on land for irrigation (plantation) per IS 2490 are as follows: (i) color and odor = remove as far as practicable; (ii) suspended solids, milligrams per liter (mg/L) = 200; (iii) pH = 5.5 to 9.0; (iv) Oil and Grease, mg/L = 10; (v) biochemical oxygen demand, mg/L = 100; (vi) arsenic (as As), mg/L = 0.2; (vii) cyanide (as Cn), mg/L = 0.2; (viii) alfa emitters, millicurie per milliliter = 10-8; (ix) beta emitters microcurie/milliliter =10-7 and (x) bioassay test = 90% survival of fish after 96 hours in 100% effluent.

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Appendix 3