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Case study on

Finance and Accounts Department


at
Columbia Asia Referral Hospital,
Yeshwanthpur, Bangalore.

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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
ManagerMarketing)
and
Mathew
Abraham
(ManagerCorporate
Communications) of Brigade Enterprises Ltd, on 17 December.
We would like to know a little about Columbia Asia Hospitalits origin,
history and how its come to India.
Columbia Asia is an international companycurrently 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 Indiaand why specifically Bangalore?
Basically, India has a rapidly emerging middle class populationone 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 Malaysiaand 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 Asias 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 Bangaloreand expected to be operational in
about a years 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
informationto 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 Asiahere, the patient sees
the treatment and then pays; not vice-versa. And there are no queues: people are
seated, people are escortedits 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 boneswhatever.
But some of the high level caresuch as heart operations, interventional
cardiology and so onis 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
(its 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 recruitmentit 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 gathereddoctors,
administrators and non-medical peopleare 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
Yesthats 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 managementan eventuality every airport has to be
prepared for.

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 BangaloreYeshwanthpur, Malleshwaram
and Rajajinagarso 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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T .................................................................... 1
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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T ................................... 21
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
TPAS 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
Dos for hospital insurance coordinator while serving Insurance Patients ........................................ 35
Donts 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. ADBs 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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Pa ge Left Bla nk
Intentionally

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THE IDEAL FINANCE DEPARTMENT

11

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.,

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 dont 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.
2.
3.
4.
5.
6.

Service mix and decisions regarding specialization.


Pricing.
Free and concession care.
Community health and involvement in social developmental activities.
Training and research.
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.

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 dont 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

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.

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.,

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,

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

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

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.

10

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

11

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

12

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.

13

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
doesnt 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.

14

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

Accounts
Receivable
Grants
&
Donations
Income
from
property
Other Income

Supplies
and
expenses
Repair
&
Maintenance
Plant operation

Major
Fixed Long term loan
Equipment
Minor Equipment Specific Purpose
Fund
Cash
Capital
Investments
Inventory

Utilities, Admin
Expenses
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
15

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.

16

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
17

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.

18

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
19

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 years 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.

20

ACTUAL FINANCE AND ACCOUNTS


DEPARTMENT

AT

COLUMBIA ASIA REFERRAL HOSPITAL,


YESHWANTHPUR, BANGALORE

21

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.

22

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.

23

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

24

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- companys 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 onesixth 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.

25

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.

26

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.

27

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
Front Office Staff
Accounts Payables
Treasury
Corporate Accounts
Purchase and Stores
Corporate Clients
Cash Management
Cashiers

28

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.
2.
3.
4.
5.
6.
7.
8.

Accounts receivables
Accounts Payables
Treasury
Corporate Accounts
Purchase and Stores
Insurance
Corporate Clients
Cash Management

29

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

30

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,

31

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 takes 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.

32

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.

33

TPAS 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 members discharge from the hospital for reimbursement

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

34

Copy of Member ID card with the members 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

Dos for hospital insurance coordinator while serving Insurance Patients

Check the members identification (ID card / pre authorization letter)


before extending cashless treatment in the hospital.
Counsel the patient (attenders) 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 34 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.

35

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

Donts 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.

36

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 Psychoneurotic 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 doctors advice.

37

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 patients 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 TPAs 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

38

Discharge medications should not be included in the final bill.


Dont discharge the insurance patients on Sundays and during National
Holidays 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 safes 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
Hospital, Yeshwanthpur is 564 Million INR.

Referral

Financial Planning
Pre-Operations
All of the Columbia Asia Hospitals 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

39

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 Hospitals 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)

40

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 ADBs public communications policy (PCP, 2005), this abbreviated version of the RRP
excludes confidential information and ADBs assessment of project or transaction risk as well as other
information referred to in paragraph 126 of the PCP.

Asian Development Bank

41

CURRENCY EQUIVALENTS
(as of 1 August 2008)
Currency Unit Indian rupee/s (Re/Rs)
Re1.00 = $0.02353
$1.00 = Rs42.49
ABBREVIATIONS
ADB
ALOS
BPL
CAG
CAH
CAHM
CPS
CSP
DSCR
EBITDA
EBM
EIRR
FIRR
ICM
ICU
IEE
NABH
Providers
O&M
PAT
PBT
PRC
SHE
SOP
TPA
TRAA
WACC

Asian Development Bank


Average length of stay
below poverty families
Columbia Asia Group
Columbia Asia Hospitals Pvt. Ltd
Columbia Asia Health Care Sendirian Berhad
country partnership strategy
country strategy and program
debt service coverage ratio
earnings before interest, tax, depreciation, and
amortization
evidence-based medicine
economic internal rate of return
financial internal rate of return
International Columbia 2004
International Columbia US, LLC
initial environmental examination
National Accreditation Board for Hospitals and
Health Care
operation and maintenance
profit after tax
profit before tax
Peoples Republic of China
safety, health, and environment
standard operating procedure
third party administrators
trust and retention account agreement
weighted average cost of capital

42

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)
M. Barrow, Infrastructure Finance Division 1, PSOD

Director
Team leader
Team members

S. Gupta, Senior Economist, Operations Coordination


Unit, PSOD
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

43

Contents
MAP
I. THE PROPOSAL
II. BACKGROUND
A. Health Sector in India
B. Government Policies and Plans
C. ADBs 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

44

45

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 economys development and
growth. Adequate levels of expenditure on health care are also necessary to
ensure improvements in life expectancy. Econometric evidence indicates that a 5year gain in life expectancy is associated with a 0.060.58 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 Peoples Republic
of China (PRC), for example, had a female life expectancy of 74 in 2005 and an

46

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 20022006 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

47

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 highquality 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 Indias 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

48

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

49

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 Governments 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. ADBs Operations

50

1. ADB's Country Strategy


17. Private sector development is an integral part of ADB's draft country
partnership strategy (CPS) for India for 20082012. 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. ADBs 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. ADBs 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.

51

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 CAGs 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

52

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 510 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
Beds

Cost
(Rs
million)

Construction
Completion
(date/status)

Land and B+G+1


building
on lease

81

218

In operation
since
July 2005

Land and B+G+4


building
on lease

160

564

In operation
since
July 2008

Project

Ownership

Hebbal,
Bangalore

Yeshwantpur,
Bangalore
(tertiary
hospital)

Number
of Floors

53

Gurgaon

Land and
Building
owned

Patiala

B+G+1

90

588

In operation
since
July 2008

Land
on B+G+2
Lease
Building
owned

100

528

Construction
ends
July 2009

Mysore

Land and
Building
owned

B+G+1

84

637

Construction
ends
July 2009

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

B+G+2

100

673

Construction
ends
July 2010

Ahmedabad

Land and
Building
owned

B+G+2

100

707

Construction
ends
July 2010

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 evidencebased 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
54

back-office operations such as accounting and reporting, procurement and


purchasing, project management, and by using recent technology for teleimaging.
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 NABHcompliant. 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.

55

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 CAHs 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
Projects 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

56

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 Projects 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 Projects design and monitoring framework is in
Appendix 1.
2. Development Effectiveness

57

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 Projects 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 ADBs draft country partnership
strategy (CPS) 20082012 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

58

regulatory work and allows public resources to focus better on the needs
of the rural and poorer sections of society. Indias 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 fixedinterest rate credit will increase the stability of the Projects 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 Projects 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

59

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 highlyqualified local medical professionals.
(x) ADBs 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 ADBs 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
ADBs 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
60

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 ADBs 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.

61

Appendix 1
Design and Monitoring and Development Effectiveness Frameworks
Table A1.1: Design and Monitoring Framework
Design Summary Performance
Data Sources
Assumptions
Targets
and/or and/or Reporting and Risks
Indicators
Mechanisms
Impact
Assumptions
Improved health
and human
development
of
the
people in India

Indias indicator
for
health
of
the
workforce
increases from 1
for
20022006
(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 Units
country
assessments and
forecasts
National
demographic
data

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
Assumptions

CAH operates
CAHs operating
the proposed 8 reports
facilities in phase
Reports
of
2 of its expansion
health
care insurance
Private sector regulators
Government
hospital
beds
increase by at least reports
20% by 2014

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

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

62

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

Assumptions

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

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

CAH reports
Hospitals reach
Statistics and
50%
occupancy after 1 information
disclosure by
year of
operation and 75% the NABH
NABH reports
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

63

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

trained according
All facilities are
to
international accredited
standards
by QCI approved
NABH in
the first 6 months
of their
operation.
Annual increase
of 10% in
the
number
preventive
health care checkups 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

64

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

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.

Objective
Private Sector
Development

Table A1.2: Development Effectiveness Framework


Impact
Performance
Measurements
Targets
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

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
Impact
Beyond facility.
the Company
At least 3-15

65

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

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
sustainable
Separations

Objective

Timely
Amortization of
and repayment of
loans
debt
Financial internal
Satisfactory
rate of return
financial
CAH financial
internal rate of reports
return
(greater than
weighted average
cost of capital)

Impact

Performance
Targets

Measurements

Contributes
to
economic
growth
through
mitigation
of shortages in

Economic
Economic rate of
internal
return
rate of return
Increase in
greater
preventive health
than 12%
care programs by

Economic
Sustainability

66

10% per year


health
Increase in the
Government
care services.
number
of
Contributes in corporate
reports
improving
employers that
the health of the
register for health
workforce.
care programs
Reduces
Government
pressure on
outsource health
public
hospitals care services for
and
its employees and
allows
better below poverty line
families
access by
10% annual
the poor
Deepening of growth
health insurance rate in health care
insurance till 2012
market due to
Corporatization of
secondary health
care
ADB = Asian Development Bank, CAH = Columbia Asia Hospitals Private
Limited, NABH = National Accreditation
Board for Hospitals and Health Care Providers.

67

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 middleincome 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 ADBs 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

68

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 Projects 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.

Project
Locations

Table A2.1: Project Details


Plot Area Number Beds Cost
(sq meters) of Floors
(Rs million)

8,255

Tertiary Hospital
B+G+4
160
564

Hebbal

7,648

Secondary Hospitals
B+G+1
81
218

Gurgaon

10,158

B+G+1

90

588

Patiala

6,932

B+G+2

100

528

Mysore

8,129

B+G+1

84

637

Chandigarh

6,635

B+G+2

100

707

Lucknow

8,363

B+G+3

100

605

Pune

6,812

B+G+2

100

709

Ghaziabad

6,161

B+G+2

100

673

Yeshwanthpur

69

Status

In operation since
July 2008

In operation since
July 2005
In operation since
July 2008
Construction
ends July 2009
Construction
ends July 2009
Construction
ends October
2009
Construction
ends April 2010
Construction
ends April 2010
Construction
ends July 2010

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 CAHs 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

70

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
Blue plastic
Tubings,
57
Infectious (Non
bag in plastic
catheters,
IV
biodegradable)
bin
tubes, blood bags,
drains,
gloves,
aprons
and
endotracheal
tubes
Red
Red plastic
Cotton,
gauze, 46
Infectious
bag in plastic
bandages, plaster,
(Biodegradable)
bin
dressing.
Yellow
Yellow
Human
tissues, 3
(Organ and
plastic bag in
organs,
body
tissue waste)
plastic bin
parts,
placenta,
pathological and
surgical waste,
microbiology and
biotechnology
waste
Black
Black bag in
General
paper 40
plastic bin
waste; and also
kitchen
waste,
that
is
disposed
separately.
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

71

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.

72

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

73

eastern part of the city there is a huge residential area. The hospital in Mysore
City is located on the BangaloreMysore 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 middleclass 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

74

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 citys
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 citys 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 SarkhejGandhinagar 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 Authoritys 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

75

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 20002003
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

76

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 (g/m3) to 150 g/m3,
sulfur dioxide from 7 to 23 g/m3, and oxides of nitrogen from 4.5 to 23.5
g/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.

77

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.

78

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 contractors 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

79

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 Projects 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 Projects 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 Projects 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 (g/m3) for suspended particulate matter (SPM) and 6080 g/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 am10:00 pm) and 40 dB(A) for night time (10:00 pm6:00 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

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