Health System Innovation in India Part III


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Taking high-quality affordable primary care to the rural poor with the help of handheld computers, telemedicine, and P4P.

In our first post in this series, we showed how illness in India causes financial hardship and leaves Indians—especially poor ones—with limited access to affordable good-quality health care that can actually make them better. In our last post, we outlined the Aarogyasri scheme—a novel government-sponsored health insurance program in the state of Andhra Pradesh that has the potential not just to reduce financial impoverishment but also raise quality standards in hospital care. In this post, we discuss an innovative private-sector approach to delivering and financing primary health care in rural Andhra Pradesh.

a) Quality of care in India—from bad to excellent
In our first post, we highlighted the low quality of care among India’s unqualified and qualified providers many of whom work in India’s unregulated and fragmented private sector. But it would be wrong to think that all India’s private providers deliver poor quality care.

India’s private sector is actually home to a pool of health care entrepreneurs who have developed processes for high-quality and low-cost care. They have developed their own cadres of professionals and para-professionals to perform specific tasks after internal training. They have developed new technologies and new ways of existing technologies. These innovations and approaches have brought down cost and increased specialization. Major improvements in health outcomes as a result of these innovative practices have been documented in areas such as maternal and child health, eye care, cardiology and also primary health care.

One example is Ekjut, an organization that piggybacks on the existing networks of self-help groups in India. They work on awareness and demand-creation, and as documented in The Lancet were able – over a period of three years – to achieve a reduction in death rates among newborns of 45 percent.

b) Reddy to (Primary) Care
Dr. Krishna Reddy runs a chain of 12 for-profit hospitals in South India known as CARE Hospitals. The chain is committed to affordability and has worked towards low-cost care by developing indigenous technology such as stents. Reddy is convinced that improved quality of care reduces the cost of care and improves revenues – with reduction in hospital infections and medical errors. The chain has developed internal clinical audits and professional teams across the hospitals.

What caught our attention when we recently caught up with him over dinner, however, was Dr Reddy’s enthusiasm for CARE Hospitals’ sister organization, the CARE Foundation. Schemes like Aarogyasri – the subject of our last post – encourage medical (and indeed surgical) intervention and in India’s most high-tech facilities. They do nothing to encourage prevention and the management of chronic conditions. As a commentator on our first post noted, India – like most countries – badly needs innovation in primary care too.

Dr Reddy’s CARE Foundation is precisely such an initiative – in fact, it comprises multiple initiatives. The Foundation aims to bring affordable high-quality primary care to India’s rural poor. It builds on the human resources that already exist in India’s villages ensuring care is delivered where the patient lives by someone from their community. These “village health champions” are female educated paramedics. Each VHC is equipped with and trained in the use of a mini-computer that performs multiple functions. The computer can perform some basic tests such as an ECG and other tests for monitoring chronic conditions. It also houses software containing algorithms to support the VHC in arriving at an accurate diagnosis and treatment. But the device is also linked to a supervising doctor via a mobile network: the VHC can talk to the doctor; the doctor can monitor and if needs be step in and join the consultation remotely (the CARE Foundation is a champion of telemedicine); and the doctor-sanctioned prescription is printed out on the VHC’s mini-computer. The VHC issues the medicines, and the mini-computer logs the information in the database of the group’s supply chain. The device also issues a smart card for all program members, and records each consultation and transaction.

The idea is to detect disease at an early stage in the village, and then manage disease close to the patient while being backed up by a supervising doctor and with the option of referral to a hospital when needed. VHCs manage 60-70 percent of primary care treatments in the village itself. The VHC receives a base salary and a performance-based supplement, based apparently on a mix of quantity and quality indicators.

After Dr Reddy had walked us through the details of the program, we discussed what was known about its impact. The organization collects lots of data, but he admitted he didn’t know how much better it was doing than the government primary care system. We asked him whether he’d be agreeable to subjecting his program to a rigorous randomized control trial. He said he’d be delighted to.

c) An innovative delivery model. But who pays?
We then talked about the financing of the program. Currently it’s households who finance the program directly. In part they pay through microinsurance premiums: currently around 600 families have signed up at a cost of Rs 300 (just under $ US 7) for a family of 4. This does not cover chronic care, however: individuals with chronic conditions can be treated for Rs 50 per monthly visit with low-cost (but effective) generic drugs.

Whether such a financing model is sustainable, efficient or equitable is debatable. The history of community financing in health is a mixed one, with far fewer success stories than failures – limited resources, adverse selection, and small risk pools all work toward undermining a microinsurance approach to health financing. And it seems a little hard on people who develop chronic conditions to have to shoulder the costs of their care by themselves.

d) Having your cake and eating it
Is there an alternative? Different financing and delivery models can be bolted together in lots of different ways. As one us argued in an earlier post, a model that is proving popular in Asia (and indeed in the OECD) is one where the taxpayer finances an institution that sits at arm’s length from the health ministry and contracts with public and private providers.

So, we put it to Dr Reddy as we were finishing our dinner that there would be nothing to stop his innovative primary care delivery model being financed instead by the AP government on a contractual basis. After all, the Aarogyasri program does precisely that, albeit only for tertiary care – it could also contract with organizations like the CARE Foundation to ensure that the population also has access to affordable high-quality primary care, with a strong focus on prevention and the management of chronic diseases. In fact, the two parts to such an integrated program could reinforce each other. Dr Reddy’s model could improve not only the pre-hospital care but also the follow-up treatment and monitoring. Hospitals under the Aarogyasri scheme have to provide consultations and medicine for one year for many of the treatments. Patients are now traveling across the state to come back to the same hospital; the travel for these visits is not covered, and people are also losing income on trips that can take more than a day.

Dr Reddy liked the idea of his foundation contracting with the AP government to extend Aarogyasri’s reach into primary care. But on recent trends, this seems unlikely to happen. Soon after our last post went live, the AP government announced that 133 of Aarogyasri’s 938 procedures will be treated exclusively in government hospitals in 10 districts across AP. There is talk of it scaling back private-sector involvement in Aarogyasri much further (hat tip to Robert Palacios).

For the moment then Dr Reddy’s innovative primary care delivery model looks set to continue relying on microinsurance – not the first best but probably the best available option right now.


Adam Wagstaff

Research Manager, Development Research Group, World Bank

Sofi Bergkvist

Managing Director, ACCESS Health International

Join the Conversation

August 09, 2011

Exactly illnesses have always being finance snatcher for any individual. Any type of severe illness is nightmare anyone, whether he/she be from India or any other country, the prime goes heavy outflow of bucks........
So people should be planned to preserve money for such emergencies.
Still a hearty congratulations to Andra Pradesh government for introducing such an innovative and noble program.

Nrip Nihalani
August 09, 2011

This is great! Even though the model seems a bit weak, its being implemented and will lead to effective protoyping for future scaling. I hope with more publicity, and more awareness, better funding models also start becoming more apparent... and the scale is broadened

August 10, 2011

Take a look at the many activities in India related to the use of open source health care solutions. They are starting to push the envelope and lead the way for many others. Take a quick look at the following link to Open Health News -

August 11, 2011

What a great story about the successful use of telemedicine! As successes like this continue, I think more medical professionals in India will begin to adopt telemedicine practices to treat the rural poor, especially if telemedicine applications become less expensive to implement.

Dr. Kama Raju Chitrapu
August 12, 2011

Despite the success of the Aarogyasri scheme in Andhra Pradesh, there was a huge cry over its misuse. It is often projected as a channel to support private medical practitioners and leaving the government administered hospitals in to a state of anarchy. People with a political clout, gets the preferential treatment at private hospitals as reported by the local media

Nachiket Mor
August 16, 2011

This a very interesting discussion in progress on the issues surrounding the future directions that Indian health care systems must take. I want to take this opportunity to share a few of my views on this subject and to ask a few questions as well.

1.Currently average healthcare expenditure in India is in the neighbourhood of Rs.2500 per capita of which only Rs.500 comes from the government. It is my understanding that the government needs to take this to a minimum of Rs.1500 per capita if it is deliver the kind of care that is needed even at a minimal level, with almost Rs.1000 of that being spent on primary care. With just Rs.500 on the table not much by way of comprehensive care can be provided I feel.

2.Given the overall context of a massive underfunded public healthcare system and a very high burden of unmet disease (with rising chronicity) it is my concern that introducing hospital based insurance policies such as Arogyasri and RSBY is quite troublesome because it ends up doing precisely the opposite of what one would want in such an environment:

a.It lowers entry barriers to access hospital care so people move further away from primary care. What is needed I feel is the opposite -- particularly when resources are scare -- spend as much as possible on primary care and let voluntary insurance schemes make available catastrophic insurance covers for those that want to pay for them privately. Moving even one rupee of this very limited resource away from primary care may not be the best idea in my view.

b.States such as AP are already spending more than 50% of their healthcare budgets on tertiary care -- these insurance plans exacerbate this trend. The allocation for primary care should be 70% of the budget with tertiary care receiving less than 10% of the resources.

c.Insurance companies are acting as purchasing agents of the government and healthcare providers are being paid entirely on a fee-for-service basis -- this will end up creating a massive (relative) oversupply of tertiary and secondary care facilities and will end up gradually consuming almost the entire healthcare budget of the state. It is my belief that offering insurance cards to people is politically attractive in the short-run because it creates the appearance that healthcare problems have been addressed with a very limited expenditure when in fact I worry that it already exacerbates the existing problems.

3.My question is: if indeed insurance companies and private sector providers are involved isn’t there an opportunity to launch full Managed Care type approaches in which providers are offered long-term contracts and paid on a capitation basis so that they have an incentive to invest in full systems?

While I have not personally seen the work of CARE Hospitals and I am sure they are doing a good job of this, in general I worry about tertiary and secondary care facilities offering a somewhat minimalist model of primary care – it has too much of a flavour of demand generation for the hospital itself. I also wonder if we are not expecting too little from primary care when in the same breath as Indians we are extolling the virtues of our super-modern tertiary and secondary health care system. Private health care expenditure is very high in India and in primary health in many locations approaches 100% since governments are spending more and more of their scarce resources on hospital based care. From what I understand even with no support from the government by merely better organising the health care options available to citizens with some carefully designed user fee systems one could actually run a self-supporting AND high quality primary health care system on top of which an entire Managed Care model could be built. A research organisation that I am associated with ( is trying to design a modern primary health care system (for use by the government and / or the private sector) and their field based partner ( in addition to helping ICTPH field test its models is also trying to develop easy-to-use and equitable user fee systems. Please do take a look at this blog post from them and share your views on their approach:

shanti gupta
August 17, 2011

Dr. Reddy is doing a great work for providing health care services but still financing and sustainability is a question in this model. Many times insurance or micro insurance for the poor people do not have much significant role; even health affects the economic development of household. In long run cross subsidization is also one of the alternative as Aravind Eye Model in Madurai Tamil Nadu ( South India) is working in self sustainable manner. Any way good idea, hope it will bring prosperity in the lives of rural people indeed .

MG Chandrakanth
August 18, 2011

Rural India and farmers are still not out of woods with regard to health care and cure. Farmers and rural people deserve much greater attention than any body else as they serve the entire nation producing food. The plight of India's primary health centers ... is any body's guess. Health infrastructure needs improvement on three counts : 1. well equipped hospital / clinical facilities totally lacking in PHCs, 2. availability of specialist doctors at MS, MD, DM levels and 3. availability of good paramedical facilities including qualified nurses. While paramedical facilities may be available, India suffers from availability of specialist doctors in rural areas. With not so good accessible rural roads farmers and rural people still have to find their way to find specialist doctors in peri urban and urban areas and by the time they reach, a few precious lives would have been lost. The positive side certainly is the NRHM, National Rural Health Mission which is certainly serving the rural masses, yet given the 600 million rural population, NRHM needs to be strengthened at least 5 folds, since specialist doctors have no great incentive/s to work in rural areas. Rural areas are fraught with poor infrastructure especially electricity and water, including sanitation. There are no proper incentives for specialist doctors to serve in such places. Unless the Government enhances their salaries / contractual payments, rural areas continue to be neglected in India and farmers continue to be neglected, given their exposure to soil, snakes, rusted iron, orthopedic problems,.... The latest predicament is the chronic alcoholism. While the life expectancy at birth is increasing, the DALY too is increasing. An average Indian suffers for atleast 10 years from chronic ailments. The role of AYUSH and educating people about alternative medicines is crucial. Ayurveda has rich scope in rural areas and other alternative medicines too in curing chronic ailments. These are also cost effective. The Govt needs to emphasize on AYUSH much more than the present so that AYUSH can fill the void created by the Allopathy medicine in rural areas.

September 09, 2011

A very timely, appropriate and thoughtful discussion indeed. Thank you for raising a very valid question Nachiket, and not only that; I assume some wonderful work being done at ICTPH to answer those issues in practical way.

Having been associated with the conceptualisation and development of Dr, Reddy’s healthcare delivery model from its inceptions, I feel there is still a great distance we all have to travel to achieve the ideals we all aspire for. We have seen value of insurance coverage in many instances for poorer patients but I agree that there are inherent risks in models like Arogyashree as they incentivise intervention while distracting the focus from primary care.

There is little doubt that treating problems (which we call “demand based service” – where the sick person demands from healthcare providers) becomes more and more expensive at each rung of primary, secondary and tertiary setting. Even more importantly prevention or early intervention (which we call “protocol based service” – where the provider has to follow an agreed protocol) reduces cost at each step. The assumption with managed care models is they would promote the latter approach.

There is much to be argued, both, for and against managed care models (as practices in developed countries) because virtually nothing can compensate distorted human values. Does choosing one model over the other compensate for tilted power scales, biased prescriptions and misaligned incentives? We still have the opportunity of learn from the west (of good that is achieved) and not repeat the mistakes they have made before engineering our interventions.

Whether demand based or protocol based, delivering care at grassroots level, in a timely, appropriate and guideline driven manner is not an easy task. Planting a "biologically engineered exotic tree” of western medicine in wild rural Indian climate requires a lot of tender care. Coping with skill gaps, evidence gaps and resource gaps requires constant innovation and acclimatization to local environment, just like a “wild bush” does. I continue to wonder, how the hybrids will evolve, and how "cross pollination" (of ideas) would influence their future appearance.

Being a great advocate of keeping people healthy within their communities, I continue to be inspired by the wisdom hidden within the powerful Sanskrit word "swa-stha" which means 'established within oneself'. It defines for us the concepts of positive health, self sufficiency and local empowerment that could become the underpinning philosophy and possibly contribute towards greater global understanding. Amartya Sen has shown reflections of this wisdom beautifully in his work.

Healthcare delivery, health financing and even public health measures could benefit greatly by keeping common values in the centre and attempt to bridge gaps between modern medical interventions and traditional wisdom.

Dr. Rahul Reddy
October 04, 2011

It has been widely written that Aarogyasri is a financing program exclusively for provision of tertiary care, which is not true. Aarogyasri is already paying the insurer a premium and the hospitals a package rate high enough, that includes the cost to provide access to primary care.

I would like to bring to notice that Aarogysri's benifit package includes aspects related to primary care.Reading the fine print in the agreements betweeen the Government, Insurer and Hospitals clearly mandates the following -

1.Empanelled hospital should conduct health camps periodically for disease screening.
2. Every empanelled hospital should provide OPD consultation diagnostics, traetment to the enrolle at no cost to the patient when he visits the hospital due to illness though he might not ultimately have surgical/ medical treatment.
3. Government also pays for the follow up services upto a year after undergoing any surgical/medical treatments.
4. The first point of contact in rural areas to the people is aarogyamithra who is located at the primary health centre (PHC) or the community health centre (CHC)helping to direct the enrolled for treatment. There is every chance that the ill first visit the public physician in PHC/CHC(if he is present)for their complaints.

As Aarogysri has a stringent mechanism to monitor every case that it pays for, I assume the conversion rate of those attending out patient consultations/ health camps to undergo tertiary care treatments is quite low giving the people the best of primary and tertiaty care.

I believe it is necessary to properly understand and evaluate if all the above processes that provide appropriate care to the enrolled are being provided or just huge amounts of the state budget is schiphoned off with out a greater value to the benificiery.

I agree that aarogyasri doesnot directly provide continous care for chronic / lifestyle diseases all through the life of a patient but it is not correct to say Aarogaysri and such schemes do nothing to encourage prevention and the management of chronic conditions.It is important to recognize that the Government has its economic constraints to pay and provide for all health services more so when there are competing issues in developing countries.
Along with Aarogysri, the primary health system is also completely funded by the government, though its performance is a completely different discussion.

It is in such econmomic and institutional constriants that the Aarogyasri has limited some of its services to goverment hospitals to avoid paying the ever hungry private hospitals who in aarogyasri's analysis were providing unnecessary procedures to the enolled.

The work by Dr. Reddy's not for profit is commendable. But why should Government contract and pay not for profit organizations smiliar to Dr. Reddy's ? As civil society organizations they are complemeting the governments work with the money they have raised for the poor, the should fulfil their mandate and not expect to be financed by government for such activities.

1. The best possible way is the Government can strenthen its widely exiting primary health care system by create a network of PHCS and CHCS for every empanelled hospital and define ways to complement the existing aarogyasri services to provide continuous care for chronic diseases.

2. All the not for profits working in health can share their knowledge, finances and experinces to make the system better collectively.