Shahid Akhter, editor, ETHealthworld spoke to Nivesh Khandelwal, Founder and CEO, LetsMD, New Delhi, to know more about challenges by way of affordability in healthcare and how LetsMD is playing a unique role as a financing platform.
How is affordability impacting healthcare in India ?
Affordability in healthcare in India, today, and going forward will be a challenging field to address, due to a couple of reasons.
First healthcare inflation in India is about 15-17%, so no matter what you do, every year the cost escalates by 15-17%. Second, Insurance penetration in India is negligible. 80% of India’s healthcare expenditure is out of pocket. And, 50% of that out of pocket expenditure today is financed through loans. Going forward, even if people start taking insurance, because health-care inflation being 15-17%, the insurance premiums will keep going up. So a lot of work has to go to on the preventive healthcare side, to make healthcare affordable in the long run in India.
What are the other challenges in affordability ?
I think the other challenge in India would be to get financial as well as access to health care for tier 2 and tier 3 city populations in India. A lot of large hospitals in India are concentrated in the metros, and the metros come with their own cost structures and their own disease profiles, and we usually need to pay very high bills. So when you see people moving in from tier-2 and tier-3 cities to metro cities for treatment they have to pay those bills according to metro city rates, which become a bit of a challenge when it comes to affordability.
I think on the solution side, there are three things that the private sector and government together can do. First,the government should incentivise setting up infrastructures in tier-2 tier-3 cities. Secondly, a lot of education has to go into telling people, the benefits of insurance, outside of keeping tax saving instruments. Today bulk of health insurance schemes are sold as tax saving instruments and health insurance is much more than that. So education needs to happen where both the government and private sector have to contribute and thirdly, insurance companies need to figure out ways to collect more data about their customer base so that they can price the policies correctly to make insurance more affordable.
Tell us something about the role of banks and non-banks in affordability
Banks and NBFCs both have a very important role to play, especially when it comes to setting up infrastructure in India. Tertiary care centers cannot be setup using only equity. So they can and will play a very pivotal role in financing the setting of infrastructure. And what they will have to work around is the fact that hospitals, especially larger hospitals, take a little bit of time before they start generating cash flow. Banks and NBFCs have to design instruments and loans that can account for this delay in cash flow right from when they take loan to when the hospital sets-up.
What are the limitations with the insurance companies?
There are two primary challenges that insurance companies are facing. First, Lack of data: This doesn’t allow them to price and create policies more accurately.
Second, they are very tightly regulated by the IRDA which doesn’t leave a lot of scope of innovation. IRDA needs to figure out a way of allowing insurance companies to be more innovative and if they can reduce the time from when they file a new policy to when they can sell it. I think that will go a long way in helping insurance companies to create very innovative products for India.
Tell us something about LetsMD, genesis and vision
LetsMD was created as a healthcare financing platform. Our goal is to be one of the largest payers to the healthcare ecosystem, in the next five years. “Why the name LetsMD” is because we are basically allowing access to healthcare by enabling finances for someone who doesn’t have immediate liquidity to get access to treatment. So somebody might not be able to pay INR 1.5 lakh immediately but could give an installments of INR 10000 or INR 5000 per month over a period of time. So that’s actually what LetsMD stands for and that we are allowing people access to an MD. And, that’s the genesis of the name.
In terms of why we started the company, we realised the need from our personal background in setting up IVF centres across North India that setting up an infrastructure is a problem number two. I could set up a beautiful hospital in a Tier 2 city but most people in tier-2 or tier-3 cities or even in metros will not be able to afford the healthcare that is offered in those hospitals because, number one, insurance penetration in India is less than 5% and healthcare inflation is 15-17% . And that is why we set up LetsMD to enable people to access healthcare by providing them short-term liquidity.
Your business model?
We go and we partner with hospitals and we allow patients at hospitals to pay their bills in zero percent interest installments. The patient doesn’t bear any interest, the hospital as a customer service experience offers us the interest for the patient. So the patient’s bill simply converts into an installments where we get the interest income from the hospital.
We also have a digital channel where we find patients who have still not decided about which healthcare service provider they should go to. So we assess them on our platform, we tell them the kind of loan they’ll be eligible for and based on the loans they are eligible for, we suggest hospitals for them. Let’s say for example somebody wants a bilateral knee replacement and his loan sanction is INR 2 to 2.5 lakh. So we know that he simply wouldn’t be able to afford a top hospital so we offer him a lower cost hospital that fits in his budget and still provides quality treatment.
So these are the two business models that we have currently.
How do you differentiate yourself? What is the USP of LetsMD?
First of all we provide zero percent interest loan so it’s much better than a bank as it will charge you interest.
Secondly, our turnover times are really fast so about 75% of the loans we can sanction the same day and balance 25% over the next day. So in two days time we sanction 100% of our loans.
And thirdly, what we also do is help a patient choose a healthcare service provider which fits within his budget. So somebody might have an immediate liquidity of amount ‘X’ but that allows him only to access a sub optimal hospital. However, if you can give him a loan of “2X” allowing to him to pay you back in EMIs, he can upgrade the quality of the healthcare he is accessing.
Your future plans?
Currently we are active in Delhi, Bombay and Kolkata and over the next three years, we want to be present in the top 20 cities where 80% of India’s tertiary care infrastructure lies. We are also looking at a hybrid product combining loan and insurance and that product will allow the drop in a policy price by about 60-70%. So we are working with insurance companies on that product and pretty soon we’ll finalise the product and launch it in the market.