Monthly Archives: April 2014

GOCO pill for efficient running of government hospitals

With over 12,760 hospitals and over 24,000 primary health care centers, public health care forms the backbone of India’s health care services. However, many studies on utilization of health care facilities indicate that citizens prefer private health care over state run public hospitals for the cost and quality of services provided. Research studies indicate that over 80% of citizens prefer to use private sector facilities for minor ailments, even when higher quality doctors are available at public hospitals. Studies also highlight 78% of household prefers to go to private sector to private sector for their cleanliness and professional handling of patients. Several studies indicate while many state run hospitals are staffed with better quality and more experienced doctors, it is the infrastructure and service issues that turn many patients away. Dismal sanitary conditions, long waiting times, lack of basic HMIS, high infection rates, and substantial clinical care are some key issues that force the public health care facilities out of choice set. The other significant factor is rude behavior of staff and functioning of the hospitals. While cost of treatment in government hospitals may be free, bribery, insensitive behavior, limited working hours dissuade the use of public health care systems. CAG audit reports also point out to inefficient use of public funds. Many hospitals had Digital X-Ray, Pet scan machines lying for years in open and rusted, as they could not hire competent staff to man the job.  One eminent government administrator mulled about 40% of funds go unutilized and about 30% of the instruments including OT end up as scrap as preventive maintenance is given a go by. Political interventions, inbreeding and bureaucracy precipitate inefficiency and apathy.

Several state governments in India have recognized the need to bring in efficiency, affordability and higher reach of state health care system. States of Karnataka, Gujarat, Kerala have introduced novel PPP mechanisms, including insurance schemes to cover the economically weaker sections. While exceptions like Jayadeva Hospital, Bangalore and Rajiv Gandhi Cancer Research Institute, New Delhi may exist, many suffer from poor infrastructure, lack of motivated staff, poor sanitation and hygiene issues. State governments have brought in concrete steps to address service quality and implement continuous quality improvements. While insurance and other related PPP interventions have certainly improved the access to better quality health care to underprivileged population. However, the fundamental issue with improving the hygiene and service quality of government run hospitals has not been addressed. Governance, management of efficiency and effective utilization of resources has been given a go by.

Should state governments adopt a proven PPP approach used in military complexes to efficiently run the hospitals. Government Owned Contractor Operated (GOCO) model is a proven model where industrial, academic and non-profit organizations manage government national labs.  A GOCO model enables each partner to perform relevant duties. The government subsidizes the healthcare mission, increases reach and use of affordable healthcare, while private sector implements the mission and manages using best business practices.  Several state governments, Karnataka, TN, J&K, Maharashtra have tried limited GOCO approach by letting 3rd party private players run and manage the diagnostic facilities. Private firms (install) or manage the machinery, maintain and offer the services at prescribed government rates to reach out across various segments. Below poverty line (BPL) families benefit from affordable diagnostic services and public funds are effectively used to primarily serve the healthcare mission and generate revenues.

While this limited outsourcing has brought in technical efficiency in only one department, overall management and effectiveness need further exploration. State governments must explore complete GOCO approach to allow private partner to run the hospital efficiently. Many challenges like insufficient doctors, inability to attract specialists, lack of appropriate rewards and recognition systems to motivate employees, that currently affect state run hospitals to achieve greater heights can be rightly addressed by GOCO partner. The GOCO partner a trust or an academic institution or an industry partner can bring managerial efficiency and high quality delivery focus, while state governments can successfully pursue appropriate investment and high impact mission goals.

However, switching over to the GOCO model is not going to be easy. State governments need strong political will, transparent and efficient process to identify the right partners and importantly the right structure and process to manage the GOCO contract. Creation of an independent board under the chairmanship of district administration with members consisting of prominent citizens, elected representatives, members of Medical council, GOCO partner is a must.  GOCO operations must also be aligned with the health mission using performance frameworks such as results based framework (RBM).

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Privatization of national scientific organizations

Scientific organizations are a crucial part of national innovation system (NIS). They create a pool of scientific resources who are employed in creating relevant scientific innovations for the nations. These research organizations help in technological advancement of the industry by transferring lab-proven technologies to commercialization. They may be engaged in development of civilian technologies such as agriculture, Food, or IT or defence and related technologies.  In developing countries context, these research labs help in accessing and developing trade restricted technologies. They also help increase the nation’s bargaining power at international technology negotiation tables. However, one fundamental flaw with these organizations is that they are designed to fail and falter in long term. Their structures are too bureaucratic, they have low flexibility to hire and disengage talent as the need be, have administrative challenges in matching salary and other benefits to attract the best minds, contribution and engagement with industry is arms-length and have very few sources of revenue generation. Most of the organizations, even those involved in applied science and technology areas, become too dependent on federal grants to survive.

In this background, governments across the world are trying various approaches including privatization to bring in competitiveness and sustainability into these organizations. Council of Scientific and Industrial Research (CSIR) has reduced its total number of labs from 42 to 38. The federal government defence lab establishment, DRDO is leveraging the business expertise of the private sector by partnering with FICCI to market 40 of its most promising dual-use technologies. 26 of its 50 laboratories are participating in the venture, and the DRDO intends to consolidate and reduce its number of 50 laboratories to manageable less than 10 labs.  Governments have also pursued complete divestment of R&D labs, for example Centre for development of Telematics (C-DOT) has been acquired by Alcatel.

Privatization enables organizations stemmed in the “science and commercialization push” regime of the past to embrace and deliver the “demand pull” of business engagement with markets and customers today. Privatization can yield several benefits. The elimination of bureaucracy allows selective hiring and retaining of manpower, raising overall productivity.  PPPs also enable cost-sharing, while preserving the expertise of technology transfer processes and commercialization techniques. These are areas where the private sector is likely to possess a strategic advantage, both in experience and business acumen.

What are the necessary elements of privatization that set the tone for success? The experiences of other nations in R&D partnerships offer valuable insights. The United Kingdom has been especially successful in privatization of its government-owned R&D entities. Through a structured approach, identified labs are driven to satisfy a set of defined goals, typically consisting of cost recovery through sale of products or services, cost reductions and meeting task deadlines within allocated budgets.  Labs are exposed to participating in the market-based tendering process and are gradually moved away from their association with the government. Post privatization, labs continued to receive government orders and obtain funding through statutory government processes for a limited period.  The United States has approached privatization of public research labs through direct private participation in R&D consortiums, or by adopting a Government Owned Contractor Operated (GOCO) model. European nations such as Norway, Sweden and Finland have pursued some hybrid models of privatization, mostly preserving government ownership but with significant private sector policy adoptions.

Given this diversity in the approach to privatization, what model has works best for countries like India?. While there are no informed analysis on the approaches the outcomes yet, successes and failures of privatization is salient upon: (1) a clear objective to facilitate the building of necessary capital, after evaluating market potential (2) creation of a collaborative environment conducive to the sharing of technical know-how (3) attraction of the greatest minds with top class talent across the country (4) a smooth technology transfer process across establishments to enable successful commercialization of a product or proprietary knowledge. Certainly, there is no ‘cookie cutter’ approach to be applied to all R&D facilities owned by the government. Each entity should be evaluated for its contribution to the technology pool of the country, and more importantly, assessed on whether conversion to the private sector will possibly make the entity more productive and efficient.  An additional factor to consider is the uniqueness of the lab in terms of human resources, processes and infrastructure. A government R&D lab with unique research resources and facilities is likely to have a network of research relationships that extends beyond government agencies. Increasing the competitiveness of the R&D sector will determine whether India can sustain its S&T advantages over time, while catering to our national interests of security and economic development.

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