Monday, December 16, 2019

Profit vs profiteering in Healthcare

Profit vs profiteering
Profit is bad but surplus is OK: In NGO we never say profit but income over expenditure

Personal opinion and suggestions solicited

Dr KK Aggarwal
President CMAAO and HCFI

Some people believe that they are doing good things in the world because:
“We don’t make any profit”
“Our profits are given away”
“Oh, you don’t understand, we’re a SOCIAL enterprise, you can’t possibly make MONEY!”

The belief is wrong that money is evil and terrible unless given to a charity. Not making a profit isn’t impressive, doing as much good as you possibly can is impressive.
So, one should change the word Profit to the word Surplus. EVERYONE loves a surplus, it’s what keeps organisations alive. Not for Profits makes a surplus, and so they should.

Profit is different from its ugly cousin: Profiteering
In profiteering you exploit the social mission. It is the act of making an unreasonable profit not justified by the corresponding assumption of risk, or by doing so unethically. One generates disproportionately large or grossly unfair profit, generated often through manipulation of prices, abuse of dominant position, or by exploiting a bad or unusual situation such as temporary scarcity. There is usually no governmental control over profiteering unless it involves illegal means.

What is reasonable profit

When you invest in a fixed deposit in a bank you end up getting < 8%. The mutual funds give a return of 9-10%.

The funds are also available in the Indian financial market for microfinance at 10 to 12%.  The National List of Essential Medicines are also having a trade margin fixed of 8% for the distributor and 16% for the retailer. The same is 10 and 20% for the non NLEM drugs.

The Govt. of India has declared lending to MFIs as priority sector. Its cots 5% to manage these funds. Even after considering a provision of 2% to 3% there is no justification for charging interest rates in excess of 20% to the poor.

So, from my point of view any profit of up to 20% is justified and more than 20% is profiteering.
Private health sector in India is both a part of the problem and also a part of the solution. The health needs of a billion people simply cannot be managed by public sector in a country that lacks basic infrastructure. The public health sector needs a boost in investment. At the same time, it is only appropriate, and indeed desirable, if the private sector can shoulder some of the burden of the population’s health needs. Therefore, a reasonable profit must be allowed to them.

Doctors are supposed to make surplus and not indulge in profiteering. Their main income should be from consultation and any money earned from non-consultations (dispensing, point of care investigations etc) should not be more than 20%.

Doctor’s investing in labs, imaging also will, have two components: interpretation and return on investment. While they have a right to charge transparently about their consultation the ROI should be < 20%.

This is my personal opinion; opinions are invited for taking this forward. Medical, profession is a social marketing and not marketing. In marketing profit is your fundamental aim and in social maflet5ing surplus is a by-product.

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