The concept of hospital management is yet to gain importance in India with few hospitals and nursing homes making optimum use of their resources. In a market environment where demand has been outstripping supply, most hospitals and nursing homes have not felt a need for adopting hospital management practices, according to analysts. However, with increasing competition and the demand for optimum pricing of healthcare, hospitals must seriously consider introducing management practices to optimize return on investment.

Sources in prominent hospitals in Bangalore like the National Institute of Mental Health and Neuro Sciences, Kidwai Institute of Oncology, Jayadeva Institute of Cardiology and Indira Gandhi Institute of Child Health agree that professional management is vital for the survival as it is one of the key ingredients to optimize return on investment.

It is due to this absence of hospital management that hospitals and nursing homes in the country are not able to generate revenues and make profits, according to A. Srivathsan, director, Kritical Health Systems & Services Pvt Ltd (Kritical Health).

The initial capitalization is high, resulting in prohibitive costs and depreciation. The cost of delivering services has also not been covered in the prices, he added. Further, employee productivity is low since too many employees means low per capita revenues.

Srivathsan also observed that only a few hospital administrators are actually able to carry out a systematic analysis of the usage dynamics of the medical equipment. "Most of the hospitals in India did not make the maximum use of the state-of-the-art equipment they have invested in. There is not enough business analysis done prior to procurement of equipment and consequently the utilization is also not monitored on a regular basis."

The only aspect of hospital management, which is only now being adopted of late, is the concept of corporate ownership. Though marketing has been recognized as an important activity, no significant marketing efforts are being made by hospitals in India, Srivathsan said.

Hospitals are right at the top of the value chain and represent the most expensive way to treat illness. The primary challenge facing hospital managers is optimum utilization of resources so that appropriate medical treatment can be provided to the consumers. In such a situation, hospital management becomes vital. Further, hospitals are labour intensive enterprises and a 50-bed hospital could employ close to 100 persons. The human resources account for 15 per cent of the hospital's revenues, which does not include the medical professionals who are often not on the payroll of the hospital. If they are retained as consultants then revenues account for an additional 10 per cent.