Politicians in Kerala would do well to travel to other states to see for themselves the fee structure in private medical colleges.

Economics of medical education Why Kerala fee hike protests are absurdFacebook
Voices Opinion Tuesday, October 04, 2016 - 09:37

The agitation in Kerala on the issue of hike in fees of private medical colleges in the state has helped bring the focus again on the issue of spiraling costs of medical education in India. However, the quantum of fee increase that is being opposed by the Opposition, the Congress-led UDF in Kerala, seems laughable compared to the fees that are being collected in private medical colleges in the neighboring states and many other parts of the country. The protesters also seem to be ignorant of the real costs of medical education.

In next-door Tamil Nadu this year, a few colleges increased their annual fee to over Rs 20 lakhs. In most colleges, the annual fee crossed the Rs 10 lakh mark for non-government quota seats. This is to ostensibly compensate for the losses in the capitation fee that many of them were illegally collecting earlier. Further, this year, thanks to admissions through NEET, the collection of capitation fee was arrested significantly. So colleges that were hitherto charging anywhere between Rs 5 lakhs to Rs 12 lakhs per annum, suddenly doubled their annual fee to make up for the loss of Rs 50-75 lakh lump sum capitation fee they were earlier allegedly taking. In Karnataka and Andhra also, private colleges sharply increased their fee this year.

In this context, the agitation in Kerala against increasing the annual fee to Rs 2.2 lakh for a percentage of seats and to Rs 15 lakh for the highest slab, seems in some ways incongruous. Running a medical college is a costly affair, and it is unreasonable to expect private players to run it on a charitable basis despite the "Not for Profit" tags that the trusts that run the medical colleges carry.

Any medical college owner will tell you that the bare-bones running costs alone of a medical college and a hospital with 500 beds as stipulated by the Medical Council of India (MCI) with all the necessary infrastructure, will be not less than Rs 2 crore per month. This is the minimum cost, and many managements may spend in excess of Rs 3 crore a month. This means that colleges have an annual running expenditure of Rs 25-35 crore.

There are only two sources of revenue for the colleges. First is the fee collected from the students and the second is the revenue generated from the paying patients in the hospital. Unfortunately, as most of these medical colleges have really bad infrastructure and hardly any star doctors to attract patients in sizable numbers, the hospital often ends up being a drain on the management rather than a profit centre. Whether they have patients or not, they need to maintain the requisite number of staff to meet MCI norms. All this means that managements look upon the hospital as a necessary evil that has to be run to keep the permissions for the college intact.

The initial set-up cost for a medical college, including the hospital, is at least Rs 150 crore. If this is a loan, then interest payments alone will add up to a few crore rupees each year. Assuming a college has 100 MBBS seats each year, and the fee collected at say Rs. 5 lakhs per student per year (on average as government quota students pay much less and management quota students pay more), the total income will only amount to Rs. 25 crore per year (100x 5 lakhs x 5 batches). This is hardly enough to keep the college running especially if there are loans to be repaid. Earlier, colleges collected a hefty capitation fee that was in the region of Rs 25 lakh-75 lakh depending on the state. This cushion of close to Rs 25-75 crore per year enabled them to make a hefty profit and keep expanding. Buildings would be put up using the cash payments received and even staff salaries were being part paid in cash in some colleges.

There is a need to find a middle ground on the issue of fees in private medical colleges. Even as we have to ensure that fees aren’t too high, creating an obstacle for the students, colleges need to be able to make enough to make ends meet and also to sustain further growth.

One way of achieving this is for the government to lease the attached hospitals on a no-cost or nominal-cost basis and run them. The government can utilize the infrastructure and provide its staff to run these hospitals. The revenue generated from paying patients can be split between the college managements and the government. Such a move would enable the colleges to drastically save on running costs of the hospitals, and as the hospitals would attract more patients with the government tag, the students also get better training. Governments save the cost of setting up the hospital infrastructure and its maintenance. The fee for the student can then be kept at reasonable levels.

Under the draft National Medical Commission Bill which could see the light of day sometime in the next year or two (with modifications), the fee cap on private medical colleges is sought to be removed and there may only be certain categories of students (government quota etc.) who may get some fee cap protection. There is also a proposal to enable "for-profit" entities to run medical colleges, bringing to an end the joke of a rule that only "Not for profit" trusts can run them.

Politicians in Kerala would do well to travel to other states to see for themselves the fee structure in private medical colleges. This may bring home to them the futility of the present agitation. Or, as a cynic asked, maybe they want the capitation fee system to continue?


(The views expressed are the personal opinions of the author)

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