The rise of vertical lending in healthcare: Opportunities and challenges

By Gaurav Gupta, Co-Founder & CEO, CarePay
Being one of the most dynamically diverse sectors, the Indian Healthcare landscape continues to undergo
ongoing developments. Driven by investments made by both government and private players alike, the
sector is continuing to grow healthy, reaching a value of $372 billion in 2023. Despite the tremendous
progress being made in terms of technology, advanced care, and improved services, the undaunting inaccessibility to healthcare financing has refrained the industry from achieving holistic growth.
While the government has increasingly focused on creating medical facilities in rural India, especially delivering primary healthcare services, the insurance penetration continues to loom large as a major setback plaguing the healthcare industry. At the same time, a plethora of patients lack awareness about the series of healthcare financing options, and the fragmented and unregulated landscape of healthcare financing has only aggravated the rising discrepancy in medical services.
Understanding the current market scenario
Over time, while improvements have been made in certain facets of the healthcare industry, the bridge
between out-of-pocket expenses and medical care continues to extend further. With over 62% of healthcare expenditure coming from out-of-pocket payments, the financial barrier for many seeking medical care becomes more prominent. Additionally, medical inflation in the country is escalating at an alarming rate of 14%. This has added strain on household budgets leading to over 40% of Indians delaying seeking medical treatments, which has resulted in worse outcomes and close encounters with death.
Changing horizons with vertical lending
With rising medical costs causing 71% of employees to personally cover healthcare expenses, as only 15% of the country's workforce receives health insurance support from employers, the advent of vertical lending presents a promising opportunity. In tandem, the global healthcare financing solutions market is expected to reach $249.65 billion by 2030, at a CAGR of 8.45% from 2022 to 2030, indicating the strong potential and demand for vertical financing.
Moving beyond a one-size-fits-all approach, vertical financing is rooted in creating a well-integrated healthcare financing landscape, wherein all the players, namely hospitals, lenders, and patients are equally involved and benefitted. Characterised by an intuitive, digitised, and personalised healthcare financing experience, vertical financing is more than just a lending avenue, changing the dynamics of healthcare financing in a multitude of ways.
Empowering patients
At the core of its foundations, lies its ability to allow patients to spread the cost of treatment over
time through manageable monthly payments. This goes a long way in reducing the upfront financial
burden. With reduced financial strains, vertical financing emerges as the best financial model, especially
for the underbanked population, ensuring that they don’t have to forgo crucial healthcare due to a lack of
traditional financing options.
Improved access to care
Being a specialised form of healthcare financing, it offers tailored financial solutions which align seamlessly with the patient’s needs, within the overall framework of the healthcare sector. Having enabled the underinsured to overcome financial barriers, vertical lending plays a significant role in opening doors to immediate medical care which in other cases would have been delayed. This leads to expedited diagnosis and treatment.
Beyond patients, transformed healthcare landscape
On one side of the threshold, vertical lending has reduced the burden on the already stretched public
healthcare facilities, by delivering timely access to financing leading to fewer treatment delays. On the
other side, it has been instrumental in improving healthcare outcomes all over, with early intervention and
access to quality care leading the charge to cultivate a much healthier and more productive workforce.
Collaborative edge
Aiming to level the playing field by fostering a collaborative framework, vertical financing brings a whole
new edge to the landscape of healthcare financing. Operating on a comprehensive approach, it cultivates
a multiway setup that encourages all players to jump on the healthcare bandwagon, improving patient
care by mitigating financing deficiencies. Betting on coordination, lenders partner with healthcare
providers, to deliver timely funds on an expedited basis, collectively contributing towards creating a better
healthcare space.
Imbued with the capacity to bring about a healthcare revolution, vertical lending is proactively making an
indelible mark on the country’s decentralised healthcare financing ecosystem. Characterised by
innovative technology, the ascent of digitised financial solutions has been successful in bridging the gap
between financial delinquencies and ensuring inclusive access to healthcare services. Leaving no stone
unturned, vertical financing is poised to usher in a new era of healthcare financing.
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