Privatisation of district hospitals

Two years after Niti Aayog, the government’s think-tank, unveiled a plan for district hospitals to be handed over to private healthcare companies to run attached medical colleges on a public-private-partnership (PPP) basis, at least five states have agreed to take up the idea.

Uttar Pradesh, Maharashtra, Karnataka, Gujarat and Meghalaya are now in the process of finding bidders for this project, a private advisory firm said in a report on medical education in India.

“State governments across India are actively pursuing the PPP model to bridge the financing gap for setting up a medical college,” Anand Rathi Financial Services said in the report.

Niti Aayog had already developed the Concession Agreement Guiding Principles for Setting up Medical Colleges, which was drawn up based on models tried in Gujarat and Karnataka earlier.

The Aayog first came up with the idea in January 2020, just before Covid-19 hit, and later again urged states to adopt the project in 2021, in the middle of the pandemic.4

The move by the states comes as the number of medical college seats in India crossed 91,000, although medical education experts stress on the need to address regional disparities and the rural-urban divide in the distribution of medical colleges.

States with PPP plan
Madhya Pradesh intends to set up medical colleges in Bhopal, Jabalpur, Katni, Balaghat and Indore in the first phase under a DBFOT (Design, Build, Finance, Operate and Transfer) basis, Atul Thakkar of Anand Rathi said in the report.

The state government will provide land to the private partner on a 99-year (60 years + 39 years) lease to set up a medical college and in addition, will provide a 300-bed district hospital to the partner.

In Uttar Pradesh, 16 medical colleges are to be developed under the state government’s one-district-one-medical-college initiative, which has been financed under the Viability Gap Funding scheme of the Central government.

The state government will provide a district hospital and the land for medical colleges on a 33-year lease.

In Meghalaya, the state has invited bidders to develop Shillong Medical College and Hospital and similar plans are afoot in Karnataka and Maharashtra. Punjab, too, has expressed willingness to join the initiative.

Devil in the details
According to the report, 23,000 MBBS (Bachelor of Medicine and Bachelor of Surgery) seats were added in the past five years, more than 60 percent of them in government-run colleges.

Healthcare executives said too much government regulation may act as a deterrent for private companies to invest in medical education.

The idea of the government and private companies coming together to run medical colleges is good, said Vivek Desai. However, it needs to be followed up with details of the expectations from both sides and how they can be met.

Desai is the founder of HOSMAC India, a hospital planning, design and management consultancy. He is also a senior member of NATHEALTH, a network of private sector healthcare companies.

“With state-regulated fee structures, private players become apprehensive as district hospitals are not able to attract private patients, which otherwise cross-subsidise the low realisation from scheme patients,” he said.

Whose benefit is this?
Health economist Rijo M John pointed out that PPP can become unfavourable for ordinary patients, especially if the “private” dominates the “public.”

“The government should promote the PPP model of healthcare delivery only after ensuring sufficient tertiary care facilities in the public sector itself,” John said.

He added that when there is already a lack of sufficient tertiary care facilities at the district level, adopting the PPP model for existing hospitals might result in more profiteering by the private sector, with the inevitable increased out-of-pocket expenditure for the general public.

Public health expert Dr Antony KR said PPP in the health sector has often resulted in a loss to the government and taxpayers and has been beneficial to the private sector.

“Very few philanthropic organisations and charitable trusts have sincerely collaborated with the government for the common good,” he said. “This PPP model of giving away district hospitals to private medical colleges should not end up in a similar fiasco.”

Past fiascos
Antony pointed out that the Chiranjeevi scheme in Gujarat – meant to give women from poor families access to institutional deliveries in private hospitals – had resulted in the weakening of well-utilised public health institutions in the Surat, Ahmedabad and Baroda regions. Also, the scheme had no takers for areas such as Kutch, which is poorly served by the government, he said.

Similarly, when Chhattisgarh wanted to outsource diagnostic services in district hospitals, there were no bidders for the tribal divisions of Bastar and Sarguja. The private sector bid only for the Raipur and Bilaspur divisions, where they could make a profit, said Antony, who is an independent monitor for the Centre’s National Health Mission.

Citing the example of Rishikesh in Uttarakhand, he stressed that private companies were reluctant to carry out public health programmes like immunisation, maternal and child health, and family planning in response to calls by the government, while being very keen on offering diagnostic services. Moneycontrol