Health care does not need the PPP route

UPSC Syllabus Topic: GS Paper 3 –Issues relating to development and management of Social Sector/Services relating to Health.

Introduction

India’s healthcare system works through a mixed public–private model, where the public sector anchors universal access and the private sector dominates specialised services. Despite higher government spending and a fall in out-of-pocket expenditure, deep structural gaps remain in infrastructure, workforce distribution, and regional equity. In this context, healthcare PPPs—especially in medical education and district hospitals—are projected as solutions, even as they raise serious concerns about public control, affordability, and long-term health system strength.

Current status of Healthcare in India

• India’s healthcare runs as a mixed system: a public network that anchors universal access, and a private network that delivers a large share of secondary–tertiary care.
• The public system is organised as a three-tier structure—primary care (PHCs/Health & Wellness-type services for first contact), secondary care (community/ district-level hospitals for referrals and basic specialties), and tertiary care (medical colleges and large government hospitals in major cities).
• The private sector is more concentrated in metros and Tier-I/II cities, and dominates many specialty services.
• Within this mix, healthcare PPPs are used to fill capacity and service gaps—for example, outsourcing diagnostics/NCD services within district hospitals, running specific units on concession/contract, and partnering for facility upgrading and management using model/guide documents.

Data and facts

• The demand for Indian healthcare professionals is expected to double nationally and globally by 2030.
• By 2025, India will require three million additional hospital beds to achieve the target of three beds per 1,000 people, along with 1.54 million doctors and 2.4 million nurses to address the growing healthcare demand.
• India’s public expenditure on healthcare is expected to be 1.9% of GDP in FY26, compared to 2.5% in FY25, as per the Economic Survey 2024-25.
• Government share: The share of government spending in total health expenditure increased from 29% in FY15 to about 48% in FY22.
• Out-of-pocket expenditure: Out-of-pocket spending declined to about 39–40% of total health expenditure in FY22.
• Doctor–population ratio: The doctor–population ratio is estimated at roughly 1:800, which meets WHO norms in aggregate but masks large rural–urban disparities.
• PPP presence: Public–Private Partnerships have become integral to service delivery, particularly in dialysis, diagnostics, and insurance-based hospital care under PM-JAY, where private hospitals deliver publicly financed services.

NITI Aayog Guidelines on Healthcare PPP Model in India

• The private establishment will construct the medical college on the site given by the government.
• The site will be given for lease to the private establishment for 99 years at payment of a subsidised lease of 8% of the circle rate (guidance value) of the land.
• The medical college will be owned by the private establishment.
• The government district hospital is handed over to the private establishment for 60 years (which may extend).
• The private establishment will have all the rights to operate and maintain the hospital.
• The private hospital is expected to develop the district hospital further, for which grant funds will be provided by the government.

Arguments in favour of the Healthcare PPP Model in India

1. Capacity Expansion: PPP enables rapid creation of hospitals, medical colleges, and diagnostic centres without overburdening public finances.Example: PPP medical colleges in Andhra Pradesh expanded seat capacity faster than purely public routes.
   2. Resource Mobilisation: Private investment supplements limited public health budgets, especially for capital-intensive infrastructure. Example: Use of long-term institutional finance via NABARD for health infrastructure.
2. Efficiency Gains: Private partners bring managerial efficiency, cost control, and timely project execution, reducing delays common in public works.Example: PPP-mode diagnostic services in district hospitals.
3. Technology Access: PPP facilitates access to advanced medical technology and digital systems otherwise unaffordable for states. Example: PPP-run CT/MRI services in government hospitals.
   5. Human Resources: Addresses shortage of doctors and specialists through shared staffing and flexible recruitment. Example: Private faculty support in government medical colleges.
   6. Quality Improvement: Performance-linked contracts incentivise service quality, uptime, and patient satisfaction. Example: Contract-based quality benchmarks in PPP hospitals.
   7. Risk Sharing: Construction, operational, and financial risks are shared, reducing fiscal stress on states.
   8. Regional Equity: PPP helps establish facilities in underserved districts where private entry alone is unlikely.

Arguments Against the Healthcare PPP Model

1. Risk to Public Assets: The model often involves handing over public assets, such as district hospitals and land, to private entities for long lease periods (e.g., 33-66 years), effectively resulting in privatization.
2. Profit Motive vs. Welfare: Critics argue that the fundamental difference in motive—the state’s goal of public welfare versus the private entity’s need for profit—leads to a conflict of interest that ultimately harms public health goals.
3. Inaccessibility and Cost: There are concerns that PPP models lead to a two-tiered system of “paid” and “free” beds, potentially reducing the number of beds available to the public and increasing out-of-pocket costs for the majority of the population.
4. Lack of Enforcement Capacity: The argument posits that many states lack the institutional capacity for robust contract enforcement, which, as past examples in Karnataka and Andhra Pradesh show, can lead to failed agreements, poor management, and a lack of accountability.
5. Prioritizing Commercial Interests: Instead of addressing gaps in the public health system, such models may prioritize high-profit services, unnecessary diagnostics, and higher out-of-pocket expenditures for patients.

 Way Forward

1. Strengthen primary care first: Invest in comprehensive primary healthcare, as evidence shows nearly 30% of hospitalisations can be avoided through effective first-contact care.
2. Retain public control over district hospitals: District hospitals should remain public to ensure integrated referral pathways across all three tiers.
3. Reform medical education financing: Expand subsidised seats and invest in faculty to build a public-oriented health workforce, especially for rural areas.
4. Address human resource gaps: Target specialist shortages through direct public recruitment and incentives, rather than relying on commercial education models.
5. Limit PPPs to short-term, service-specific roles: Any private participation should be tightly regulated, time-bound, and focused on non-core services.
6. Improve state capacity and regulation: Strengthen contract enforcement, monitoring, and health regulation before considering asset-heavy PPP models.

Conclusion

India’s healthcare challenge is not only about expanding infrastructure but about ensuring equity, quality, and system integration. While PPPs promise speed and capital, they risk weakening public control and fragmenting care delivery. A stronger, publicly funded, and well-regulated health system remains the most reliable path to affordable and inclusive healthcare.

Question for practice

Examine how the Public–Private Partnership (PPP) model in healthcare affects public control, equity, and long-term health system strengthening in India.

Source: The Hindu