A strange hybrid: 

A strange hybrid:

Context:

The  Niti Aayog is all set to push states to privatise well functioning district hospitals in the Tier 2 and 3 cities like Pune, Baroda, Visakhapatnam, Madurai and so on.

Introduction:

• The proposed model consists of leasing out for 30 years a portion of the hospital to a private company to provide treatment for the three diseases — cardiology, cancer and pulmonology — that account for 35 per cent of mortality in India.
• It’s a strange hybrid that has no precedent anywhere in the world and can be called strategic, bizarre or hare-brained depending on which side of the equation you are on.

Objectives:

• The intention of the proposal, to hive off 60,000 sq ft of the hospital and vacant land, if any, to a private investor, is to attract private capital through equity and venture funds to build the required infrastructure to world class standards.
• The private entity will have its own staff and personnel, laboratories, pharmacy store, ambulances and common services like cafeteria and bookshops down to the ATM.
• It will have an assured market, access to all confidential records and information and freedom to charge user fees.
• Complicated cases will, however, be referred to bigger hospitals — their own or of government
• Government reimbursements for patients referred to them will be on par with rates paid under the CGHS or the state-sponsored insurance scheme, if any.
• A grievance redressal mechanism is proposed.
• Overall accountability is confined to submitting some annual reports to the government.
• In case of any violation of conditions, the government will need to seek judicial relief.
• The rationale for coming up with this hybrid model is the fact that these three diseases do account for almost 35-40 per cent of total mortality in the country.

Key points:

• India has a plethora of PPPs in health, starting with handing over free land and extensive custom duty waivers for imported equipment, to “strategic partnerships” under which public hospitals have been handed over to large corporate, outsourcing of diagnostics and dialysis units and so on.
• The largest PPPs are however, under the government sponsored insurance schemes where treatment costs for eligible patients are reimbursed by government at agreed package rates that have, however, witnessed steady increases as have premiums.

Challenges:

• The challenge in the Niti Aayog hybrid model is its implementation.
• Every day, there are instances of patients being denied treatment in private hospitals till payment is made or preferring paying patients to the government insured ones or levying additional charges in addition to the sum reimbursed.
• Private hospitals are also known to overcharge devices like stents and drugs that are the key revenue earning centres.

Soultions:

• The Aayog could easily have come up with a soundly argued, evidence-based white paper on the need for hospital reform, providing various options with fiscal implications.
• The model does not provide any information on the pricing strategy and its impact on public budgets.
• The CGHS is an imperfect instrument to rely upon as the rates fixed under that programme are based on tenders.
• Prices quoted, therefore, include cost of capital, liabilities and profit. Since under the Aayog model, several “costs” are being subsidised, rates charged ought to be half of the CGHS rates.

Conclusion:

The Niti Aayog proposal has a sound rationale but the design is fraught with adverse implications for the existence of public hospitals that are a refuge for the poor. In the absence of government as the monopoly purchaser, such a hybrid model will be a challenge.

Niti Aayog need to consult, listen, collect evidence, analyse, understand and reflect, not prescribe based on the advice of the World Bank and a few interested corporate houses.