Rural PPP hospitals: Private operators want govt help with operational costs, permission to fix fee

A senior official in Niti Aayog, the government’s think-tank, said it was a matter of concern that no private hospital has come up under the scheme so far.

A scheme to set up hospitals in public-private partnership mode in rural areas in India can work if the government bears the operational expenses and allows operators to fix fees, according to an analysis by the apex body of private healthcare companies.

The Scheme for Financial Support to PPPs in Infrastructure or Viability Gap Funding Scheme, launched in 2006, was extended to healthcare in 2010 and was revised in 2020, but not a single hospital has been set up under this so far.

This even though India has insufficient health infrastructure with less than 1 bed per 1,000 people as against the world average of 2.7 beds per 1,000 people, with 70-80 percent of the beds available located in the urban areas.

The government has approved only three projects in Odisha, although they are yet to be awarded, according to the report titled, "Enabling an Accessible, Equitable and Affordable Health Coverage for 1.4 bn Citizens," by the Healthcare Federation of India, or NATHEALTH.

It said challenges in implementing the scheme include problems with the design construct that lacks customisation for the health sector and unattractive identified locations from the catchment and resourcing point of view.

A complex bidding process, lack of a clear demand-channelling mechanism, and cashflow risks owing to delayed payments also deter private providers.

Way forward

NATHEALTH suggested there should be structured interactions to create draft tender documents ahead of the RFP process and there should be a separate partner to design and construct hospitals, which is not the operator’s competency.

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Considering that operational expenditure over 30 years would be 25 times the initial capital expenditure, financial support is needed for operating expenses, the report said.

A hub-and-spoke model where the PPP should be limited to the hub location and the government should facilitate the spokes (primary health centres and district hospitals) by priority routing of sponsored patients from the catchment to the hub is needed to ensure guaranteed volumes, it said.

“Pricing of services to be aligned to the true cost of services delivery with a flexibility to treat cash patients at a fee determined in consultation with the private provider will address the challenge of financial viability,” it said.

A senior official in Niti Aayog, the government’s think-tank, said it was a matter of concern that no private hospital has come up under the scheme so far.

“We are ready to talk about and resolve the problem areas, but private hospitals should show interest in the first place,” the official said.

‘Public good’

Abhay Shukla, national co-convenor of Jan Swasthya Abhiyan, pointed out that there is no evidence so far that rural health services have been delivered more efficiently by the private sector anywhere.

“In fact, there may be a need to regulate the private sector, as we saw during the COVID-19 that private hospitals had to be reined in in at least 15 states,” said Shukla.

“Even if some services are delivered to people through private players in certain contexts, it should be within the framework strictly defined by the government with a larger public good in mind.”