Fact Check
Site search 2 hours ago Nikhil Inamdar Mumbai Getty Images India's private healthcare industry has seen unprecedented growth in recent years On a recent visit to Miraj, a small town in western India where I grew up, I counted more than 50 multi-specialty hospitals, diagnostics centres and health clinics packed along a five kilometre stretch of road. Many of them had come up in just the past five years, even though the town has historically been a regional medical hub in the state of Maharashtra. The proliferation of these new facilities tells the story of the unprecedented boom in India's private healthcare industry over recent years.
Hospitals have been undertaking breakneck expansion every quarter by adding thousands of new beds, diagnostics chains are expanding their footprint across smaller towns and medical institutes are raising hundreds of millions of dollars through the public markets to expand presence across the country. In early August, Manipal Health, India's largest multi-specialty hospital, raked in nearly a billion dollars in what became India's second largest initial public offering (IPO) this year. The sector has also been a darling of global private equity (PE) investors.
Between 2022 and 2024, Indian healthcare and pharma companies recorded nearly 600 mergers and acquisitions and private equity transactions valued at more than $30bn. Forty per cent of these funds went to hospitals, according to data from Grant Thornton. An additional amount over $20bn was raised by the sector in the last two years, as per more recent data obtained from the consultancy by the BBC.
Yet, even as the country's health infrastructure has seen a radical improvement in access as a result of this investment wave, millions of Indians have been priced out by the boom. NurPhoto via Getty Images Relatives of patients wait inside a government-run hospital in Kolkata This was borne out by a new report released by a government panel recently, which highlights the strikingly unequal nature of India's burgeoning healthcare economy, raising serious concerns about a "deepening affordability crisis" in the country's private hospitals. The report found that treatment in private hospitals is often between five and 10 times costlier than in government facilities, with the gap further widening for serious illnesses such as cancer, heart disease and kidney failure.
It also said the "unbridled" growth of clinics, nursing homes and diagnostic centres and uneven implementation of regulatory standards had led to "glaring disparities in both the quality and cost of care in private sector, leaving patients vulnerable to arbitrary pricing and substandard practices". It further blamed "rampant commercialisation of private healthcare" for increased patient grievances when it came to things such as excessive billing, unnecessary diagnostics, and soaring costs for routine procedures like childbirth, which it said was "directly pushing vulnerable households into catastrophic debt and distress, causing asset sales". Earlier this week, the food and drug regulator in India's richest state, Maharashtra, also found IV (intravenous) sets being sold at an astonishing profit margin of 2,800% in hospitals, raising concerns over the pricing of medical devices, which it said was almost entirely unmonitored .
The government panel had a range of recommendations to address the challenges: among the more contentious of them, a cap on hospital room tariffs to the nearest three-star hotel level, price regulation of essential treatments, diagnostics, and routine procedures across all private hospitals and standard treatment guidelines to prevent over-treatment. It also red-flagged foreign ownership of over 51% in hospital chains. India's private hospitals have pushed back against some of the proposals.
In a statement to the BBC, Siddhartha Bhattacharya, Secretary General of NATHEALTH, an association representing India's private healthcare sector, said the government should focus on reducing structural costs of healthcare delivery including taxes, land, capital, manpower and regulatory compliance requirements - rather than capping rates. According to him, healthcare delivery is capital-intensive and investment-heavy and return on capital employed "hovers at around 10%, significantly lower than many other sectors of the economy, which often generate 1.5-2.5 times higher returns on capital". He also cautioned against comparing hospital tariffs with hotel tariffs, saying it overlooks key compliance requirements that hospitals have to adhere to, such as infection control standards and patient safety norms, all of which add up to costs.
The country's biggest hospital chains, from Max Healthcare to Fortis, have warned that such arbitrary caps will " stifle " investment into the sector and scare away foreign investors if they are unable to get risk-free returns on their money. Hindustan Times via Getty Images India is mulling a cap on hospital room rates But public health experts say there is definitely a need to debate price regulation, given that private healthcare in India is currently entirely a seller's market. "With big foreign private equity money coming in, especially in tertiary care, it is people outside the country who are basically making decisions on price points.
That should not be the case," Dr Srinath Reddy of the Public Health Foundation of India told the BBC. Government intervention is all the more critical given the "super profits" many of these hospitals have been making, said Vivek ND, another health policy expert. "The increased emphasis of these hospitals on conducting various tests, pushing for diagnostics which might not be required must also be looked into," he said.
Some of the proposals - such as a fairer goods and services taxation regime which the panel recommends - could be welcome steps to reduce the cost of private health care, according to Vivek, though he adds wider consultations with the industry are required before any recommendations are made binding. Dr Reddy agrees. Before the government arbitrarily decides price caps, proper countrywide estimates on the precise cost of private healthcare are needed, he said.
"Costs will differ state to state and city by city, so you can't impose blanket caps across the country," he said. But as this debate heats up, the broader thrust, experts say, must be on strengthening public healthcare to reduce patient costs, something which even the panel recommends. India's current government health expenditure at 1.4% of gross domestic product (GDP) has been below the 2.5% target set in the National Health Policy almost a decade ago, and much behind the 5% prescribed by the World Health Organization.
The govenrment panel's report itself notes that disproportionately low spending on secondary and tertiary healthcare has driven citizens towards expensive private facilities, resulting in "catastrophic out-of-pocket expenditure". The government will "have to up its game" with more public investment to reduce the common man's dependence on private hospitals, said Vivek. But at the same time, the reality is that India needs an estimated $300bn in additional healthcare investment to build capacity.
A big chunk of that capital will evidently come from private domestic and foreign investors, leaving policymakers with the task of ensuring that investors don't flee even as ordinary people aren't priced out of essential services.
Source: BBC
