Sep, 2012     

Healthcare Delivery Industry

This document is an article which highlights the emergence of Public Private Partnership models in Indian Healthcare Market.

Public Private Partnership in the Indian Healthcare Market

Need for Public-Private Partnership (PPP) to enhance the healthcare business model

  • Lack of adequate healthcare infrastructure
    ‒ Lack of adequate public infrastructure such as hospital buildings, types of equipment,
    laboratories, diagnostics, and pharmacies
  • Heavy burden of patients, with the scarcity of manpower
    ‒ The ratio of doctors per bed and nurses per bed in government hospitals is much lower
    then the private hospitals while government hospitals serving a larger share of overall
    ‒ As of FY 2010, India had approximately 300 medical colleges, 290 colleges for
    Bachelor of Dental Surgery and 140 colleges for Master of Dental Surgery admitting
    34,595, 23,520 and 2,644 students annually respectively. India needs to open 600
    medical colleges (100 seats per college) and 1500 nursing colleges (60 seats per
    college) in order to meet the global average of doctors and nurses
  • Lack of sophisticated equipment’s
    ‒ The equipment and technology used to treat patients in private hospitals are relatively
    more sophisticated vis-à-vis government hospitals
  • Accessibility and coverage in the rural area is low
    ‒ Reach of basic healthcare facilities in rural areas is very low. A majority of the
    population living in rural areas is deprived of basic preventive care. Intervention of
    private players such as NGO's can facilitate these services
    ‒ Around 74 percent of the graduate doctors in India work in urban settlements which
    account for only approximately one-fourth of the population. The countrywide
    distribution of these institutes is also skewed. 61 percent of the medical colleges are in
    the 6 states of Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh and
    Pondicherry, while only 11 percent are in Bihar, Jharkhand, Orissa and West Bengal
    and the north-eastern states

Public Private Partnership in Indian Healthcare Delivery

Evaluation of PPP models

While adopting any PPP framework for customization into a model, it is necessary that the
model's viability is evaluated upfront before the private and public sector participants proceed
with the PPP planning and implementation

Evaluation parameter Factors to be considered
  • Level of success in meeting its objectives
  • Effectiveness in monitoring the delivery of the program
  • Scalability
  • Local stakeholder buy-in
  • Value of money analysis
  • Affordability (public sector support)
  • Cost of developing the monitoring mechanism
Equity and political considerations
  • Ability to benefit the poorer and not subsidize the rich
  • Political resistance
  • Need for wider public sector reforms
Financial sustainability
  • Economic return to private sector
  • Financing risk
  • Private sector appetite and capability

Risk allocation and sharing

One of the key consideration for the PPP model is risk allocation and sharing. The risk should
be borne by the party that is best able to manage it. Following are some key risks in PPP
‒ Design risk
‒ Construction and development risk
‒ Performance risk
‒ Operating cost risk
‒ Variability of revenue risk
‒ Termination risk
‒ Technology and obsolescence risk

Public Private Partnership in Indian Healthcare Delivery

Challenges in PPP in healthcare

  • Absence of standard policy framework for PPP in the current healthcare business model
    ‒ Currently, there is no standard policy framework for PPP in healthcare in India,
    standard policy framework will help enhance private sector participation and will also
    fix accountability and rule out threats of corruption
  • Monitoring the operations of hospitals under PPP
    ‒ Monitoring is essential to supervise the utilization of beds reserved for poor patients
  • Timely implementation of PPP projects
    ‒ For the successful and timely implementation of PPP projects, speedy decisions and fast
    execution of processes such as selection of private players, preparation of project
    agreement etc. is crucial

Critical success factors for PPP

The critical success factors for PPP are
‒ Political commitment and introduction of requisite regulations
‒ Clear policy and legal framework for operating PPP models
‒ Strong control mechanisms for efficient oversight including dispute resolution
‒ Risk apportionment through careful design of the contract
‒ Incentivize the private sector with an 'acceptable rate of return'

Successful PPP projects in India

Examples of successful PPP projects are
‒ Karnataka Karuna trust; Yashaswini scheme
‒ Tamil Nadu mobile health services
‒ Andhra Pradesh Aarogyasri
‒ Madhya Pradesh community outreach program
‒ West Bengal mobile health services
‒ Rajasthan contracting-in public hospitals
‒ Gujarat Chiranjeevi project

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