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A strange hybrid

Niti Aayog proposal for privatising public hospitals is ill-designed, driven by ideology more than welfare

Written by Sujatha Rao |
Updated: August 11, 2017 12:00:23 am
Niti Aayog, Niti Aayog initiatives, Niti Aayog hospitals, CGHS, Niti Aayog hybrid model, health, Niti Aayog health, Niti aayog models As per media reports, the 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. (Representational photo)

The corporate hospitals have been resting their gaze on public hospitals for long: Land, doctors and patients. Finally, in the Niti Aayog, they have found a sympathetic collaborator. As per media reports, the 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. 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.

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. Accordingly, the “implementing authority” — the government — will hand over the site, facilitate early approvals and permissions, ensure continuous availability of water and power, provide viability gap funding, a share in all the common services, undertake all back-end office processes like collecting fees and keeping accounts, mobilise patients as per a plan to be approved by the investor, and reimburse expenses incurred on the treatment of such referrals. If costed, all this would account for close to half the price of service.

The private entity will have its own staff and personnel, laboratories, pharmacy, 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.

A cursory glance clearly indicates the one-sidedness of the agreement, with the government bearing all the risk and the private partner running away with all the profits. Risk is unequally spread. 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. So attention to them is not misplaced. It is also a fact that three-quarters of the specialists, equipment and beds are in the private sector. Partnership with them is therefore inevitable. What has been eluding public policy is how to make both these sectors work for achieving welfare goals without financial stress to government or the patients.

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 corporates, 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. None of these initiatives have to date been critically evaluated by any credible third party. Stray studies have indicated negligible impact on reducing catastrophic or out-of-pocket expenditure, though they have widened access to treatment. The jury is out on the welfare benefits accrued on account of such partnerships.

The challenge in the Niti Aayog hybrid model is its implementation. How do public and private managements coexist in the same physical space? A hospital is a living institution that cannot be dismembered. Salary streams, motivation levels, working methods, prescription practices, monitoring and accountability systems, work expectations, all vary. Everyday, 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. How, then, will the government operate its low-cost generics aushadhi pharmacies alongside the private entity pharmacies? In other words, in such a model how will conflicts of interest be managed?

All countries normally come up with new strategies based on a thorough evaluation of the existing experience, since successes, and more importantly, failures provide insights and lessons. This is more imperative given the market failures in the health sector. Therefore, as a first step in these three years, 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. Secondly, 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.

Besides, in the absence of an unequivocal commitment to increasing health budgets, will payments under these programmes imply diversion from the more important public health programmes? As it is, infectious disease control programmes like TB are underfunded. Thirdly, will private sector accept government protocols? These are not standardised, with government hospitals tending towards more rational and conventional treatment styles as opposed to private hospitals that at times appear to be more influenced by compulsions of profit maximisation.

Clearly, 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. The protagonists of such schemes believe there are no alternatives or options. There are. Plenty. Niti Aayog has an obligation and a duty 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. In this case, it is clear that ideology, and not welfare, is the driving consideration.

The writer is former Union Secretary, Ministry of Health, and author of ‘Do We Care? India’s Health System’

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