Niti Aayog’s Plan to Privatise District Hospitals

Niti Aayog’s Plan to Privatise District Hospitals

The current BJP led government spares no effort to seek new avenues that have the potential to contribute to the profits of private enterprises. To promote such efforts a recurring policy thrust has been on privatisation of public services.  Virtually all public services energy and water supply, transport, roads and infrastructure, education, and healthcare are being privatised. While the government argues that private providers will bring in new investments and provide services more efficiently, there is no evidence that this ever happens. To the contrary there is mounting evidence, both in India and internationally, that privatisation of public services leads to increase in cost to users and denies services to those who are poor. In many countries, including in developed capitalist countries such as Germany, public services are being “˜re-municipalised’ that is privatised public services are being taken over by the government.


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In India, however, in keeping with the government’s vigorous push for privatisation, the Niti Ayog has recently announced an elaborate plan to effectively privatise district hospitals in two and three tier cities. On advice from the World Bank, the Niti Ayog has drawn up a “˜Model Concessionaire Agreement’, that provides a blueprint for handing over to the private sector the provision of healthcare services for cardiac (heart) and pulmonary (lung) diseases and cancers. The proposal is aimed at handing over existing public facilities in district hospitals to private providers on a thirty year lease. These facilities will be allowed to charge patients for the full cost of treatment in other words they would function like any other private facility. The proposal envisages that patients covered by the governments social health insurance schemes (such as the Rashtriya Swasthya Bima Yojna or similar state level schemes) would be exempted from paying for treatment. The government would reimburse the private providers the costs of treating such patients.

Ostensibly the scheme is designed to address the acute shortage of trained personnel and infrastructure in public hospitals, particularly those situated away from large cities and metropolitan centres. The Niti Ayog asserts that the scheme will lead to infusion of resources by the private sector, and will expand access to healthcare services. Such claims are in the realm of fantasy and have no relation to the current situation. Private providers are interested in profits and hence concentrate on setting up facilities where they can extract higher fees from patients. A mapping of (for profit) private hospitals shows that they are almost exclusively concentrated in and around big cities and in states and districts where people have a higher paying capacity. Conversely they are virtually absent in poorer districts. Taking advantage of the Niti Ayog’s grand plan, private providers will “˜cherry pick’ the most lucrative districts, and ignore the poorest districts where people are most deprived of healthcare services.

The scheme also provides for an Escrow Account that would offset the risk to the private providers posed by possible delays in reimbursement by state government. Providers would also secure access to public facilities such as ambulance services, blood banks and mortuaries. Clearly no effort has been spared to roll out the red carpet and ensure that private companies are able to freeload on public assets. On one hand they will be provided free access to existing facilities built with public money. On the other, they will be assured a constant supply of patients referred by the public system. “˜Risk management’ in the Niti Ayog’s proposal is largely directed at protecting the financial interests of the private providers. In contrast there is almost nothing in the proposal that is designed to protect patients from unethical behaviour by private providers. It is fashionable to pose so called “˜public private partnerships’ as a “˜win-win situation’. Nothing can be more ridiculous if somebody wins, somebody is bound to lose. In this case the clear winners are private providers who at public cost receive access to a guaranteed patient load from whom they are free to extract profits. The losers are patients who, when unable to pay, will be denied care even in public facilities.


The moot question is, what are the implications for accessible health care services? First, the proposal implies that most patients would have to pay for care even in public facilities. The promise that patients covered by government health insurance schemes would access care free of cost needs to be seen in the context of recent surveys which show that just 12-13 per cent of people are covered by public funded insurance. Even those patients who will receive “˜free’ services will in all likelihood be enticed into paying for services that are not covered in their entitlements. This is a standard practice resorted to by private providers who are contracted by the government to provide services. Ultimately patients who are supposed to receive free care end up paying for a range of unnecessary diagnostic tests, medicines and procedures.

Second, an implementation of the proposal will further worsen inequity in access to healthcare services. Private providers, following the money trail, will stay away from poor and remote districts, leaving these to the public sector to manage. This will further weaken the ability of public hospitals to attract and retain trained doctors and other health workers, as public services will be ghettoised in the poorest areas where working conditions are the most difficult. The private sector is already dominant in India, as a result of grossly inadequate financing of public services and accounts for upto 60 per cent of in-patient care and 80 per cent of out-patient care. By securing access to even greater chunks of the healthcare sector, the private sector will draw away both financial and human resources from the public system. As the public sector is further weakened, this will become the argument for greater privatisation based on the plea that public services are unable to deliver!

Third, tens of thousands of patients will be left at the mercy of private providers. Past experience shows that unethical practices are rampant in the private sector, and patients are often exploited mercilessly to extract profits. World over, private provision of healthcare is associated with deficiencies in quality and rationality of services. As we note earlier “˜risk management’ in the Niti Ayog’s scheme is primarily concerned about “˜risks’ to private providers and not about protection of patients from unethical practices of private providers.

Fourth, outsourcing of hospital care to private providers, inevitably becomes unsustainable over time as the latter ratchet up demands on reimbursements and fees. This is not a theoretical scenario, we are seeing this happening in the case of the social health insurance schemes across India. The proposal to hive off hospital care to the private sector is justified by the argument that public services are not financed adequately and face an acute shortage of trained human resources. The simple remedy could be to significantly enhance investment in public healthcare services, including in the training of health workers. Currently public expenditure on health in India is less than 1.2 per cent in GDP among the ten lowest of over 200 countries. The government’s singular resistance to follow such a path is linked to its ideological moorings, which find virtue in private enterprise and view public services as inherently inefficient. This skepticism regarding public services needs to be tempered by the experience that success stories of public health, in diverse settings such as the UK, France, Cuba, Thailand and Sri Lanka, are all related to public systems.

The Niti Ayog’s proposal is a betrayal of public trust. By handing over public assets to private enterprises, the government is clearly abdicating its duty to provide healthcare services. The Niti Ayog describes itself as a “˜think tank’, unlike the earlier Planning Commission which formulated polices after discussions with representatives of all state governments. It is understood that the scheme will be piloted in a couple of districts, presumably in BJP governed states. Health care is primarily a state subject and state governments must first question the legitimacy of a supposed think-tank to formulate public policy and advocate for its implementation.