PPPs in Healthcare: Scope, challenges and the way forward

Scope, challenges and the way forward

The Indian healthcare sector has so far shown a low level of acceptance for public-private partnerships (PPPs). However, with the launch of the ambitious Ayushman Bharat – Pradhan Mantri Jan Aarogya Yojana (PMJAY) – the government aims to harness the efficiency of the private sector in order to expand the reach of healthcare facilities and achieve universal health coverage.

Scope for PPPs

The four key pillars of healthcare – primary care, preventive care, public healthcare and research and development (R&D) – have a varied potential for PPP penetration. With regard to primary care, wherein financing and provisioning is done by the government, the potential for PPP is moderate. Preventive care, which involves three-fourths of the financing and two-fifths of the provisioning by the private sector, has a high potential for PPPs. Similarly, R&D, which is largely financed and provisioned by the private sector, also has a huge PPP potential. However, public healthcare, wherein both financing and provisioning is done by the government, the potential for private participation is quite low as compared to other areas.

Across the globe, four models are used for developing healthcare infrastructure. The first one is the contract model under which the provision of services is largely through the private sector. The second is the build and operate model wherein the infrastructure is built and operated by the private sector while the third is the build and transfer model which involves transfer of the infrastructure created by the private sector to the government, upon completion. The fourth is the co-location model where the public and private sectors work together for creation of the requisite infrastructure.

Roadblocks on the way

PPPs in healthcare are fraught with several challenges. The first one is the issue of viability. The viability of providing services depends on the demand for them. If there is no demand, supply cannot be generated and vice versa. Therefore, this vicious circle needs to be broken by creating demand so that provisioning of services can be justified. Principal-agent issues have also posed a challenge for the implementation of PPPs in the healthcare sector. Once the government has provided viability gap funding to the private sector, it has no mechanism in place to check whether the implementation is in line with the required standards. Ensuring quality is another issue hampering performance of PPPs in the healthcare sector.

Launch of the PMJAY – Solutions in sight

There exists a huge gap between hospitalisation rates of the top and bottom 40 per cent of the population, at 5.2 per cent and 2.3 per cent respectively. This results from the fact that the majority of the people belonging to the lower-income strata of society do not have access to or are unable to afford hospital care. An increase of even 1 per cent in the hospitalisation rate will result in an additional 6.3 million patients every year. The PMJAY framework, once established, is expected to facilitate 12 million hospitalisations every year, of which two-thirds will be in private hospitals. This will help in creating demand, especially in Tier II and Tier III cities, and thereby resolve the issue of viability.

Under the PMJAY, the government aims to do away with the principal-agent problem by not providing any capital expenditure and instead asking private players to undertake the construction of hospitals on their own. The government will provide a large part of the recurring revenue and costs through insurance, thus facilitating demand-side financing, which will be conditional on the hospitals providing services to the bottom 40 per cent of the population. Hence, with the PMJAY, an incentive structure, which was not present earlier, has been put into place.

With the introduction of the programme, the choice of the hospital in which the beneficiary wishes to avail of services rests with the patient. The beneficiary is free to choose between private and public hospitals as well as from among the various private hospitals. In addition, a minimum criterion has been set for empanelment of hospitals and a beneficiary feedback mechanism has also been put in place. These measures will go a long way in ensuring that quality services are provided.

The government is also looking to explore PPPs beyond hospitals for assuring market commitment as well as providing support for quality improvements via artificial intelligence, machine learning and telemedicine. Further, the PMJAY has also partnered with Start-up India to promote growth in the healthcare sector.

The way forward         

In a PPP project, the private partner needs to adhere to several conditions. This notwithstanding, the private player must be treated as an equal partner in the project with a well-

specified role to play. A certain level of flexibility with regard to the terms and conditions should be provided to the private partner. In order to meet the huge demand for hospitals in the country, state governments need to undertake PPP projects in a systematic manner and on a large scale. Proper institutional frameworks need to be put in place by the state governments for decision-making as PPPs are still ad hoc initiatives in most of the states. Further, there is a need for a permanent authority in the form of a dedicated PPP cell at the state, district and national levels for promoting public-private collaborations in the sector.

With regard to project completion, the government must set realistic deadlines to be decided upon through a proper screening process. In addition, a careful selection of advisers must be undertaken for healthcare projects, as each and every project is unique and requires an in-depth knowledge of the sector. Today, as most governments lack the capacity for due diligence, they appoint low-cost advisers.

On the financing front, India requires around $45 billion for the healthcare sector. This huge requirement reiterates the need to recognise expenditures in the health sector as an investment, rather than a cost. So far, the country has been spending only 1.4 per cent of its GDP on healthcare. However, it’s time India starts investing heavily in the sector and creates resilient health systems. Further, the government must create the capacity to ensure that quality services are provided at the right cost and efficient PPPs are undertaken. A strong information system also has to be put in place for ensuring proper delivery and monitoring of services.

As social infrastructure PPPs differ from economic PPPs to a large extent, there is a need to decentralise governance and financing mechanisms for their successful implementation. Technological intervention has a major role to play in the healthcare sector. With regard to the existing technology, there is a need to look at three aspects – availability, accessibility and equity. PPPs can be quite useful in making the already available technology accessible to all and in maintaining equipment. As many non-communicable diseases have shared risk factors, there is a potential to deal with them through mobile-based technologies. Mobile technology can be harnessed to deliver healthcare outcomes. Allowing nurses to do preliminary screening of patients will help in constructive utilisation of physicians’ time. Diagnostics is an area where successful PPP models have been implemented. Fragmenting the pool of beneficiaries on the basis of any parameter – state of origin or occupation – needs to be avoided. There is a need to work simultaneously on technological innovation as well as traning healthcare professionals to operate these. Further, the importance of programme innovations must also be realised. In addition, systems for evaluating programme innovations and monitoring them should also be put in place.

With the PMJAY, the government has entered as a “steward” player into the healthcare arena for the first time. Rather than purchasing individual items/services and hoping that all of them work well in synergy, the government has expressed its willingness to pay those capable of providing the requisite service. This marks a paradigm shift in the sector as PPPs have the potential to bring in the much-needed change in the healthcare sector. However, the government needs to ensure that all the issues are dealt with in a timely manner and the process of private participation is constantly refined to ensure maximum efficiency.

Based on a panel discussion among Alok Kumar, Adviser, Health and Education, NITI Aayog; Dr Indu Bhushan, CEO, Ayushmaan Bharat; Dr Henk Bekedam, Representative, WHO India; Dr Rakesh K. Shrivastav, Senior Adviser, WISH Foundation; Maneesh Garg, Joint Secretary, Ministry of Human Resource Development; Dr Poornima Prabhakaran, Deputy Director, Public Health Foundation of India; and Dr Pranav Mohan, Investment Officer, International Finance Corporation, at a recent NITI Aayog conference