PPP in Healthcare – The Road Ahead

The transformation expected by the healthcare industry continues to remain unfulfilled in all previous budgets, as the healthcare industry has failed to gain the priority infrastructure status.

 

This may slow down private investment and will adversely affect the spread of secondary healthcare in Tier 2, Tier 3 cities and rural areas surrounding these cities. The new government should bring forward a comprehensive policy on Public Private Partnerships (PPP) for use by Central and State Governments which may help in promoting the much needed PPP projects in Healthcare.

 

In Nascent Stage

 

India has PPPs and related reforms evolving in many states, with the governments across the country promoting them as a means for bridging the disparity in infrastructure so as to meet the needs of the citizens.

 

In the past one year, states like Karnataka, Uttarakhand, Maharashtra and Andhra Pradesh have adopted a number of PPP projects in the healthcare sector. Some of the projects introduced in these regions include Yeshasvini Health Insurance Scheme, Emergency Response Services, Development and Operation of Radiology Diagnostic Centres and Rajiv Aarogyasri Community Health Insurance Scheme.

 

In fact, the governments of Uttarakhand and Himachal Pradesh have appointed RAHI Care to install dialysis facilities at hospitals through a PPP model. Maharashtra also hasn’t been far behind.

 

Last year, the state decided to address one such problem through a PPP model, as 22 government hospitals in Maharashtra will be provided with the diagnostic services of the Mumbaibased Enso Healthcare Private Limited. Similarly, another contract was bagged by the same firm in Punjab. Chhattisgarh has started outsourcing its diagnostic needs through a bonus and penalty PPP model. Other states such as Karnataka, Rajasthan and Gujarat are expected to follow suit.

 

Governmental source is the most common mode of financing a PPP, even as the entities of both the public and private sectors contribute to the financing of the project. The scheme is supported by the public sector in the form of subsidies, grants, land and capital expenditures.

 

The government also provides Viability Gap Funding (VGF), a scheme that aims at supporting infrastructure projects that are economically justified but all short of financial viabilities.

 

The total funding provided under the scheme does not exceed 20 per cent of the total project cost, provided that the government or the rightful entity that owns the project provided additional grants out of its budget, but not exceeding a further 20 percent of the total cost.

 

It can be observed that almost 40 percent of all the PPP projects proposed till March 31st, 2104, are already in the operational phase, indicative of the fact that PPP in Indian healthcare is still in a nascent stage compared to other countries.

 

A large number of projects are in the bidding and construction phases – 12 percent and 9 percent respectively, which once operational, will add to the penetration of PPP in the country.

 

A look at the list of the operational PPP projects in the healthcare domain reveals that currently, 44 projects are functional across the country. Majority of these projects are concentrated in the states of Karnataka, Uttarakhand, Andhra Pradesh and Maharashtra.

 

These projects include insurance schemes, emergency response services such as mobile vans, management of Community Health Centres etc., indicating a majority of O and M type projects. The cost of these projects range from Rs 30 lakh to Rs 900 crore.

 

The type of a PPP chosen depends on the project’s objective, its complexity and the extent of involvement of the private entity.

 

Build Operate Transfer (BOT)

 

Operation and Management

 

Concessions

 

Lease

 

Joint Venture

 

Regulatory Aspects

 

Opportunities

 

1 BENEFITS TO THE PUBLIC ENTITY

 

PPPs enable improved operation and enhanced efficiency of public services by accessing private sector innovation, technology and processes. In certain cases, it also provides an alternate source of funding for infrastructure and services.

 

2. BENEFITS TO THE PRIVATE ENTITY

 

As partnerships have become more complex, the benefits have also become more diverse and include elements such as publicity, influence and prestige.

 

Partnership help build legitimacy as they allow the private sector to work with respected organizations.

 

Research work that can be used in the future for product development.

 

Enhancement of brand image and name recognition.

 

The objective of these projects cover a wide spectrum of application, spanning health insurances schemes, systems for urgent  delivery of healthcare services, installation of healthcare equipment in hospitals, up gradation of diagnostic services and development of healthcare facilities.

 

The government has also been taking initiatives to promote private investment into healthcare. It has been addressing issues constraining participation of private players and has also drafted a national PPP policy and promoted the formation of the Public Private Partnership Approval Committee (PPPAC) in order to streamline the projects.

 

After such steps, immense domestic as well as foreign interests are expected from private players for improving healthcare in the country of over a billion people.

 

As the public sector continues to face challenges in financing and management, discussions around PPPs in the healthcare sector is very low as of March 31st, 2014

 

States such as Uttar Pradesh, Bihar and Jharkhand, where rural areas account for a major chunk of the population, the access to the affordable healthcare is low. These states need to focus on increasing PPP activity in their respective healthcare sectors.

 

As the population of India continues to grow, significant rise in the demand for healthcare products and services is expected. In such scenario, participation of the private sector, which brings along resources and technical expertise, is inevitable.

 

Therefore, in order to meet the rising needs of the country, both public and private sectors will have to work in close collaboration, sharing responsibilities, resources, risks as well as benefits at every step of the project.