Towards Sustainable PPP in Healthcare: Why Reform Must Come Before Partnership

India's emergence as a global hub for affordable, high-quality healthcare and medical tourism is rooted in a carefully balanced ecosystem comprising a strong public healthcare network, regulated medical education, and selective private sector participation. This balance has enabled the country to deliver value-based healthcare outcomes at costs significantly lower than those in many developed economies.

As discussions around expanding Public–Private Partnerships (PPP) in hospitals and associated medical colleges gain momentum, it is essential that policy decisions are grounded in this broader context and guided by long-term sustainability considerations.

Understanding PPP in Healthcare: Context and Costs

PPP in healthcare is not a cost-neutral arrangement. While private participation can introduce efficiencies in construction, operations, technology management, and service delivery, it also brings additional costs related to capital recovery, professional management, risk premiums, and returns on investment.

If adopted indiscriminately or as a default option, PPP risks increasing the cost of healthcare delivery and undermining the affordability and equity that define India's public healthcare system. International experience demonstrates that excessive reliance on privatized, insurance-driven healthcare models can lead to cost escalation, access inequalities, and erosion of public trust.

India's Position in Global Healthcare

India has emerged as a preferred destination for medical tourism primarily due to its ability to deliver high-quality medical care at a fraction of the cost charged in developed economies. This position has been built over decades through a combination of clinically competent medical professionals, advanced medical infrastructure in select institutions, and comparatively affordable service pricing.

A key reason foreign patients increasingly seek treatment in India lies in the structural nature of healthcare systems in countries such as the United States and several European nations. In these countries, healthcare delivery is predominantly dominated by private sector hospitals, with access to services largely mediated through private medical insurance systems. While technologically advanced, the interaction between profit-driven healthcare providers and insurance intermediaries has resulted in sustained cost escalation.

India's comparative advantage therefore lies not merely in lower costs, but in its ability to deliver value-based healthcare—where outcomes, expertise, and patient experience are achieved without imposing excessive financial burden.

Public Perception and Emerging Concerns

A significant and growing segment of Indian patients who avail services from private hospitals—particularly those covered under private medical insurance—acknowledge that while the quality of medical care and service delivery is often superior, the financial practices associated with such care are increasingly viewed with mistrust.

Patients frequently report that during hospitalisation, especially under cashless insurance arrangements, they are subjected to multiple diagnostic tests, procedures, and consumables whose medical necessity is not always clearly explained or transparently justified.

These concerns are increasingly reflected in consumer forums, judicial proceedings, regulatory interventions, and public discourse, indicating systemic issues in the interaction between private healthcare delivery and insurance-driven financing.

"When such dynamics exist in the private healthcare ecosystem, their implications become particularly significant when private participation is introduced into publicly funded or publicly oriented healthcare institutions."

The Case for Reform-First Approach

This analysis argues for a reform-first, evidence-based approach to PPP in healthcare. It emphasizes that private participation should be considered only after the Government undertakes a time-bound corrective action plan to strengthen existing public hospitals and medical colleges through adequate funding, administrative accountability, and operational reforms.

Such a corrective phase enables:

• Realistic assessment of public capacity
• Identification of genuine gaps
• Development of credible benchmarks for capital costs, operating expenses, and service performance

By anchoring PPP decisions in verified public-sector data, clearly articulated constraints, and measurable outcomes, Governments can ensure that PPP is deployed selectively, strategically, and transparently.

Constitutional Framework and State Responsibility

Under the Indian Constitution, public health is primarily the responsibility of State Governments. This is clearly provided under Article 246 read with the Seventh Schedule, where Entry 6 of the State List assigns to States the subjects of "public health and sanitation; hospitals and dispensaries."

The Right to Life under Article 21, as interpreted by the Supreme Court of India, includes the right to health and access to medical care. This places a positive obligation on the State to ensure that citizens are not denied essential healthcare services due to lack of public provision.

Further, Article 47 of the Directive Principles of State Policy explicitly declares that improving public health is a primary duty of the State.

Can Budget Constraints Justify PPP?

From a constitutional and governance perspective, financial constraint alone is not a sufficient justification for reducing or withdrawing public healthcare provision. Indian courts have consistently held that the State cannot plead financial difficulty as a defence for failing to meet obligations arising from fundamental rights.

PPP can be a useful policy instrument, but it is not a cost-free alternative to public provision. PPP involves financing costs, risk premiums, professional management expenses, and returns on private investment. Therefore, PPP does not automatically reduce costs; in many cases, it increases long-term fiscal commitments.

PPP should be adopted only after the State demonstrates that:

• Public capacity has been reasonably strengthened
• Budget prioritisation has been examined
• The remaining gaps are structural and not correctable through public means

Action Points for State Governments

For State Governments considering PPP in the health sector, the following action points are recommended:

1. Launch a Time-Bound Corrective Action Plan: Initiate a funded, time-bound reform programme to strengthen existing government hospitals and medical colleges, implemented under the supervision of senior IAS officers with accountability at the institutional and departmental levels.
2. Constitute a High-Level Review Committee: Establish a Government Review Committee comprising Health, Finance, Medical Education, and Planning departments to periodically assess progress, review outcomes, and submit consolidated reports.
3. Mandate Evidence-Based Assessment Before PPP: Require completion of a documented assessment of residual gaps after the corrective phase, clearly identifying areas where public capacity remains inadequate.
4. Develop Cost Benchmarks and Performance Indicators: Capture and validate public-sector capital and operating cost data to establish realistic benchmarks and define measurable KPIs.
5. Institutionalise PPP Justification and Oversight: Make submission and approval of a comprehensive PPP Justification Note mandatory for all healthcare PPP proposals.
6. Strengthen Governance and Feedback Mechanisms: Implement a structured citizen feedback mechanism to capture patient and insurance-related experiences.
7. Adopt Selective and Strategic PPP Deployment: Consider PPP only in clearly identified functions or facilities where public delivery is demonstrably infeasible or inefficient.

Conclusion

India's strength in delivering affordable, high-quality healthcare—reflected in its global standing in medical tourism—rests on a carefully balanced ecosystem of public institutions, regulated medical education, and selective private participation.

Any expansion of PPP in hospitals and associated medical colleges must therefore be approached with caution, clarity, and a strong public-interest lens. PPP is not a cost-neutral solution and should not be adopted as a default model, but only as a necessity where public systems are demonstrably constrained despite targeted corrective efforts.

A reform-first, evidence-based approach is essential to preserve affordability, maintain public trust, and ensure long-term sustainability of the healthcare system.