Dr Krishna Reddy Nallamalla

The evolution

At the time of Independence, the public sector accounted for most of healthcare provision, healthcare financing and production of healthcare resources. With time, the public sector was unable to cope up with the growing health needs of the population. The private sector entered to meet these unmet health needs. As successive national and state governments neglected healthcare, the private sector mushroomed in an unregulated way to fill the growing void. With liberalization of Indian economy, the private sector rapidly displaced the public sector as the dominant healthcare provider. It currently accounts for nearly two thirds of all healthcare provision in the country.

In the absence of the necessary regulation and stewardship, private healthcare evolved into a highly complex and fragmented system. Clinics, drug stores, diagnostic labs, teleconsultations, mobile clinics, online platforms etc., proliferated to meet outpatient health needs. While the availability of qualified allopathic health professionals remained concentrated in urban areas, people in rural areas and urban slums sought services from qualified AYUSH professionals and unqualified informal providers. Nursing homes came up in the homes of doctors to address inpatient needs of their patients. Non-profit trusts and faith-based organizations were the first to establish modern hospitals in the private sector. For-profit corporate hospitals came into being in metro cities post-economic liberalization with the inflow of foreign private equity capital.

The private pharma industry grew much more rapidly, not only meeting domestic needs, but alsoexploiting the opportunity in global markets. Biotechnology and biomedical sectors soon followed suit to supply health goods. Health professional education too shifted gradually into the private sector, as public institutes were not in a position to cater to the rapidly growing and diverse needs. Though private life and general insurance was allowed from early 1990s, private health insurance was late to enter the fray.

As governments increasingly failed on their responsibility towards financing and providing healthcare to all, the financial burden of meeting healthcare needs shifted on to people. While the growing capital needs for infrastructure are being met by private equity, people are increasingly ending up paying from their pockets to meet their essential healthcare needs. In this way, private sector became a vital player of health systems in India over the last few decades.

The impact of the private sector on health systems performance

Equitable access to high quality,affordable healthcare is one of the core functions of any health system.The private sector has been innovative and instrumental in improving access to healthcare. By design, it is not expected to address the issue of equitable access. In the absence of uniform enforceable national standards, the quality of care across the private provider network is highly variable. It is mostly driven by the market competition, patient expectations, and financial incentives being offered for quality accreditation by the large payers. While price regulation is limited to essential drugs and few medical implants, prices of a bulk of healthcare services are left to the discretion of the providers. Of late, market competition by online service providers and big diagnostic chains is pushing down the prices of drugs and diagnostics. Hence, access to care for people who do not have any financial protection, is increasingly being dictated by what people can afford.

The private sector has been the most impactful in increasing the availability of health goods and human resources to meet the health needs of the people. Private healthcare, which is predominantly designed to meet personal health needs, cannot be expected to address population health needs. And yet, the private sector does play an indirect role in influencing other social determinants of health, both favorably and adversely.

The entire health system needs to respond to  thevarious health crises arising out of epidemics and pandemics, natural disasters, mass migrations due to war and strife etc. However, a fragmented private health system with no stewardship by the government, may not mount an effective response to such crisis situations.

Stewardship over Private health sector

National and State governments must provide effective governance to improve the performance of the health systems. Stewardship over private health sector is a critical responsibility of good governance. Stewardshipis different from regulation of the private sector. It begins with the recognition of the significant role private sector plays in the functioning of health systems. Active engagement of various stakeholders in the private sector in health policy formulation and its implementation is a critical aspect of stewardship. Creation of an enabling policy environment for the private sector to overcome its challenges and grow in a sustainable way is what effective stewardship does. Stewardship based on a shared purpose and vision, with mutual respect and trust, constructive partnerships, and transparent dialogue is essential for strengthening health systems.

Regulation of Private health sector

Regulation of complex systems is a core function of governance. Unregulated systems can become chaotic and dysfunctional. regulation defines boundaries and frameworks within which systems have to operate. At the same time, it should not hinder innovation, efficiency, and sustenance. Self-regulation is the best form of regulation if it evolves organically within an ethical social framework. The next best is the regulation by autonomous bodies empowered by legislation. The least effective is the direct regulation by the government. Both regulators and the regulated must understand that the core purpose of regulation is to safeguard the interests of the people. Since the purpose of medicine is ‘to do no harm’, the quality of goods, health professionals, and clinical services is the primary target of various regulations.

Financial protection while accessinghealthcare services has become an important function of health systems. Countries across the world are bringing prices of essential health goods and services under some form of regulation. This is seen especially where the market forces collude to make these expensive and unaffordable. Given the complexity of the health insurance system, many countries are opting for a separate regulator for health insurance.

While it is easy to pass regulations, the governance system needs to develop the capacity and capability to regulate in a transparent, efficient, and effective way. It is being increasingly observed that an ineffective regulatory system is damaging to health systems performance. Corruption, in most countries, breeds on the back of weak regulation. On the other hand, highly effective regulation that exists in some parts of the developed world is adding to the costs of health products and services and stifling innovation.

Medical ethics versus Business ethics – can they coexist?

Traditionally, maximizing profits is the business ethic of all for-profit enterprises. Many businesses in healthcare apply the same ethic. However, medical ethic remains the same whether it is public, non-profit private, or for-profit private healthcare systems, which isto safeguard the interests of the patient. Given the limited fiscal space, India depends on private capital to strengthen its weak health systems. As both public and private payer systems expand and consolidate, strategic purchasing has the potential to negotiate better prices and drive quality and ultimately safeguard the interests of patients. As the country moves towards universal health coverage, businesses will have to shift towards “high volume – low operating margin” models and compete on the quality of care provided. Standards-based, interoperable health information systems will enable further transparency and accountability. Strengthened public healthcare systems with a shift towards demand-side financing can result in effective competition. Unless the recently initiated major healthsystems reforms are implemented effectively, we may not witness the balance between medical and business ethics in the near future.

Is the trust and confidence in private healthcare waning?

Over the years, people have lost trust and confidence in public healthcare due to the poor quality of services. As the costs of private care keep rising, and as the practice of referral fee systems and unnecessary tests and procedures become known to them,people are fast losing trust and confidence in the ethical practices of private healthcare. There has been a growing demand for a minority of providers who still keep patients interests above their own.

The role of the private health sector in innovation and economic growth

The private health sector has been innovating to address the unmet healthcare needs of the people. Within the context of the unique challenges faced by the Indian healthcare ecosystem and the lax regulatory environment, the private sector has been innovating in providing new healthcare products and services. Innovations mainly pertain to cost reduction of products and improvement in access to services. While these innovations are in response to the unique needs of the Indian population, they are also relevant to many low-middle income countries. There is a significant economic output from the export of health professionals, drugs, vaccines etc outside of India. Private health sector (including producers, payers, and providers) is among the largest generators of employment. It is also responsible for improved economic productivity as people have better access to healthcare.

In conclusion, how can we leverage private health sector to strengthen India’s health systems?

Engagement of the private sector in the spirit of equal partnership across all aspects of governance will help build the mutual trust and confidence between the government and the private sector. The private sector needs to self-regulate itself and communicate effectively, to build the trust and confidence in the general public. It needs to become more responsive to people’s health needs in terms of quality, equity, and accountability. It should reconfigure its business ethics to achieve the triple bottom-line.

Dr Krishna Reddy Nallamalla
President, InOrder Regional Director, South Asia, ACCESS Health International

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