Over time health systems have evolved into mixed systems, with both public and private sectors playing an important role. With healthcare being an essential human need, governments have the responsibility to ensure that people’s health needs are met. Where governments are unable to meet these needs, non-governmental actors step in to meet the unmet demand. While the for-profit private sector looks at it as a business opportunity, non-profit private sector looks at is as an opportunity to provide social service. 

At the dawn of India’s independence, a majority of healthcare needs were being met by the public sector, with a small proportion being provided by faith-based missionaries or charity-based private or public trusts. Private clinics and doctor-owned nursing homes emerged in urban centers while informal providers and providers of traditional systems of medicine became popular in rural and semi-urban centers to meet the growing unmet healthcare needs of the people. The economic liberalization from the early ‘90s ushered in the advent of for-profit private hospitals, pharmacies, diagnostic centers; medical, nursing, dental, and pharmacy colleges; pharmaceutical, biotechnology, biomedical, and medical device manufacturing companies. 

The growth of the private sector ensured that people at least have access to healthcare when needed. However, the private healthcare system failed to ensure equitable access as it is concentrated in urban areas and over time it became unaffordable to mid and lower income populations. For-profit private sector, by its very nature, is beholden to its shareholders with a business ethic of maximizing returns on investments. Even a self-employed private doctor is driven equally by economic interest as much as by professional ethics. Hence, the private sector cannot be faulted for not being responsible for their actions in the context of people-centered health systems. 

Elected governments are fully responsible to ensure that people have equitable access to safe and effective care. They can either strengthen public healthcare provider systems or source goods and services from the private sector. Governments are also responsible to ensure that people who purchase their healthcare and health insurance needs from private sector are not financially exploited and get safe, effective, and appropriate care. Governments must engage the private sector through purchasing of goods and services, policies, legislation, public-private partnerships, and regulation. 

Governments are evolving into the largest purchasers of healthcare services. Through strategic purchasing, they have the ability to influence the behavior of private providers. Financial incentives to quality accredited services drove many corporate hospitals and diagnostic centers to get NABH and NABL accreditation. Bundled benefit packages have been driving efficiency amongst empaneled hospitals. However, empaneled private providers develop their own strategies to counter the power of strategic purchasing. Cherry picking patients, inappropriate use of services, and fraudulent billing practices are some of the consequences of these strategies. Those providers who have sufficient demand from high value customers will aim at increasing the proportion of high-value customers like those with private insurance and those paying out of their pockets. 

The private sector has grown rapidly without a proper regulatory system. As it evolved into the dominant provider, attempts at regulating the sector are failing either because of the power and influence of the private lobby or due to the ineffectiveness of the governments to regulate. As of now, the private sector is either self-regulating (in minority) or being regulated and influenced by market forces. The latter are predominantly driving improvement in quality of services while lowering the costs. The financial lever of the purchasers (both public and private) is another powerful lever to influence the unregulated private sector. Access to health information from every provider as envisaged under the National Digital Health Mission (NDHM) will enable more effective regulation than what exists today. 

The COVID-19 pandemic has demonstrated the power of public-private partnerships (PPP) and collaboration. Indigenous vaccine (Covaxin) development within 12 months of the onset of the pandemic is a testimony to this. Private industry benefited by gaining access to numerous public R&D facilities and was able to rapidly respond to the unexpected demand for personal protective equipment, diagnostic tests, drugs, oxygen and ventilator beds. Dialysis services in public hospitals through PPP arrangements is another example of effective engagement of private sector to improve access to needed services. 

India’s private healthcare has grown around individual doctors who have been creating their own clinics, labs, pharmacies, and nursing homes. Private equity started coming into the health sector after economic liberalization in early 1990s. It started consolidating doctors’ practices into corporate hospital chains, diagnostic and pharmacy chains. It enabled the creation of international standard healthcare infrastructure, introduction of professional management systems, quality accreditation of facilities, and efficiency in operations. However, it also resulted in migration of healthcare professionals from public to private sector and from semi-urban to urban metros resulting in a skewed distribution of professionals. The pressure of profit maximization introduced questionable business practices, dilution of medical ethics, and rapid escalation in healthcare costs. 

Hence, there is a need for financing the capital needs of private healthcare providers to improve access in an equitable way. Governments can create a policy space for innovative financing of private healthcare sector. Priority sector lending will improve access to low cost debt. Public guarantee schemes to encourage investments in underserved areas will attract private players to rural and semi-urban locations. Blended financing and social impact funds should be encouraged over pure private equity financing in healthcare to balance the business objectives with medical and social objectives. 

Engaging the private health sector is one of the key responsibilities of the governing leadership. Government engages the private sector in multiple ways – as a purchaser of healthcare services and health goods, as a regulator to protect the interests of people, in health policy formulation and implementation, and as a partner in provision of healthcare services and development of health goods. Government leadership should make efforts to understand for-profit private sector in terms of its business ethics and its responsibilities towards its shareholders and lenders. Similarly, it should articulate the core purpose of health systems of improving health status of its people, protecting people from impoverishing and catastrophic health expenses and be responsive and accountable to meet the health needs of people. Leadership should work towards removing the natural distrust between governments and the private sector by creating enabling ecosystems. 

The COVID-19 pandemic has demonstrated the power of public-private and private-private collaboration. That spirit should be nurtured to make health systems strong and resilient to prevent and respond to future health crises. 

Dr Krishna Reddy Nallamalla

President, InOrder
Country Director, ACCESS Health International

Photo Credits: Findtopten