PPP Ground in India
India has a long culture of PPP. Many projects have been realized using this model.
The total number of PPP Projects reaching the financial closure since 1990 is 1031 projects with total investment value of 252,897 million US dollar.
The currently active projects, under construction or under operation, is 989 with total active investment of 238,571 million US dollar.
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| PPP in Healthcare, The Indian experience |
The majority of the projects are the traditional PPP projects in Energy and transportation fields as well as ports and airport construction and rehabilitation. (1)
To prepare the ground for PPP, India created in 2006 a specific unit for PPP projects which is the The PPP Cell, that acts as the Secretariat for Public Private Partnership Appraisal Committee (PPPAC), Empowered Committee (EC), and Empowered Institution (EI) for the projects proposed for financial support through Viability Gap Fund (VGF). The PPP Cell is responsible for policy level matters concerning PPPs, including Policies, Schemes, programmes, Model Concession Agreements and Capacity Building. The PPP Cell is also responsible for matters and proposals relating to clearance by PPPAC, Scheme for Financial Support to PPPs in Infrastructure (VGF Scheme) and India Infrastructure Project Development Fund (IIPDF). (2)
Involvement of the private Healthcare sector in India
The public health system is responsible for delivering healthcare and preventive services. Due to its short resources, it bears less than 30% of the burden of providing healthcare. Actually, a big part of services, more than 70%, is provided by the private sector. It is estimated that 93% of all hospitals, 64% of beds, 80 to 85% of doctors, 80% of outpatients and 60% of inpatients are in the private sector. (2)
The private sector, however, operates in largely unregulated environment, especially in the rural areas of India.
Engaging the private sector in service providing was a priority for 2 reasons:
To regulate the work of the private healthcare providers
To compensate the shortage of infrastructure of the public healthcare system
Forms of Public-Private-Partnerships in India
To engage the private sector on national level, up to eight types of health PPP have been implemented till today in India that are: (3)
Partnerships in health financing through health insurance
Contracting-in and contracting-out of service delivery
Outsourcing of operations and management of public health facilities
Build-operate-transfer model
Concession model
Joint venture model
Social franchisee model
Voucher schemes
Corporate social responsibility (CSR)
Joint venture model
From all the above forms, I would like to analyze only the Joint venture model, in which the project is jointly owned and operated by the public and private sector entities that share costs, risks and revenues. Most of the time, a joint venture is undertaken when the public sector seeks technical skills from a private entity. (3)
India developed an interesting approach that is more one of a private hospital built on public land with a requirement to make a certain number of beds/ treatments available to publicly funded patients. The rest of the facility can be used for private patients. In some cases the concessionaire will pay the government a fee for the right to operate the concession, in others it will require a subsidy. (4)
An example is the land subsidy provided to private healthcare providers by the Delhi government in return for 25% free inpatient and outpatient treatment. (3)
This approach adopts a comprehensive service delivery PPPs, where not only are the facilities developed and improved by the concessionaire but services are provided also (4). It is different than the most commonly used approach where only non-clinical services are provided by the concessionaire while the clinical services are still provided by the public partner. For more details please check the article about Inkosi Albert Luthuli Central Hospital in South Africa.
From financial point of view, the fundamental difference between the two approaches is that, in the first one adopted in India, the final beneficiary of the clinical services is the direct payer of the facility built and operated by the concessionaire. While in the second approach, where the clinical services are provided by the public health, the State pays the facility through annual or monthly rate.
India applies the first approach because of the limited resources designated to the health sector. Actually, the public expenditure on health is around 1% of GDP and was always lower than 1.3% in the last years (3). This ranks India's expenditure on Healthcare as one of the lowest in the World.
The public contribution represents only 20% of the total expenditure on Healthcare in India while the private sector contribution is around 80%, which is around 4% of the GDP. (5)
From the other hand, the shortage in resources is not limited to the financial ones. India faces also a severe shortage in the skilled manpower working in the Healthcare industry such as doctors, nurses, laboratory technicians and technical staff (5). Actually 80% to 85% of the doctors are in the private sector. (3)
Conclusion
As we said, in this approach of the Joint venture model, the payer of the health facility is the beneficiary of the services. Taking into consideration the low income of the Indian population, more than 90% of the population in India today still find the access to modern and specialized facilities unaffordable (5). The land cost in India represents around 15% of the total costs in a healthcare facility project (5). Therefore the participation of the public partner should not be limited to the provision of the land only.
Additional mechanisms of the public participation should be adopted in order to increase the percentage of free inpatient beds and outpatients treatment as well as the reduction of the fees that patients pays for the remaining services. Such mechanisms could start from tax exemption to provision of free services from the public sector. It is important, therefore, to involve other public actors in the health projects and to manage them on the central level.
Bibliography
3. African development Bank Group; Developing coordinated public-private-partnerships and systems for financing health in Africa Experiences from Africa and India; 2017
5. CII in collaboration with KPMG: The Emerging Role of PPP in Indian Healthcare Sector
6. Photo by Naveed Ahmed on Unsplash
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