Ayushman Bharat Scheme - Pros and Cons for the Private Hospitals

The PPP model helps to address many of the challenges faced by private healthcare providers who want to set up new facilities

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Public healthcare systems have shouldered the burden of providing affordable and accessible services to scores of Indians for long. However, the sheer expanse of the area and number of people make it difficult for the government to reach all those who need help. Private healthcare has emerged as a reliable partner over the past three decades. With Ayushman Bharat, it got a much-needed shot in the arm – armed with a state-funded insurance scheme, the poor were bought at par with their compatriots. However, private participation in this ambitious scheme is affected by several issues and the allocation of INR 69,000 crore on account of health in this budget is only half of the INR 1.12 lakh crores demanded by the ministry.


PPP Model a Relief But Cost Needs Revision

Having said that, the government’s proposal to expand the reach of Ayushman Bharat scheme in more tier 2 and tier 3 cities with no empanelled hospitals brings some good news. The allocation for Ayushman Bharat for FY 2020-21 is expected to be INR 6,429 crore and as per NITI Aayog’s recommendation, the government has aggressively promoted the idea of public-private partnership for deeper penetration of PMJAY. For anyone who has ventured or tried to venture into that coveted and yet uncharted territory of tier 2 and tier 3 cities will know what it entails. A PPP model helps to address many of the challenges faced by private healthcare providers who want to set up new facilities – land acquisition, finance, and permits are to name a few. With the government support, many of these issues can be eased out. However, making the operation part a win-win lies in managing finances and optimum use of resources – the cost per bed of setting up a private hospital in a metro city can be as much as INR 1.30 crore.

Licensing Involved 

It takes more than 50 licenses and approval to open a hospital in India, all of them are time consuming – for example, an approval on a building plan and an approval from the pollution control board takes several weeks. The single-window approval system proposed by successive governments is still pending. There is also no clarity on how the land – one of the biggest assets of any business and a major cause of their concern in recent times – will be sourced and who will be primarily responsible for that. Together with finding good doctors and nurses, providing necessary equipment and technicians to handle them, as well as training and retaining all such people, hospital operations is far more Herculean a task than it appears to be. It’s not only limited to the infrastructure of the hospital but also all other supporting amenities like good education institutes for the children of people coming to work in these hospitals, in the same town.

The Risks Involved

The financial and reputational risks are too real to ignore – the problem of scaling up, the lack of adequate and trained workforce, the insufficient road and transport options – all of them together make tier 2 and tier 3 cities a lucrative but tough call. It is commendable that the government has noted this and proposed viability gap funding, a very popular concept in the infrastructure sector wherein the government provides support to infrastructure projects that are justified economically but fall short of achieving financial viability. While the plan is to utilise the proceeds from taxes on medical devices to this end, the question is, as the widely used medical devices and equipment are covered by NPPA regulations, thereby limiting the source of tax and fund, how will the fund create a corpus to help the private partners? Besides, whether the support will be one-time or funds will be released from time to time is not yet clear. A one-time support may be good to boost the physical infrastructure of setting up the hospital but sustaining quality healthcare delivery may need more than that.

Operational Viability, a Concern

This all brings us to an even bigger concern – operational viability,  that helps sustain a hospital in the longer run. While VGF and other aids from the government can help build the infrastructure, its purview is limited till the time the hospital becomes operational and starts delivering its services to the people at the government-approved rates. However, private partners have found the rates proposed for surgeries and other medical procedures unviable and no common ground has been achieved so far. If we want Ayushman Bharat to achieve its full potential, it is time to take this bull by its horn.