Some reflections on private health in India

I recently spent two enjoyable weeks in India meeting our portfolio clients and other private health sector players. It gave me time to reflect on the private healthcare services sector in India. Here are my quick thoughts.

The private sector plays and will continue to play a key role in health service delivery in India. Market dynamics are changing, with an increased focus on cost and quality and resulting in the private sector entering a second phase of evolution. There is a need to shift focus away from individual standalone hospitals and toward integrated systems and networks, with a growing emphasis on quality of care and improved value for money.

Although Tier 1 super specialist models of care are important and still extremely relevant given the demand, the future will require networks of planned services capable of servicing Tier 2-4 locations with relevant pricing and quality. India faces an impending tsunami of noncommunicable diseases and the government is not fully equipped to deal with it. The private sector can provide viable solutions and be a long-term partner if business models are correctly designed and aligned to the right price. While the growth potential for the private sector is huge, innovative business models are needed. For example, a consistent message from all my India meetings has been that Tier 1 models can’t be directly applied in Tier 2 locations. In Tier 2-4 locations, there is a discernible move toward business models that focus on lower cost, higher volume, and high quality.

Government sentiment toward the private health sector is mixed. Whilst there is a clear willingness from the private sector to work with the public sector—for example through Public-Private Partnerships—more work is needed to fully figure out pricing structures and coordination. There needs to be contractual arrangements that guarantee payment within workable time-frames and reasonable tariff pricing. The private sector needs to demonstrate consistent approaches to quality and care outcomes and develop business models built around volume-for-price instead of the traditional fee-for-service model still too prevalent in the market. This switch could be a challenge given the dominance of cash in the market and given that providers are not fully aligned to newer, more progressive payor payment models—for example: capitation, bundled payment, and shared risk.

I also noticed a change when it comes to doctor contracting. Historically, many private hospital groups have been dependent on the services of third-party doctors who practice in multiple locations and not always with the same provider group. It could be argued that this ‘star doctor’ model has not always led to value for money. There is a clear trend emerging amongst specialist providers and regional providers to either fully employ doctors with appropriate salary and performance structures or ensure that contracts with third party doctors share financial benefit through aligned objectives.

Another clear trend is the increased utilization of performance analytics to better understand cost and revenue drivers. Too many groups appear to have pushed for revenue growth while underestimating the time and focus required to actively manage costs. Aligning with global best practice, we are witnessing this increased focus on data analytics in other emerging markets too. This enables providers to more accurately structure pricing and, for markets with higher health insurance penetration, to negotiate volume-based contracts and move away from fee-for-service.  As the market matures and insurance products become more sophisticated, providers with strong data analytics will be in a stronger negotiating position. 

In addition to hospital services India is a hotbed for digitization and digital health solutions. Hospital groups are encouraged to embrace the solutions and trends through system integration that benefit care coordination and ultimately patients. Currently these solutions are independent of providers, but they do appear to be changing consumer awareness. 

Overall the future is positive for India’s private health sector but change is required. It cannot be business as usual.