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Investing in Health

Healthcare Industry in India

 Indira Chakravarthi( is a Delhi-based public health researcher. Bijoya Roy ( and Indranil Mukhopadhyay ( teach at the Centre for Women’s Development Studies, New Delhi and O P Jindal Global University, Sonipat, respectively. Susana Barria ( is a researcher at Public Services International, Faridabad.

The publication of “Investing in Health,” the World Bank’s highly influential 1993 World Development Report, has guided structural adjustment policies and health sector reforms in many developing countries. This study looks at how investment in health has since taken place in India with the withdrawal of the state from healthcare, transformation of healthcare into a commodity, and promotion of the private healthcare sector by the state. This has led to an unregulated industry that is aggressively seeking expansion and profits from the provision of healthcare, and attracting investments by global finance capital.

Annexures to this paper are available on the EPW website.The authors acknowledge the comments of an anonymous reviewer. The usual disclaimers hold.

It is well known that since the mid-1980s, the Government of India has actively encouraged the formal private healthcare sector through direct and indirect concessions and policy measures. The poor performance of the public healthcare sector, arising from prolonged inadequate funding and deliberate neglect, is conveniently used by the private sector as well as policymakers to increase private sector participation. Private sector healthcare in India is known to be a heterogeneous mix of informal and formal providers, with the formal providers belonging to either not-for-profit or for-profit categories. Further, formal providers range from individual practitioners to formally registered small-to-medium private hospitals, and the corporate commercial hospital sector. While there is a large unorganised sector comprising own account/individual-run enterprises, however, the National Sample Survey (NSS) data points to a declining trend in such individual-run enterprises in private health sector and an increasing trend towards small-, medium- and large-sized enterprises, with large-sized enterprises increasing at a much faster rate as compared to medium- and- small ones, between 2001–02 and 2010–11 (Hooda 2015). The IMS census conducted in 62 major cities of the country showed that there were around 13,413 private hospitals contributing to almost 95% of the total hospital facilities in these cities (Mukhopadhyay et al 2015).

The National Health Policy (NHP) 2017, in its opening paragraph, refers to the presence of a “robust” healthcare industry and its double digit growth, and notes that it brings in revenues and employment (GoI 2017a). Further, the NHP refers to “ongoing efforts by the Government to streamline the own-account-enterprises (OAEs) within the corporate sector and to regulate them” (GoI 2017b: 10). It calls for engaging with the private sector through measures such as strategic purchasing of services from different providers, including for-profit ones, and for encouraging “the private sector to invest—which implies an adequate return on investment that is, on commercial terms which may entail contracting, strategic purchasing, etc” (GoI 2017a: 19).

The overall healthcare market in India was estimated to be $100 billion (2015), and expected to grow to $280 billion by 2020, an annual growth rate of 22.9%; healthcare delivery, which includes hospitals, nursing homes and diagnostics centres, and pharmaceuticals, constitutes 65% of the overall market (IBEF 2017). While business reports indicate that the healthcare industry in India is rapidly growing, there is little information about the growing commercial–corporate sector beyond these figures and forecasts of growth and investments therein. While there are anecdotal accounts or references in the context of medical tourism and foreign direct investment (FDI) (Chanda 2010) or from a business perspective (Burns 2014), there is little systematic documentation and study on companies and investors in the healthcare industry, its characteristics, services provided, employment conditions, costs, and efficiency. It is important to understand the implications of a growing network of for-profit healthcare corporations for public health and health systems, medical practice, cost, quality and ethics of care, access and affordability (Chakravarthi 2013), especially in view of the increasing calls for engagement with the private sector to move towards universal health coverage.1

Given this gap, an exploratory study on the private hospitals segment of the healthcare industry in India was undertaken as a scoping exercise to obtain preliminary information on companies, investments, location and ownership patterns, services provided, etc. This study is intended to be illustrative rather than comprehensive, the purpose being to draw attention to this critical yet under-researched component of the health system in India. The following four sections present sequentially the method of information collection; the findings respectively on some general features and activities of few healthcare companies; profiles of the investors, namely, international institutions and private equity funds; and the implications.

The term “healthcare industry” is used as an umbrella term encompassing hospitals and diagnostic centres, drugs and pharmaceutical manufacturers, medical equipment and device manufacturers, and the health insurance industry. The hospitals sector is reported to be the major segment (GoI 2017a), and hence, the term healthcare industry is often used while talking about corporate and other big private hospitals in India. In this paper too, it is used while referring to companies providing clinical/medical care services. The activities and behaviour of the pharmaceutical industry receive much attention and are well-documented for long. While health insurance has grown over the past decade (PHFI 2011), only 12% of rural and 13% of urban population are reported to be under some kind of health insurance (Prinja et al 2017). Others report coverage of 18% of the population, with the majority covered under either government or employer programmes and around 2.3% by commercial private health insurance (Thomas 2017), and the presence of about 40 private health insurance providers (Ahlin et al 2016). Overall, health insurance in India in general, and the numerous government schemes in particular, have also been receiving attention, especially in the context of the government objective and policy of universal health coverage. As mentioned earlier, this study confines itself to the private and corporate hospitals segment of what is referred to as the healthcare industry.


Information collection was initiated with online search by using specific search words relevant to the study, such as: healthcare companies/healthcare industry in India, private hospitals, corporate hospitals, diagnostic centres and private equity in healthcare. Search words included names of specific well-known corporate hospitals. Based on the information that started becoming available, a combination of snowballing and iterative process was adopted, wherein the information available from the initial search became the basis for more information. This was done until information saturation was reached and some trends became discernible. The information is largely from business newspapers; publicly available information and reports from government sources, websites of well-known companies in healthcare, private equity firms, international institutions like the International Finance Corporation (IFC), industry intelligence sources, Centre for Monitoring Indian Economy (CMIE), Prowess database (companies under Code No 86, Human Health Activities under National Industrial Classification [NIC]) and secondary literature.

Features of the Industry

It is seen that there is an increasing number of organised for-profit private healthcare providers, and it is no longer the case that there are a few corporates providing tertiary-level/super-specialty care confined to the metros. Ninety-four healthcare companies were found in the Prowess database in 2014. As of April 2017, the National Accreditation Board for Hospitals and Healthcare Providers (NABH) listed over 450 accredited hospitals in India. While this includes a handful of government facilities, bulk of them are private hospitals (NABH 2016). However, the actual number of companies could be much more, as accreditation or being in Prowess database is voluntary. The respective State Registrar of Companies can be a starting point to get a realistic statewise number of companies providing healthcare.

The analysis of financial data of 89 companies belonging to hospital activities (NIC 86) in the Prowess database shows that their revenues and sales have increased over the years, so have profits (Table 1). From 2010 to 2014, total income and expenditure grew at 19.3% per annum in nominal terms (whereas, the gross domestic product (GDP) in that period grew at 13.5% at nominal rate). However, the share of wages in total expenses has remained nearly the same at around 17% and not increased much (Figure 1). Among the other components of expenditure, outsourced jobs and advertisement and marketing expenses have increasing share of expenditure: outsourced jobs increased from 2.6% to 4.1% in 2014. Advertisement and marketing expenses grew from 2.5% to 2.7%. Advertisement expenditures grew at 23.2% during the period—indicating an increasing importance of promoting healthcare. The assets of the companies grew from `1,89,498 million to `3,22,870 million, a compound average annual growth of 14%. An overwhelming 78.9% of the investment in this period has been in the form of equity shares (`2,06,912 million). Such equity investments are a reflection of better financial prospects of the company, not necessarily green field investments and expansion of healthcare services.



There is diversity in ownership and size. While there are few big Indian companies, with thousands of beds and a pan-India presence (Annexure 1), there are several smaller companies with regional presence (Annexure 2). There are also companies owned by non-resident Indians (NRIs), registered in Gulf countries (Figure 2). There is for-profit presence in every segment of healthcare, primary, secondary, tertiary levels of care, in diagnostics, and single specialty services; some new segments have also arisen, such as home-based care, hospital management, online platforms (Annexures 3 and 4).

Ownership is no longer confined to medical professionals/doctor entrepreneurs, nor is it local. Foreign institutions held 45% stakes in the Apollo Health Enterprises Limited (AHEL 2016a, 2016b). Global and domestic private equity funds are acquiring significant stakes in big and small regional companies, and are becoming part of the governance and ownership of healthcare companies, as demonstrated by the case of the Narayana Hrudayalaya (NH). In 2015, shareholders of the NH were: domestic promoters 68.62%, foreign venture capital investors 11.22% and corporate bodies 16.78%. Among the public shareholders were: Ashoka Holdings 8.63%, Ambadevi 2.59%, JP Morgan 10.91% and CDC Group 5.88%. According to the company:

We may be viewed as a “foreign controlled” company beginning 22 August 2013, and investments made in our Subsidiaries thereafter may be viewed as indirect foreign investment. JPM, Ashoka Holdings and Ambadevi, who are persons resident outside India (Mauritius), possessed extensive veto rights under the Shareholders’ Agreement dated 28 January 2008, with respect to the management of our Company. With the further investment that our Company received in December 2014 from CDC Group and CDC IOL, two other persons, resident outside India, acquired certain veto rights with respect to our Company ... Our Company may likely be viewed as “foreign controlled,” beginning 22 August 2013, as a result of the veto rights exercisable by our foreign investors. (Narayana Hrudayalaya 2015: 21)

Several foreign/multinational companies are operational in India, either through greenfield ventures or acquisition of local hospitals. Examples of the former are Columbia Asia with origins in the United States (US) and the Japanese venture, Sakra World Hospitals; meanwhile the NMC Healthcare, Dubai has acquired several hospitals. DaVita India, subsidiary of DaVita Inc US, acquired Bengaluru-based NephroLife (Annexure 5). Global private equity companies have also acquired hospitals in India—in 2016 Dubai-based Abraaj Group acquired a 72% stake in Quality CARE India, Hyderabad, which owns CARE Hospitals (Abraaj Group 2016) (Box; Annexure 5).

Indian entities are seen to be expanding their activities across the country, including previously uncovered regions in eastern and central India. Corporate hospital chains were acquiring standalone hospitals; the focus and attention is on low-cost models and Tier II cities to drive their growth plans, due to the high competition and high land costs in Tier I cities (IRR 2015; AHEL 2016a, 2016b), particularly targeting the expanding purchasing power among the upper and middle classes. The bigger companies have multiple operations that include: owned hospitals, hospitals and/or some specialty centre operated and pay revenue share to the owner of the hospital premises, hospitals, standalone clinics and primary care facilities operated on a lease or licence basis, hospital management services provided to third parties for a management fee, and pharmacies, diagnostic centres. For companies with such multiple businesses in healthcare, hospitals contributed the largest share in revenues. Some also conduct clinical trials for pharmaceutical and medical equipment manufacturing companies and run educational and training courses for doctors and paramedics (from Red Herring prospectus and reports of companies; NH 2015: 47; HGEL 2016).

AHEL is the largest entity, providing a range of services from tertiary care hospitals, diagnostic clinics, pharmacies, neighbourhood primary care clinics, Apollo Reach Hospitals in Tier II, III cities, and telemedicine and education services. The group owned and managed 69 facilities in India and abroad, with 9,554 beds and 43,557 employees as on March 2016 (AHEL 2016a, 2016b). Fortis Healthcare, which operates through Religare Health Trust (RHT), a business trust owned by the Fortis group listed in the Singapore stock exchange, had 18 owned and managed hospitals across six cities (RHT 2015). NH, a Bengaluru based company, operated a network of 57 facilities across 32 cities, towns and villages, with 5,600 operational beds as of September 2015. The chain employed around 11,478 employees and students and additional 1,660 doctors on a consultancy basis (NH 2015). Cardiac Research and Education (CARE Hospitals of Quality CARE India), Hyderabad, founded in 1997 by a group of doctors, had 17 hospitals across seven cities in five states, with 2,400 beds (Annexure 1).

The large hospital chains are acquiring smaller institutions. For instance, AHEL increased its presence in the secondary care segment by acquiring 11 Nova Surgical Centres of Nova Medical Centres, entering cities like Mumbai, Jaipur and Kanpur; Manipal Health Enterprises acquired SK Soni Hospital in Jaipur in early 2014; Max acquired 340-bedded Pushpanjali Crosslay Hospital, Ghaziabad, and 51% equity stake in Delhi-based Saket City Hospital from Singapore-based Smart Health City; Healthcare Global Enterprises Ltd (HCGEL) acquired multispecialty hospitals in Ahmedabad and Bhavnagar.

Some of these companies have gone public, such as AHEL, NH, Aster DM Healthcare, Fortis, Thyrocare, Dr Lal PathLabs, etc. Many have private equity investments to a small or large extent (Box 1; Annexure 4). With increasing competition, organised marketing as well as creation of brand value is considered a necessity. Advertising and marketing expenses form a significant portion of the expenses of bigger companies (our analysis; Kanchan 2015).

Some of these companies also have overseas presence, in neighbouring Asian, Gulf and African countries. For instance, AHEL has facilities in Dhaka and Mauritius; Aster DM has hospitals, clinics, pharmacies in Gulf countries. Fortis has five hospitals in Bangladesh with AFC of Bangladesh, and is also a shareholder in Lanka Hospital, Sri Lanka; MHEL acquired a hospital in Malaysia. NH is a shareholder in a hospital in Nairobi. It also owns a hospital along with Ascension of US, in Cayman Islands Caribbean, run in public–private partnership (PPP) mode. The Kerala Institute of Medical Sciences has set up hospitals in several Gulf countries.

The Indian healthcare business is now seeing emergence of small-format providers in single-specialty segments such as the short-stay surgery care format started by Nova Medical Centres, nephrology, and eye care, largely supported by private equity (Singh and Mathews 2013). Centre for Sight, a Delhi-based eye care chain, operated 51 facilities spread across nine states. Apart from independent eye care centres, LASIK centres, pharmacies and optical outlets, it also operated ophthalmology departments within third party hospitals; and had acquired operations of local eye doctors in various cities. Sandor Nephro services operates and manages a chain of in-hospital dialysis centres under the brand name Sparsh Nephrocare, with 50 centres spread across smaller cities and towns in 12 states. NephroPlus, another Hyderabad-based entity has 75 operational centres—66 of them as tie-ups with hospitals and nine stand-alone centres. The government tertiary institutions like King George Medical College, Lucknow and the Jawaharlal Institute of Postgraduate Medical Education and Research  (JIPMER) Puducherry, and companies like Apollo, Fortis, Max had tied up with these entities to operate dialysis centres in their hospitals. Both these dialysis companies had entered into PPP arrangements for setting up dialysis centres in district hospitals, in Rajasthan (Sandor) and Andhra Pradesh (NephroPlus). These single speciality settings are reported to be low-cost models requiring a smaller area, and hence, lower investment. At times these hospitals are based in rented premises with equipment on lease. Through hub and spoke model the smaller hospitals (spokes) refer patients to a large multi-specialty hospital, and day care/ambulatory centres (IRR 2015).

Diagnostic chains Thyrocare (Mumbai based), Metropolis Healthcare (Mumbai), Dr Lal Path Labs (Delhi), SRL Diagnostics operate on a hub and spoke model, with a central processing laboratory, some regional laboratories and a large number of sample collection centres across states often on franchise basis (Thyrocare 2016). These entities have operations in countries of South Asia, West Asia and Africa. Some have PPPs with state governments: like Medall Healthcare (with Tamil Nadu, Andhra Pradesh, Karnataka); Suraksha Diagnostics (West Bengal).

Companies are also introducing a corporate model for primary healthcare, by drawing individual practitioners and clinics into a network. The following are some examples: Nation Wide Primary Healthcare Services, which is trying to revive the concept of “family doctor,” Wellspring Healthcare Services running around 30 clinics with more than 100 doctors in cities like Mumbai, Thane, Vashi, Pune, Bengaluru, and Delhi. Companies like HCL (in information technology business) have also entered the healthcare sector, by acquiring a family clinic in the primary care segment in the National Capital Region (NCR) (Dey and Dey 2014). HCL is tying up with hospitals such as Apollo, Fortis, Max, Medanta to refer patients requiring hospitalisation.

Influx of Finance Capital

Healthcare has emerged as an attractive sector for investment by venture capital and private equity funds2 (Malhotra 2014; Babu 2013); the healthcare industry is reported to be flushed with private equity funds (Dutta 2008). Private equity investment in the healthcare provider sector was reported to be $552 million in 2014 and $786.2 million in 2013 (Indulal 2015). As of December 2013, 69 healthcare private equity and venture capital deals worth $1.11 billion were reported, compared with 65 deals worth $1.07 billion over the previous year (Chaudhary and Joshi 2013). Healthcare is considered to be a recession proof and a blue-eyed sector for investors, partly because of the large profits that had been made by some private equity firm exits. In 2013, Apax Partners exited from Apollo Hospitals for $360 million, three times its initial investment in 2007; Avenue Capital exited Medanta in 2013 for $155 million, more than four times its initial investment in 2006. According to the corporate advisory firm Grant Thornton, healthcare services such as hospitals and diagnostics services witnessed a reasonable deal activity:

Majority of the deals were driven by the imminent domestic consolidation in these sectors and as such were small to mid-size deals ... Chain of single-specialty centres such as eye care, dialysis care and primary care continues to be the most actively invested segments, while multi-specialty hospitals such as Aster DM Healthcare and Asian Institute of Medical Sciences and Thyrocare (diagnostics chain) attracted the larger investments, Grant Thornton officials said. (Badrinath 2014)

Overall, domestic funds, family funds, large global funds and sovereign wealth funds are seen to be active investors in the healthcare companies in India (Annexure 5). High Net Worth Individuals (HNWIs) are also reported to be interested in the sector (Nair 2015).

A notable development is the intensified support by development agencies and international finance institutions, such as IFC of the World Bank group and the Commonwealth Development Corporation (CDC) of the United Kingdom (UK), to the spread of private companies in healthcare, through direct and indirect financial support. This support is a manifestation of the larger shift in international development policy to the use of loans and equity investments to support the growth of a range of private sector companies, in the name of creating employment opportunities and promoting economic growth and development. The International Development Committee of the UK House of Commons proposed a transition to “beyond aid” policies to remove the underlying causes of poverty, which would “be good for UK in the short run as well as in the long run” (Hunter and Murray 2015). In December 2014, the UK secretary of state for international development made reference to a transition towards “returnable capital investments” in Indian health and education sectors. Subsequently, CDC, the investment arm of the Department for International Development (DFiD), made an investment of $48 mn (£32 mn) in NH to support its expansion. Apart from investing directly, IFC and CDC are also investing in several private investment funds focusing on hospitals and healthcare in the Asian region. Development financing institutions of other countries—Germany, Sweden and United States Agency for International Development —are also supporting private healthcare sector in several ways.

IFC is the largest multilateral investor in private health in emerging markets. It has prepared a Guide to Investors in Private Health Care in Emerging Markets, as part of its Health and Education Advisory Services. At the IFC’s International Private Health Conference in May 2011, an IFC functionary stated that, “Healthcare has become a major global industry, growing faster than GDP in most countries … as the world recovers from the international financial crisis, the expansion of the private health sector continues rapidly across emerging markets” (IFC 2011). IFC’s investments are closely aligned to the World Bank group’s strategy for private sector healthcare in India. It actively engages with and promotes the private sector in the name of increasing and improving access to affordable, quality health services, particularly in low-income states and Tier II–III cities.

IFC has made equity investments and/or given loans to a large number of healthcare companies in India (Table 2).

IFC has also made investments in healthcare companies in Africa, in which Indian healthcare companies are partners such as ISO Health hospital in Kenya, whose shareholders included three Kenyan doctors, financial investors—IFC and the Abraaj Africa Health Fund—and NH, the strategic operating partner, which through its wholly owned subsidiary held 26% stake (India Today 2016). ISO Health was to set up a greenfield 130-bed multi-specialty hospital in Nairobi. CIEL Healthcare Ltd, a Mauritius registered company, invests in tertiary hospitals across sub-Saharan Africa, in association with Fortis Healthcare. Another important investment of IFC was in Abraaj Growth Markets Health Fund (Annexure 5).

CDC UK is another agency for directly helping the private sector in developing countries. DFiD is the sole shareholder of CDC and directs its overarching strategy. It does not require a dividend from CDC; instead, all profits are reinvested in funds throughout CDC’s targets in emerging markets (Thompson 2011). The CDC group has invested heavily in several private health facilities in India, particularly those targeting middle- and high-income groups: 10%–15% stake in NH for expansion in Kolkata, Bhubaneshwar, Lucknow and Bengaluru (Shah 2015); in Rainbow Hospitals (with Abraaj Group), a paediatric and maternity healthcare business in Andhra Pradesh for expansion in Chennai, Pune, Visakhapatnam and Kurnool, and also expected to support the creation of as many as 3,000 new jobs (CDC 2013; Gooptu 2013).

CDC has investments in several funds that have invested in healthcare companies in India, such as the India Value Fund Advisors (IVFA) (Badrinath 2012), which has invested in Aster DM Healthcare, Manipal Hospitals, Trivitron Healthcare, Cloudnine Hospitals (Balakrishnan and Pilla 2015); in Aavishkar Venture Capital Funds in 2010, 2011, which made investments in Swas Healthcare Pvt Ltd, a Gujarat-based chain; Vaatsalya Healthcare Pvt Ltd, a hospital chain in Karnataka; and Delhi-based GV Meditech Ltd, which operates a chain of secondary level hospitals in Uttar Pradesh, western Bihar, Jharkhand and of Nepal. In 2015, CDC invested around $75 mn in the Abraaj Growth Markets Health Fund (CDC 2016) (Annexure 5).

Several global private equity firms are active in India; some have launched Asia-focused funds, focused on healthcare in the region. Prominent Indian businesspersons have also invested in healthcare companies through their family firms, such as Catamaran Ventures of former owner of IT company Infosys, that invested in Wellspring Healthcare Pvt Ltd, Entrust of former Infosys CEO Nilekani that has invested in Drishti, an eye care company, and Aarin Capital of another former Infosys CFO Mohandas Pai that has invested in healthcare and life sciences companies such as InVictus Oncology. Domestic firms such as I-Ven Medicare of ICICI have invested in smaller regional companies since 2007 (Annexure 5).

Public Needs Private Profits

The neglect of the public health infrastructure in India is a deliberate strategy to promote the large private health interests that have grown over the years, and in keeping with the larger neo-liberal thinking against healthcare as a social good and provision of welfare services by the state. In addition, public funds are being diverted to the private sector through state insurance programmes and PPPs, which reduces funds available for the public healthcare sector (Sundararaman et al 2016). Undoubtedly, the healthcare system in India, specifically the private sector, has moved into a distinct new phase where the provision of medical care has become a highly sought-after sector by capitalist institutions, with a growing network of companies supplying medical care for profit. The medical/healthcare sector is getting rapidly transformed from an “unorganised” to organised sector, a process being facilitated also by powerful institutions such as IFC. Not only is there expansion of corporate hospitals and diagnostic chains to smaller cities and towns, for-profit enterprises are entering into setting up of smaller facilities for specialised, single-specialty care—such as maternity eye care, cardiac care, care-dialysis-diagnostics, etc—primary care clinics, providing home-based care, and getting into partnerships with governments.

This healthcare industry adopts a moralistic stance and talks of working towards universal, affordable and high quality healthcare to the millions of Indians who do not have access to good medical care. This, the industry says, is possible through innovative business and market mechanisms, and is making plans for expansion, penetrating new markets, targeting new segments, training and attracting medical professionals, etc. The discourse is dominated by business notions of healthcare as an attractive destination for growth and investment, increasing interest of private equity investors, acquisition-expansion-diversification-strategic planning-adopting aggressive techniques, creating brand value, innovative healthcare start-ups, vertical horizontal integration, etc.

Experiences from other countries shed some light on the impossibility of achieving universal care through such measures. There is not much evidence that a mixed system is better, more equitable or efficient. On the contrary, there is plenty of evidence of the adverse and pernicious effects of corporate investment, of private capital, as well as of having a system of public funding, private provisioning and of purchasing healthcare. Analysing the phenomenon of entry of financial and industrial capital in medicine and healthcare in the US in the 1970s, McKinlay (1978) pointed out that the industrial and financial capital institutions in medical care impose the same logic (profitability through expansion) on this field that they have been doing in other sectors of the economy since around the turn of the 20th century. There is an urgent need to comprehend the behaviour and power of corporations that have the resources to raise finance, hire marketing expertise to create, package and sell new demands, to influence medical practice and the nature and pricing of services offered, and the kind of technologies used.

Several concerns arise about private finance capital in healthcare. When capital market provides funds to the healthcare companies, it expects a return just as in any other area of enterprise. In his discussion on the role of capital markets in the healthcare system in the US, Silvers (2001: 1022–23) says: “The capital market is dominated by an economic perspective, which leaves little room for broader measures of welfare. Those who lend money want it back.” Furthermore, accessing equity capital carries implications for expected financial returns, as well shared control or ownership. In the context of US, it has been found that the capital market has had a major role in restructuring the healthcare sector (Silvers 2001). Reliance on private investment sources in the US has fundamentally shaped the focus of the industry in a manner dramatically different from the systems found in other countries where governments supply capital. As the level of outside financing has grown, other differences blur and traditional concern for the public or even attending physicians may come second after profitability (Silvers 2001: 1027–28). The resulting market discipline extends to both for-profit firms and non-profit organisations in several ways. The important question that emerged was whether the requirements of private capital can be made compatible with larger needs of society to provide service to marginal populations (Silvers 2001: 1028).

A review of a large number of studies of the US healthcare system concludes:

The US has four decades of experience with the combination of public funding and private healthcare management and delivery, closely analogous to reforms recently enacted or proposed in many other nations. Extensive research shows that for-profit health institutions provide inferior care at inflated prices. The US experience also demonstrates that market mechanisms nurture unscrupulous medical businesses and undermine medical institutions unable or unwilling to tailor care to profitability. The commercialization of care in the US has driven up costs by diverting money to profits and by fuelling a vast increase in management and financial bureaucracy, which now consumes 31 percent of total health spending …The poor performance of the US healthcare is directly attributable to reliance on market mechanisms and for-profit firms, and should warn other nations from this path. (Himmelstein and Woolhandler 2008: 407)

Experience all over the world shows that corporations, big or small, wield great social, political and cultural influence, nationally and globally; and influence local communities, and behaviour and values of ordinary individuals. For instance, we see that the healthcare industry is active in promoting health insurance for low income groups, in creating demand and consumer awareness of market opportunities for buying healthcare, in portraying health as an individual responsibility, and so on. Although corporate businesses are privately-owned enterprises, still their activities are as pervasive as that of governments, and have consequences that affect the larger public. The primary focus of the corporate sector is on individualised curative care; there is no attention to public health concerns of disease prevention, surveillance, monitoring and reporting of epidemics and illness data, research, all of which form important inputs for comprehensive public health planning at population level. This phenomenon of private business in provision of a social-public good such as public health, therefore, has deep ramifications for the kind of public health systems we want, for goals such as universal healthcare and even universal health coverage, and for regulation of the private healthcare sector.

In this context, when the NHP 2017 is openly encouraging further growth of this healthcare industry and for aligning private sector with public health goals, there is need to understand the nature and behaviour of the private sector and the healthcare industry. Is it possible to align the activities of this private industry to meet public health objectives of comprehensive, universal, rational, and equitable healthcare? What will be the consequences of “strategic purchasing” on cost of care? Our study indicates that the private sector is moving towards an organised industry status and oligopolisation. This would give an increasing bargaining power to the for-profit sector to negotiate prices with government purchasing agencies. The experiences of the US or even some European countries that depend on private provisioning show that the cost of healthcare has gone up significantly in the last few decades, which the best of regulatory systems have not been able to contain, raising questions about the efficiency and sustainability of these models. On the other hand, experiences of Thailand, Malaysia show that, in the long run, a well-functioning public health system is the only way to contain costs, regulate practices in the private sector and deliver united healthcare at sustainable costs.


1 See Lancet series on the private sector, 26 June 2016, Vol 388, pp 596, 606, 613, and 622;

2 Ashoka and Ambadevi are together referred to as AIG Funds; these two companies and JPM are listed as foreign venture capital investors by SEBI,, viewed on 2 August 2016.

3 For more on private equity as “a new form of investment, ownership and power that has helped to rewrite the rules of the financial sector at the time of its greatest dominance over the world economy,” see Corner House (2008: 1).


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Updated On : 14th Nov, 2017


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