Traditionally the responsibility of the state, primary healthcare delivery has been rolling downhill. From over 25,000 Primary Healthcare Centres (PHCs) set up across the country, only about 5,000 meet the government’s own public health standards, a third do not have labour rooms and about two-thirds do not have operation theatres.
The poor state of the PHCs is not unknown to the government and industry. The problem here isn’t a lack of funds, nearly three-fourths of the country’s health budget goes into addressing primary care. India spent close to Rs 21,000 crore in 2012-13 alone through the rural health mission. Now, the government has committed to a health budget of Rs 48,878 crore for the current fiscal year, out of which the national health policy stipulates that 70% would be spent on primary healthcare. It amounts to around Rs 34,214 crore. Not enough for the whole country, but big enough to attract private companies.
So the question entrepreneurs asked at the meeting was: Is this an opportunity? It’s a question the government—both at the Centre and in the states—has been asking itself over and over again. If the UP government’s proposal, floated with the help of the Gates Foundation—which has been working in the state since 2012—works out, it could crack open a massive opportunity, which private healthcare providers have been wary of wading into.
Quality over quantity
Primary healthcare is the state’s responsibility for a reason—it does not generate a revenue stream for private providers. Dr Hanumappa Sudarshan, founder of Karuna Trust, which operates such centres in the remote parts of Karnataka, says that a profit motive alone cannot drive a PHC because its key role is preventive healthcare, including immunisation. “No one is going to pay for a disease they do not yet have. Which is why private companies function in curative clinical care where profits are generated with the use of drugs and diagnostics.” He is still smarting from the Trust’s experience with PHC outsourcing in Karnataka, where the key denominator was low cost. The state government first outsourced PHCs to the Karuna Trust and then cancelled the contract to pull PHCs back into government control. This decision was based on news reports showing non-compliance of rules, misuse of funds and an absence of quality service.
But Dr Sudarshan still wants to bid for the UP outsourcing project—as part of a consortium—because quality is the primary criteria this time.
“In most cases, nonprofits might be better suited to the role of PHC managers, but the UP government provides a much higher budget allocation than the other states making it easier for private players to participate,” he says.
Those who have studied the RFP, which opened in December 2016 and is expected to close in April 2017, note that its appeal lies in the fact it gives 70% weightage to the bidder’s capability or experience and 30% weightage to its financial health. “This is very different from the motivation of the Karnataka government, which was aimed at cutting costs. The annual expenditure on a PHC is between Rs 30-40 lakhs, and the government was not willing to pay more than 90% of that to us,” added Dr Sudarshan.
While the Gates Foundation declined to comment on this, an official involved in drafting the RFP, on the condition of anonymity, said that there were two distinct purposes of outsourcing to private hospitals. One, the efficient management of PHCs; two, to offer an enhanced basket of health services. “Traditionally, PHCs have provided mother and child healthcare services only. The aim of the pilot project is to introduce additional services including the management of non-communicable diseases like blood pressure and diabetes with help from private players’ expertise,” said the official.
The UP government and the Gates Foundation declined to officially comment on the pilot stating that it is at an early stage.
“State governments have tried various forms of Public Private Partnership (PPP) but the UP government has been advised by the Gates Foundation in the right way. It’s great that they have not prioritised the lowest bidder, positioning it better for success,” says Kaushik Sen.
(The Ken reached out to four state health departments—Karnataka, Maharashtra, Rajasthan and Uttarakhand—and all of them confirmed that private healthcare providers are invited only to lower costs.)