Study

Study Backs PPP in Healthcare

A perceived imbalance of power existed in the PPP partnership, with the Government emerging as dominant partner

Enormous investments required to bridge the demand-supply gap can only be met through Public Private Partnership (PPP), as per a recent study carried out by PriceWaterhouse Coopers (PWC). The PPP experience in India and other Asian countries suggests five common models, based on contracting in, contracting out, social marketing, social franchising and equity arrangements.

However, experience in Asia reveals challenges in the healthcare sector, like the need for an appropriate policy framework backed by an appropriate institutional mechanism. Another setback in PPP was use of generic contracts without any reference to specific indicators like number of free treatments offered by the Government and cost of serving the Below Povery Line (BPL) policies.

The study also points out that after thorough analysis of PPP arrangements in the Indian healthcare sector and elsewhere, the recourse mechanism available in case of default by either partner was rather weak. A perceived imbalance of power existed in the PPP partnership, with the Government emerging as dominant partner. Furthermore, absence of well-known accreditation standards for ensuring quality of services impacted Government's capability to ensure consistent service from the private partner. Added to this, high interest rates and turbulence in the equity markets resulted in the need for newer norms for risk capital investments in hospitals. Recently, Apax Partners pulled up 1.7 per cent stake in Apollo Hospitals, taking its total stake at 15 per cent.

Fortis Healthcare adopted the PE route too. Similarly, smaller firms like RG Stone Clinic and Dr Lal Path Labs and Metropolis also received PE funding.

EH News Bureau