India’s healthcare growth needs a new measure of freedom: Affordability

Independence Day tends to bring out large questions about India’s development – infrastructure, technology, jobs, entrepreneurship and the road to 2047. Healthcare belongs in that discussion, but I think the sector deserves a slightly different question this year.

India clearly needs more healthcare investment. We need hospitals, diagnostics, medical devices, healthtech, preventive care, insurance capacity and much better reach outside the biggest cities. Private capital will have to finance a meaningful part of that expansion. Yet the same sector is also dealing with a very basic anxiety: whether a family can afford good treatment when it is actually needed.

For someone looking at healthcare through an investor lens, that tension is not separate from the business case. It is part of the business case.

The National Health Accounts Estimates for 2022-23 show real progress. Out-of-pocket expenditure fell from 64.2 per cent of total health expenditure in 2013-14 to 43.4 per cent in 2022-23, while the government’s share increased over the period. The direction is encouraging. But 43.4 per cent is still large enough to remind us how much of the financial shock of illness continues to sit with households.

That is why I would be cautious about treating affordability as a social concern that sits outside investment analysis. In healthcare, it can tell us something about the quality and resilience of the underlying business model.

What is actually driving the margin?

A hospital can improve margins in more than one way. It can negotiate procurement better, use equipment more efficiently, reduce duplication, improve staffing, shorten turnaround time and build stronger clinical processes. Or it can rely heavily on raising what patients and insurers are charged.

On a spreadsheet, both routes may produce a better margin for a while. I would not view them as equivalent.

Efficiency-led improvement can create room to reinvest, expand and keep pricing more sustainable. A model that depends mainly on continuous price increases is more exposed to payer resistance, regulatory attention and loss of patient trust. The risk may not appear immediately in quarterly numbers, but it can accumulate quietly.

This is one reason healthcare due diligence cannot stop at revenue, occupancy, bed additions and EBITDA. Pricing behaviour, billing transparency, claim disputes, patient complaints and clinical governance deserve more attention than they often receive. They are not soft indicators. In a business built around moments of vulnerability, they can become early signals of financial and reputational risk.

Take something as ordinary as an estimate given before a procedure. How often does the final bill depart materially from it? What causes insurance disputes? Are complaints concentrated around a particular process or facility? Does governance weaken when a network expands quickly? These are practical questions. They also tell an investor a great deal about how scalable the organisation really is.

Technology has to change the economics, not just the experience

Healthcare technology is another area where the investment story can look impressive very quickly. AI-assisted diagnostics, remote monitoring, automation and hospital information systems are all important. But once the excitement around the technology is set aside, I would ask a fairly simple question: has it made care easier or cheaper to deliver?

If a digital system reduces administrative work, avoids repeat tests, improves utilisation or allows specialist expertise to reach patients remotely, that is meaningful. Over time, at least some of that efficiency should show up in the economics of care. If every new layer of technology simply becomes another premium feature, the promise of digitisation is incomplete.

For investors, this distinction matters. The most durable healthcare platforms may not be the ones with the longest technology list. They may be the ones that can show, with evidence, that technology improves both operating efficiency and access.

Smaller cities will expose weak assumptions

The next phase of healthcare growth will also be shaped by Tier 2 and Tier 3 India. Demand is obvious, but the economics are different. A metropolitan cost structure cannot simply be transplanted into a smaller city and passed on to patients.

This is where capital can be useful in a way that goes beyond funding new buildings. Investors can push for better reporting, tighter governance, more efficient formats, sensible use of technology and partnerships that make expansion work at a different price point.

I would rather ask whether a healthcare model can remain financially viable while serving a broader population than only ask how many facilities it can open. That may sound like a social question, but it is also a question about market depth. A business that can serve more people without weakening quality has a larger and potentially more defensible market in front of it.

The financing ecosystem is already intertwined

Public and private healthcare financing are not separate worlds anymore. As of June 30, 2026, Ayushman Bharat PM-JAY had authorised 12.69 crore cashless hospital admissions worth Rs 1.92 lakh crore. Whatever one’s view of the scheme, the scale makes one point clear: providers, government programmes, insurers and patients are already deeply connected through the economics of care.

That makes simplistic choices between ‘profit’ and ‘public good’ less useful. Hospitals need viable economics. Insurers need claims they can price and process. Governments need reach. Investors need returns. Patients need to know that treatment will not destabilise a family’s finances. The challenge is to build models where these interests are not constantly working against each other.

There will always be premium healthcare, just as there are premium products in every sector. The larger opportunity, however, may lie with businesses that can combine clinical quality, transparent economics and scale. That is where affordability stops looking like charity and starts looking like competitive strength.

An Independence Day test for healthcare capital

India does not have a shortage of healthcare opportunity. Capital will continue to find the sector because the need is structural and the runway is long.

What should become more demanding is our definition of a good healthcare investment. Growth and margins matter. So do the manner in which those margins are created, the trust the institution earns, the way technology changes delivery costs and whether expansion actually widens the market for quality care.

For me, that is the more interesting Independence Day question. Not whether India’s healthcare industry will become bigger – it will – but whether its strongest businesses can grow by making quality care work for more people.

If affordability becomes part of how investors judge the durability of a healthcare business, rather than an afterthought discussed only in policy forums, the sector may end up stronger for it. And so may the patient it ultimately exists to serve.