Is Profit Motive Infecting Indian Private Health Care Sector? An Analysis of Unincorporated Healthcare Providers

Abstract

Indian healthcare system is dominated by private sector; its importance is growing with implementation of ‘Ayushman Bharat’, flagship programme of Indian government. Though 62% and 75% of inpatient and outpatient cases in India are treated in private sector, the information about the economy of private healthcare providers is very limited. To the author’s best knowledge, this is the first attempt to address the issue with empirical evidence for the private healthcare providers from a nationally representative survey data for India. Private healthcare sector is estimated to provide employment to 2.34 million persons annually and generate gross value added (GVA) of ₹473.3 billion. Treatment cost on an average is much high in private sector as compared to the public sector. But supply-side data show that average annual receipt per annum is six times higher than average operating cost per annum for unincorporated private healthcare providers in India, indicating underlying profit motive. Analysis of factor payments shows that 55% of GVA of unincorporated private hospitals is gross operating surplus (or profit), followed by emoluments paid to employees and workers (42%). These factors potentially cause over-charging in private sector. Context-specific and appropriate regulatory mechanisms are very much needed to ensure quality of services and control medical inflation.