UP, MP handover of district hospitals to pvt sector: Here's what to watch out for

Soon the people of Madhya Pradesh and Uttar Pradesh – two of the poorest with worst healthcare facilities – would have no government hospitals to go to. Both have initiated the process of handing over government-run district hospitals to private sector to facilitate setting up private medical colleges in PPP mode.

Madhya Pradesh floated tenders (RFPs) for 10 districts on July 24, 2024. Uttar Pradesh re-issued expression of intents (EoI) for 12 districts in August and November 2023, for the second time after 2021, and has issued RAF and DCAs (draft concession agreements) for six districts in March 2023.

This is a process that began with “broad guidelines” of the Ministry of Health and Family Welfare (MH&FW), issued on January 8, 2019, for setting up private medical colleges at district levels in PPP mode. In 2020, the NITI Aayog and FinMin (budget) took it forward. The Centre’s scheme offers (a) “VGF support for CAPEX up to 60% of the TPC” and (b) “100% Operational cost Recovery” (subsidy) – in addition to (c) handing over district hospitals to private players and also (d) land at a “concession” (Lok Sabha answer, March 12, 2021). This would entail (e) multiple tax incentives.

Take another look at the scheme (more details later). It is almost entirely public funded.

Going by the “funds released” by the MoH&FW for new government medical colleges (“attached with existing district /referral hospitals”), average cost comes to ₹138.8 crore (Lok Sabha answer, February 9, 2024). Total fund release was ₹3,531 crore for 27 medical colleges during FY20-FY22, after which funds stopped (none in FY23 and FY24), indicting completion of the projects.

Point to ponder 1: Can such a small amount be set aside from ₹11.11 lakh crore of the Centre’s capex for FY25 (47% or ₹5.2 lakh crore of which is for roads and railways) for government medical colleges – without parting with district/referral hospitals, giving cheap land, 60% VGF and subsidising O&M cost? After all, health (along with education) is critical for human capital development.

Bids for handing over hospitals for private medical colleges

The Madhya Pradesh government notified the decision to hand over 10 district hospitals on July 11, 2024 (the notification, NIT No. 471/2/YV/DME/2024, is not in public domain). On July 24, 2024 a one-line Request for Proposal (RFP) was issued: “Public private partnership request for proposal for setting up of medical college and upgradation of district hospital at below locations of Madhya Pradesh”. It listed 10 districts: Katni, Morena, Panna, Balaghat, Bhind, Dhar, Khargone, Siddhi, Tikamgarh and Betul.

Official documents make two other revelations (other than transfer of district hospital, VGF, O&M subsidy, cheap land etc.): (i) private medical college would be on the Design-Build-Finance-Operate-Transfer (DBFOT) basis with a concession period of 30 years and (ii) once handed over, district hospital will provide 75% beds “free” and 25% chargeable (100% free under government).

It was health activist group (NGO) Jan Swasthya Abhiyan (Madhya Pradesh) which highlighted the developments. It issued a public appeal (August 1, 2024) to be heard and sought public consultations before handing over government hospitals. It has not received any response.

Simultaneously, the state has initiated processes to hand over 10 government-run trauma centres and 13 path labs to private sector. This would also mean higher healthcare costs and deprivations.

Uttar Pradesh started it off in 2021 by issuing expression of interest (EoI) for 12 districts – Ballia, Sant Kabir Nagar, Chitrakoot, Rampur, Bhadohi, Shrawasti, Baghpat, Mainpuri, Hathras, Kasganj, Mahoba and Hamirpur – which were re-issued on August 2, 2023 and November 17, 2023.

The initial goal was to cover “16 unserved districts” and came after the Centre announced the PPP scheme in the 2020 budget. Since then, it has issued six RFPs and DCAs (draft concession agreements) – for Ballia, Sant Kabir Nagar, Chitrakoot, Rampur, Sant Kabir Nagar (Bhadohi) and Shrawasti. Nothing more is known.

UP private medical colleges would be on the Design-Construct-Operate-Maintain-Transfer (DCOMT) basis.

This move is ironic for many reasons, the most important one is: Madhya Pradesh and Uttar Pradesh are one of the poorest states with worst health indicators and facilities. What would this mean for common man’s healthcare?

Very poor in income and healthcare

Madhya Pradesh is India’s third poorest and Uttar Pradesh the second. Among major states, Bihar tops the list.

MoSPI’s “state-wise data on per capita income”, last released on July 24, 2023, showed, per capita income (“net” SDP) of Madhya Pradesh was ₹65,023 in 2023 and that of Uttar Pradesh ₹42,525 in 2022 (no data for Uttar Pradesh is available for 2023).

This makes them poorer than even Sub-Saharan Africa. The World Bank data shows, per capita GDP of Sub-Saharan Africa (current USD) was $1,637 (₹135,854 at ₹83) in 2023 and $1,702 (₹141,241) in 2022. Thus, average incomes of Madhya Pradesh and Uttar Pradesh are less than half and less than one-third, respectively.

The NITI Aayog’s multidimensional poverty (MPI) data, released in January 2024, shows Madhya Pradesh is the third poorest (20.6%) and Uttar Pradesh the second (22.9%) among major states – next only to Bihar (33.8%).

NITI Aayog’s Health Index for 2019-20 (latest available) shows, when it comes to health indicators and healthcare facilities – like mortality rates, child health and nutrition levels, immunisation, institutional deliveries, healthcare facilities etc. – Madhya Pradesh is the third from bottom (score of 36.7) and Uttar Pradesh at the bottom (score of 30.6).

Privatisation of district hospitals is Centre’s initiative.

Centre pushing privatisation of district hospitals

On January 8, 2019 the MoH&FW issued “Broad Guidelines for Private Investments in setting up of Hospitals in Tier 2 and Tier 3 cities subsequent to PMJAY”. It asked states to provide “VGF up to 40% of the total cost of the project, gap funding up to 50% of tax on capital cost, restoration of status of hospital as industry for getting benefit of VGF, etc.”

This guideline didn’t talk of handing over district hospitals to private sector; its objective was “to ensure maximum utilisation of the benefits under PMJAY and to improve the demand for quality healthcare services at affordable prices to general public”.

That part (privatisation of district hospitals) came up in the NITI Aayog’s proposal of January 1, 2020 which framed a PPP model for “design, build, finance, operate and maintain the medical college and also upgrade, operate and maintain the associated District Hospital” in order to overcome “dire shortage of qualified doctors”. The Aayog proposed “PPP units” in district hospitals earlier in 2017 for non-communicable diseases (NCDs).

For a medical college to exists, it needs a hospital.

On February 1, 2020, the Centre’s budget (FinMin) endorsed the NITI Aayog’s PPP model but without spelling out the details.

The details came on July 20, 2020.

The MoH&FW revealed to the Lok Sabha on March 12, 2021 that the Department of Economic Affairs (FinMin) had notified the details on July 20 2020 (not in public domain). As per this, the VGF is “allowed” for private medical colleges in PPP mode “by utilising the existing District Hospitals” if

1. “States fully allow the facilities of the hospital to the medical college” and

2. “States provide land to the medical college at a concession”. It listed two sub-schemes and also 50% subsidy in O&M for five years:

About VGF and O&M subsidy it said:

3. Sub-scheme 1: “VGF support for CAPEX up to 60% of the TPC… The projects eligible under this category should have 100% Operational cost Recovery”. Of the VGF, 30% of TPC would be by “central government” and the rest 30% by “state government/sponsoring central ministry/statutory entity”.

4. Sub-scheme 2: “Limited to support demonstration pilot projects”; Centre to give VGF of 40% of TPC, another 40% by “state government/sponsoring central ministry/statutory entity”. “In addition, the Central Government and State Government/Sponsoring Central Ministry /Statutory Entity can provide up to 50% (25% + 25% each) of Operational & Maintenance costs for the first five years after Commercial Operation date”.

It is another irony that private medical colleges charge exorbitant fees and quality of education is suspect (ghost faculties, poor infrastructure etc.).

Experiments in privatisation of district hospitals

Centre initiated privatisation of district hospitals in 2020 but many states have done it for years.

Strangely, no study or comprehensive account of states’ experience is available. The NITI Aayog did claim, in its January 1, 2020 note on the subject, that it “developed” its PPP model for medical colleges “based on the international best practices, and similar PPP arrangements that are operative in the States of Gujarat and Karnataka”. But it gave no more information about what the states’ experience is.

Going by publicly available information, states’ experience seems more failures, less success. A few examples:

· Madhya Pradesh handed over district hospital of Alirajpur to a Gujarat-based non-profit without tender in 2015 in the PPP mode. The PPP model was challenged before the Jabalpur High Court, which stayed it in 2016. In 2021, the state took back its CHC in Indore due to local protests.

· Karnataka experimented in 2002 by handing over the Rajiv Gandhi Super Specialty hospital (tertiary care) in Raichur to a private player – only to scrap it a decade later, in 2012, due to deficient services. It also scrapped another PPP scheme “Arogya Bandhu” for primary healthcare in 2016 due to non-compliance with rules and poor services.

· Gujarat handed over Dahod hospital; the Gujarat High Court stepping in 2019 to check high healthcare charges by the private operator. Protests have erupted against the plans to hand over the Government Referral Hospital in Tapi district. Its first PPP experiments with the Bhuj’s district hospital has had a long history of controversies (from the handover to deaths of 1,018 infants over five years that hit the headlines in 2019).

· Maharashtra’s move to hand over Aundh district hospital is facing repeated protests from locals.

· Andhra Pradesh’s handing over of the Chittoor district hospital in 2015 has sparked protests.

Point to ponder 2: Is it prudent to hand over government hospitals to private sector without cost-benefit analysis and evidence of efficacy?

Point to ponder 3: The Lancet published a study of converting public hospital to private in “high-income countries” in March 2024 which concluded: “We found that hospitals converting from public to private ownership status tended to make higher profits than public hospitals that do not convert, primarily through the selective intake of patients and reductions to staff numbers. We also found that aggregate increases in privatisation frequently corresponded with worse health outcomes for patients.”