Private healthcare needs a new social contract

As private healthcare expands across India, the sector must build a stronger social contract rooted in affordability, accountability, quality care and patient trust.Any serious discussion about India's health system must begin by acknowledging an uncomfortable truth: we cannot deliver healthcare to 1.4 billion people without the private sector.Private providers handle roughly 60 per cent of all hospitalisations and 70 per cent of outpatient care. In urban centres, nearly two-thirds of inpatient treatment occurs in private facilities. At the top end, corporate hospitals deliver sophisticated tertiary and quaternary care, using technology and specialised skills that the public system still struggles to provide at scale. These institutions have also made India a global destination for medical tourism, attracting 6.4 lakh foreign patients in 2024 for cardiac, orthopaedic and specialised surgeries, more than triple the number in 2020.Private enterprise has injected capital, management expertise and innovation into Indian healthcare. Crucially, hospital chains are now expanding beyond metropolitan hubs into Tier 2 and Tier 3 cities, a geographic footprint India desperately needs.Yet despite these contributions, private healthcare faces a deepening crisis of trust. A STRUCTURE MALADY, NOT A FEW BAD APPLESThe latest reminder comes from Maharashtra, where a Food and Drugs Administration survey found an intravenous infusion set procured for 11 billed to a patient at 325, a mark-up of 2,841 per cent.This is not a new story. Nearly a decade ago, in 2017, an NPPA examination of a seven-year-old dengue patient's bill at a Gurugram hospital revealed margins as high as 1,737 per cent on basic consumables. Subsequent NPPA analyses across other private hospitals confirmed similar patterns. The fact that the exact same headline reappears a decade later points to something deeper than a few overpriced syringes. We are looking at a structural failure in the healthcare market.THE FINANCIALISATION OF THE SICKBEDThis structural failure is now being compounded by a rapid influx of speculative capital.Between 2022 and 2024, India's healthcare sector logged more than $30 billion in mergers, acquisitions and private-equity transactions, with hospitals alone accounting for nearly 40 per cent of that value. In 2024, hospital deals reached roughly $6 billion, a 24 per cent jump over the year before.Private capital is not inherently problematic. India needs massive investment in bed capacity, advanced diagnostics and clinical talent. Capital can professionalise management and scale high-quality care into underserved markets. But capital also expects returns, and private equity expects rapid ones.Consider Sahyadri Hospitals. Ontario Teachers' Pension Plan Board took a majority stake in the Pune-based chain in 2022, ploughing in roughly 900 crore to expand it into one of Maharashtra's largest hospital networks. Three years later, in 2025, it sold that stake to Manipal Hospitals for about 6,000 crore. A single institutional owner, in three years, more than tripled the value of a regional hospital chain. That is not necessarily wrongdoing. But it raises a fair question: what happens when the clock on an investor's exit starts running faster than the clock on a hospital's clinical maturation?International evidence offers a clear warning. A 2023 BMJ systematic review of 55 studies across eight countries found that private equity ownership in healthcare was consistently linked to higher costs for patients and payers, while its effect on clinical quality ranged from mixed to harmful, and no setting studied showed a consistent benefit. A separate JAMA study of over 4.8 million Medicare hospitalisations found a 25.4 per cent increase in hospital-acquired adverse events at hospitals in the years after a private equity acquisition, even as those hospitals performed fewer procedures.India must establish guardrails before these international warnings become local realities.WHY THE HEALTHCARE MARKET FAILS PATIENTSHealthcare markets have some peculiarities and are prone to what economists call “market failures”.A patient lying on an emergency room stretcher is not an empowered consumer. They cannot compare prices, evaluate clinical credentials, or walk away. The physician who diagnoses the illness also orders the tests, prescribes the drugs, and selects the surgical implants. Fee-for-service payment models reward doing more—more tests, longer stays, additional procedures—regardless of whether they improve outcomes.That is why treating a hospital as a purely commercial enterprise, free to maximise profit, is a mistake.Hospitals must be financially viable. Without reasonable returns, investment dries up, technology stagnates, and expansion halts. But earning a fair return is fundamentally different from maximising profit at all costs. A hospital carries a fiduciary duty that a hotel or a retail chain does not. Healthcare can be a business, but it must never become merely a financial asset class.A FOUR-PILLAR COMPACT FOR REFORMHaving spent years designing public purchasing frameworks like PM-JAY, I have seen that blanket price controls rarely work. Setting a rigid price cap on paper is easy; preventing hospitals from cutting corners or turning away complex cases is much harder. Instead of heavy-handed price administration, we need a targeted, modern regulatory compact.1. End opaque pricing and require outcome transparency. Hospitals must publish digital, standardised schedules of charges and provide binding, itemised estimates for planned admissions. For high-value consumables and implants, the procurement price, MRP, and final patient price should all be transparently disclosed. Equally important, quality must be made visible: hospitals should disclose standardised metrics on hospital-acquired infection rates, readmissions, procedure mortality, and patient satisfaction.2. Rethink the payment engine. Fee-for-service incentivises unnecessary intervention. Public purchasers like PM-JAY and CGHS, alongside private commercial insurers, must move aggressively toward bundled package rates, Diagnosis-Related Groups (DRGs), and outcome-linked reimbursement. Automated claims analytics and medical audits should be deployed to flag outliers such as hospitals running unusually high rates of C-sections, prolonged ICU admissions, or repetitive diagnostic runs.3. Put guardrails on private equity and hospital M&A. Ownership structures, debt leverage, and related-party transactions in private-equity-backed chains must be fully transparent. Large acquisitions that create regional monopolies should face strict competition scrutiny. Clinical governance must remain insulated from aggressive corporate EBITDA targets, and operating assets must not be stripped to finance investor exits.4. Leverage public purchasing and strengthen public hospitals. Government schemes collectively command massive purchasing power. Pooled procurement models, like the Tata Memorial initiative that saved 1,320 crore on oncology drugs across 23 centres, show how aggressive volume-based bargaining can lower costs upstream without squeezing clinical quality. Ultimately, a well-funded public hospital system remains the single best benchmark for fair market pricing and the strongest protection for vulnerable patients.CONCLUSIONThe choice facing Indian healthcare is not between private enterprise and public interest. India needs private investment, technological innovation, and clinical excellence. But it also needs rules equal to the trust patients place in these institutions.The underlying bargain should be simple: society allows healthcare providers to earn fair returns and investors to build sustainable value. In return, patients must never be treated as captive assets from which financial margins are extracted.In a healthy healthcare system, profit follows good care. Good care is never compromised to generate profit.The authored piece is written by Indu Bhushan, Retd IAS officer, Economist, Former CEO, National Health Authority.- EndsPublished By: vaishnavi parasharPublished On: Sep 20, 2026 08:00 IST