含羞草社区

Healthcare in India can broadly be classified into a publicly funded and controlled government sector and the private sector. Public spending on healthcare in India is among the lowest in the world and the public health system suffers from underutilized or dysfunctional infrastructure and a lack of adequate human resources. Initiatives have been launched at both the central and state government levels to maximize coverage and minimize the healthcare disparity, including a national health policy, the National Rural Health Mission and the National Urban Health Division.

PPPs in healthcare

Public-private partnerships (PPPs) have also emerged in the healthcare industry with state governments experimenting with different models with varying degrees of success. These range from pure services or management contracts to joint venture developments and more traditional design, build, finance, operate and maintain concessions.

Services, management contracts

Here the state continues to own the hospital (and so remains primarily responsible for its success) and enters into contracts with the private sector to provide specific services such as building cleaning and maintenance, utilities management, laundry and catering, and personnel management. This model has been used successfully in various states including Orissa (where the cleaning services for a hospital were contracted to Sulabh International) and Tripura (for upkeep, cleaning and maintenance of the GB Hospital).

Lease model

Under this model the state continues to own the hospital and its facilities and grants the private participant a lease over the facility (or part of it). This model is usually used in conjunction with other models such as build-operate-transfer (BOT) of a new facility or upgrade and refurbishment of existing facilities. This model is being used to build two greenfield superspeciality hospitals in Bhatinda and Mohali in Punjab.

Concession-based model

Under this the state enters into a longterm concession agreement with private participants (usually to design, build, finance, operate and maintain) to construct or upgrade and operate a facility.

Examples include a PPP between a consortium led by Wipro-GE Healthcare and Medall Healthcare and the Andhra Pradesh government to provide diagnostic services to people in low and middleincome brackets in four hospitals. Others, like an IFC backed initiative to establish a speciality hospital and medical college in Shillong, and a greenfield hospital project being initiated by Gwalior Municipal Corporation, use a similar model.

Quasi-concession models have also been used, including the Rajiv Gandhi Superspeciality Hospital in Raichur, Karnataka, which was implemented as a joint venture between the government of Karnataka and the Apollo Hospitals Group. The government provided the land and hospital buildings and Apollo is responsible for providing medical facilities and staff to operate the hospital.

Risk sharing not risk shifting

So what does a healthcare PPP project need to succeed? First, the risk must lie with the entity most capable of dealing with it. In addition, to maximize value-for-money for the state, the state must share in the project’s risks.

But clearly the degree of risk will depend on the model used. For example, the risk of a project will be far greater for the state in a purely service/management contract as compared to a concession agreement, where the private participant will bear the lion’s share of the risk. However, even in a concession agreement, the state should share certain risks including that of force majeure, relief and delay events, including risk of industrial action from unions and a change in law.

The government should also clearly set out project outcomes and performance standards and implement monitoring tools. It should balance penalties for failure to meet requirements with incentives for exceeding contractual parameters and public policy requirements against the private participant’s ability to earn a reasonable rate of return on investment. It should implement payment mechanisms to ensure steady cash flows in order to encourage debt funding – this can be by way of a user charge paid either by users directly or by the state (usually used for providing services to persons below the poverty line).

Historically PPPs in India have been used in traditional sectors such as roads, airports, ports and power. Their use in healthcare and social infrastructure is only now gaining momentum. The PPP model has been used successfully in developing healthcare in other countries, in particular the UK, which has developed standard documentation as part of its private finance initiative. With the correct regulatory environment and policy the same success could be replicated in the Indian context.

Akshay Jaitly is a partner at Trilegal and Saurabh Bhasin is a counsel. Trilegal is a full service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. They can be reached at Akshay.Jaitly@trilegal.com and Saurabh.Bhasin@trilegal.com.