Research

PwC backs PPP in healthcare

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The huge investments required to bridge the gap between the demand for healthcare and the existing supply could only be met through public private partnership, points out a recent study by PricewaterhouseCoopers (PWC). Health was a state subject and governments were actively courting private industry in healthcare. The PPP experience in India and other developing countries in Asia suggested five common models, based on social marketing, social franchising, contracting in, contracting out and equity arrangements. However, the Asian experience revealed challenges in the healthcare sector, like the need to have an appropriate policy framework backed by an appropriate institutional mechanism. Another problem in PPP was use of generic contracts without any reference to specific indicators like number of free treatments to be offered by the government and cost of serving the BPL policies. Also, analysis of PPP arrangements in the Indian health sector and elsewhere showed that recourse mechanism available in case of default by either partner was rather weak, the study points out. There was perceived imbalance of power in the PPP partnership, with the government emerging as dominant partner. Further, the absence of established accreditation standards for ensuring quality of health care services impacted government’s ability to ensure consistent service from the private partner. High interest rates and turbulence in the equity markets created the need for newer norms for risk capital investments in hospitals. Recently, Apax Partners picked up 1.7 per cent stake in Apollo Hospitals, taking its total stake at 15 per cent. Fortis Healthcare adopted the PE route too. Similarly, smaller firms like R G Stone Clinic and Dr Lal Path Labs and Metropolis also received PE funding.

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