The perils of private equity in India’s healthcare

India’s health sector has historically suffered from poor public investments and weak private sector alignment with the end goals of delivering quality care that is available, accessible and affordable. The nation’s response has been, in one part, to allow the injection of private equity into the sector to attract capital and drive expansion. The latest PE sector reports released in recent months tell us how these investments have surged. The policy has been playing out for the last two decades or so, with a new fillip in the National Health Policy, 2017, which called the private sector “strategic partners” for “critical gap-filling” towards universal health coverage, suitably reinforced by the NITI Aayog highlighting investment opportunities.

But instead of making the sector more responsive to the needs of citizens, the red carpet rolled out to private equity has added in new and complex ways to age-old sectoral burdens. Total PE investments into healthcare and pharmaceuticals reached $5.5 billion in 2023, representing a 25% increase from the previous year, with further “notable growth” in deal activity from 2024 to 2025, according to Bain and Company, a leading global management consultancy firm, which released a global PE report earlier this month. The Global Healthcare Private Equity report published by Bain said India accounted for about 25% of Asia-Pacific healthcare private equity deal volume in 2024, making it the largest PE market in the region by volume, as reported in a graph for which underlying data was not published.

The investments will lead to more hospital beds, but the logic of PE investments and PE-led growth sits at odds with the mission of healthcare to reach all sections of a society marked by inequities, imbalances in development, and a rural-urban divide that may be getting more pronounced as a result.

More significantly, PE-led growth can colour the entire institution of healthcare, including non-PE hospitals, in ways that may not help India meet its goals of universal health coverage. This is because the imperatives of equity, often looking for exits as they hop to more lucrative shores, turn the game towards premiumisation, tourist healthcare or complex and advanced procedures where returns can be higher, by forsaking simpler or lower cost remedies. The refrain is that a clear business orientation has taken root, coupled with some sharp practices that are being normalised in an increasingly corporatised sector. Managers in suits sit at fancier front desks to sign off on higher billing rates that make the hospitals and their exceedingly qualified set of doctors and surgeons less available to the majority of the population.

Take the example of a leading and widely respected hospital group in Mumbai that uses home glucometers to test patients’ blood sugar levels twice and often thrice a day with insta-strips that cost less than Rs 30 apiece but bills these to the patients at Rs 500 per test, a markup so outrageous and unsophisticated that many insurance companies refuse to honour the expense.

In general, lived experience, anecdotal evidence, and a small but persistent voice from doctors against this new trend tell us that matters are going from bad to worse, not merely in the immediate but also in terms of a larger and longer-term loss in an altered ecosystem. Care cedes to commerce when the health system imports
the language of a returns-hungry
private equity, normalises newer
revenue metrics (the simplest being the highly cited average revenue per occupied bed, AROB, which is growing at 3x pre-Covid levels in multi-speciality hospitals), and, in the process, redefines broad engagement (not to speak of purpose) in overly business terms.

The missing correctives

An indication of the frustration and anger at the state of affairs was a statement last year by Mohan Bhagwat, the chief of the Rashtriya Swayamsevak Sangh (RSS), the ideological vanguard of the BJP, that health (and education, he added) is out of reach of ordinary people. For an organisation that wields untold influence and control over the government, the remarkable silence and lack of energy in the government to look for correctives signalled that even the RSS does not matter on everyday issues of ordinary citizens, or that policy is caught in a structural bind from which it is not expedient to change course. We have probably gone too far out on the road.

The counter view that India does not have the money to invest in growing its hospital chains, or that the public sector has failed or that its rent-seeking nature means cost-effectiveness is a casualty and efficiency will be compromised, represents a limited frame that does not allow for creative or innovative solutions. These views force a fallback to solutions that are already failing the system in new ways. We can tweak the system at best, like the government did when hospitals agreed (only informally) to freeze rates till 2026 so that insurance premiums did not rise, but any temporary stop will only mean accelerated hospital inflation in the coming years. The nature of the beast and the structure of the engagement are such that there is no escape.

Given the place we have landed, the only clear way out is to turn health into a new priority, to push accelerated new public investments in the sector, to have clear and strong regulatory mandates and strict red lines. The government of Karnataka has offered some leadership in passing the Karnataka Private Medical Establishments Act, but the experience has yet to play out. The risk of a deadened bureaucracy introducing roadblocks remains high, but at the very least, it can be argued that someone is watching and will crack the whip if things go out of line. The system will also have to build trust with doctors, empower them, and set a culture where service is honoured and respected.

(The writer is a journalist and faculty member at SPJIMR; 
Syndicate: The Billion Press)