Privatising district hospitals: Health ministry, states, experts had little say in Niti Aayog plan

The Niti Aayog’s blueprint to increase the role of private hospitals in treating non-communicable diseases in urban India by handing district hospitals over to the private sector on 30-year leases was built largely on a template provided by the World Bank. The template was fine-tuned in close coordination with top private healthcare industry representatives. State health officials and the Union Ministry of Health and Family Welfare had a limited role in developing the blueprint, and public health experts outside the corporate world had an even smaller role, show government documents reviewed by Scroll.in.

A meeting chaired by Prime Minister Narendra Modi last year gave Niti Aayog the mandate to build model contracts for public-private partnership in the health sector. Much of the discussion in the Niti Aayog in drafting the blueprint was limited to tweaking model contract agreements to ensure buy-ins from private players.

Towards the end of the discussions, one senior officer within the Niti Aayog warned against the discussions being led by private players in the health sector and the consequent template. The officer noted that the template did not focus on final health outcomes but only on inputs to get industry interested in the proposal. The consequences of such an approach would not be good, she warned.

Her advice was ignored.

Instead, Niti Aayog Chief Executive Officer Amitabh Kant ordered that there was no need to ensure proof of the model’s efficacy through pilot projects or for the Union cabinet to approve of the idea – both of which had been proposed initially.

The Niti Aayog eventually proposed that district-level hospitals be leased out to private sector players for 30 years to provide secondary and tertiary level care for non-communicable diseases such as cancer and respiratory ailments at rates prescribed under government schemes. The document was leaked to the media in June and eventually released by the government think tank in August.

Under the proposal, there is to be no free treatment or separate beds in privatised district hospitals for those who are not covered by government health schemes. State governments are required to direct ill people from community health centres and primary health centres for higher treatment to these privatised hospitals to ensure customers. But patients without government health insurance will not get free treatment beyond primary and community health centres. The scheme allows the government to have people covered by its schemes treated without having to administer the services itself.

District hospitals are supposed to provide the private partner with building space and also share back-end infrastructure facilities such as ambulance services and blood blanks with them. The agreement also offers private hospitals a chance to set up 50- or 100-bed hospitals in towns other than India’s eight largest metropolises. The state government will provide private partners with some of the viability gap funding (a one-time grant to set up the hospital).

Scroll.in used the Right To Information Act to access the official documents with the government on the privatisation of district hospitals in order to reconstruct how the Niti Aayog reached its controversial conclusions.

The trigger

On March 14, 2016, Modi chaired a meeting at his residence reviewing the state of healthcare in the country. Union Health Minister JP Nadda, health secretary CK Mishra and other health ministry and Niti Aayog officials attended the meeting, the minutes of which show that Amitabh Kant made presentations on the health sector.

On the subject of infrastructure, it was decided “to promote private players partnering with government to ramp up infrastructure and improve quality”. It was decided that “Model Concession Agreements for PPP in health (across primary, secondary, and tertiary sectors)” would be prepared and a new central body would be set up to promote innovative ideas for public private partnership in health. The health ministry was given six months to take action on this decision.

However, officials of the Niti Aayog had already begun work on the plan a month earlier in February, when they met an health sector investment officer of the International Finance Corporation and a health specialist and senior economist of the World Bank. They discussed developing “a model concession agreement chronic disease units co-located with district hospitals in PPP mode”.

On March 4, Kant approved the note to involve the World Bank for technical support to develop the blueprint. On April 4, after the meeting at Modi’s residence, a Niti Aayog official noted that the proposed blueprint would first be tested at a couple of district hospitals as a pilot study. “Thereafter, it has been planned to seek the approval of the Union Cabinet for sharing the MCA [Model Concession Agreements] with all the States for rolling out across the country,” the official noted.

By May 19, 2016, the finance ministry approved the World Bank as the sole technical consultant to prepare the blueprint.

World Bank in driver’s seat

Two more meetings were held in April and July 2016 at the health ministry. Chaired by health secretary CK Mishra, with officials of the Niti Aayog and some industry representatives present, broad ideas related to the public-private partnership were discussed at these meetings. Mishra asked the Niti Aayog to figure two or three possible areas in health where the public-private partnership model could be developed.

On May 31, Niti Aayog informed the health ministry that it had already sought permission from the Department of Economic Affairs to let the World Bank provide technical assistance to prepare a Model Concession Agreement “to foster public private partnerships at district level” for prevention and control of non-communicable diseases. It said that the contract would be formulated by the World Bank with inputs from the Niti Aayog and the health ministry.

The Niti Aayog file on the matter did not have the minutes of the July 5 meeting.

After consultations, the World Bank shared a concept note for discussion on public-private partnerships for non-communicable diseases. It discussed various models including the insurance-based one. It recommended that the hub-and-spoke model of public-private partnership and a standalone facility providing these services can serve as models – a proposal that was eventually adopted. This model entailed leasing out district hospitals to private players, with community health centres and primary health centres of the government providing the clientele.

The concept note focused on the profitability of the venture for the private sector. It asked questions such as:

“What are the minimum essential infrastructure/support requirements that the private sector expects in district hospitals at the time of handing over from the government?”

and

“Based on the experience as the private sector, what are the concerns that you have related to the government’s offer of support in the partnership? What are the incentives from the government that would make investment proposition more attractive for the private sector.”

The World Bank also warned of a possible conflict between government health insurance schemes and the profitability of the privatisation model. The concept note said:

“There may be existing or new health protection schemes of the government that may conflict with the provisions of the proposed PPP for non-communicable diseases thereby affecting the market for such arrangements, like state specific health insurance schemes or the current Rashtraiya Swasthiya Bima Yojna.”

Private sector players become key

In the last week of November, the Niti Aayog sought the responses of industry representatives in a questionnaire to understand the industry’s perspective on the concept of providing care for non-communicable diseases at district hospitals.

On December 8, Niti Aayog advisor Alok Kumar convened a meeting with 57 people including industry representatives from private healthcare providers, diagnostic services, equipment manufacturers, industry bodies, officials from World Bank and International Finance Corporation.

Only one officer from the Union health ministry, Dr Damodar Bachani, a low-ranking deputy director from the non-communicable diseases division, attended the meeting. The meeting set up four working groups with five to nine members in each group.

The four working groups included one defining the diseases to be tackled, financing, project structuring and on how to cover pre-requisites for selection of diseases, and diagnostics. All the convenors of these working groups were representatives of the private sector. The ministry was asked to nominate a person for each group.

At this stage, Kumar specified the model – the “co-location model” – for which the government was seeking inputs. Under this model, the private sector would get district hospitals to run and the government’s contribution would be physical space and access to basic amenities.

At this meeting with industry representatives it was also decided that the private sector’s takeover of district hospitals would be sustainable only in the long-term, and not in the four-to-seven year period that was initially proposed.

The minutes said: “There needs to be a mechanism in place to adjust prices that will protect the private sector from potential losses and the government from higher costs.”

In January 2017, another meeting with the Chief Medical Officers of three district hospitals each in Maharashtra, Rajasthan, Meghalaya, Odisha, Uttarakhand, Andhra Pradesh and Madhya Pradesh were invited to interact with industry representatives on the public-private partnership project model.

On February 20 and 21, the Niti Aayog invited state principal secretaries for health from seven states – including Maharashtra, Rajasthan, Meghalaya, Odisha, Uttarakhand, Andhra Pradesh, Madhya Pradesh – for a video-conferencing meeting with industry representatives. Records of these meetings were not found in the Niti Aayog file either.

The final reports from the four working groups were submitted and discussed at the Niti Aayog on February 20 and February 21.On March 29, a meeting was held at the Niti Aayog where the think tank’s officials, including Kant, were present, as were three health ministry officials – secretary CK Mishra, joint secretary Manoj Jhalani, additional secretary Anil Kumar Jain – World Bank officials and Pranav Mohan of the International Finance Corporation.

Records show that a concept note was circulated to officials in the Niti Aayog based on discussions held so far.

The World Bank group made a presentation about the services that will be provided under oncology, pulmonology and cardiology under the proposal. The World Bank officials presented the industry perspective.

The minutes said, “Given the trade-off between variables of the project such as term of concession agreement, user fee, Viability Gap Funding, level of services etc” the World Bank recommended four options with varying tariff rates keeping Central Government Health Scheme as the base rate, number of years in the concession period, and the viability gap funding.

The World Bank’s presentation also said that Central Government Health Scheme rates can be used as the benchmark to fix tariffs for those not covered by the scheme.

But as suggested by the health ministry, it was decided that instead of Central Government Health Service rates, the prices set by the government for its insurance schemes would be used to set tariffs for services at the privatised district hospitals. It was also decided that the model contracts would be for 30 years and that the viability gap funding provided to the private player would be used as a parameter for bidding in the project.

Objections from within Niti Aayog

For this meeting, another advisor in the Niti Aayog, Anna Roy sent in written comments. She said that the proposed model should be scrapped. The records show that Roy asked that the approach to public-private partnership in the health sector be revised, with public officials leading the discussions instead of the private sector. She asked that the proposal be revised after identifying the various norms and practices that have been successfully followed in the past.

Roy questioned the overwhelming presence of private sector representatives in these discussions, warning that the results would also be biased towards the private sector’s interests. She said that the idea that the government would provide land and prescribe uniform tariffs should be reviewed. She noted that the model allowed private players not to offer any free services or reserved beds for the poor, and said considering the government was also going to provide funds, a bulk of the services should be reserved for common people instead.

She added that the proposed model had discussed rights and obligations of the players in detail. It had not set performance indicators for them to achieve. The advisor added that the model contract being prepared did not specify the outcomes of the project which was contrary to best practices for public-private partnership models.

Roy’s was the lone voice of dissent through the discussions.

But in April, Kant ordered that the blueprint be adopted without pilot projects or cabinet approval. He said states could just use the template as guidelines to adopt the model. He said taking the Union cabinet’s approval would make the model inflexible for adoption by states and would become time-consuming if it later had to be amended.

The World Bank was expected to prepare the final draft by May 15. At the end of May, Kant said there was no need to send the documents to the department of legal affairs for vetting.

Once the draft was produced, it was sent to all states by June 5. The health ministry was sent a copy of the model contract for privatisation of district hospitals only in August after the document was already in the public domain.