Nearly 45-50 per cent of seats across both PG and MBBS are contributed by the private sector. After growing roughly at a similar rate as the public sector between 2011 and 2017, the private sector’s participation, especially at the undergraduate level, has been muted over the past five years (see Chart). While the slowdown was partly a result of some private sector colleges being de-recognised due to corruption scandals, the regulatory uncertainties pertaining to establishing and running a medical college have also deterred private sector participation.

Understanding the importance of private sector participation in medical education is crucial. It has the requisite capabilities, employs bulk of the doctors and specialists and caters to the dominant patient base (55 per cent of the hospitalisation and 66 per cent of the outpatient caseload). They have also made concerted investments in state-of-the-art technology. It would be a no-brainer to leverage these capabilities. This brownfield expansion would reduce the investment required for a greenfield medical college.

Varying scales

The private sector in medical education, just like in the case of medical care, is not a monolithic structure in the Indian context. There are players operating at varying scales, characterised by differing financing dynamics and overall quality of service delivery. On one end of the continuum are the low-quality private players, which derive their revenues mainly from the operation of medical colleges, have a barely functional teaching hospital and are not able to comply with most of the outlined norms. On the other end are the medical colleges run by highly established private players, with a dense network of hospitals nationwide. These players have a vibrant teaching hospital, contributing nearly two-thirds of the revenues, and medical college fees are a smaller share of the revenue. Policymakers should enable high-quality private hospitals to set up or expand medical seats versus the fragmented, low-quality, fee-dependent private medical colleges.

Out of roughly 43,000-plus private hospitals in India, approximately 1,000 have more than 100 beds (a proxy for scale), and the thought process would be to encourage the best amongst the 1,000 to teach. Several challenges may deter high-quality large hospitals from fully participating in medical education.

Earnest compliance with the regulatory standards for a high-quality, private-sector medical college entails high upfront capital investment and consistently high operating costs. For instance, most super-speciality hospitals will not have departments like general surgery, ophthalmology, psychiatry, and these would have to be separately created. The norms also require that the number of beds for gynaecology and obstetrics should be 75 for a 150-seat UG medical college. Given that most of these hospitals are concentrated in developed States, which have low fertility rates, it becomes difficult to comply with the occupancy norms.

Similarly, the regulatory framework is often unviable for private investment. Even the leading private hospitals in the country do not have an 80 per cent bed occupancy. In addition, there are no economies of scale, and with increasing seats, there is a linear increase in cost drivers (beds, patients, teachers, etc). Besides the absence of economies of scale, the regulatory environment has also been fraught with uncertainty about the recognition of specific courses (DNB, CPS) and constant churn regarding requirements for setting up medical colleges, fee capping, and maximum permissible seat capacity. This, in turn, translates into greater unpredictability about the break-even timeline for private sector medical colleges, resulting in the whole operation of medical colleges appearing to be financially unviable.

The burden of de-recognition in case of lapse in compliance with existing norms also squarely falls on the private sector, even as public sector medical colleges have reportedly flouted the same norms. A case in point is the glaring shortage of teaching faculty, omnipresent across both the public and private sectors. Thus, there is a need to consider these costs while designing the incentives to attract greater participation from the private sector.

Over the years, a number of welcome changes have been introduced by the government. The land requirements have been reduced substantially, with the latest norms defining it as an adequate built-up area with all the relevant facilities, in contrast to the explicit land requirement (in acres) mentioned in previous versions. The need for residential quarters, a minimum number of operating beds, books and journals, and teaching faculty has also been rationalised.

Staffing norms

However, there is room to rationalise the scaling and bed requirement norms further. Certain staffing norms like reducing the permissible number of non-MBBS graduates as faculty in non-clinical courses has also meant increased requirement for MBBS graduates as teachers, leading to higher operating expenses. The latter are more reluctant to join as full-time teachers, given the high opportunity cost of giving up full-time practice. Norms around bed utilisation and the linear ramp-up of cost drivers with scale should also be revisited. Similarly, capping the maximum number of seats at 150 further impacts operating cost efficiency, which has implications for the bottom line.

In the wake of the aforementioned challenges, the private sector prefers operating as standalone hospitals instead of centres of excellence, undertaking cutting-edge research and imparting education. A mix of monetary and non-monetary incentives as well as an effective regulatory policy framework can facilitate greater participation from the private sector. For instance, research grants and industry collaboration can incentivise greater participation of specialists employed in the private sector as teaching faculty across both the public and private sectors. Similarly, greater integration of technology in curriculum instruction can also further rationalise requirements for teaching faculty. Lastly, there is a need for a multi-stakeholder task force, inviting representation from the National Medical Commission, private sector hospitals and medical colleges, for re-thinking private sector participation in the current medical education system.

Amrita is a Visiting Fellow, and Khushboo is a Research Associate, at the Centre for Social and Economic Progress. The views are personal

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