I. Private Medical Sector – ‘All is not well’ with the unregulated giant
The private sector in healthcare, and privatization of health systems are becoming important issues today in the context of most LMICs (Low and Middle Income Countries). As pointed out in a recent Lancet series: ‘The private sector in health care is not going away. Indeed, it has a large and expanding part to play in the health systems of all low-income and middle-income nations’. There is also increasing concern regarding regulation of the private sector, in context of mixed systems comprising both public and private segments: ‘The task of those concerned with health should be to subject the private sector to scrutiny—description, analysis, and evaluation…; the evidence on which to make wise policy decisions concerning the private sector is often weak or absent. That situation must change’.
In this section we will take a brief review of the private segment of healthcare systems in several South Asian countries, followed by a quick look at the current status of regulation of this sector.
The Private medical sector in South Asia (Bangladesh, India, Nepal, Pakistan, Sri Lanka)
The private health care sector is tremendously heterogeneous, ranging from independent informal and formal practitioners to small, medium and large hospitals, charitable hospitals and corporate hospital chains and diagnostic centres. While there are similarities among all the five countries as far as presence of a private sector goes, there are also significant differences among them with respect to the size, nature, and importance of the private sector, and the relationship between the private and public healthcare segments. A bird’s eye view indicates that in this region Sri Lanka has a much better resourced public sector, with a smaller private sector, and overall lower levels of commercialisation of healthcare. However, the private sector is reported to be a growing force even in Sri Lanka, due both to greater investment from private players. India has a very large and dominant private sector ranging from large for-profit corporate entities in hospital and diagnostics, not-for-profit trust hospitals, smaller doctor owned hospitals and nursing homes, individual practitioners (qualified and unqualified), chemists, and traditional healers. Similarly, Bangladesh, Nepal and Pakistan have weak public health infrastructure and low levels of public spending, and a private sector including for-profit and not-for-profit hospitals, general practitioners (both qualified and unqualified), chemists, and diagnostic laboratories. The following section gives a very brief country-wise outline.
Sri Lanka has proportionally the smallest private medical sector among the group of South Asian countries, since the public sector accounted for 73% of the hospitals and 93% of bed capacity, while handling over 90% of the total patient admissions in 2014. Public-sector hospitals are engaged in both curative and preventive care, while the private sector focuses mainly on curative care. The quality of treatment and management of inpatient care was found to be better in the public sector despite being available at a lower cost. While the number of private hospitals has increased during 1999 to 2011, private hospital beds represented only 6% of the total hospital beds, consisting mainly of a few leading hospital chains and large number of small regional players. The top five private hospitals accounted for nearly half of the private-sector bed capacity in 2014. Medical tourism was reported to be a key growth driver, which is concentrated in the Western Province, while rising per capita income was also seen as increasing demand for private healthcare. This was accompanied by increase in the technologies available at private hospitals, and a shift in the private sector from smaller to larger facilities having over 100 beds.
In Nepal nearly two-thirds of healthcare delivery facilities are privately owned and operated. There are an estimated 3000 private healthcare enterprises in Nepal, of which around 70% are diagnostic clinics, and 26% are primary clinics, secondary and tertiary hospitals. The secondary and tertiary private sectors are better organised, and their growth was outpacing growth in the public sector. The number of private secondary hospitals has increased from around 69 in 1995 to 350 in 2015, with secondary and tertiary hospitals largely concentrated in Kathmandu and a few other urban centres like Pokhara. Significant foreign investments have been made since 2010, especially in private tertiary hospitals while established business groups of Nepal, as well as groups of high net worth doctors have set up healthcare companies.
In Bangladesh private presence in secondary and tertiary level medical care has emerged over the last one and a half decade. As of November 2016 there were 14,337 registered private hospitals, clinics and diagnostic centres, while the total number of government hospitals under the DGHS was 610. Local businesses and entrepreneurs from the pharmaceutical and diagnostic care industries have expanded to set up multi-specialty hospitals. Bangladesh has a liberal FDI regime, with no limit for equity participation and repatriation of profits and income. In the late 2000s, Goldman Sachs identified Bangladesh and Pakistan among the eleven next big emerging markets (N 11), which was expected to have implications in healthcare arena, for healthcare financing and potential for private investment in infrastructure.
India has one of the largest private healthcare sectors in the world, and the private healthcare industry here is much more developed compared to the previous three countries, where it is in an emerging phase. The private healthcare sector in India is more established as well as diversified, and more influential in policy making. Available reports show that the private sector is dominant and provides about 80% of outpatient services and 60% of inpatient services. Further, private facilities are expanding to smaller towns and cities, with 48% of all private hospitals and two thirds of corporate hospitals reported to be located in smaller cities. The most significant development is that there has been organized promotion of healthcare provision as a big business opportunity and the rise of the healthcare industry, projecting healthcare provision as a highly profitable economic venture. The health care sector in India has become an attractive area for private capital investment by global investment firms, private equity funds, and high-net-worth-individuals, and also by global financial institutions such as International Finance Corporation (IFC). Further there are several Indian multinational healthcare companies that have growing presence in neighbouring South Asian countries, as well as in the Gulf and in some African countries.
In Pakistan, health care is highly privatised, with public health expenditure as percentage of GDP falling from 0.72% in 2000-01, to just 0.42% in 2014-15. Private spending on healthcare was estimated to be 70%, out of which 98 % expense was borne by households. Private services include for-profit clinics, high-tech specialty hospitals, and not-for-profit clinics and hospitals that provided free or discounted care to the poor, pharmacists and laboratory technicians, nurses along with shopkeepers, unqualified practitioners, traditional healers. According to an IFC report (2011), an increasing number of trusts, NGOs and social welfare organizations had invested in not for profit health facilities, which were serving a very large cross section of the population. Most businesses were individual or family owned, however there was an increasing trend of individuals considering hospitals as investment business for commercial return.The government was exploring PPPs and encouraging private sector to provide facilities in villages and small towns. The IFC report observes that “Low public expenditure by government, lack of expansion in the public health sector, increasing population with rising income levels indicates a high potential for growth for the private hospitals”.
An important, noteworthy development in the region is the active role of the International Finance Corporation (IFC - a World Bank institution) in not only promoting the growth of the private sector in these countries, but also actively financing its growth and expansion through measures such as lending and directly investing in hospitals for expansion, and also investing in private equity funds and companies that in turn invest in healthcare companies in ‘emerging economies’. In fact several large global private equity companies have created specific funds for investing in hospitals in South Asia and the MENA (Middle East North Africa) region.
Groups of private hospitals are also present and growing in Latin American countries such as Brazil, Mexico, Colombia and Peru. It is reported that the industry is, however, less developed in this region than in some the emerging markets of Malaysia, India and South Africa. Healthcare companies from the latter countries have expanded to multiple other countries and have listed on stock exchanges to access more capital to finance their expansion. Overall in LMICs across the world, the private medical sector is a growing and significant player in almost all healthcare systems.
Performance of the private healthcare sector – Blind optimism belied by troubling reality
It is useful to recall the arguments that were made by international institutions such as the World Bank and some policy makers since the early 1990s, favouring growth and increased participation of the private sector in health care. It was claimed that private services are better in terms of efficiency and quality etc. However increasing number of studies and accounts point to the myriad problems with the private medical sector. While the Oxfam report is one important reference, studies have shown that the public sector provided better quality care than the private sector (Footnote 5). Studies on performance of health insurance programmes and other forms of PPPs demonstrate a range of problems with private providers. The pathbreaking book ‘Dissenting Diagnosis’ published in India based on testimonies of 78 ‘whistleblower’ doctors has ripped the lid on the myriad malpractices in the commercialised private medical sector, including unnecessary treatments and interventions, and irrational care driven by profit seeking by large hospitals, pharma industry – doctor nexus, institutionalised system of kickbacks, and inflated, arbitrary costs of care.
Danger of ineffective or ‘captured’ regulation, imperative of social accountability
Given this context of large and often dominant private sectors within the health systems of many LMICs, the mechanisms for regulation are often weak, under-resourced, bureaucratic and inadequately effective ,. There are major gaps in policy design and implementation, human resource constraints, problematic organizational relationships, and major risk of ‘capture’ of the regulatory bodies by private interests. Regulation may be minimal, limited to addressing certain physical infrastructure issues, and standards may be influenced by either academic experts or the corporate healthcare industry. There is an emerging view that the problems with regulation of the private sector are not just narrow, technical issues of poor design, rather healthcare services have certain unique features requiring special regulatory strategies compared to other services or products. In fact regulation is a socio-political process which must address issues of quality, safety, affordability, access, transparency, accountability, equity and justice ,. Further the goal of universal health care provides a basis for taking a Health systems perspective to manage the private sector, and the main aim of government policies must be to develop a healthcare system that ensures widespread availability of good quality, free or highly affordable care, so that this system meets the needs of the population as a whole, especially working people and marginalised populations.
Linked with such a broader socio-political and people-oriented approach to regulation is the need to explore ‘bottom-up governance’, and related concepts of social accountability of regulators, and social regulation, related to the Health care system including the private medical sector. Social accountability refers to formal or informal mechanisms through which citizens and/or civil society organisations bring officials or service providers to account. ‘Social regulation’ refers to action-oriented approaches designed to reinvent and democratise regulation, with greater participation and accountability of the regulatory process to users and the public. This includes developing participatory oversight mechanisms for regulatory bodies, such as patient and citizen involvement in monitoring of enforcement of rules and regulations related to health care providers, from a patient-oriented and rights-based perspective.
Horton, R. and Clarke, S. (2016) The Perils and Possibilities of the Private Health Sector. The Lancet 388: 540-1, Published OnlineJune 26, 2016, http://dx.doi.org/10.1016/, S0140-6736(16)30774-7
 Same as in footnote 1.
Govindaraj et al (2014) Healthcare in Sri Lanka: What can the private health sector offer? HNP Discussion Paper World Bank.
Sengupta, A., Mukhopadhyaya, I., Weerasinghe M.C., and Karki, A. (2016) The rise of private medicine in South Asia. British Medical Journal 2017;357:j1482 | doi: 10.1136/bmj.j1482
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Amarasinghe, S. et al (2015) Private Health Sector Review 2012. IHP Technical Reports Series Number 2, Institute for Health Policy, Colombo, Sri Lanka
 A Report on Market Data for Private Sector Investments in Nepal Healthcare Sector, by Dolma Development Fund, UKAID and Intellecap, September 2014
Government of the People's Republic of Bangladesh (2017) Health Bulletin 2016. Management Information System, Directorate General of Health Services, Ministry of Health and Family Welfare.
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India. Paper presented at International Public Policy Association Conference. Milan.
The term “healthcare industry” is used as an umbrella term while referring to hospitals, diagnostic centers, drugs and pharmaceutical- medical equipment and devices and the insurance industries. The hospitals sector is reported to be the major segment, and hence the term healthcare industry is often used while talking about corporate and other big private hospitals.
 International Finance Corporation and State Bank of Pakistan (2011) Health and Social Work: Private Sector Hospitals. IFC Washington.
Cleaton-Jones I.P. (2015) Private Hospitals in Latin America: An Investor’s Perspective. World Hospitals and Health Services. 2015;51(2):7-9.
Oxfam (2009) Blind Optimism.
 Dissenting Diagnosis - by Arun Gadre and Abhay Shukla, Penguin Random House India, 2016
Peters, D., and Muraleedharan, V.R. (2008) Regulating India’s health services: To what end? What future? Social Science and Medicine 66:2133-44.
 Bloom, G., et al (2014)
 Sheikh, K., Saligram, P., and Hort, K. (2013)What explains regulatory failure? Analysingthe architecture of health care regulationin two Indian states. Health Policy and Planning 2013: 1-17.
 Same as footnote 16
Santos, F.P. and Merhy, E.E. (2006) Public Regulation of the Healthcare system in Brazil
 Same as in footnote 5.