India’s risks overdose on medical inflation fix

**CONTEXT NEWS** A parliamentary committee on August 7 recommended the government “strictly review and rationalize" foreign investment in healthcare facilities and protect affordable mid-sized hospitals from "predatory corporate buyouts”. The “Affordability and Accessibility of Healthcare Facilities in Public and Private Sector” report said that "aggressive corporatization is fundamentally transforming healthcare from a public service sector into a purely capitalistic enterprise, artificially inflating the cost of medical procedures and triggering a cascading effect of price hikes across the entire healthcare ecosystem". The report also recommends that the room charges for a hospital should be capped to average room tariffs in three-star hotels in the peripheral area or vicinity of the hospital. (Editing by Una Galani; Production by Aditya Srivastav) ((For previous columns by the author, Reuters customers can click on DUTTA/[ujjaini.dutta@thomsonreuters.com](mailto:ujjaini.dutta@thomsonreuters.com))) **By Ujjaini Dutta** BENGALURU, Sept 4 (Reuters Breakingviews) - New Delhi will hurt itself if it puts foreign funding for its healthcare system under the knife. A day after U.S. private equity firm KKR KKR.N agreed to [buy](https://media.kkr.com/news-details?news_id=6a6c6df1-c849-4af4-a6a2-4fbef3d757a0) Medicover's MCOVb.ST India hospitals business for $1.4 billion, a parliamentary panel [urged](https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2296281®=6&lang=1) the government to "review and rationalise" overseas funding, shield smaller providers from "predatory corporate buyouts" and cap room rates at the equivalent of three-star hotels. Adopting those measures may be politically appealing but it will ultimately worsen India's chronic shortage of healthcare capacity. Capping room rates won't materially improve affordability either. These account for just 12% of a patient's total bill over a four night stay based on an [average room tariff](https://www.manipalcigna.com/cost-of-treatment/hospital-room-charges-in-india) of 8,000 rupees ($84.25) and average revenue per bed of 68,767 rupees, according to Breakingviews calculations using data from Fortis Healthcare FOHE.NS and Visible Alpha. Hospitals would simply try to recover the difference by charging more for procedure costs or doctor fees as they did when the government [capped stent prices](https://timesofindia.indiatimes.com/india/stents-cheaper-but-not-all-get-benefit/articleshow/62687068.cms) in 2017. Worse, benchmarking rates to nearby three-star hotels as proposed would leave much to be desired in quality of accommodation, even for the non-fussy among India's well-heeled. Standardising treatment costs and enforcing faster claim dispute resolution are better ways to reduce unnecessary medical inflation for those that can afford to pay. Blaming foreign investors for problems arising from India's miserly spending on public health, at less than 2% of GDP, would be a costly misdiagnosis. The impulse to increase affordability is easy to understand. Woefully low public spending leaves the majority of Indians depending on private hospitals where annual medical inflation rate is running at up to 13%, per the committee report. Though the amount paid out of pocket to cover bills is reducing, it remains high at 44%, [roughly three times](https://data.worldbank.org/indicator/SH.XPD.OOPC.CH.ZS) that of the United Kingdom, Australia and Canada. Yet price rises reflect a maturing industry, more than fraud and waste. Most external investment flows to big cities led by Bengaluru, Mumbai and New Delhi where affluent populations want cutting-edge treatment. Restricting capital inflows will slow the pace of technology advancement and growth: India still has just 16 hospital beds per 10,000 people, compared to China's 56 and Japan's 126. Take Manipal Health Enterprises MNIA.NS. Singapore's Temasek first invested in the Bengaluru-based company in 2017, became its controlling shareholder in 2023 and retains a 44% stake after the $10 billion hospital chain's IPO last month. During that time, Manipal Health acquired five rivals, comprised of 31 hospitals but it plans to add another 1,943 beds to its current 13,037 through greenfield projects through 2030. Blackstone BX.N, CVC and others have made similar investments.

India’s risks overdose on medical inflation fix

Context and committee recommendations

India risks hurting healthcare investment

Room-rate caps may not improve affordability

Inflation concerns reflect a growing private healthcare market

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