In India, a hospital that’s just what the doctor ordered

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The Indian State of Bihar, by population, is larger than the Philippines. Or, if you prefer, by the number of residents, Bihar would be the 13th largest country in the world. Yet Bihar’s health indicators are consistently worse than India’s average. And despite accounting for nearly 9% of India’s population, not a single specialty health facility in Bihar is among the nearly 340 Indian hospitals accredited by the National Accreditation Board of Hospitals & Healthcare Providers.

The combination of a high population and a significant lack of quality specialty healthcare facilities has a profound negative impact on the people of Bihar. This is an onerous burden in a state that is already one of the five poorest in India, with a per capita income only half of that of the country as a whole.

Predictably, the poorest part of the population is hit hardest, as they typically lack financial means to travel outside the state to seek care at specialty private health facilities. So until recently, those who most needed these services simply went without. But fortunately, treatment prospects for Bihar’s residents have changed dramatically since the state government launched a public-private partnership (PPP) with a leading Indian health care provider, Medanta, which will develop and manage a 300-bed super-specialty hospital over the next three to four years in the capital city of Patna. The hospital will be expanded and will have a bed capacity of about 500.

Groundbreaking in every sense

Our team has advised on many PPPs that have helped improved the quality of life for people throughout the region. But it was especially inspiring for us to be able to shape a PPP that addresses a major Indian public health issue – the lack of advanced, high-quality healthcare facilities in one of the country’s poorest states. The project promotes the development of advanced facilities that many of us living in major cities like Delhi or Mumbai take for granted, such as cardiology, neurology, and nephrology units that include surgery facilities. This limits additional economic hardships on an already-poor population who once had to travel great distances for medical treatment.
The project is expected to provide direct access to better and advanced tertiary healthcare services to about 230,000 of Bihar’s people annually at affordable prices. It will mobilize about $40-45 million in private investment over the next three to four years.
This partnership was also built to address what is perhaps the greatest challenge for the people of Bihar: large out-of-pocket medical expenditures. Because a critical element of the PPP includes cashless treatment of poor patients – with the government of Bihar paying for care provided to those living below the poverty line – health services are financially and geographically within reach. The hospital will earmark 25% of the beds at Central Government Health Scheme (CGHS) rates, where Bihar’s government will refer extremely poor patients. The remaining beds will provide services paid for either by patients or through insurance.

Our team structured the PPP this way so the government of Bihar would receive an annual premium of about $500,000, which was competitively discovered through bidding, in addition to a small revenue share equal to 1% of the gross revenue. Both revenue streams will be deposited into an escrow account as a secured source of reimbursements for certain pre-identified low-income patients, ensuring sustainable care for poor patients.

Furthermore, there is no cash subsidy required from the government. Should the government wish to pay for more poor patients to be served, this can be done through an established mechanism for topping up the escrow account. This flexible structure – which ensures quality care for the state’s poorest citizens while providing an income stream for the government to finance healthcare for the people of Bihar – will have significant long-term benefits for the state and will reduce the disparity in healthcare the people of Bihar receive. In recognition of its scope and innovation, the project has been shortlisted as one of the top 10 healthcare deals globally from Partnership Awards (2016) – one of the leading awards in the PPP space globally. 

In other words, it’s just what the doctor ordered.


Pranav Mohan

Investment Officer, IFC

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