The Surge of Private Healthcare in India: Pricing Challenges and Investment Boom, ETHealthworld

Bengaluru | Mumbai: Fix hospital room charges at the average tariffs of three-star hotels in metro cities, a parliamentary committee on health and family welfare recently said as part of its 361-page report on the affordability and accessibility of healthcare in India.

The panel, while acknowledging the wide variation in hospital charges across the country, stressed the need for better public health infrastructure, capping fees, and strengthening the cadre of medical specialists.

The report, in short, captures the mood of millions of Indians who often face financial distress for treatment at quality private healthcare, which has emerged as a crucial industry over the decades as the state-aided facilities remained relative stragglers or inaccessible.

Top private-sector hospital chains such as Apollo and Max Healthcare have, however, argued that blanket price caps on beds may stifle growth and investments.

The reasons for those views are not hard to find. In about three years, nearly 60 hospital-linked private equity deals have been signed for eye-popping values of ₹49,000 crore. Back in 1983, that would have been unthinkable. That year, Prathap Reddy, founder of Apollo Hospitals chain, came back to India from US and set up the first corporate hospital in Chennai 1983.

The Pioneer

Reddy broke much more than new ground. Doctors practised mostly through small clinics or as clusters of specialists. Privately-run hospitals were unknown as hospitals were not classified as an industry. For Dr Reddy, it was a battle to change the legislation.His objective was clear-widen access and affordability of quality healthcare. The young cardiologist pushed hard for a multispecialty hospital-all under one roof-to cater to the mounting demand.

Apollo’s scale-up success saw an avalanche of doctor-led hospitals across large cities and towns. According to the latest National Sample Survey data private hospitals account for nearly 58% of hospitalisations in rural India and 64.6% in urban centres.

“Most healthcare providers have become national providers. Demand-supply gap right from the time that Apollo became a corporate hospital chain, and many others came in, was built around the fact that India’s public healthcare can only grow at a certain pace,” says Vishal Bali, executive chairman of healthcare platform Asia Healthcare Holding (AHH).

For dozens of marquee global investors like AHH, India has turned into an irresistible hunting ground for healthcare enterprises. To name a few, Blackstone, KKR, Carlyle and TPG, have struck deals at valuations to salivate for.

Bhanu Prakash Kalmath SJ, healthcare partner at Grant Thornton says post-Covid, patients are prioritising quality of care and health outcomes.

“Private healthcare accounts for nearly 70% of surgeries in the country, while public healthcare has not been able to keep pace with the requirements of the larger population,” he adds.

PE Power Play

Currently, PE investors or global investment companies hold majority ownerships in top-tier hospital groups like Manipal Health, Sahyadri Hospital (via the deal with Manipal), Healthcare Global (HCG), Baby Memorial Hospital (BMH), and Star Hospitals, via private equity funds such as Temasek and KKR. The race for quicker and better returns has, however, made healthcare unaffordable to most of the population, aggravated by lack of insurance coverage, as highlighted by the parliamentary committee report.This trend coincided with a steady rise in average revenue per bed (ARPOB) for hospitals, a key metric that reflects strong growth of hospitals. According to Grant Thornton data, the industry average ARPOB of six major hospitals, including Max and Apollo, rose 11% to ₹56,520 in FY25 from ₹50,821 in FY23.

For higher RoIs, health experts say PE investors are unsparing and influence decisions in key management operations: how much to pay doctors, what technology should be deployed, what rates to be charged to patients, and where to invest for future expansions. As financial investors, the plans revolve around achieving a certain multiple and pass on the ownership to the next strategic or financial investor or seek a full or partial exit via a public listing.

Amid the churn, Temasek-controlled Manipal Hospitals stands as an example of that phenomena. It was recently listed but over the years, Manipal had changed multiple hands. It was first targeted by TPG in 2015, followed by the National Investment and Infrastructure Fund (NIIF). Temasek then bought out NIIF and part of TPG’s stake in 2023 for full control.

Public Listings

There are similar examples. Max Healthcare listed in 2020 following a corporate restructuring, with KKR holding nearly 52% stake. Fortis’s ownership contest played out after its original listing, culminating in IHH Healthcare’s 2018 acquisition. Narayana Hrudayalaya’s pre-IPO PE investors held a minority stake and partially exited at its 2015-16 listing.

From six until 2010, India currently has 16-17 listed hospitals or healthcare companies.