Panel seeks review of FDI in private hospitals, warns of aggressive corporatisation, rising healthcare costs
Foreign capital should be encouraged in the manufacture of medical devices, consumables and specialised medicines for rare diseases, while its application in the direct operation and acquisition of hospitals needs greater scrutiny, the report by the Parliamentary Standing Committee on Health and Family Welfare says
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Context
A parliamentary committee on Health and Family Welfare has recommended a review of Foreign Direct Investment (FDI) limits in private hospitals. The committee expressed concerns that 'aggressive corporatisation' and the influx of foreign capital could lead to increased healthcare costs, undermining the affordability of medical care in India.
UPSC Perspectives
Governance
The parliamentary committee report highlights a classic governance dilemma: balancing private sector investment with public welfare. The recommendation to review FDI limits (the maximum percentage of foreign ownership allowed in a sector) in private hospitals points to concerns about the corporatisation of healthcare. The committee argues that while private investment is needed, it shouldn't transform a crucial public service into a 'purely capitalistic enterprise'. To address this, the committee suggests a robust public healthcare system to act as a market regulator, exerting competitive pressure to lower costs. They also recommend establishing autonomous public multi-speciality hospitals in every revenue division and increasing the mandatory reservation of beds for marginalized groups, such as those covered by the (AB-PMJAY), from 10% to 20%.
Economic
The economic implications of FDI in healthcare are significant. Currently, India allows 100% FDI under the automatic route for greenfield (new) healthcare projects and 100% under the government route for brownfield (existing) projects. The committee's concern is that foreign capital is driving the acquisition of mid-sized hospitals, leading to market consolidation and potentially higher prices. They propose a strategic shift: redirecting foreign investment towards domestic manufacturing of medical devices and pharmaceuticals rather than hospital operations. To encourage private investment in underserved areas (tier-2, tier-3 cities, and rural areas), the committee suggests fiscal incentives like tax holidays, soft loans, and subsidized land. They also advocate for cross-subsidisation, where revenue from higher-paying patients subsidizes care for poorer patients, ensuring equitable access.
Social
The social aspect of this issue centers on the affordability and accessibility of healthcare, a critical component of the Right to Health implicitly recognized under of the Constitution. The committee's data reveals a stark disparity: the average cost of hospitalization in private hospitals is ₹50,508, compared to ₹6,631 in government hospitals, according to the . This widening public-private cost gap disproportionately affects vulnerable populations. The call for mechanisms to standardize and cap costs for essential treatments, diagnostics, and routine procedures aims to protect patients from exorbitant out-of-pocket expenditure. Furthermore, the recommendation for hospital-level ethics committees to examine professional fees underscores the need for greater accountability and transparency in private healthcare delivery.