Motivation, and establishment of private health care institutions

Private HCIs can be broadly divided into (a) forprofits and (b) nonprofits. Forprofits include proprietary and corporate HCIs. There are important differences between proprietary and corporate HCIs. Proprietary HCIs are usually single owner, physician practice facilities or joint partnership of physicians. Life span of proprietary hospital is usually linked to the professional career of their physician founder. Some of these may change to corporate or nonprofit hospitals. Proprietary hospitals usually have lower assets per bed. Corporate hospitals tend to remain in business for longer terms and are usually of bigger size. Corporate hospitals grew in the US during a period of liberal reimbursement by government through the Medicare and Medicaid programs. As the reimbursement climate changed there was a decline in corporate hospitals. Nonprofits play a major role in healthcare delivery in the US. Majority of HCIs in most economically developed countries are either in the public or nonprofit sector. Major advantage of forprofit health care institutions is their quick response to changes in demand. Hence a small complement of forprofit health care institutions can be useful to ensure responsiveness of the health system changes in demand for healthcare services.

A glaring gap in India is the near absence of nonprofit health care institutions. No doubt there are a some charitable and nonprofit health care institutions in various parts of the country. But their numbers and size is too small compared to the overall size of the health sector. There appears to be a decline in building of nonprofit healthcare facilities in AP. This is a disturbing trend. It will be desirable to encourage development of nonprofit HCIs in the long run. This is best achieved through social movements and by building up awareness among community leaders. Policies to encourage nonprofit healthcare institutions should be accompanied by streamlining of the general regulatory environment for nonprofit organisations. This is required to minimise the risk of misuse of public funds.

Growth of private forprofit HCIs in AP started during the 1970s and has continued to show an increasing trend since then. A large number of private diagnostic facilities have also appeared during this period. Almost all (99%) of solo clinics, 84% of small hospitals and 87% of diagnostic facilities in the sample were proprietary. Only 20% of big hospitals were proprietary. Another 30% of big hospitals were corporate and the rest 50% were trust (nonprofit) hospitals. The number of corporate hospitals in AP is currently very few. At present the private forprofit HCIs largely consist of proprietary firms. The private forprofit HCIs are definitely experiencing a period of growth in many parts of the state.