Public policies have single or multiple objectives. Policy for public-private partnerships (PPP) in medical education could be many: the desire to ensure quality education at affordable rates; helping the investor make profits; to show people symbols of development by a ‘happening’ state; rent seeking on contracts in these multi-crore projects and so on. The design of the policy framework indicates the policy objective that is being sought to be achieved.
An expansion of numbers
Three years ago, the Andhra Pradesh government expanded the number of medical colleges by six, taking the total to 17 in the government sector. There are another 19 in the private sector. The government is now seeking to add another 10 under the PPP mode. The total number of seats in all these colleges, when functional, is expected to be over 6,500. For these 10 new colleges, initiated by the Y.S. Jagan Mohan Reddy government, 835 acres of land have been acquired and the colleges are at different stages of development.
At the average rate of about ₹450 crore a college, the total project cost was estimated to be ₹4,500 crore, to be mobilised from the National Bank for Agriculture and Rural Development (NABARD), government and Government of India schemes. Each college was expected to have 150 seats attached to a 650-bed district hospital by suitably upgrading it. In normal course, government colleges provide subsidised education. But for ensuring fiscal sustainability, a three-tier fee structure was designed: 50% of total seats for ₹15,000 a year; 35% at ₹12 lakh and 15% earmarked for non-resident Indians at ₹20 lakh. The total revenue from fees could amount to ₹11 crore a batch a year, which means a total recovery of about ₹55 crore in the fifth year. In addition, these colleges would be eligible for another 28 post-graduate seats from the second year, going up to over 50. Post-graduate seats are at least three times more expensive.
In 2024, the new N. Chandrababu Naidu government engaged KPMG to prepare feasibility reports for the 11 medical colleges under a PPP mode that NITI Aayog is pushing vigorously. Under the PPP model, the entire land is proposed to be on a 33-year lease, extendable for another 33 years at ₹100 an acre, along with the district hospital; provide viability funding of 25% of the estimated project cost; empanel the hospital under the State health insurance programme and obtain the National Medical Commission’s and other statutory clearances; and ensure 70% bed occupancy. In return, the investor is expected to complete the civil works within two years; provide free outpatient and earmark 70% of the beds for free inpatient treatment for “special” patients or those referred to by the government to be reimbursed at package rates of the Ayushman Bharat health insurance scheme. Commercial rates can be applicable for the remaining 30% beds. To ensure time-bound construction, the government has to depute a full-time engineer at the site. Two rooms, measuring 500 square feet each, would also be provided for free to set up a Jan Aushadhi pharmacy and for medico-legal work.
The need for evidence-based assessment
There have been protests and much disquiet over the proposed policy, with the allegation of “privatisatising” what is envisioned to be a public asset. There is apprehension that middle class and poor students would lose out on opportunities to study, lose job opportunities as the private investor would be under no obligation to adhere to quotas for recruitment, and pay out of pocket for services that are currently free.
The contract seems faulty as the risks do not appear to be evenly shared. The risk of delayed payments, earmarking virtually the whole hospital — 70% of the beds — for patients to be referred by the government and treated at Ayushman Bharat rates and all outpatient treatment free, may only lead to incentivising the private investor to game the system by charging under the table capitation fees; resort to shortcuts in appointing the full complement of faculty (who are also very difficult to find); make compromises on the quality of care, and deny care, on various pretexts, so as to divert the earmarked beds on the plea that demand is low. The risk is greater for the government in case the investor fails, as the only remedy is the judiciary which in turn could take several years to adjudicate.
The idea of giving away all control over the district hospital, and for 66 years, needs to be reconsidered and better justified. Evidence shows that with comprehensive effective primary care, 30% of hospitalisation can be averted, besides the fact that with advancing technology, the list of day surgeries not requiring hospitalisation is increasing.
Technology is rapidly disrupting known delivery systems and arrangements. Thus, there is a need for a more thorough evidence-based assessment, keeping in view the shifts in disease burden, demographic profile and technology, to justify the need for 650 beds uniformly across the State.
Besides, the PPP arrangement at the district level only fragments the public health system and in the long run, harms its organic development. System efficiencies need vertical integration of primary, secondary and tertiary care to ensure a strong referral system and the smooth patient pathways required for continuum of care. This is central to coping with chronic diseases and good patient management.
Inefficiencies in the system
The health system in Andhra Pradesh has several inefficiencies due to inadequate infrastructure in turn linked to chronic underfunding and a large number of vacancies, particularly among specialists and in rural areas. The worry is that the already critical situation of vacancies in rural areas and government facilities will be further exacerbated if medical education is commercialised (as evidence shows that students after paying huge fees are more inclined to go abroad, work in the private sector and live in urban cities). Therefore, it is necessary for the government to invest in ensuring doctors and specialists at subsidised rates (instead of the present model of selling 50% seats) so that the government can build a pool of doctors who are willing to work in public health, in rural areas and in public hospitals.
Given these serious concerns, opting for the PPP route on grounds of financial stringency seems facetious as there are several options available to raise capital. The PPP route is also cause for concern as privatisation requires a strong state with institutional capacity to enforce laws and contracts. Andhra Pradesh, like the rest of the country, does not have that capacity. The earlier Telugu Desam Party regime fragmented the primary health-care system with almost half a dozen contracts. Poor enforcement resulted in chaos. Andhra Pradesh has not even been able to enforce the relatively benign Clinical Establishments (Registration and Regulation) Act. Given that the state in India is soft, it is unwise to get into the privatisation of public assets in critical areas such as health care that directly impact the lives of the poor.
Medical education is in a crisis and is also rapidly changing. At the current rate of the thoughtless expansion of colleges without faculty, the day may not be far when many medical colleges may have to shut down as engineering colleges did after the first flush of the IT boom. Quality of education and equitable access are more serious issues to address than opening medical colleges. The PPP model as a means of delivering welfare does not inspire confidence.
Kannuru Sujatha Rao is former Union Health Secretary, Government of India
Published – December 27, 2025 12:16 am IST
