Hospitals to be an industry under Ayushman Bharat

The present government has announced plans to make hospitals into an “industry” under the Ayushman Bharat health insurance scheme and also give help to private hospitals such as land and funding. The government has issued broad guidelines for private investments into setting up hospitals in Tier 2 and Tier 3 cities. Three categories of hospitals have been defined under these guidelines:

  • Model I: Doctor owner (30-50 beds)
  • Model II: Doctor manager partnership-Multispecialty (100 beds)
  • Model III: Multispecialty (100 or more beds)

The government will incentivise setting up of private hospitals like allotting unencumbered land to private hospitals on lease or through bidding, providing funding for projects which are deemed unviable by the private sector and speeding up clearances through special windows with specific timelines, compulsory empanelment of the hospitals for PMJAY and other Government schemes and ensure timely payments for services.

In order for the government to provide this funding to private hospitals under ‘Viability Gap Funding’ (VGF), the hospitals would now be classified as an “industry”.

VGF is essentially a capital subsidy, which the government can provide to project bidders and often, the bidder who asks for the lowest gap funding may clinch the project. The government will provide VGF for private hospitals up to 40% of the total cost of the project, and will also provide gap funding of up to 50% of tax on capital cost.

The private sector has the responsibility to “build, design, finance, manage, operate and maintain with quality standards” these hospitals.

In November last year, the Centre sent a note to all states asking them to sanction loans at agricultural rates of interest and provide electricity at residential rates, to these private hospitals. They want private hospitals to come up in Tier 2 and Tier 3 cities.

In July, the NITI Aayog proposed a model to all states to privatise urban health care – offering private players the chance to capture beds and patients who come to government district hospitals – for the treatment of non-communicable diseases. Private players were being offered this access for a 30 year lease.

The NITI Aayog has also framed guidelines for this PPP model in district hospitals.

So far, private hospitals and medical colleges have worked largely on a “trust model”, wherein a trust owns the hospital or a company manages the hospital via the trust.

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