The demand for private medical care providers is likely to show consistent growth for another decade in India. The role of the private sector is likely to increase as the government is constrained by its fiscal position and the increasing preference for private medical care.

According to the latest study conducted by INGRES (ICRA Information, Grading and Research Service), the current scenario of demand exceeding supply is likely to continue at least over the next decade. The impact of the emergence of private insurers will depend on the number of insured but could cause structural changes amongst the providers.

ICRA's analysis shows that decreasing hospital profitability in the short term usually follows the emergence of managed care. Over the long term, the dynamics of managed care are known to have led to decreased utilization of hospitals, both in terms of admissions and average length of hospital stay, and to a shift in demand towards outpatient care.

The key trends that are likely to alter the demand for medical care services, as highlighted by ICRA include changing demographic profile (towards a higher proportion of the aged), epidemiological transition towards non-communicable diseases, and increasing concerns about the quality of care among users. On the supply side, quite a few investor-owned hospitals have come up, while the number of foreign alliances have increased, private health insurers are likely to enter the market and medical care providers are using information technology to improve the reach of their services, the study said.

Even when the future of the private sector is bright, there remains an urgent need to build up more patient trust towards the private establishments "The necessity, appropriateness and efficiency of care delivered by medical care facilities are increasingly under question. There is a widespread belief that most facilities "overcharge" by way of unnecessary diagnostic tests and by stretching the patient's length of stay. The problem is exacerbated by lack of regulation and institutional pressure to lower "cost per illness episode", the study noted.

ICRA analysis pointed towards the need for some form of quality checking mechanism, either by way of licensing or by accreditation. There has been increasing interest in the latter with a number of bodies having announced plans for developing an accreditation service. Further, there are indications that the government, both at the centre and at the state levels, is in the process of developing suitable legislation to ensure standards, it said.

The medical care infrastructure in India includes over half a million doctors, more than 15,000 hospitals and over 900,000 beds. The government runs a multi-tiered, partially integrated medical care system. The private and voluntary sector is largely fragmented and is dominated by the nursing home segment. Despite a relatively extensive MCI in the public sector, its utilization has declined over time and accounts for 43.8 per cent of all hospitalization cases in rural India and 43.1 per cent in urban India. Even in the outpatient medical care segment, the private sector dominates. The inadequacy of resources in government-run medical care infrastructure has led to severe under-utilization of its facilities (as much as 50 per cent in rural areas) and shifted the demand towards private providers.

While considerable progress has been made in improving the health status of the Indian population, the current status still compares poorly with that of many other developing countries. This is ironical considering that India spends a comparatively large share of its GDP on health. The country's policy towards health has traditionally identified provision of primary healthcare as the state's responsibility and encouraged establishment of a countrywide, State-run primary care infrastructure. The role of the central government has been limited to family welfare programmes and design of disease control programmes. The policy has traditionally remained silent on the role of the private sector in the provision of medical care. Notwithstanding this, the private and voluntary medical care sectors have developed to meet the increasing demand for medical care services, it said.

The study reviews the current health status of the Indian population, the size of the Indian healthcare spending, the government's approach and policies towards the sector and the size and types of medical care infrastructure in India. Besides, the report also highlights the key trends in the sector, the outlook on demand, and the structural and financial impact of the emergence of private health insurers in the country.