A recent commentary by startup entrepreneur Deepak Abbot has kicked off a rather uncomfortable but nevertheless imperative discussion – to what extent has India’s private healthcare sector shifted or progressed from ‘care’ to ‘revenue’maximisation?
Referring to the profit after taxes (PAT) of “India’s largest hospital chains,” namely Fortis Healthcare (₹1,588 crores), Max Healthcare (₹1,392 crores), Apollo Hospitals (₹1,446 crores), and Medanta (₹956 crores), “Drawing attention to such figures is essential,” writes Patel, “to underscore that corporate healthcare in India has made an undeniable impact from a financial point of view.”
From a corporate perspective, this is no surprise. Large hospital chains are scaled enterprises that optimize tertiary and quaternary care, premium-level diagnostics, trust/brand, medical insurance penetration, and economies of scale. Industry reports and corporate disclosures demonstrate unequivocally that inpatient offerings of hospital chains represent the profit engine, and outpatient departments, for all intents and purposes, represent sales acquisition points and do not qualify as profit-driving business units in their own right. Another industry accepted “truth,” of course, is that outpatient department hospital services are conducted at unsurplus-margin activity levels, and consultation fees are paid through to the physicians as part of their fully or semi-variable compensation packages.
However, this very economic framework is called into question by Abbot. When doctors’ payment is directly or indirectly tied to admission numbers, procedure numbers, and occupancy ratios, there is every possibility that medical decision-making is tied to financial incentives. Under such conditions, hospitals are less like health care providers and more like capacity utilization enterprises where unoccupied hospital beds mean lost money.
It does not necessarily indicate malpractice. The majority of physicians continue to function in an honest, compassionate, and committed fashion to patient care. However, incentive systems do make a difference. Five decades of research in health economics have demonstrated that incentive systems that are tied to or offer financial rewards for each service provided or fees for service will lead to increases in utilization, sometimes even when the general health needs of the population indicate otherwise. The private hospital sector in India is also vulnerable to this phenomenon.
Thus, the hospital management perspective would see the need for high margins to finance infrastructure development in India being capital-intensive in terms of technological development and the servicing of debts. On the same note, they also function as centers of excellence in terms of hiring the best brains in the world.
Nonetheless, the ethical conflict is ever-present. “Historically, the practice of medicine has been a trusted profession, not a sales process. When the physician is perceived, either explicitly or implicitly, as a revenue-generating instrument, the ethical bearings of the medical practice are jeopardized. It is a sad state of affairs,” observes Abbot, citing a sentiment that is increasingly felt by entrepreneurs, as well as physicians.
The wider impacts have systemic implications. The healthcare system within India is trending towards a binary structure: it has large profitable corporate hospitals on one side and financially vulnerable smaller healthcare facilities on the other. In the absence of careful reformation and change, based on proper pricing structures and investing in better ethical and financial models for outpatient departments, there could be an increased trust deficit between customers and healthcare providers.
Again, profit in healthcare does not inherently equate to being unethical. Where profit in healthcare becomes morally troublesome is when it loses its relationship with value for patients. This should be understood in terms of Abbot’s critique being not an outright attack upon privatized healthcare, still sensing a return of its central balance. The future of the Indian healthcare industry will depend on its ability to remain financially sustainable without making healthcare a commodity that is valued merely on the parameters of margins and occupancy.
Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh).
MBA in Healthcare & Hospital Management (BITS, Pilani),
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru).
Senior Professor and former Head,
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery.
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India.
My Vision: I don’t want to be a genius. I want to be a person with a bundle of experience.
My Mission: Help others achieve their life’s objectives in my presence or absence!
My Values: Creating value for others.
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Dear Dr. Prahlada N. B Sir,
Your article on Indian healthcare's monetization has struck a chord, highlighting the delicate balance between financial sustainability and patient care. The profits of major hospital chains like Fortis, Max, Apollo, and Medanta raise concerns about prioritizing revenue over care. Incentive structures tied to admission numbers or procedures can lead to unnecessary treatments, eroding patient trust.
The issue isn't about vilifying healthcare providers, but ensuring the system prioritizes patients' best interests. India's healthcare system is becoming binary: corporate hospitals vs. financially vulnerable smaller facilities. To address this, we need proper pricing structures, ethical financial models, and transparency.
Profit in healthcare isn't inherently bad, but it should align with patient value, not just margins and occupancy. As you said, ethics should come above monetary gains always.
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