Let Managers Manage: Raising Indian Public Hospital Performance

This is the first post in our series, “Raising the Bar for Indian Healthcare”, which highlights the challenges and opportunities facing India’s healthcare delivery system. In this post, we discuss considerations for raising public hospital performance through greater autonomy.

The recent rollout of PM-JAY – a government-subsidized health insurance scheme that aims to provide inpatient coverage up to 500,000 INR per year for India’s poorest families – signals the trajectory of India’s healthcare system. Building on the experiences of earlier state and centrally-sponsored insurance schemes, it solidifies the government’s expanded role as a purchaser of healthcare services. For India’s public sector hospitals, which are accustomed to mainly supply-side financing through line item budgets, this expansion of insurance revenue, together with the separation of healthcare financing from provision, will bring new opportunities, as well as challenges. Specifically, public hospitals will need greater financial and managerial autonomy if they are to respond to the incentives embedded in payment systems set by purchasers to control costs and provide high-quality services (see Chapter 12 of this useful resource for more information). The government’s 2018 New Strategy for India @75 calls for granting some autonomy to public facilities to enable effective use of claims money generated under PM-JAY to improve the care they provide. How India will guide and implement greater autonomy in public hospitals remains an open question.

Indian public hospitals have much to gain from new forms of governance and management. Most are directly operated by state health departments, and as a result, hospital managers have little decision-making authority over inputs or day-to-day operations, and political interference in human resource management is rife. Emerging evidence suggests that Indian hospitals are poorly managed, especially publicly-run facilities. Under these conditions, it is difficult to implement changes in support of quality and efficiency improvements. For both purchasers and patients, the result is often low-value care.  

Most successful autonomy-oriented efforts in India to date appear to have occurred in other sectors (e.g., Delhi Metro Rail Corporation, DMRC). Yet, recent evaluations have shed light on some highly successful healthcare examples such as GVK Emergency Management Research Institute (EMRI), which operates emergency transport services, and the Tamil Nadu Medical Services Corporation (TNMSC), which manages the ordering, testing and distribution of drugs and  medical supplies throughout the state of Tamil Nadu. India also has a long history of experimenting with autonomous hospitals. These have taken different legal forms, including legislated “autonomous” facilities at the central and state levels (e.g., All India Institute of Medical Sciences (AIIMS), Indira Gandhi Institute of Medical Sciences in Patna), and more recently, public-private partnerships (e.g., Mumbai Municipal Hospital).

Given these experiences, reforms that increase the autonomy of public hospitals have considerable potential in India – assuming accountability mechanisms are ratcheted up simultaneously to keep autonomous hospitals aligned with public priorities. Recognizing this, government has initiated steps in this direction. For example, under PM-JAY and some state-sponsored insurance schemes, public hospitals are allowed to retain payments received through insurance claims according to formulas set by the schemes.

Yet, there is a need for caution. Our extensive review of hospital autonomy experiences in India and globally revealed numerous possible pitfalls, as well as factors for success. What came through most clearly, however, was the need to ground any autonomy-oriented reform in the local (e.g., state) context, with strong understanding of enabling (and disabling) factors in the broader financial, institutional and political environment. This is a challenge in India, as past and ongoing hospital autonomy initiatives have not been assessed. Even for existing legally “autonomous” hospitals, little is known about effective decision-making authority, managerial capacity, performance or lessons learned.

 With limited data or information, it will be difficult for government to develop truly evidence-based policies or programs. There is a need to focus efforts on gathering critical evidence on existing autonomy initiatives before launching new ones, to support learning and continual improvement over time.