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India’s private healthcare sector grew fast, attracted big corporate money and “star” clinicians, and now operates on perverse financial incentives (fee-for-service, packages, referrals, TPAs) that push up prices, encourage unnecessary procedures, and shift risk and cost onto patients — while public spending remains low and out-of-pocket payments stay very high. The result: huge profits for some, medical tourism advantages, and real financial ruin for many middle-class households. Below I explain how this happened, give evidence and examples (including the blood-unit charge issue), and end with practical fixes.

How we got here — a quick history of the shift

Since the 1990s India has seen steady privatisation and corporatisation of hospitals. Corporate chains, private equity and high-net-worth investors moved into healthcare, building tertiary hospitals in cities, promoting high-margin specialties (cardiology, orthopaedics, oncology) and “star doctors.” That reshaped incentives from public-service medicine toward revenue maximisation and shareholder returns. Academic analyses and reporting show this financialisation reshaping clinical practice and hospital strategy.

The measurable harm: people still pay most health bills themselves

Despite schemes like Ayushman Bharat, households still bear a large share of healthcare spending. National Health Accounts put household out-of-pocket expenditure at roughly half of total health spending — a persistent source of catastrophic spending and impoverishment for millions. That structural imbalance means private hospitals can charge directly, and patients pay.

The mechanics of “looting” — how money is extracted from patients

Fee-for-service + star-doctor premium = higher bills.
When hospitals are paid per test, procedure or bed-day, each service generates revenue. Promoting “advanced procedures” and hiring famous clinicians allow hospitals to charge premium fees and justify expensive packages. Studies and field reports document hospitals charging higher fees to cover costs of marketing, equipment and star consultants.
Unnecessary procedures and referral kickbacks.
Where financial incentives dominate, there are documented cases of overuse (for example, unnecessary stents or surgeries) and of referral payments between providers. Investigative reports and interviews have exposed kickback practices in some specialties — not universal, but enough to erode trust and increase procedure volumes.
Opaque “package” pricing that masks real costs.
Many private hospitals sell bundled “packages” for surgeries (e.g., a knee replacement package). In theory these are meant to give predictability. In practice packages are set high to cover worst-case use of ICU, implants, medicines and “extras” — and hospitals can then add non-package add-ons, diagnostics, doctor fees and hospital-level surcharges. Patients often lack a way to compare or challenge these charges.
Ancillary charges (including blood, consumables, tests) are profit centres.
Items like blood units, platelets, proprietary implants, and high-end consumables often carry big markups. The public outcry over private hospitals charging thousands for “arranging” blood or processing is precisely this — and the government has had to clarify that only processing charges should be levied in many cases. Still, in practice patients report being billed ₹3,000–₹8,000 per unit or more when no donor is available.
Marketing, real estate and corporate overhead get passed to patients.
Building a modern tertiary hospital in an expensive city, advertising, paying commission to agents, and servicing investor expectations — all these costs are amortised by charging patients more.

Why doctors sometimes push procedures (and why some feel pressured)

The sector has even produced billionaires, underscoring the profitability of the model, but at what cost, from when Doctors become party to blood money!

Economic dependence & incentives: In corporate settings, consultants may be on productivity-linked contracts, or dependent on hospital referrals. That creates pressure to generate revenue through procedures.
Referral networks & informal payments: Longstanding networks and sometimes unethical referral practices mean surgeons receive a steady flow of cases — and a clinician who resists may find themselves sidelined economically. Investigations have documented such referral payments in some specialties.
Clinical uncertainty + defensive medicine: When standards are weak, doctors may order more tests or interventions “to be safe” or because institutional protocols favour intervention.
Not all doctors participate: Many clinicians are uncomfortable with over-treatment, but systemic incentives and employment conditions in some private hospitals can limit their autonomy.

Insurance, TPAs and the cashless paradox

Cashless is complex and fragile. Third-party administrators (TPAs) and insurers run pre-authorisation, audits and claim reviews. Hospitals complain of low package rates, delayed reimbursements and frequent claim rejections; insurers complain of overbilling and fraud. When disputes arise, hospitals may suspend cashless services or demand reimbursement — that leaves patients paying upfront or being denied access to empanelled hospitals. Recent reporting shows hospital empanelment under public schemes has dipped because of these disputes.
Package rates vs real costs: Governments and insurers set package/case rates to limit costs. Hospitals say rates are too low to cover high-end tertiary care, and withdraw. Patients suffer because they either pay out-of-pocket or forego treatment.

Why costs are rising — the main drivers

Low public health spending. When public systems underperform or are underfunded, citizens turn to expensive private care.
High out-of-pocket share (price transfer). Households pay directly for care; private hospitals can therefore charge market rates.
Expensive devices and implants. Many implants and single-use devices are imported or patented and expensive, and hospitals mark them up.
Urban land, infrastructure and staffing costs. Building big hospitals in metros is capital-intensive. Those capital costs are recovered via fees.
Regulatory gaps + weak price transparency. Lack of enforceable, standardised price lists and poor billing transparency lets variable pricing flourish. PMC

The human cost: poverty and medical bankruptcy

Because households pay so much themselves, expensive hospitalisations push families into debt. The system extracts wealth from the middle class and poor while enriching parts of the corporate health sector. This is the central moral problem: the system can make global profits via medical tourism and high-margin care, while failing to protect ordinary citizens from catastrophic bills.

The blood-unit example (concrete, recent illustration)

There have been frequent reports of private hospitals charging ₹3,000–₹8,000 per unit when no donor is available; in response, regulators and the Union government have clarified that hospitals/blood banks should only levy reasonable processing charges, and excessive overcharging has been fined in regional cases. Despite guidance, enforcement is uneven and patients still face sharp bills in emergencies.

Medical tourism: Can it be the answer for the profitability of Healthcare?

High-end private hospitals profit from foreign patients and high-margin specialties (cosmetic surgery, complex cardiac care). That attracts investment and builds capacity — but the same advanced facilities become expensive for domestic patients, producing a dual market: medical tourism revenue on one hand and costly care that middle-class Indians must still shoulder on the other.

What needs to change — practical reforms (short and long term)

Short-to-medium term

Transparent billing & standardised price lists. Mandate item-wise bills and publish standard package components so patients can compare.
Tighten rules on referral fees and enforce anti-kickback laws. Stronger policing, whistleblower protection and fast-track enforcement against corrupt referral practices.
Regulate ancillary charges (blood, consumables) with maximum allowable processing fees. Make violations criminal/financially punishable and public.
Speed up insurer reimbursements and improve grievance redressal. Faster TPA/insurer payments and independent arbitration to prevent hospital suspensions of cashless services.

Longer term

Raise public health spending and strengthen public hospitals (reduce reliance on private sector for essential tertiary care).
Universal, comprehensive coverage with proper provider rates — expand public funding that fairly reimburses quality care rather than forcing people to choose between money and health. Evidence shows PFHIs can cover many but need robust design and provider engagement.
Clinical governance and guidelines. National standard treatment guidelines and audit of high-variation procedures would reduce unnecessary interventions.
Capitals & anti-trust checks. Oversight of mergers and acquisitions in healthcare to prevent monopolistic price setting.

The current model rewards procedures, packages and high-end care — not population health or affordability. That’s why medical tourism and corporate hospitals can boom while ordinary families suffer catastrophic bills. Fixing this requires both stronger regulation and a renewed public investment in accessible care. Policymakers, professional bodies (medical associations), payers (insurers/TPAs), and patient groups all have roles to play — and public pressure on transparency and enforcement can make a difference quickly in areas like blood pricing and opaque packages.