Financial Viability of Private Hospitals Operating Under India’s National Health Insurance Scheme Ayushman Bharat Pradhan Mantri-Jan Arogya Yojana (AB PM-JAY)

Background Private hospitals account for 46% of all hospitals empanelled in India’s national health insurance scheme and contribute to 54% of all the hospitalizations under it. However, insufficient package prices are often cited as a constraint to viable hospital operations. This study assesses the financial viability of establishing such hospitals at district level, with a focus on determining the break-even threshold by forecasting the financial trajectory of hospitals. Methods By utilizing primary data from 27 district hospitals across nine states in India on cost of providing healthcare services, a blend of bottom-up and top-down micro-costing methods was used to estimate financial cost across input resource categories, including land procurement, building construction, human resources, equipment, drugs, consumables, maintenance, and overheads. Revenue from inpatient services was estimated using healthcare provider payment rates under India’s largest tax-funded health insurance scheme, coupled with patient volume data stratified by distinct diseases across different specialties. Revenue projections from outpatient services were extrapolated as a fixed proportion of their inpatient counterparts. A 10-year evaluation framework was employed to forecast the hospital operations using revenue–expenditure perspective. Sensitivity analyses were undertaken to assess the extent of variations in the output owing to varying bed-occupancy levels and doctor-to-bed ratios. Results For a model 100-bed private hospital operating at district level, the average annual expenditure and revenue are projected to be at Indian Rupee (₹)85.27 million (US $1.03 million) and ₹104.36 million (US $1.26 million), respectively, for the initial 10 years. Human resources constitute the primary share (40%) of total expenditure, followed by spending on drugs and consumables (20%). A sequential evaluation of annual revenue and expenditure reveals that hospitals reach breakeven by their fourth operational year, subsequently transitioning into a profitable phase. Conclusions The study suggests a viable financial trajectory for private hospitals at district level, following the pricing structure of government-sponsored health insurance scheme.