The previous YSR Congress government in Andhra Pradesh had sanctioned 17 new medical colleges in 2020–21 at an estimated investment of Rs 8,480 crore. Six colleges began operations between 2023–24 and 2024–25, but the remaining 11—proposed at Adoni, Madanapalli, Markapuram, Pulivendula, Penugonda, Palakollu, Amalapuram, Anakapalli, Bapatla, and Parvathipuram—remained incomplete even four years later. The current TDP government decided to adopt the PPP model, to leverage private sector efficiencies, reduce the financial burden on the state exchequer and speed up the process of execution and grounding of these projects.
In Phase 1 of the PPP model, the current Andhra Pradesh government has selected four districts—Pulivendula, Madanapalle, Markapur, and Adoni—where new medical colleges will be developed under the Design-Build-Finance-Operate-Transfer (DBFOT) framework wherein Projects are awarded on a 33-year lease, with an option to extend for another 33 years.
Under this framework, a private company—the concessionaire—will design the medical colleges, build the infrastructure, finance both construction and operations, operate and manage the facilities for a fixed period, and finally, transfer the fully functional medical college & hospital back to the government.
Each hospital associated with these medical colleges will be upgraded to 625 beds, and a new medical college will be established in each location, having 150 undergraduate seats and 24 postgraduate seats. Project costs are estimated between Rs 410 crore and Rs 446 crore per college (along with hospital attached to it), with plots ranging from 50 to 95 acres.
Selected private partners through a competitive bidding process will finance, operate, and manage these medical colleges & hospitals. The colleges are expected to become fully operational within a year, and the concessionaires will assume operation and maintenance responsibilities for up to two years, or until the new 625-bed hospitals are fully functional, whichever is earlier.
The State government will provide land on nominal lease charges of Rs 100 per acre per year, along with development rights to the concessionaires. It will also facilitate capital grants, approvals, and support in obtaining accreditation from the National Medical Commission. The State government said it will set tariffs for free and paid services, monitor quality, and provide overall oversight to ensure public healthcare objectives are met.
At the end of the concession term, all facilities will be returned to the government, ensuring the public (government) retains long-term ownership, while benefiting from the private sector’s efficiency during the operational phase.
The state government also said that it will ensure that at these hospitals built under PPP Model outpatient services remain completely free, including doctor consultations, medical tests, and diagnostics. For people below the poverty line, all inpatient services remain fully free. 70% of inpatient beds would be reserved for government-referred patients under state and central health insurance schemes (e.g., Ayushman Bharat package rates). Even for others, the state government said it has established reimbursement mechanisms through health insurance schemes, such as the NTR Vaidya Seva, which is similar to the Ayushman Bharat scheme. This ensures that private partners recover their costs without charging patients directly. Telemedicine, AI-assisted diagnostics, and digital health records are planned in these hospitals as part of quality and efficiency commitments.
In due course AP State government wants to establish Multi speciality hospitals with 100–300 beds in each Assembly constituency using PPP. These would be developed with private capital and managed jointly.
AP State government is also planning to create Special Newborn Care Units (SNCUs) under PPP, with government grant support. These units are targeted at strengthening neonatal care in district and sub-district hospitals.
Some new dialysis centres are also planned to be set up under a PPP model at Community Health Centre locations.
Several Cath labs and CT scanners at government hospitals will be introduced via PPP arrangements to enhance patient diagnostics and critical care capability.
Fee structure for medical education under the PPP Model
The AP State government said fifty per cent of undergraduate seats will be reserved for government quota students, who come after clearing the NEET-UG entrance exam and who pay regulated fees. The remaining seats will be divided into management and NRI quotas, with fees regulated by the state’s regulatory committee. For postgraduate courses, 12 out of 24 seats will be reserved for government students. Thus, the state government wants to ensure there is no increase in fees due to private participation.
The PPP model
Under PPP Model the government retains ownership of the medical colleges and hospitals, and the private entities only invest in building and operating them for a fixed period under the model, collect the revenues to recover their investment with certain element of profit. The state continues to control academics, admission policies, and healthcare standards, ensuring public interest and quality are maintained. The main goal of PPP is to reduce financial burden to the government and improve efficiency, not to transfer full control to private hands.
Several other states have implemented PPP models in healthcare. News reports indicate Uttar Pradesh is developing 13 medical colleges, Jharkhand has implemented [the PPP model] at four, and Uttarakhand has developed one college with a hospital [under the PPP model].
The core objective of PPP Models in Healthcare is to accelerate healthcare reforms, optimise resource utilisation, and ensure more equitable access to quality healthcare services.
Support from the Union government
PPP health projects are eligible for substantial assistance from the Union government under the Viability Gap Funding scheme. Under this scheme, funding support can rise up to 80 per cent of the total project cost for the initial development (pilot projects) while operations expenditure support can reach up to 50 per cent for the first five years in certain cases, with the Centre and the state paying equal shares.
The India Infrastructure Project Development Fund (IIPDF)—a Centre-run scheme supports states and public agencies in preparing and structuring infrastructure projects, particularly PPP initiatives.
States have been advised to set up internal units (dedicated PPP Cells) for coordination with the Union Health Ministry. Currently PPPs are operational for dialysis centers, diagnostics, medical colleges, and mobile medical units.
There is an established framework with guidance from NITI Aayog, the Union health ministry, and the department of economic affairs for these PPP Models in Healthcare to ensure public service is maintained while leveraging the private sector’s efficiency.
Successful hospital PPPs in India include Kasturba Medical College (KMC), Mangalore, partnering with district hospitals for training, Odisha’s VGF projects for new facilities (Angul, Jharsuguda and Bhadrak) under DBFOT, and Yeshasvini Scheme by Narayana Hrudayalaya, Karnataka for farmer healthcare (cooperative and insurance based model), showcasing models from long-term integration to viability gap funding and cooperative insurance. These models leverage private expertise for infrastructure, operations, and service delivery, addressing gaps in public healthcare access, though challenges like monitoring and affordability persist.
In order to extend the outreach and the effectiveness of these medical colleges and hospitals under PPP Model proposed by the Andhra Pradesh government, the author suggests the following additional measures:
Preference may to given to the students with rural background and those who are willing to serve in the villages as doctors for admission in the medical colleges. Suitable guidelines may be laid down for the minimum tenure of service as doctors in rural areas.
The hospitals may extend their services to all the people (i.e., in addition to people BPL and those covered under health insurance schemes) and the AP State government may fix a price cap in line with the CGHS (Central Government Health Scheme) covering the comprehensive medical care. This will address the twin problems of the financial viability of the PPP models and affordability of health care services to the people. Needless to say, that both the private sector and the government, will have joint responsibility to ensure that quality in healthcare is maintained under these PPP Models. Social audit may be introduced to rope in the involvement of the local communities and improve the public accountability of these PPP Models.
