To address shortage of qualified doctors and bridge gap in medical education, NITI Aayog has come out with the public-private partnership model to link new or existing private medical colleges with a functional district hospital to augment medical seats.
In its draft 'Model Concession Agreement for Setting Up Medical Colleges Under the Public Private Partnership' guideline document, the government think-tank has developed a concession agreement based on international best practices and similar PPP arrangements that are operative in Gujarat and Karnataka. Some of the unique aspects of this model concession are:
- This model concession modifies the typical DBFOT model as the greenfield part of the project, i.e. the medical college would not be transferred back to the authority upon the culmination of the concession period. The land for the medical college may be procured by the concessionaire itself or provided by the authority through a separate lease agreement (on a case to case basis), for a period beyond the concession agreement. Only the district hospital would be transferred back to the authority upon the expiry or termination of the concession.
- A major incentive for the concessionaire in setting up the medical college is the affiliation with the district hospital. The hospital would continue to remain in the ownership of the authority granting the concession. Though there is no exclusivity proposed in the concession agreement for affiliation with the concerned district hospital beyond the concession period, given the stipulations under the MCI/ NMC regulations, it would be difficult for the concessionaire to obtain affiliation or seek affiliation of any other district hospital.
- The model concession provides maximum flexibility with respect to the development, operation and maintenance of the medical college. All revenues from the medical college are not required to be shared with the authority. This flexibility and freedom will surely spark a lot of interest from private players. The model concession does allow for an option where a revenue share is provided to the authority and, depending on the viability of the specific project, the revenue share may be a bidding parameter under the bid documents.
- A key issue that will be identified at the RFQ stage would be the deputation or transfer of existing employees from the district hospital when it is handed over to the concessionaire. The number of employees that would be retained or transferred from the hospital would be a key consideration at the bidding stage. Additionally, this concession creates a rare dynamic where both government and private employees may be working in cohesion in the district hospital and medical college and assessing liability in such situations may prove to be difficult.
- The termination payments for authority default and the concessionaire's default have been linked to the adjusted depreciated value of the assets and not on the total project cost which is typically seen in most concessions. The intention seems to be to keep the termination payment linked only to the augmentation works of the district hospital which frees up the authority from making any payments for the works relating to the medical college at the time of termination.
The overall objective behind the model concession is to ensure that existing district hospitals would be able to facilitate and provide top of the line medical services to patients at market-driven rates. Given the flexibility being given to the concessionaire to run and generate revenues from the medical college, the model concession creates a hybrid greenfield/ brownfield project that counter-balance the expenses the concessionaire would incur in running and augmenting the district hospital with the potential uncapped revenues of the medical college.
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