PE’s $10bn India hospital push faces growing affordability backlash

PE firms have invested about $10bn in Indian hospital operators over the past five years, but the influx of capital is increasingly drawing scrutiny over rising treatment costs and the financial strain being placed on patients and insurers, according to a report by Bloomberg.

helping fuel expansion and consolidation across one of the world’s fastest-growing healthcare markets.

Blackstone, KKR, TPG, General Atlantic and other international investors have helped fuel expansion and consolidation across one of the world’s fastest-growing healthcare markets by providing hospital groups across India, with funding for new facilities, technology and acquisitions. While private equity-backed operators account for less than 5% of the country’s hospital beds, they have established significant positions in lucrative areas including oncology and cardiac care.

The investment case has been underpinned by India’s shortage of healthcare infrastructure. The country has roughly 1.3 hospital beds per 1,000 people, while demand for specialist treatment has been rising alongside incomes and life expectancy. The fragmented nature of the hospital sector has also created opportunities for sponsors to build larger networks through acquisitions.

That strategy has delivered strong financial results for some investors. KKR’s investment in Kerala-based Baby Memorial Hospital, for example, has been followed by rapid expansion and acquisitions. The private equity firm has also agreed to acquire Swedish healthcare group Medicover’s Indian operations for $1.4bn, a transaction that will significantly expand its hospital footprint in southern India.

KKR has previously backed Radiant Life Care and its combination with listed Max Healthcare Institute, while its 2022 exit from Max generated substantial returns. Other investors have also benefited from India’s increasingly liquid capital markets, which have provided opportunities to exit investments through stock-market listings and secondary transactions.

Temasek, for example, has generated an estimated tenfold return on its investment in Manipal Health Enterprises following a partial sale linked to the hospital operator’s IPO. The investment produced an internal rate of return of roughly 30%, according to Indian private-market data provider VCCircle.

The strong performance of the sector has encouraged further investment. Crisil expects private hospital revenues to rise by as much as 15% in fiscal 2027, helped by higher patient volumes and increases in revenue generated per occupied bed.

But those gains have also intensified debate over affordability. A parliamentary committee has warned that an unchecked flow of foreign capital could accelerate consolidation by large hospital groups and recommended tighter scrutiny of foreign investment, potential price controls and the creation of an independent hospital regulator.

Medical inflation has been running as high as 13% a year, according to the parliamentary report, while treatment at private hospitals can cost several times more than comparable care in the public system. The cost differences are particularly pronounced in areas such as cancer treatment, cardiac care, kidney disease and maternity services.

Insurers and hospitals have become increasingly divided over who should bear those costs. Insurers have accused private providers, including private equity-backed chains, of increasing bills and steering patients towards expensive procedures. Hospital operators, meanwhile, argue that delayed payments and inadequate reimbursement rates are putting pressure on their margins.

The dispute has extended to newer technologies and treatments. Insurers are questioning whether expensive procedures such as robotic surgery consistently deliver enough additional clinical benefit to justify their higher costs, while hospital operators maintain that advanced equipment, implants and surgical techniques can improve patient outcomes.

For private equity investors, the debate presents a potential challenge to an investment model that depends on expanding hospital networks, improving operating performance and ultimately realising gains through strategic sales or public listings.

Industry executives have warned that aggressive regulation of healthcare pricing could also make India less attractive to international capital. EQT chair Jean Eric Salata, whose firm has investments in Indian healthcare businesses, said in September that intervention could discourage further foreign investment.