Are PE-backed hospitals driving up healthcare costs in India?

Private equity (PE) investors are increasingly taking controlling stakes in hospital chains in India, and research and industry analysis suggest that greater financial ownership in healthcare could influence how hospitals allocate capital, expand services and price treatments in the private healthcare market.

A paper by Vivek Nenmini Dileep, published in the Global Health Journal in December, argued that the expansion of investor-backed healthcare platforms through acquisitions and network growth across multiple cities has contributed to what he describes as the “corporatisation and consolidation of healthcare services” in the country’s private healthcare system.

The study adds that increasing financial ownership may influence how providers allocate resources and prioritise services as they scale operations and pursue efficiency. It also notes that these developments could affect pricing dynamics and treatment priorities in private healthcare markets where corporate hospital chains account for a growing share of care delivery.

International research has also observed the implications of investor ownership in healthcare. A 2025 study published in the peer-reviewed journal JAMA Health Forum by Yashaswini Singh and colleagues analysed physician practices affiliated with private equity firms in the US and found that prices negotiated for office visits were about 7-8% higher than those at independent practices.

Consolidation gathers pace

Industry data indicates that consolidation is gaining momentum in India’s hospital sector. Private equity and merger activity in healthcare have remained strong over the past few years, with transaction value reaching about $5.5 billion across 139 deals by October, broadly sustaining annual deal flows of $6-7 billion, according to Kaivaan Movdawalla, National Healthcare Leader at EY-Parthenon India. Healthcare accounts for about 6% of overall private equity deal flow, with activity running at more than three times the pace seen before the Covid-19 pandemic.

“The real anchor for this is the tectonic growth of the organised segment, with patients increasingly seeking quality branded care driven by rising incidence of chronic diseases, an expanding middle class and growing health insurance coverage,” Movdawalla said. Organised providers currently account for about 30% of the healthcare market, while listed hospital chains represent roughly 17%, according to EY-Parthenon sector estimates. He said the organised segment could capture 45 to 50% of the market over the next six to seven years as larger healthcare networks expand capacity and acquire regional providers.

Expansion beyond metros

Hospital groups are expanding infrastructure to meet rising demand for organised private healthcare. India will require around one million additional hospital beds, requiring an estimated $80-100 billion in investment to address the demand-supply gap, according to EY-Parthenon.

The top 10-12 healthcare chains have grown at about 18% annually, with roughly 70% of the growth coming from organic capacity additions and 30% from acquisitions. Providers that have relied more on acquisitions have grown faster at about 27% annually, with nearly half of that increase coming through mergers, according to the EY analysis.

Analysts say a significant part of future expansion could come from smaller cities. EY-Parthenon notes that Tier-2 markets are emerging as important growth centres for hospital operators, supported by lower real estate costs, improving insurance penetration and a growing patient base seeking specialised treatment closer to home. Several hospital groups that began in regional markets have expanded into multi-city networks, while larger chains are increasingly entering cities such as Lucknow, Patna and Trichy.

Investors move from minority stakes to control

Industry experts say these developments are also changing how hospital chains are governed and managed. Salil Kallianpur, pharma analyst, said private equity investors are increasingly moving from minority stakes to controlling ownership in hospital platforms.

"What began as minority growth capital from private equity investors has, in many cases, evolved into majority and even near-total ownership, with stakes ranging from 70% to 100%," he said. "Institutional capital is now shaping strategy, governance, expansion plans and capital allocation across large hospital networks."

Kallianpur said the trend reflects the capital-intensive nature of modern healthcare infrastructure. “Large-format hospitals require sustained investment in infrastructure, technology, clinical talent and geographic expansion. Private equity ownership brings structured governance, financial discipline and the ability to fund consolidation in what has historically been a fragmented market.”

He added that governance structures within hospital chains are increasingly becoming board driven. “Decision-making is becoming more metrics-focused, with return on capital, asset utilisation and scalable operating models taking centre stage.”

"If managed carefully, institutional ownership could strengthen balance sheets and modernise India's hospital ecosystem. If misaligned, it risks tension between financial returns and healthcare delivery priorities," Kallianpur said.