The surging cost of health care in Kerala

Sunil Jose (name changed), a private company employee in Kozhikode, recently took his daughter to a corporate-run hospital in the city after she complained of fever, cold, and headache. The doctor suggested a battery of medical tests to diagnose her condition.

Jose tried to find out the tentative bill amount. “Without batting an eyelid, the staff said the costs could be around ₹10,000! I managed to flee from there, making some flimsy excuse,” he says.

Jose then went to another health-care institution in the cooperative sector, where the total bill for treatment didn’t exceed ₹1,000. There were fewer medical tests, too.

The episode is reflective of some of the paradoxes in the much-celebrated Kerala model of health care—a large number of people depending on private hospitals or those offering specialty treatment even for minor illnesses, and incurring an exorbitant out-of-pocket expenditure on health, say those in the health-care sector.

Along with this, global private equity firms are investing heavily in the State’s private hospitals, both big and small, sparking off concerns about the way ahead. Parallelly, a large number of small private hospitals, which offered affordable health care, especially in the rural areas, have been winding up or scaling down their operations over the years.

The Competition Commission of India (CCI) on March 17, 2026 cleared a proposal by Bentley Asia Holdings II Pte Ltd., a Singapore-based company, to acquire an additional stake in Baby Memorial Hospital (BMH), Kozhikode, controlled by U.S.-based global private equity firm Kohlberg Kravis Roberts & Co. (KKR). Along with this, the CCI also approved the BMH’s acquisition of certain shareholding in Unimed Health Care Pvt. Ltd., which operates two multi-specialty hospitals in Hyderabad under the brand name Star Hospitals, by way of a secondary purchase.

In September 2025, it was reported that BMH acquired a majority stake in Meitra Hospital in Kozhikode. In July 2024, KKR had invested nearly ₹2,500 crore to secure 70% shares in BMH. It had earlier taken over the 350-bed Chazhikattu Multi-Specialty Hospital in Thodupuzha in Idukki for an undisclosed amount.

In 2023, Quality Care India, backed by another U.S. firm, Blackstone, pumped in around ₹3,300 crore to take over 80% of the shares of KIMS Health. In 2024, Aster DM Healthcare’s India operations merged with Quality Care, creating one of the largest hospital chains in India.

P.K. Sasidharan, former Head of the Department of General Medicine, Government Medical College, Kozhikode, says it is only natural for the “business magnates” to infuse money into what he called the “disease care industry” in Kerala because the people here have the capacity to pay for their medical treatment.

The National Health Accounts Report says that the per capita private health expenditure in Kerala has gone up from ₹7,636 in 2013-14 to ₹13,343 in 2021-22. The report also points out that 59.1% of the total health expenditure in the State in 2021-22 was private in nature and 32.5% was borne by the government. The corresponding figures for 2013-14 were 76% and 24%, respectively.

A. Althaf, Professor, Community Medicine, Government Medical College, Thiruvananthapuram, says that the State could achieve high life expectancy, affordable medical costs, and low infant and maternal mortality rates, the hallmark of the Kerala model of health care, because of the better awareness of health and hygiene, extensive health-care facilities, and the availability of nutritious food, among other factors.

“Of late, we are facing challenges such as a high disease burden. Diabetes, blood pressure, cancers, mental health issues, and other lifestyle problems are on the rise. Along with this, more road accidents are reported. The elderly population in the State is increasing both in size and in proportion. So, health-care costs will obviously go up,” he feels. A large number of people seeking medical treatment and their willingness to pay could be driving large private equity firms to Kerala, Dr. Althaf points out.

Small hospitals are shutting down

Meanwhile, Roy R. Chandran, State secretary, Indian Medical Association (IMA) Kerala branch, claims that though the number of corporate hospitals, with 500 or more beds, has gone up by at least 65% in the past 10 years, small private hospitals with around 20 beds in rural areas or small towns have shut down during the period.

According to the data available with the IMA, a total of 1,306 institutions offering outpatient (OP) services and 444 providing inpatient (IP) services closed down in the past five years in Kerala. A total of 148 OP clinics and 262 IP institutions had shut shop between 2016 and 2021.

On the other hand, the number of beds and private hospitals across the State has gone up as well. The number of hospitals increased from 3,677 to 5,402, and the number of beds from 80,267 to 82,557 between 2021 and 2026, say IMA functionaries.

The IMA blames the strict enforcement of some of the provisions of the Clinical Establishments (Registration and Regulation) Act 2018 for the closure of small private hospitals.

Dr. Chandran says that some of the equity firms that are on an acquisition spree have had no previous experience in the health-care sector, though some of them have interests in the insurance industry.

Consequences of corporatisation

A background paper for the United Nations University-International Institute for Global Health symposium held in Kuala Lumpur, Malaysia, in April 2025 claims that corporatisation of health care in India has introduced a layer of managerial oversight driven by business principles, often limiting the doctors’ professional autonomy.

In corporate hospitals, specialist doctors are offered high salaries, but they are expected to meet revenue-linked targets, including quotas for admission, diagnostic tests, and therapeutic procedures. This is also influencing smaller and medium-sized private and charitable hospitals, many of which are now taking loans, hiring specialist consultants, and investing in costly medical equipment to remain competitive. As a result, health-care costs have risen sharply, leading to reduced access to or denial of care for economically disadvantaged patients, and contributing to financial hardship for those who seek treatment. Corporatisation has also strained the doctor–patient relationship, contributing to a breakdown of trust and a rise in incidents of violence against doctors and hospital staff, the paper says.

Focus on making profit

Dr. Sasidharan claims that the dominance of private enterprises in the health-care sector could leave far-reaching consequences. “They mainly focus on making a profit from patients who can either afford to pay or cover their expenses through health insurance schemes. This is resulting in Kerala having state-of-the-art five-star hospitals in the private sector and tertiary care hospitals in the government sector. Along with this, profit-making avenues in the Ayush sector are being promoted in the name of wellness,” he says.

Government’s stand

Chief Minister Pinarayi Vijayan recently flagged the concerns of the State government related to the rising health-care costs in the private sector while laying the foundation stone for the Kerala Institute of Organ and Tissue Transplantation in Kozhikode. Mr. Vijayan said that a large number of private hospitals were charging high rates for medical treatment and they varied from one institution to another too.

Health Minister Veena George, meanwhile, says the department is focussing both on developing the infrastructure and improving the treatment options, including launching new and advanced methods, in government hospitals. “The treatment is either free or is provided at subsidised rates. As per a report of the National Statistical Office, treatment costs in Kerala have been coming down considerably due to government intervention. However, deliberate efforts are now being made to divert the patients who come to government hospitals to corporate-owned hospitals. This needs to be resisted,” she says.

‘Not commercialisation, but adaptation’

Harish Manian, Group Chief Executive Officer, BMH, however, says that “consolidation” of institutions and pumping of “private investment” have been happening in Kerala’s health-care sector for more than a decade. It should not be viewed as “commercialisation,” but as “adaptation” to a more complex care environment, he says.

In an email response, Manian points out that it is important to distinguish between health-care cost inflation and price escalation.

“Costs are rising across India due to advanced diagnostics, modern infrastructure, specialist manpower, digital systems, and quality standards. Responsible private investment often improves governance, procurement efficiencies, and long-term planning. Scale can enhance sustainability rather than inflate pricing. In a market like Kerala, where patients are highly informed and cost-conscious, irrational pricing is neither viable nor sustainable,” he says.

According to Manian, average revenue per occupied bed in Kerala remains the lowest in the country. This shows private equity investments in the market have not resulted in higher treatment costs, he says.

Manian claims that the future cannot rely predominantly on out-of-pocket expenditure and financial risk protection is essential. “It would be incorrect to assume that insurance participation leads to an ‘insurance-only’ model. Health-care financing will remain hybrid—combining government schemes, programmes such as Medisep, corporate coverage, private insurance, and self-pay segments,” he says.

He avers that Kerala’s strength has always been a balanced partnership between public health leadership and responsible private participation and the real determinant is governance and ethical leadership, not the source of capital.

Dr. Sasidharan is of the view that health care is an issue to be handled exclusively by the governments. “Family doctors or general practitioners are the most important doctors in the community for providing primary care with a concern for public health. However, they have been eliminated,” he says.

Echoing his opinion, Dr. Althaf says that the public health apparatus should be strengthened to address people’s apprehensions while disease prevention needs to be a priority area.