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Mid-sized hospitals in Tier-2 cities are currently trapped in a financial vacuum. This is because funding usually arrives either too early as venture capital or too late as a financial buyout, said Rakshith Rangarajan, equity fund manager, Inviga Investment Advisors.
This leaves the mid-sized healthcare institutions hitting a growth wall because their governance structure is still underdeveloped, borrowing costs are excessively high, and they lack a committed partner to drive the sustained, operational transformation, he added.
Since 2020, private equity and venture capital investments in healthcare are valued approximately at US$ 15 billion. Even as this is like a golden age of expansion, yet infrastructure remains skeletal outside major metros, he said.
While the National Health Policy recommends a minimum of two beds per 1,000 people, India currently struggles at just 0.6. To meet basic global benchmarks, India needs an estimated three million additional hospital beds, a chasm that capital alone has not been able to bridge. The disconnect is not about finance. It is a lack of 'clinical fluency' in how money is deployed. To make meaningful progress, there is a need to move beyond viewing healthcare investment as routine business and directly address three fundamental systemic failure, he noted.
First, we are seeing for mid-sized hospital corporate governance is fragile and debt is prohibitively expensive. Second, there is a knowledge gap indicating a fundamental friction between clinical professionals and financial investors. Traditional financiers often underestimate the ground realities of a Tier-2 setting, like medical workforce volatility and the rigors of infection control. Conversely, doctor-promoters often view rigid corporate board processes and complex term sheets with immense suspicion. This mutual lack of operational understanding stalls progress in the areas that need it most, pointed out Rangarajan.
Thirdly, while elite metropolitan hospitals boast advanced ICUs and integrated digital records, their Tier-2 counterparts often rely on fragmented, paper-based processes and transient junior staff. This capability deficit ensures that complex cases and the families who can afford them, inevitably access major cities, further draining the local medical care ecosystem of revenue and talent, Rangarajan said.
Fixing this requires a practitioner-led approach. Funds like Inviga are shifting the model by taking majority control of underperforming hospitals to digitize and professionalize them. Simultaneously, providing 'anchor' equity to IP-rich medtech innovators gives them the runway to survive long hospital buying cycles. This allows founders to stay at the helm while scaling the diagnostic tools and medical devices that are actually affordable for the rural market, he said.
A decade from now, success should not be defined solely by exit multiples or IRR (internal rate of return). The true measure begins with a patient in India's hinterlands who can access high-quality medical care close to home without prohibitive costs or tedious travel. It also means that skilled clinicians will view Tier-2 cities as destinations for meaningful, long-term careers rather than short-term stops. By aligning capital with the realities of clinical practice, we can help build infrastructure for a healthier future, said Rangarajan.
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