Background: There is a gap in knowledge on the overall role and characteristics of private health care providers in India. This research is aimed at understanding changes in the consumption of inpatient care services from private hospitals between 1986 and 2004, with a particular focus on equitable outreach.

Methods: Secondary analysis of National Sample Survey data on the utilization of inpatient care services in Kerala is performed for the periods 1986–87, 1995–96 and 2004. Household survey data are examined to understand the users of the private health system as there are limitations in obtaining reliable data from unregulated private health care providers.

Finding: The annual hospitalization rate increased from 69 per 1000 population in 1986–87 to 126 per 1000 population by 2004. The proportion of persons seeking care from private rather than government hospitals increased from 55% in 1986–87 to 65% by 2004. Concentration indices revealed that the year 1995–96 witnessed the highest income inequality in hospitalization rates. A decline both in hospitalization rates and in the relative preference for private hospitals over government hospitals among the poorest two quintiles between 1986–87 and 1995–96 indicates that the poor avoided inpatient treatment. The rich–poor divide in care seeking from private hospitals was moderated by 2004.

Conclusion: Improvements in the purchasing power of the population, and the strategy of private hospitals in this highly competitive market to generate revenue from the poorer quintiles by offering different pricing options, have reduced the observed rich–poor divide in the consumption of inpatient treatment from this sector. However, while this gap in utilization has closed, the burden of out-of-pocket expenditure is higher among the poor.