In India, public and private health care providers operate as two entities working towards health for all. While public hospitals are managed by national and state budgets, the private sector must find its operational viability in a competitive market. More than 70% of healthcare services in India are provided by private providers. To achieve the goal of universal health coverage, both healthcare providers have key roles to play, recognized by the Government of India which has called for an increase in public-private partnership models during the Covid-19 response. and also in the last two budgets.
Nevertheless, the feeling persists that private hospitals are against the public interest and only operate for profit, are not transparent about their costs or that hospital treatment packages are charged at unfair prices. Therefore, it is important to look at a few aspects of general hospital operational issues and challenges to decode these misconceptions.
1. Operational viability
First, most private sector hospitals do not have subsidies for public expenses and services, and even if they do, they reimburse by providing services in accordance with government regulations. They are based on fee-for-service and do not have a price advantage in tendering and purchasing machinery and equipment as is the case for public hospitals. They must work on their operational viability by investing considerably in the quality of care, certifications and accreditations.
2. Determinants of hospital pricing
Second, most private hospitals set prices for treatments or services by looking at the actual cost of labor, materials, machinery, expenses and utilities, from set-up to completion. sustainability. This may vary depending on location, level of care provided, investment in technology and research, size or scale of hospital, and adherence to international protocols and quality standards .
3. Land is only 10% of the total cost of running a hospital
A very common argument that resurfaces time and time again is that private hospitals have received free or subsidized land, and have certain obligations in return. But the fact is that very few hospitals have made this bargain between land and poor patients – less than 1% out of 60,000 in India. Most hospitals paid for the land at commercial rates. As land is only a small part of the cost structure, barely 10%, the hospital’s ability to discount is limited, especially when other costs are higher: construction and equipment medicine have a preponderant share.
With 60-70% of hospital costs and fixed overhead, the trade-off between land costs and the present value of all costs incurred to treat EWS (Economically Weaker Section) patients is actually not viable. Hospitals try to subsidize EWS, CGHS (Central Government Health Scheme), ECHS (Ex-Servicemen Contributory Health Scheme) and other government schemes for paying patients.
4. Need to review treatment package costs under AB-PMJAY
Health is an emotional subject, and if it is to have a social mix, there should be clear guidelines and frameworks. The Ayushman Bharat-PMJAY program is a big government step towards universal health coverage, but their treatment packages don’t even cover input costs. This is one of the reasons why most hospital chains are not incorporated there.
5. Barriers to setting up hospital infrastructure in Tier 2 and Tier 3 cities
The establishment of hospital infrastructures in Tier 2 and Tier 3 cities currently faces multiple obstacles. While the quality of service must be on par with what is offered in the metros, customers and patients must benefit from reduced prices of 30 to 50%. In terms of infrastructure, capital expenditures and high costs for land, buildings, medical equipment, technology/IT, utilities and services are high with fixed overhead and lower returns and unclear. Uncertain patient attendance and a shortage of qualified healthcare professionals are also challenges in small towns. For this reason, a collaborative approach is needed to enable a joint working model to develop solutions.
6. Need to regulate quality, not price
Out of more than 50,000 hospitals in India, only about 350 are accredited by NABH (National Accreditation Board for Hospitals and Healthcare); out of 100,000 laboratories in the country, only about 1,000 are certified by the NABL (National Accreditation Board for Testing and Calibration Laboratories). Amid this vast pool of unregulated players, we need to recognize and encourage those who publish clinical patient outcomes and adhere to quality standards and protocols. Central and state policies must be aligned on this point with a clear regulatory roadmap.
7. Treatment costs in India are only a fraction of what patients pay in other countries
Healthcare costs in India are perhaps the lowest compared to other countries. A large number of international patients come to India every year to get the best quality treatments at a fraction of the prices, generating hard currency for the country and earning a lot of goodwill.
Achieving the goal of universal health coverage requires that communities have access to quality health care and that out-of-pocket payments or unrealistic health expenditures do not prevent or discourage people from using health services.
One way to do this is to expand health insurance. Apart from this, several other measures are needed in this direction: addressing the shortage of qualified doctors and nurses by improving medical education and creating PPP models on the skills of health care providers, drawing leveraged digital technology to increase access, raise awareness and drive behavior change, take the continuum of care outside of hospitals, among others.
Although private providers do not have the answer to all the challenges facing India’s healthcare sector, they are a strong ally in India’s aspiration to achieve universal healthcare.
The author is a Registered Advocate at the Supreme Court of India.
The thoughts and opinions shared here are those of the author.
Discover our end of season subscription discounts with an absolutely free Moneycontrol pro subscription. Use code EOSO2021. Click here for more details.