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‘Dear Govt, Price Control Doesn’t Guarantee Healthcare For All’

Ayushman Bharat scheme chooses to achieve its objective via aggressive and sudden price controls.

Published
Fit Connect
4 min read
Private hospitals in India are in a bind.
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‘Dear Govt, Price Control Doesn’t Guarantee Healthcare For All’

Private hospitals in India are in a bind. They are being accused by the government and the media that they are unscrupulous, profiteering organisations out to fleece gullible patients in the time of their greatest need.

The patients, a majority of whom pay out of pocket seem to agree. They are increasingly wary of their doctors and hospitals and are questioning them like never before. The trust between patients and their healthcare service providers is today perhaps at its lowest ebb.

The trust needs to be restored - for the healthcare system to work at all, let alone work well. And good quality healthcare needs to be made accessible to all economic strata.

These two are immutable truths for any progressive society.

Ayushman Bharat scheme purports to address these two issues, and it is a laudable goal.

It chooses to achieve its objective via aggressive and sudden price controls. That’s where the problem lies.

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The trust needs to be restored - for the healthcare system to work at all, let alone work well.
The trust needs to be restored - for the healthcare system to work at all, let alone work well.
(Photo: iStockphoto)

Let’s look at some basic facts:

Fact 1

India has one of the least expensive private healthcare system in the world, and yet it offers world-class clinical outcomes. For instance, a cardiac by-pass surgery, which would easily cost upwards of USD 100,000 in the US is priced at under USD 5,000 at any private hospital in India. The clinical outcomes are identical.

Fact 2

Most private hospitals in India, while they are profitable, are not profiteering. They are making operating profits (EBITDA) in the 7-14% range. The Return on Capital Employed (ROCE) for the investors is in low single digits. This is mainly because hospitals are highly capital intensive – both for the infrastructure and for cutting edge medical technology.

Further, rapid advancements in medical technology compel hospitals to continuously invest in equipment upgrades. The medical teams frequently need re-skilling in new emerging medical procedures and techniques. All of this costs money. All considered, the returns in the healthcare business are a lot worse than in almost any other services industry in our country.

Fact 3

The government schemes that exist to help the underprivileged are shoddily run most of the time, and the public-sector healthcare infrastructure is collapsing. India’s public-spending on healthcare is just about 1.5% of the GDP, which compares poorly even with sub-Saharan Africa.

What Do These Facts Tell Us?

Most hospitals do right by the patient, clinically and financially, most of the time.
Most hospitals do right by the patient, clinically and financially, most of the time.
(Photo: Reuters)

While the costs that the hospitals incur to deliver the world-class care for which India is now respected globally are largely invisible to the consumer.

Media portrays an image that hospitals are making enormous profits on things like syringes and other consumables. This presents a completely distorted picture of reality.

While one can always choose to malign the entire system based on a few bad incidents, by and large the system works rather well. We can attest to that - having taken care of patients both inside the system, and from the outside.

Most hospitals do right by the patient, clinically and financially, most of the time. Even in the instances when they fail to do so, most hospitals have the desire, and the systems, to do better.

The charge of profiteering being flung carelessly at the hospitals by politicians looking to serve a populist agenda and a media craving for ever-higher TRP’s is simply false. Period.

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What is The Solution?

We are not suggesting to not have any pricing guidelines, or even controls. Rather, our point of view is that price control has to be rational, gradual, and selective.
We are not suggesting to not have any pricing guidelines, or even controls. Rather, our point of view is that price control has to be rational, gradual, and selective.
(Photo: iStockphoto)

Aggressive price control, in the long run, has always been bad for the consumer. This has been proven across industries, across countries, and over time. Healthcare is no exception.

When market forces are allowed to work, while there is some pain in the short term, the outcome in the long run is better of innovation, competition, and consequently, for the consumer. We are not suggesting to not have any pricing guidelines, or even controls. Rather, our point of view is that price control has to be rational, gradual, and selective.

In the meantime, the government must include the system – private hospitals, clinical opinion leaders, and objective third-parties – in a healthy debate and decision making process. We are of the view that private hospital systems will work with the government in providing care for the indigent, at subsidized prices, as long as some of the related mechanics are handled – such as getting paid on time, without the pain of bureaucracy.

However, if the approach is heavy handed, unilateral and opaque, it will only serve the populist agenda, and the press – and not the patient.

The cardinal principle of medicine is: First do no harm. It applies to hospitals and doctors. It also applies to the government and the media.

(Mr. Anas Wajid is a member of the executive committee of Max Healthcare. Dr. Dilpreet Brar is the founder and CEO of medECUBE, and independent clinical coordination service.)

(The views expressed above are the authors own. FIT neither endorses nor is responsible for the same.)

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