Forbes India – Healthcare in India, Covid-19, Ayushman Bharat Program, Medical Education: Understanding the Role of Private Healthcare Providers in India’s March Toward Universal Healthcare
In India, public and private healthcare providers function as two entities committed to health for all. While public hospitals operate within national and state budgets, the private sector must work out its operational profitability in a competitive market. Over 70 percent of healthcare services in India are provided by private providers. To achieve the goal of universal healthcare, both healthcare providers have a key role to play, which has been recognized by the Indian government, which has increased public-private partnership models during the response to Covid-19 and also in the last two budgets.
However, there is still a perception that private hospitals are acting against the public interest and only work for profit, are not transparent about their costs or that hospital treatment packages are unfairly priced. Therefore, it is important to examine some aspects of common hospital operational issues and challenges in order to decode these misconceptions.
First, most private sector hospitals do not have subsidies for expenses and services, and even if they do, they pay back by providing services according to government regulations. They are based on a fee basis and have no price advantage in tenders and the procurement of machines and materials, as is the case with public hospitals. They need to earn their operational profitability by making significant investments in quality of care, certifications and accreditations.
2. Determinants of hospital prices
Second, most private hospitals set treatment or service prices by examining the true costs of staff, supplies, machinery, expenses, and utilities—from facility to sustainability. This can vary based on location, level of care, investment in technology and research, size or scale of the hospital, and adherence to international protocols and quality standards.
3. Land accounts for only 10 percent of the total cost of running a hospital
A very common argument that keeps coming up is that private hospitals have been given land for free or subsidized and in return have certain obligations. But the fact of the matter is that very few hospitals have made this trade between the country and poor patients – less than 1 percent in India’s 60,000. Most hospitals paid for land at commercial prices. Because real estate is a small part of the cost structure, at just 10 percent, the hospital’s ability to discount is limited, especially when other costs are higher – construction and medical equipment dominate.
With 60-70 percent of hospital costs and overheads, the cost trade-off between country and the present value of all costs incurred to treat EWS patients (economically weaker section) is actually not viable. Hospitals try to cross-subsidize EWS, CGHS (Central Government Health Scheme), ECHS (Ex-Servicemen Contributory Health Scheme) and other government programs for patients with paying patients.
4. Need to check treatment package cost under AB-PMJAY
Health is an emotional issue and if it is to be socially mixed there should be clear guidelines and frameworks. The Ayushman Bharat PMJAY program is a big step by the government towards universal health coverage, but their treatment packages don’t even cover entry costs. That’s one of the reasons most hospital chains aren’t integrated with it.
5. Obstacles to building hospital infrastructure in Tier 2 and Tier 3 cities
The construction of hospital infrastructure in Tier 2 and Tier 3 cities currently faces several obstacles. While the quality of service must match what is offered in subways, customers and patients must receive prices reduced by 30-50 percent. In terms of infrastructure, there are high investments and high costs for land, buildings, medical equipment, engineering/IT, utilities and services with fixed overheads and lower, unclear returns. Uncertain patient frequencies and a shortage of qualified medical professionals are also challenges in smaller cities. For this reason, a collaborative approach is required to enable a common working model to develop solutions.
6. Need to regulate quality, not pricing
Out of over 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 an estimated 1,000 are certified by NABL (National Accreditation Board for Testing and Calibration Laboratories). Amidst this large pool of unregulated actors, we must recognize and incentivize those who publish patient clinical results and adhere to quality standards and protocols. Central and state policies must be coordinated with a clear regulatory roadmap.
7. The cost of treatment in India is 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 each year to get the best treatments at a fraction of the price, generating foreign exchange for the country and earning much goodwill.
Achieving the goal of universal health coverage dictates that communities should have access to quality health care and that co-payments or unrealistically high health care expenditures do not prevent or discourage people from seeking health services.
One of the ways to get there is to expand health insurance. Apart from that, several further steps are needed in this direction: addressing shortages of qualified doctors and nurses by improving medical education and creating PPP models to upskill healthcare providers, using digital technologies to improve access, raise awareness and encourage behavioral change , taking over the continuum of care outside of hospitals, among others.
While private providers do not have the answer to all the challenges faced by the healthcare sector in India, they are a strong ally in India’s quest for universal healthcare.
The author is an Advocate-on-Record at the Supreme Court of India.
The thoughts and opinions shared here are those of the author.
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