Hospital industry emphasizes standardization of costs will be unfruitful exercise

It’s exciting times for Indian Healthcare but there is a dampener lurking around the corner.

The sector is experiencing a rapid shift towards digitization, marked by the widespread adoption of cutting-edge healthtech platforms and technologies like AI. Supported by proactive government initiatives and a favourable investment climate, the industry is evolving into a dynamic and innovative landscape. According to a report by Boston Consulting Group (BCG) and B Capital, the digital transformation of India’s healthcare industry has the potential to surge tenfold, leaping from $2.7 billion in 2022 to an estimated $37 billion by 2030.

Amidst the promising advancements in the healthcare sector, the industry faces a potential roadblock in the form of a recent directive from the Supreme Court. The court has urged the Government of India to standardize rates for medical procedures, sparking a wave of discussions and concerns within the healthcare community.

On February 27, 2024, the Supreme Court of India gave directions to the Government to institute standardized rates for medical procedures, aiming to redress a nationwide imbalance in hospital charges. The Court reproached the Union government for neglecting the 12-year-old Clinical Establishment (Central Government) Rules, which grants it the authority to set standardized rates considering regional living standards. The issue was highlighted in a public interest litigation (PIL) filed by the NGO ‘Veterans Forum for Transparency in Public Life.’

The Supreme Court has directed the Secretary of the Department of Health to work with states and UTs to create a proposal within six weeks. The court had warned the central government that if it does not present a proposal for hospital rates compliant with the rules in collaboration with states, the court will enforce the Central Government Health Scheme (CGHS) rates as an interim measure across all private hospitals, in line with the petitioner’s request, at the next date of hearing.

An impossible exercise
However one can argue that the attempt to standardize rates for medical procedures will be an impossible task to achieve due to a range of inconstant elements involved, from the expertise of the doctor to the kind of infrastructure available in a hospital. In short, it will be a complicated and impossible task to achieve due to the multitude of variables involved.

Industry bodies such as The Association of Healthcare Providers India (AHPI) emphasize that the standardization of medical procedure costs will likely be an unfruitful exercise. AHPI has highlighted the formidable challenge posed by the Supreme Court directive, asserting that the costs of medical procedures are contingent upon a myriad of variables. These include factors such as technological advancements, the quality of equipment, types of medicines used, the experience and background of the medical professionals involved, the reputation and category of the hospital and adherence to safety norms.

According to the industry body, the healthcare landscape is fraught with complexities, making a one-size-fits-all pricing model impractical. They argue that even if standardizing the costs of medical procedures were feasible, it poses numerous challenges. Consider gallbladder surgery, for instance; determining costs not only involves variables like hospital infrastructure and surgeon expertise but involves the surgical approach (laparoscopic or open), use of medical resources, and post-operative care – all of these need to be considered for accurate cost determination.

Solutions that will not work
So essentially AHPI is making the point that addressing the variable costs of numerous procedures across thousands of private hospitals nationwide would be a practically challenging and unfeasible undertaking. Health professionals opposing the move to standardize costs for medical procedures argue that suggested solutions, such as creating an auditing mechanism or committee, would not work. Establishing such an entity to assess actual input costs incurred by healthcare providers faces an insurmountable challenge due to the lack of data regarding costs, rendering the exercise impractical.

Determining procedure rates, as per the Clinical Establishment Rules 2012, requires collaboration between the Central and State governments. The challenges involved, coupled with the impracticality of uniform rates, may necessitate legislative adjustments for nationwide implementation. Currently, only 12 states and seven Union Territories (UTs) have adopted the Act.

Again, implementing CGHS rates, stagnant for a decade, is far from a practical solution. The concern lies in the arbitrary pricing employed by CGHS when procuring healthcare services for central government employees. Surely, the absence of a scientific pricing methodology since 2014 raises questions about its relevance in 2024. The healthcare landscape has evolved and new challenges demand a more up-to-date approach to pricing that reflects the current realities of the industry.

In conclusion, addressing the imbalance in medical procedure rates necessitates a nuanced approach, acknowledging the complexity of the variables involved. Standardization and imposing CGHS rates nationwide are extreme measures that will prove futile and counterproductive. A balanced solution can emerge through collaboration among stakeholders, including medical professionals, hospitals, consumer bodies and the government. This collaborative effort should navigate the intricacies of the issue, ensuring a resolution that preserves the industry’s progress.

Rajesh Mehta is a leading International Consultant in the field of Market Entry, Innovation and Public Policy. The Sunday Guardian