Imposing standardised rates could result in closure of numerous hospitals, industry

On Tuesday, 27 February, the Supreme Court chided the Union government for its inability to specify a range of rates for accessing services at private hospitals and clinical establishments.

There is a mandatory provision in Rule 9 of the Clinical Establishment (Central Government) Rules of 2012, which requires the government to determine the fees chargeable to patients at private healthcare facilities.

However, this regulation has not been enforced thus far.

In response to this lapse, a Supreme Court bench directed the Union health secretary to convene a meeting with state counterparts and formulate a concrete proposal before the next hearing.

The court issued a warning that failure to comply with these directions would prompt the consideration of implementing Central Government Health Scheme (CGHS) rates instead.

“Insofar as the suggestion of the learned counsel for the petitioner with regard to adoption of CGHS rates, as an interim measure, is concerned, in the event the Central government does not come out with a concrete proposal by the next date of hearing, we will consider issuing appropriate directions in this regard,” said the Supreme Court bench of Justices BR Gavai and Sandeep Mehta.

However, apprehensions have arisen regarding the practicality and repercussions of such uniformity.

Private hospitals contend that imposing standardised rates could have catastrophic effects on the healthcare system, potentially resulting in the closure of numerous hospitals — especially larger ones.

Voices against the move
Healthcare provider associations as well as doctors’ bodies are against imposing a uniform rate. They contend that it poses a significant risk of compromising the quality of healthcare.

“Any capping of charges affects the privilege and rights of doctors in fixing their fees directly and indirectly. This is particularly evident in the case of doctors with smaller practices, such as a husband and wife who have been practising together for three decades,” Indian Medical Association (IMA) national president Dr RV Asokan said.

“In such instances, the fees set by seasoned practitioners with decades of experience are likely to differ significantly from those of a doctor with only five years of experience,” he explained.

“The diversity in practice size, longevity, and expertise underscores the challenges associated with implementing a uniform fee structure that fails to account for the nuanced characteristics of individual medical practices and the varying levels of professional experience among healthcare providers,” added Asokan.

“The rates proposed may not align with the actual costs incurred by hospitals, leading to potential closures due to financial constraints,” the Association of Healthcare Providers (India)’s Tamil Nadu chapter president Dr Sathish Devadoss told South First.

“Maintaining a high standard of care becomes challenging when the rates provided are insufficient, potentially resulting in the closure of numerous healthcare facilities,” he added.

“Our stance is that it’s impractical to establish a universal rate for every hospital, considering the diverse nature of healthcare facilities,” said Devadoss.

“The determination of charges is contingent upon various factors, including the type and location of the hospital — whether it is in Tier 1, Tier 2, or Tier 3 cities,” he opined.

More considerations
Devadoss added that these distinctions were crucial, and a one-size-fits-all approach would not be feasible.

“Additionally, the rates established for the CGHS are not applicable to private institutions. The CGHS rates, formulated in 2014 without a scientific basis, are designed for government hospitals where the expenses are subsidised,” he added.

He pointed out that drawing a parallel between government and private hospitals was not realistic, as the latter incurred costs similar to a shopping mall for the utilisation of electricity.

“Any revision of rates should only be undertaken after a meticulous scientific study, potentially conducted by cost accountants appointed by the government,” noted Devadoss.

Meanwhile, Asokan said that governments and authorities had thus far failed to do scientific costing of hospital procedures.

“Until now, there has been a notable absence of a scientific approach to costing hospital procedures — whether through initiatives like CGHS, Ayushman Bharat, or private insurance companies,” he said.

“The processes employed thus far have been arbitrary and lacking in a systematic methodology,” added Asokan.

He said that a more scientific and universally accepted approach — one that considered the input of all stakeholders involved — was essential to rectify this.

“Proper costing procedures need to be implemented, a sentiment we have been advocating for quite some time,” he said.

“For instance, when Ayushman Bharat was introduced, we highlighted inadequacies such as the fixed payment of ₹8000 for Cesarean sections — which included the charges of anaesthesia, gynaecologists, and paediatrician services during childbirth. This approach failed to account for the diverse range of medical services and their associated costs,” said Asokan.

“Our proposal is to establish a comprehensive template or methodology for all procedures, systematically determining the actual costs incurred,” he asserted. “A reasonable margin, perhaps 8-10 percent, could then be added to ensure the sustainability of hospitals.”

Asokan explained: “By adopting such a transparent and scientific approach, we can arrive at fair and justified pricing for healthcare services. Despite our efforts, the government has yet to endorse this more systematic and sustainable approach.”

What about Right to Health?
IMA president Asokan also claimed that the responsibility for the Right to Health rested primarily with the government of each country rather than the private sector.

“The government should channel its efforts into investing in and enhancing the public sector, focusing on the establishment and development of public hospitals and an increase in human resources within these institutions. The ideal approach involves providing universal health care through a tax-funded model,” he said.

Asokan noted that under this model, the government should design a basic healthcare package accessible to all citizens.

Individuals desiring additional coverage would have the option to acquire private insurance or pay out of pocket for supplementary services, he said.

The government’s role in ensuring that a fundamental healthcare package is available to all citizens, particularly for those below the poverty line, was crucial, he asserted.

To address instances where government facilities might not offer certain specialised services, a strategic purchase approach is advocated. In such cases, if a citizen — particularly someone in need and financially constrained — required a specific medical procedure that was unavailable in government hospitals, the government should facilitate the purchase of that service from a private healthcare provider, he noted.

“In the event that an individual in my town needs bypass surgery, and the government hospital lacks the necessary facilities for such a procedure, a private hospital that offers the service is available. However, the person may be economically disadvantaged and unable to afford the surgery. In this situation, the government hospital should buy that care for him. That is a strategic purchase,” said Asokan.

He pointed out that this strategic purchase model is need-based and specifically targets individuals below the poverty line who require care not readily available in government facilities.

“This approach was outlined in 2012 by a High Power Expert Group formed by the Planning Commission (the precursor to today’s NITI Aayog) at that time. The group emphasised the importance of a comprehensive healthcare strategy, combining public sector investment, universal basic healthcare provision, and strategic purchases to ensure the right to health for all citizens,” said Asokan.

The Supreme Court verdict
A Public Interest Litigation (PIL) was filed by the NGO Veterans’ Forum for Transparency in Public Life asking the Union government to determine the rate of fee chargeable from the patients in terms of Rule 9 of the Clinical Establishment (Central Government) Rules of 2012.

Rule 9 states:
i. Every clinical establishment shall display the rates charged for each type of service provided and facilities available for the benefit of the patients at a conspicuous place in the local as well as English language.

ii. The clinical establishments shall charge the rates for each type of procedure and service within the range of rates determined and issued by the Central government from time to time, in consultation with the state governments.

The petitioner advocate submitted that the Union of India itself had notified the rates that applied to the CGHS-empanelled hospitals.

He submitted that till a solution was found, the Central government could always notify the rates as an interim measure.

Meanwhile, the government said that the rates were to be determined under the Clinical Establishments (Registration and Regulation) Act of 2010 and the Rules framed thereunder. The piece of legislation has been adopted by the governments of 12 states and 7 Union Territories (UTs).

“In view of the provisions of this Rule 9, the rates cannot be determined by the Central government unless there is a response from the state governments and UTs. Though various communications have been addressed to the state governments and UTs, there is no response and as such the rates could not be notified,” said the counsel of the Union government.

Meanwhile, Asokan said that there was no provision in the Act for any rate-fixing. “It is the case of the rules overshooting the mandate. We are not only going to implead in the current case in the Supreme Court but also going to challenge the rules,” he said.

The determination of rate
The head of operation of a private super-speciality hospital in Hyderabad explained that the rate of treatment in a private hospital was determined by various factors. He explained that, for starters, it depended on the location of the hospital.

“Super-specialty hospitals are built in mostly tier-1 cities, and some in tier-2 cities. They are built over a large area in the centre of the city, which is accessible by everyone. Sometimes, these lands are even provided by the government on the condition that the hospitals set aside some beds for government referrals and schemes such as CGHS, Arogyashri, Ayushman Bharat, or Pradhan Mantri Jan Arogya Yojana (PMJAY),” he told South First.

He explained that the quality and extent of medical infrastructure and facilities available at the hospital played another significant role in determining treatment rates.

Super-specialty hospitals often invest in state-of-the-art equipment and technologies, which could impact the overall cost of healthcare, he noted.

“The next is human resources, bringing in top notch doctors. Specialists and experienced specialists look for higher fees for their services,” explained the operations head.

Further services — such as personalised care, luxurious amenities, and a comfortable environment — could contribute to higher treatment rates.

These factors were often emphasised in super-specialty hospitals that aimed to provide a premium patient experience.

“Operational expenses, including staff salaries, utility bills, maintenance, and administrative costs, are considered when determining treatment rates. The cost of acquiring and maintaining advanced medical equipment is also factored in,” said the operation head.

He added that keeping up with the regulatory standards, licensing requirements, certifications from healthcare accreditation bodies, or meeting certain quality standards may factor and compliance with healthcare laws could contribute to the overall operational costs.

Even Asokan pointed out that every standard — be it in terms of infrastructure, services, or protocols — inherently came with associated costs.

It was essential to recognise that maintaining a certain quality standard requires financial investments, he said.

This included not only the physical infrastructure but also the training and adherence to established protocols, all of which contribute to the overall quality of healthcare services provided.

“In order to fully comprehend the implications of these standards, there needs to be a transparent acknowledgment of the costs involved. It is crucial to establish a connection between the desired quality standard and the financial commitments required to achieve and sustain it,” said Asokan.

“And, lastly, the reputation and brand value of a super specialty hospital can affect the perceived value of its services. Hospitals with a strong reputation for delivering high-quality care may set higher treatment rates,” said the operations head. The South First