Rates standardization-AHPI files intervention in SC, Medico Legal to follow

A healthcare industry association has filed an intervention with the Supreme Court seeking changes to its directive to the Indian government to fix the range of rates for medical procedures at hospitals and clinics in the country.

The Association of Healthcare Providers (India) has filed the intervention, while the Medico Legal Society of India is in the process of doing so.

“Given our history of price controls, the Supreme Court could allow, or even direct, the Centre to set prices for commodities and services,” Murali Neelakantan, principal lawyer at Amicus, told NDTV Profit. “But often, this has been irrational and against fundamental principles of basic market economics.”

Basis of intervention
The intervention aims to challenge the court’s directive on the following grounds:

• Legal tenability and potentially misleading nature of the public interest litigation filed in 2020.
• Arbitrary determination of medical procedure rates under CGHS.
• The complexity in healthcare costing.
• Impact on fundamental rights of doctors, paramedics and patients.

The directive on fixing rates of healthcare establishments, the intervention said, is in contravention to Article 19(1)(g) of the Constitution of India, which provides the right to practice any profession or to carry on any occupation, trade or business to all citizens, subject to some restrictions under Article 19(6).

Further, there has not been any study to work out the cost of medical procedures, the intervention said. It’s very complex as rates will depend on many variables like location, level of specialisation, capital investment, fixed and recurring costs and affordability to patients.

Practical issues
Giridhar Gyani, director general at Association of Healthcare Providers (India), told NDTV Profit that the CGHS rates that the Supreme Court wishes to implement throughout the country aren’t scientifically worked out.

“Most of these rates were set in 2014 and not revised for over 10 years,” he said. “A few of them were revised upward a couple of months ago, but it’s still not sufficient for the private sector to provide healthcare services at those rates. Comparing rates with public sector hospitals is not logical as the public sector is provided with huge subsidies.”

He said that if the rates are to be fixed, the government can engage the Institute of Cost Accountants of India to carry out activity-based costing for different procedures based on geography and specialty level of establishments.

Yatharth Tyagi, director at Yatharth Hospitals, called implementation of standard rates impractical to execute.

“Customers have the right to choose quality of care and services. Reducing pricing would involve reduction in doctor salaries, drugs and medical equipment cost and diagnostic services, among others.”

Elaborating on why it’s difficult to set a standard rate, he said that currently, two of their hospitals operating in the same geography—30 kilometres apart—also have different rates with the insurance company because of the difference in hospital accreditation, number of beds, machines used for carrying out medical procedures and amenities offered.

Legal and economic view
The associations highlighted that only 25% of the Indian population can avail “free-of-cost” healthcare in government facilities, indicating the state’s failure.

The burden of investing resources for healthcare delivery for the remaining 75% population has chronically been on private players and it’s unreasonable to expect them to provide service without getting a reasonable return on their investment.

Neelakantan said that while in the past, the government implemented the Drug Price Control Order that fixed prices for essential medicines in the country and the Central Government Health Scheme, which fixed medical procedure prices, the ideal scenario would be to “let the market decide the pricing”.

The government should only intervene if there is a market failure. It should first have uniform pricing across various healthcare schemes. That would form a benchmark price for the market, according to the former global general counsel of Cipla and Glenmark.

“(The) CGHS, too, has different prices for different services across the country and these are different from rates under other central government schemes. Hence, it is difficult to have one national price,” Neelakantan said.

“It is also difficult for the court to determine a basis for establishing price, like capping profits or adopting a cost-plus model because investments like land, rent, wages, cost of electricity may differ between public and private across the country,” he said.

The next hearing of the case is scheduled for the second week of April.

Gyani said the association is also considering filing a separate writ petition before the court. NDTV Profit