Patients’ gain, healthcare providers’ bane?

SC diktat on fixing CGHS rates revives debate on pricing methodologies but is it the right sustainable solution? 

A PIL filed by an NGO, the Veterans Forum for Transparency in Public Life, has brought back the spectre of price control in the healthcare sector. The NGO’s PIL pointed out that rates for treatment and surgeries varied widely across private and government healthcare facilities, as well as across metros, cities, and towns. 

The NGO’s petition quotes Rule 9 of the Clinical Establishment Rules 2012 which mandates that hospitals and clinical establishments must prominently display the rates charged for all services and facilities. The list has to be in English as well as the vernacular language. These rates need to be within the ranges of rates determined and issued by the Center at periodic intervals. The Supreme Court (SC) has given the Union Health Secretary a month to rectify the situation, failing which it has threatened to consider the NGO’s plea to implement standardised rates as per the Central Government Health Scheme (CGHS). 

While the diktat revives the price versus quality debate, there is no doubt that patients will benefit if there is more transparency about treatment rates and if rates at private hospitals are standardised. But will what’s good for patients, turn out to be unhealthy for healthcare providers? In response to the apex court’s charge, the Association of Healthcare Providers (India) (AHPI) is planning an intervention application in the SC to explain the situation. Healthcare experts like Dr Alexander Thomas, founder and patron, AHPI, aver that CGHS rates are not scientifically calculated and are requesting scientific costing as the basis of pricing. He says pricing should be in a range. 

According to Dr Thomas, many studies, including one by the Government of Karnataka, have shed light on a significant gap between the actual cost incurred by private healthcare providers and the reimbursement received from the government for services rendered. This gap not only affects the financial sustainability of healthcare facilities but also has a direct impact on the quality of services provided to patients. 

Dr Thomas emphasises that costing methodologies in the healthcare sector must account for various factors, including the type of healthcare provider (primary, secondary, tertiary), location (urban, rural, metro), and accreditation status. 

If standards need to be set, then Dr Thomas points out that accreditation bodies like the National Accreditation Board for Hospitals & Healthcare Providers (NABH) have become the gold standard in India, ensuring standardised quality benchmarks across healthcare facilities. 

Explaining why differentiating hospitals based on their categorisation is crucial for accurate costing and pricing, Dr Thomas says that while government hospitals, funded by taxpayers’ money, often provide services at subsidised rates, aiming to ensure equitable access to healthcare, private hospitals, on the other hand, operate on a for-profit or sustainable model, necessitating careful consideration of cost structures and pricing strategies.

Refuting the perception of higher costs in private hospitals, Dr Thomas points to several studies that have indicated that the overall costs in government and private hospitals are comparable. However, the subsidy model in government hospitals distorts the true cost of services provided, as these facilities receive financial support from the government.

As adhering to the Clinical Establishment Rules 2012 is vital for the registrations of hospitals, a strict implementation could have severe consequences for the sector. Hospital stocks crashed on February 29 soon after the SC diktat, losing over Rs 15500 crore in market cap, by one estimate.

Analysing the impact of this diktat on the sector, Tausif Shaikh, India Analyst – Pharma and Healthcare, BNP Paribas India reasons that that fears over pricing norms are unwarranted, as the implementation of standardised fees seems unlikely because hospitals differ considerably in terms of infrastructure, instruments used during surgeries, skills, and experience of medical staff and complexity of ailments dealt with. If standardised pricing is introduced, it would negatively impact companies with a higher share of revenue from self-pay/cash while companies with high exposure to government institutional businesses would be least affected.

While the difference in treatment costs of private and public hospitals is typically 30-40 per cent for key specialities such as cardiology, orthopaedic, and neurosciences, the BNP Paribas India analyst believes it is unlikely that even if a fee structure is imposed for private hospitals, the treatment cost would fall significantly to levels anywhere close to that of public hospitals.

The real question is, what would it take to delink cost from quality of care and outcomes? And rebuild the trust in government hospitals? Instead of providing more public health facilities that are affordable, is it right to penalise the private sector? After all, private healthcare has thrived due to the lacunae left by public health facilities. Will fixing CGHS rates for private hospitals be a short-term fix but long-term pain for India’s patients?


CGHSNABHpatient safetyPIL
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