Prof Dayashankar Maurya, Assistant Professor, Graduate School of International Relations, International University of Japan, shares his insights on how a standard hospital treatment package can help combat COVID-19
A high-level group on health met on 21st May, 2020, to discuss India’s health sector strategies to deal with the pandemic. During this meeting, Prof Shamika Ravi, Research Director, Brookings India, and a former member of PM’s Economic Advisory Council presented on modelling the path of pandemic behaviour. As per Prof Shamika Ravi’s tweet on 20th May, India’s active cases on 19th May were 60,864 with the growth rate of 3.6 per cent and therefore doubling in 19 days.
As lockdown measures are lifted and cases grow, the mitigation strategies will focus on hospitalisation and intensive care support. This would require appropriate utilisation of hospital beds in the private sector otherwise public hospitals will be overburdened, while private hospitals will remain underutilised.
At present, the private hospital beds are grossly underutilised. On 23rd March, 2020, the central government restricted the provision of non-emergency care by hospitals across the country, both public and private, to limit the spread of infection. These restrictions have brought down bed occupancy ratio, a measure of hospital utilisation, to less than 40 per cent in March end from 60-75 per cent before lockdown as per the Ernst & Young and FICCI Report. There is enough evidence that suggests that many private hospitals have been incurring extensive losses due to reduced patient volume, threatening their survival. Many hospitals have to close down their operations, and others have to drastically rationalise their staffing, cutting salaries and reducing costs to cope with a sudden slump in the revenue.
The private hospitals have seen drastic reduction in revenue along with significant increase in operating costs because of the risk of COVID-19. Many hospitals have to set up a special flu screening clinic at the entrance of the hospital so that suspected COVID-19 cases could be identified. Secondly, in suspected cases, they need to carry out the COVID-19 test before providing further treatment. Hospitals also have to set up a separate COVID-19 ward for separating COVID cases from non-COVID. Similar segregations are required in many other areas. Additionally, hospitals have to segregate hospital beds to ensure enough distancing or use single rooms. According to Amit Singh, CEO, Yatharth Group of Hospitals, the hospitals have to spend on PPE kits and a rough estimate suggests that for a single patient, a hospital requires around 14-18 PPE kits per day, an additional expenditure anywhere between Rs 10,000-Rs15000 per day depending upon the type and quality of PPE kits. The healthcare workers who are dealing with the COVID-19 are at heightened risk of catching infections; and therefore, many hospitals have to increase compensation for them. At present, at the national level, there is no health insurance policy for private sector healthcare workers, though the same exists for public sector workers.
The private hospital sector has been struggling from a number of years to maintain profitability. According to the EY-FICCI Report 2020, private hospitals were already struggling with operating profitability with EBIDTA (earnings before interest, taxes, depreciation and amortization) of 13 per cent and profit after tax (PAT) of three per cent. The cash balance was estimated to be of around 19 days to sustain expenses. As hospitals have limited budget space to accommodate increased costs due to COVID-19, they will tend to pass down these costs directly to beneficiaries in the case of uninsured patients or the insurance company in the case of insured patients.
Till 4th May, 2020 general insurance companies have received 900 claims related to COVID-19 treatment with an average of Rs 2 lakh per claim. However, as nearly 80 per cent of the hospitals in India are single-owner small enterprises, the operating costs in these hospitals is expected to lower much. With a reduction in income due to salary cuts or unemployment, even middle-income families will find it difficult to bear this catastrophic expenditure and have to seek treatment at the over-burdened government facility or get pushed under poverty.
The situation for those, who have been insured, might be a little better. Nevertheless, it is only a matter of time when it may become worse because the insurance industry also has minimal budget space to cope with increased costs.
India’s health insurance industry has been struggling to make profits even before the COVID-19 epidemic. According to Insurance Regulatory Development Authority (IRDA) Annual Report 2018-19, companies that only engaged in the health insurance business, also called stand-alone health insurance companies, reported a loss of Rs 298 crores in the year 2018-19 and Rs 102 crores in 2017-18. The general insurance industry reported a sharp decline in the profits from Rs 6,909 crores in 2017-18 to Rs 683 crores in the year 2018-19. Insiders suggest that at present, insurance companies are paying the COVID-19 claims because the overall number of claims has come down as hospitalisation has reduced due to lockdown. However, as the number of cases increases, it will become difficult for them to cope with the increased costs, especially for smaller insurance companies.
In many instances, patients — both, insured as well as uninsured — have been asked to pay additional fees for testing, PPE kits, and costs additional to regular nursing charges. Many cases of hospital abusing this situation has also been reported, where hospitals have done unnecessary multiple testings and charged exorbitantly for the PPE kits. Similarly, insurance companies have also refused to pay additional costs that hospitals have incurred and forcing patients to pay additional fees.
The Government of India has made some efforts to rationalise the treatment price in case of COVID-19 cases by coming out with a package for COVID-19 under Ayushman Bharat. However, the details of the package and rates were left on the states to decide. By 13th May, 2020, only 300 patients have taken treatment for COVID-19 under Ayushman Bharat. In Mharashtra, private hospitals have rejected the capping of private hospitals’ bill size by state government. Anecdotal evidence suggests that due to low package rates, larger hospitals have been refusing Ayushman Bharat beneficiary even before COVID-19, though they were officially empanelled under the programme. The smaller private hospitals treated Ayushman Bharat patients but have to engage in various tricks to maintain profits, such as claiming multiple packages or choosing a higher-priced package.
Need for standardised hospital package
The present situation suggests the need for creating a standardised hospitalisation package for COVID-19 cases, so that hospitals and insurance companies, and government health insurance funds can sustain themselves in this extraordinary health crisis.
As standardised pricing for COVID-19 testing has facilitated access to testing, a standardised treatment package will also enable the proper utilisation of hospitals in the private sector. This would require estimating the number of services and healthcare products that a typical COVID-19 patient will consume based on the need for general hospitalisation, Intensive Care Unit (ICU) support and need for ventilator support, as observed so far in the Indian context.
The government has an extensive experience in designing package rates under various government-sponsored social health insurance programme including Ayushman Bharat. However, this standardised treatment package needs to vary for different categories of hospitals as operational costs vary widely across jurisdictions and types of hospitals. Hospitals of different sizes differ in operating expenses. The package rates also need to change based on geography as operating expenses vary widely in the city of Mumbai to a rural private hospital in Gorakhpur district in Uttar Pradesh. Such a package rate will provide certainty about the costs of treatment, enabling patients, hospitals, insurance companies, and government health insurance funds to rationalise their operations. Otherwise, an endless cost-shifting and haggling will ensue between parties that will compromise access to healthcare among both insured and uninsured patients. Reports suggest that majority of the patients who have died due to COVID-19 have approached the hospitals late.
The central government needs to take leadership in this matter as states vary in their capacity and ability to coordinate with the private sector. Further, different provinces are ruled by different political parties which differ in ideology in terms of partnering with the private sector. The Ministry of Health and Family Welfare (MoHF&W) should involve IRDAI, given their expertise in these matters. Though, over time, the cost discovery may happen between the insurance company and hospitals. In addition, those without insurance coverage could be exploited by exhorbitant pricing by some hospitals. There is definitely a role for government to play here.