CGHS revamp good for patients, but …
Will the new CGHS policy be favourable for some hospitals and the death knell for others in terms of long term sustainability?
On October 3, 2025, the Ministry of Health & Family Welfare revised the Central Government Health Scheme (CGHS) package rates, effective October 13, 2025. This rate revision, coming after a gap of 15 years, had become a flashpoint in most discussions between hospital associations and the government, with the former pointing out that the rates needed to be revised to reflect increased costs on all fronts.
As per an ICRA analysis by Mythri Macherla, Vice President & Sector Head, Corporate Ratings, ICRA , major hospital chains earn around 4-8 per cent of their revenues from CGHS patients, though in some cases, this can be even higher. Macherla believes that the updated policy’s tiered rate card system, distinguishing between NABH-accredited and non-NABH-accredited facilities, and factoring in super specialty hospitals with over 200 beds as well as hospitals in tier-II and tier-III cities, is designed to better match reimbursement rates with the actual costs incurred by hospitals. As a result, super specialty and NABH-accredited hospitals are expected to see higher realisations, while also addressing cost differences between major metropolitan areas and smaller cities.
Highlighting a key concern of past negotiations between hospital associations and the government, Macherla calls out the long receivable cycle under government schemes like the CGHS, compared with other payer categories, such as cash-paying, international patients, or those covered by insurance.
A primary concern is that there is too big a gap between rate revisions. This is perhaps why Ameera Shah, President, NATHEALTH – Healthcare Federation of India and Executive Chairperson, Metropolis Healthcare, while thanking the Government for considering NATHEALTH’s recommendations and acting upon them through this policy measure, suggests that CGHS and other government-sponsored schemes be periodically benchmarked to the Consumer Price Index (CPI), thereby ensuring predictability, sustainability, and a win–win value proposition for patients, providers, and policymakers.
Also sounding a cautious note, Dr Alexander Thomas, of the The Association of Healthcare Providers – India (AHPI) commented, “Given its extensive scope, we are undertaking a comprehensive review to evaluate its impact on hospital providers and the healthcare system at large. A thorough analysis of the changes from existing rates will take several days. We trust that the government has taken our inputs into account and recognises that the sustainability of hospital providers is essential to the delivery of high-quality patient care.”
While associations and hospitals are studying the fine print, it is fair to say that the October 13 deadline to re-empanel private hospitals under the CGHS scheme adds urgency to the review. The memo states that all existing MoAs executed with private empanelled hospitals will be invalid from 13.10.2025 12 AM and they will have to seek fresh empanelment through the revised Hospital Engagement Module. Revised MoAs must be executed afresh within 90 days from the date of implementation of the revised rates, but in order to continue to avail the benefit of the revised rate, each healthcare organisation will have to submit an undertaking, on or before October 13, confirming acceptance of the terms and conditions of the newly notified MoA. This deadline perhaps favours larger corporate chain hospitals which have the resources to comply with the new Memoranda of Agreement (MoU) within this timeline.
The revised CGHS system introduces a differential rating system, based on accreditation status, hospital type, city classification and ward entitlement. (https://www.expresshealthcare.in/news/health-ministryrevise-cghs-rates-to-rationalise-cost-of-healthcare-services/450997/)
The new CGHS policy clearly aims to incentivise accreditation by specifying that non-accredited hospitals (non-NABH and non-NABL) will receive 15 percent lower rates than those accredited by NABH or NABL. This is a good step towards standardisation and quality of care.
But will the new CGHS policy’s tiered structure of differential rates be favourable to some and the death knell to others in terms of sustainability of hospital providers? While healthcare in Tier-II and Tier-III cities will become more affordable for patients, will hospitals, especially standalone ones, in these cities remain sustainable at the new rates that are 10 percent and 20 percent lower, respectively, than those in Tier-I cities?
Industry experts point out that the CGHS rates have been used as a bench mark, and could still impact all hospitals, as private insurance companies used these rates as a basis to negotiate with hospitals. Many hospital associations have consistently pushed for a transparent costing exercise with all stakeholders involved, referring to the 2017 costing by Karnataka government as an example.
While the recent office memo is a much delayed step towards revising healthcare reimbursement rates and policies under the CGHS scheme, the short timeline to sign up for the new rules could be viewed as a tactic to push through rates that are not sustainable. Similarly, delayed payments to empanelled hospitals remains a pain point. Until there is more transparency, there will be mistrust. The government will have to step in to address these concerns before a new stalemate sets in.
VIVEKA ROYCHOWDHURY, Editor
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