DHN Exclusive: How Price Standardization Will Derail Indian Private Hospitals

For a diverse country like India, its diversity is widespread in every system. Would you pay the same amount in a government-run hospital than in a private one?

Act 9 of the Clinical Establishment Rules of 2012 mandates all registered medical establishments to openly show the service charges for patients in the vernacular language or English. Still, there is a huge discrepancy in hospital billing across private & government hospitals.

In February, the Supreme Court of India criticized the central as well as state governments for failing to come up with a standardized pricing structure. In April, it asked the central government to standardize private hospital billing. Providing healthcare to every citizen is the objective; however, the answer to this billing discrepancy lies in its question. A closer look.

The Supreme Court verdict, which evoked curiosity and anxiety among the private hospital industry is yet to see the light of the day. Yet, the direction from the Apex Court of India didn’t bode well with the private hospital industry. Just like we can’t compare apples with oranges, the prevailing pricing disparity is rooted in the very structure of these two types of healthcare establishments.

Echoed in healthcare leaders’ voices, they rather want a level playing field for Indian hospitals that can improve healthcare delivery at an affordable cost.

What the Clinical Establishment Rules Say

The central government enacted the Clinical Establishments (Registration and Regulation) Rules, 2012, to regulate the registration and operation of medical facilities. Rule 9, precisely advocates that each medical establishment must charge the rates for each type of procedure and service within the range set by the central government from time to time, in consultation with the state government.

Ironically, till date, these rules have not been enforced and each hospital charges the bill differently and without following any method. From 2012 to 2024, the Indian hospital billing structure still looks unorganized in the absence of a pricing standard mechanism. The right to health is a fundamental right that can’t be forsaken at any cost. Indeed.

However, the issue of arbitrary pricing by Indian private hospitals requires course correction. “As a private player, we feel that forcing or enforcing a pricing without understanding the cost of operation (of a private hospital) is not the way. Unfortunately, if it becomes enforceable from the top, then many of the private entities will cease to exist,” said Amit Sharma, CIO & head-Partnerships & CSR, CyteCare Hospital.

Solving the Pricing Labyrinth in Private Hospitals

Hospital billing can not be standardized because private and public hospitals operate from two different infrastructural setups. A government hospital is covered by different government schemes, wherein they get different subsidies, grants for capital expenditure, and price reductions.

For example, these hospitals can be built on government-donated land. Besides there are tax rebates on the import of medical devices/equipment, and diagnostic machines that reduce the cost of operation immensely. Additionally, doctors in government hospitals are free to operate in their private setup too adding a leeway to earn extra.

Private hospitals, on the other hand, are hugely dependent on the money they earn from the service offered under their premises. Their doctors, medical equipment, facilities, and amenities incur huge costs as they swear by providing the best service that money can buy.

Therefore, price enforcement has to be worked on keeping in mind the inequality that exists between the two types of hospital setups. Voicing concerns on the same, private hospital leaders urge the government to come up with certain guidelines or categorizations that will help patients receive quality healthcare at a reduced price instead.

“There can be some kind of a categorization of private hospitals, like, category A, B, C, D. And these categories again are dependent on what kind of equipment or facilities are available in those hospitals. And based on those categories, prices can be fixed. Like if you’re category A, then, the same surgery here may cost INR 1 Lakh, whereas in category B, it may cost INR 40,000 or INR 30,000. This kind of structure looks more justified and reasonable,” said Rajendra Kshirsagar, head-IT, Rajagiri Hospital, Kochi.

Sharma noted that private hospitals need to cover the cost of operation and simultaneously keep their investors’ confidence intact in them. He said, “Comparing a hospital X, which is on government land, free land, with the initial capital expenditure given versus a private hospital with its own land, either bought or taken on lease, and then the instrument taken, so they will have to recover the cost. Because they are not a philanthropic organization, they are not a government organization, but are a private organization. So, at least they will have to recover their cost. Similarly, the cost of the operations, in a government set up, the doctors will have a different salary structure, the private hospital, they will have a different structure. So, you have to create a level playing field.”

Shedding light on the issue, Alok Khare, Consulting CIO, Yatharth Group of Hospital, said, “Besides all the disparities, look at the kind of treatment we get in the private hospital. Can you get similar treatment in a public hospital? No. Besides, no one is answerable to any mis happenings/malfunctioning in a government-run hospital. At best, the press can cover such incidents. Can you accept it in a private hospital?”

Wrapping Up

If price standardization is to widen the reach of healthcare to every needy citizen, the authorities need to understand the difference between public and private hospital governance.

Here ‘one size fits all’ pricing policy is not going to help, rather, setting up different pricing structures for different procedures, and treatments looks more practical. So that, the private hospitals too sustain and the treatment cost does not become a burden for the common man. Further, creating a ‘level playing field’ for hospitals is strongly recommended.