Hospitals: Capping Profits

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TOPIC: General Studies 2

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

In News: Based on the recommendation of an expert panel headed by Director-General of Health Services Kirti Bhushan, Delhi Govt. to come out with a policy to cap profit margins of city hospitals on drugs and devices. The committee had suggested capping the profit margin for drugs and devices at a maximum of 50 per cent above the manufacturing price or procurement cost, whichever was lower.

Objective: Will help the consumers access medical devices at reasonable prices

What led to this move?

Incident: The move comes after a public outrage on the death of a child due to dengue last year at a private hospital in Gurgaon, which charged the family around Rs 16 lakh for treatment.

Report Findings: Allegations of overpricing and inflated bills against private hospitals with mark-ups of sometimes 1,192% on medicines were confirmed during an analysis of bills from four hospitals in New Delhi and the national capital region (NCR) by the National Pharmaceutical Pricing Authority (NPPA).

Also,

• Overcharging, refusal or delay in providing immediate medical care to victims of crime or road accidents
• Hospitals compelling patients to purchase drugs from in-house pharmacy
• The pharmaceuticals industry in order to get bulk supply orders, is “forced” to print higher maximum retail price (MRP) in accordance with “market requirements”, and it was amply clear that for claiming higher margins, doctors in hospitals preferred prescribing and dispensing non-scheduled branded medicines instead of scheduled ones.
• Institutional bulk purchases by private hospitals, which in most cases keep a pharmacy of their own, makes it easier for them to get very high profit margins and indulge in profiteering on drugs and devices even without need to violate the MRPs, which is already enough inflated.
• Diagnostics services that constitute more than 15% of the total hospital cost were found to be higher than facilities provided by other independently run private centres.
• Rude behaviour by healthcare workers
• Delay in initiating medico-legal cases

The Way Forward:

Supply of public hospital facilities should be enhanced and improved: Private hospitals will keep overcharging the public because they are forced to go to them. As a result, the ‘out-of-pocket expenditure’ of patients in India is one of the highest in the world, at 62 per cent. As many as 70 million people sink into poverty each year due to the burden of healthcare. Monitoring profits of private hospitals is also not easy, especially when there are many ways of evading the regulatory authorities’ scrutiny.

Multi-skilled Regulators: Need regulators who have multi-skills – medical as well as financial skills

Standard Services at standard cost: It should be realistic costing. Service should include the cost of all the relevant materials going for the service. Proper costing framework needs to be followed by the private sector.

Digital Tool: Need an e-platform where the prices of the medicines and diagnostics are listed. We can use a software to evaluate the input and output cost and create packages, w.r.t the services required per person.

Product – Lack of specialist doctors: India needs to address this bigger problem of the dwindling specialist doctors owing to talent drain, and lack of PG seats. Once this problem starts getting addressed, the input cost would automatically come down.

It is high time we bring in order. Guidelines should be formulated, and be followed. There exist high level of complexities, and complex operations. Therefore, after realistic evaluation, prices for certain healthcare can be fixed. Post that, we need to let the hospitals compete and people to choose as per the service they need. Proper consultations need to be done with all the relevant stakeholders before any rule is finalised.

Be Prelims-Ready

Health: State subject

Association of Indian Medical Device Industry (AiMeD): Defines itself as an umbrella association of Indian manufacturers of medical devices covering all types of medical devices including consumables, disposables, equipment, instrument, electronics, diagnostics and implants.

Connecting the Dots:

1. Will putting a cap on the profits of private hospitals solve the deeper malady of lack of affordable healthcare in India? Discuss.