Capping of Fees in Healthcare- A disaster waiting to happen!
The doctors representing private hospitals in Karnataka have been staging a protest in Belgaum since the last few days. Due to the reluctance of the ministers of the ruling government to even listen to the objections of the doctors, the various doctor bodies of Karnataka have called for an indefinite shut down of OPD services and elective surgeries in all private hospitals of the state. Only Emergency and essential services like Dialysis and chemotherapy will be functioning from 16th November, 2017.
Not paying heed to the doctors’ protest, the Karnataka government is all set to table and pass the Karnataka Private Medical Establishment Act (KPMEA), 2017 in the winter session of the legislative assembly. The West Bengal government has already tabled and passed the West Bengal Clinical Establishments (Registration, Regulation and Transparency) Bill, 2017. Both these new laws have price capping of private healthcare as one of their major proposals.
It appears to be a foolish move by both state governments to take the attention away from the abysmal public healthcare infrastructure and delivery. The private hospitals are being victimised for giving good quality care despite the government rather than because of it.
Before you are outraged and bring morality, corruption and greed into the discussion; and get all emotional about it, let us put forth some logical arguments why the capping of fees is not a good idea.
Private hospitals need to
- Buy/ lease/ rent real estate
- Build hospital infrastructure and buy high priced equipment.
- Pay salaries of doctors, nurses, technicians, paramedics staff, administrative and clerical staff
- Pay electricity/ water bills at commercial rates, AMC maintenance of medical equipment, insurance premiums,
- Regulatory expenditures to maintain standards and get accreditations like NABH, NABL, JCI, etc
- Buy consumables like sutures, surgical instruments, implants, drugs, medical supplies to be in inventory when the patients walk in.
- Pay taxes just like any legitimate business.
- To be cutting edge, they need to keep investing in future technology, research and hire people who are up to date with the latest in medical science and skill levels
All these need to be paid for by the revenue generated in the hospital and the promoters of the hospital need to make profit to sustain, expand service width and to continue maintaining quality. If profit doesn’t materialize, the promoters or hospital owners are not going to run the hospital and will end up selling it off or pulling out their investments.
Government hospitals also need to do the same but are funded by tax-payers and they don’t need to make profit to continue ahead. Even though they need to keep standards, most of the government hospitals fall short of basic quality metrics.
So what happens when there is a capping of fees in private hospitals?
I’ll present 4 hypothetical scenarios just to drive the point home.
Scenario 1- Emergency
You become a victim of a road traffic accident. You are rushed to the nearest government hospital where emergency care is given and you are medically stabilized. However knowing the quality of care available in government hospitals, you get yourself shifted to a private hospital once you are stabilized. You’ve had a pretty bad injury and you need a complex surgery requiring a lot of implants and cutting edge tech for a successful outcome. There are brilliant and skilled doctors in the hospital and all the technology is available.
However here is the catch- The government has fixed the price of your particular surgery at Rs. 20,000 which has been decided arbitrarily without taking into account the various types of complex cases that come to the hospitals after road traffic accidents. The hospital says it cannot afford to put all their best doctors on your case since they had to let go of some of them due to the capping of surgery fees. They would have to use sub-standard implants and equipment since they cannot afford to pay for cutting edge tech.
They do not really want to do the surgery either and would prefer if you would go to the government hospital to get the surgery done because they are worried that you will file a malpractice suit against them for not resolving your problem and that would entail more costs.
How would you feel?
Scenario 2: Health Insurance & Government schemes
Say your mother needs a cataract surgery. It is a very commonly done surgery in any eye hospital in India and some of the most excellent cataract surgeons in the world are in India. You want the best for your mother, so again you go to a private eye hospital for the surgery. Your mother is a good candidate for the high end surgery that is Phacoemulsification with a multifocal foldable intraocular lens. Your father got it done just last year before the price cap laws came into being for Rs. 50,000.
To your chagrin, the doctor tells you that you have only one option for cataract surgery- Small Incision Cataract surgery with a one of the cheapest lens available in the market. This is because the government has fixed the price of cataract surgery at Rs. 6000 based on how much government schemes have fixed prices. The eye hospital had to sell off it’s phacoemulsification machine after the price cap rules. The multifocal IOL costs Rs. 30,000 and due to the price cap the vendor has taken the high cost IOLs off the shelves because it is not profitable to sell for any lesser.
You say to the doctor that money is not an issue since it’s your mother and you are ready to pay the difference. The doctor says you can’t since the price cap means that he can’t charge you a higher rate than others and also he can’t do the phacoemulsification surgery because he has sold off the machine. So in effect the surgery that is available to your mother is no different than those done to very poor patients (who cannot afford to go to private hospitals) in camp surgery or in government hospitals.
You protest saying your mother’s surgery is covered under insurance. At least that ought to solve the problem.
He tells you that he has stopped taking in government schemes and insurance payments as he is already under loss from the capping and cannot take further losses from the government schemes whose payments come once in 2 years and he is unable to provide quality assurances demanded by the insurance companies under this new regime. He also informs you that he has fired half his medical and non-medical staff since he cannot afford to pay their salaries anymore.
How would you feel if you have the money required but cannot get your mother the best quality surgery available in the world?
Scenario 3- Primary care
Your child has fever. You go to your neighbourhood family doctor. When you reach the clinic, you see 50 people waiting to see the doctor. After 4 hours of waiting, your turn finally comes. You try to tell her that your child has fever but she isn’t listening to you. She has already started writing a prescription prescribing antibiotics and paracetamol. She hands you the prescription telling you to google any queries that you have. She doesn’t have to time to examine your child because the government has capped her consultation charge at Rs. 50 and she needs to see 100 patients a day to break even. She advises that if it doesn’t get alright with the medications prescribed, you can go to the government hospital OPDs and get admitted there.
Sounds swell doesn’t it?
Scenario 4- Super-specialized surgery
Your uncle needs a liver transplant. The corporate hospitals which were earlier doing those surgeries have stopped doing so because the government has capped the surgery price at Rs. 5 lakh. At this price point, the corporate hospitals cannot sustain their transplant program. Your uncle has no option but to go to another state or country to get the same surgery. The surgery may or may not be feasible in a different state or country depending on the rules governing transplantation in those states or countries.
You can guess what would be the eventual trend….
- Honest doctors and well intentioned hospitals will reduce services to the minimum sustainable. They will refuse to do any surgery that costs more than the government allows them to charge or ones too risky to attempt.
- The unscrupulous among the medical professionals and hospitals will stop maintaining standards because that costs money. They will use the cheapest equipments, cheapest implants, low quality man-power and sometimes provide incomplete/no treatment so long as they eventually make profits. This will go unchecked because the unscrupulous have absolute monopoly and government hospitals are no better.
- Private hospitals will eventually stop doing surgeries under government schemes because many smaller hospitals and practices will close down after the price cap as it becomes unsustainable to continue. Bigger hospitals and corporate hospitals will refuse government schemes as well since they will lose money on those surgeries and other revenue sources have dried up. Eventually the poor are at the mercy of the care of government hospitals- which if it is not apparent already, isn’t very awe-inspiring.
- Many of the doctors and other medical professionals will either migrate out of the state/country or take up a job in another industry where the government does not cap the prices of the services or product.
- None of the latest technology would reach India as foreign companies will have no market for their latest but expensive machines/implants. There wouldn’t be many doctors left in the state who would have any expertise in using the new technology either as they would all move to better pastures.
- The medical tourism industry collapses on itself because the quality has dropped so much that no one cares for it anymore. The health indices of the state/country plummets drastically mirroring some west african country.
The public of course will be very happy that there are no private hospitals or doctors making any money and that the quality of care available in the government hospitals is almost comparable to the private ones (or the few that would be left).
The above account reads like a dystopian short story but that is exactly what will happen if the government caps fees in private hospitals in India and we all take it to the logical conclusion.
This whole public support around capping fees for medical services in Karnataka and West Bengal is based around the false premise that somehow doctors and private hospitals are responsible for providing affordable healthcare. They are not and cannot! Despite this, private healthcare provides nearly 70–80% of the healthcare needs of the country. The fees charged for the high level of care provided is amongst the lowest in the world. Private healthcare is what is bringing the latest in the medical world to India at the lowest prices. Hospitals use volumes (in a large country like India) to drive down running costs and expenditures thus helping reduce prices.
The full responsibility to provide affordable healthcare lies with the government. The buck stops at them. They should improve government hospitals to put them on par with the best private hospitals by really investing more money and man-power in them. They should make strong insurance laws and create more state funded insurance schemes which will prevent private insurance companies from cheating the public. They can cap basic implants/stents or even offer those free of cost if possible. They can even set prices for government funded schemes after discussions committees which comprise of hospital/doctor bodies with a legitimate say in the matter.
The moot point remains- If the quality of healthcare in government hospitals were reasonable, why would anyone have to go to a private hospital? As it stands, to cap all the prices in private healthcare is irresponsible and shows the callous attitude of the Karnataka and West Bengal governments and will eventually have disastrous consequences. To hide their failures in lifting up the standards in public healthcare, they are demonizing private healthcare for the sake of votes.
Failing to understand the economics of medicine leads to every stakeholder in the healthcare pyramid suffering in the aftermath of a poor healthcare policy.
Originally published at www.quora.com.