Is Regulating Healthcare Costs Counterproductive? SC Order Opens Pandora’s Box

The Indian private healthcare sector, the largest in the world, has so far was seen as being largely unregulated.

Challenges in Standardising Healthcare Costs: Supreme Court's Order Raises Concerns

(Photo: iStock/altered by FIT)

India was a signatory to the Alma-Ata declaration in 1978 of committing itself to achieving the goal of 'Health for all' by the year 2000. Despite the avowed policy to attain universal healthcare, until recently, there was hardly any effort to achieve that.

It has remained a pipe dream even after a quarter of a century, for the simple reason of the abysmally low 1.4 percent of GDP spending on healthcare until the COVID pandemic struck in 2020.

Underfunded public facilities compounded by their utter neglect created a vacuum to be filled by the privately funded healthcare establishments, most of which were set up as profit-making business ventures focusing only on their bottom line rather than providing service to the masses.

This is not to take away from these establishments, the state-of-the-art and top-of-the-line facilities and equipment they have made available for those who can afford them.

The Indian private healthcare sector, the largest in the world, was seen as being largely unregulated.

It is this huge discrepancy in the rates charged by the government facilities and those by the private sector, as also a lack of uniformity in the rates charged in different private hospitals for the same procedures, which led to a public interest litigation (PIL) petition filed by an NGO, Veterans Forum for Transparency in Public Life in the Supreme Court of India.

How Does the Centre Plan on Standardising Healthcare Prices?

As a response to the felt need to regulate and rein in this sector, Clinical Establishment (Registration and Regulation) Act was introduced in 2010. A Central Act, it has been adopted to date only by 12 states and 7 union territories with modifications.

Through the PIL the Centre has been requested to establish a regulated and uniform fee structure for patients as per Rule 9 (ii) of the Clinical Establishment Rules 2012, which dictates that the pricing of each service must be within the range outlined by the Central government, as decided in consultation with the state governments.

It seeks to bring some semblance of order by registering all healthcare establishments, setting minimum standards of space, equipment, healthcare personnel and treatment and even dictating costs by setting ranges.

Corporates’ professed duty to protect their shareholders’ financial interests coupled with healthcare providers’ tendency to practice defensive medicine by erring more on the side of over-investigation and treatment because of the looming threat of medical malpractice litigation has led to a healthcare delivery system which is unaffordable by most.

On February 27, 2024, the Supreme Court expressed its disappointment with the Central Government for not specifying the range of rates for treatment services by private hospitals and clinical establishments, as required by the Clinical Establishment Rules even after 12 years of its coming into force.

The bench of Justices G R Gavai and Sandeep Mehta warned the central government that they should present a proposal for hospital rates compliant with the rules in collaboration with states within six weeks, failing which the court will enforce the Central Government Health Scheme (CGHS) rates as an interim measure across all private hospitals.

Predictably, IMA (Indian Medical Association) and other health associations are not happy about it.

Why Is the Medical Bodies Against the Move?

The Supreme Court's fiat to the Union government to fix standardised rates for various medical procedures appears to have ruffled many a feather in India’s healthcare industry.

IMA and other bodies like The Association of Healthcare Providers (AHPI), which represent medium and small private hospitals, have written to the Union health ministry.

Many parties have approached the Supreme Court to implead themselves and intervene in the case.

There are multiple issues with this fiat. Supreme Court's threat to apply CGHS rates all across makes the very system unviable, hence ill sustainable.

If the private hospitals under pressure from the government or their own financial compulsions succumb to this diktat, the consequences are likely to be extremely harsh both for the patients and the industry.

The healthcare establishments will have to cut corners resulting in compromise in the quality of care, which today, India can reasonably boast of as one of the best in the world.

More importantly, to stay afloat these establishments would be compelled to resort to warped and corrupt practices, certainly not the best scenario to have.

Health being a state subject, the other challenge is that implementation across the country may warrant a change in legislation. This is because only 12 states and seven Union territories (UTs) have adopted the Act, that too with modifications.

As there is no scientifically determined benchmark of the costs, AHPI has recommended drawing up costs for various procedures based on established scientific principles and fixing rates in the ‘range’ to address the categorisation of establishments.

Counterintuitive as it may seem, standardising the pricing of healthcare is likely to be counterproductive because suboptimal quality of healthcare delivery would have undesirable outcomes for the patients.

Hospitals apart, the bright doctors in stand-alone small nursing homes and clinics would be faced with Hobson’s choice of leaving for the greener pastures abroad or changing the profession.

Eventually, patients who deserve the quality healthcare the most, would be denied the same.

Is There a Way Out of the Deadlock?

The solution probably lies in the State investing in public healthcare infrastructure and increasing the health insurance penetration with user-friendly products for the patients preferring to seek private healthcare.

This may then accommodate the whole spectrum of patients from poor to rich.

However, question then would arise why there should be a differential in the quality of treatment of disease which does not differentiate between who to afflict.

However, the solution certainly, is not relegating it to the lowest common denominator, which is what the SC diktat seems to have done.

Merits of the Court’s decision apart, it is unfathomable that the honourable judges of the Supreme Court did not know that standardising charges of doctors and private healthcare establishments directly violates a fundamental right under article 19 (1) (g) of the constitution which guarantees the right to practice any profession, trade or occupation.

But the blame certainly does not rest on their shoulders as they acted within the confines of the law, that is the Clinical Establishments Act, which however, should be declared ultra vires (literal meaning: beyond the powers) by the honourable Court for the same reason.

It will not be out of context to mention that in October 2020, Nagpur bench of Bombay High Court in Hospitals Association Nagpur and another versus Govt. of Maharashtra and another, held that there is no provision in various acts, as quoted, which empower the State Government to regulate the rates recoverable by the private hospitals for providing medical services to non-COVID patients.

The Supreme Court of India refused to entertain a special leave petition filed by the Government of Maharashtra challenging this decision.

Further, in no other profession, has there been a regulation of pricing of privately offered services. One fails to understand why the medical profession is always at the receiving end.

(Dr Ashwini Setya is the Adjunct Professor in Gastroenterology, ESIC Medical College, Faridabad, and Senior Consultant with Medanta Institute of Digestive & Hepatobiliary Sciences, New Delhi. Dr Setya is also an advisor and consultant in Medical Law and Ethics. This is an opinion piece, and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)