Why in the news? 

The SC while hearing a PIL in February’24, directed the Central Government to find ways to regulate the rates of Hospital Procedures in the Private sector.

• The SC also warned against applying Central Government Health Scheme (CGHS) rates for treatment services at private healthcare facilities until standardized rates are set.

Benchmark for Pricing:

• Standard Treatment Guidelines (STGs): These can establish relevant clinical needs, the nature and extent of care, and the costs of total inputs required.
  • They address confounders and ensure clinical autonomy while enabling the valuation of healthcare resources consumed for precise cost determination.
• Pooled payments by government: Formulating and adopting STGs require providers’ revenues to be tied to fewer payers.
  • This necessitates reimbursements from pooled payments with low Out-Of-Pocket (OOP) payment levels, supported by the government.
• Coordination between payers and providers: Governments can support the agreement on pricing that provides a reasonable and sustainable surplus over input costs.
  • However, the ability of providers to access markets with OOP payments could hinder this effort.

Challenges faced during benchmarking of the price:

• Private sector issues 

• • • Private sector dominance: In India, over half of the total health expenditure is OOP, with the private sector predominantly composed of small-scale providers. Standardizing rates faces implementation uncertainties, and enforcement mechanisms for adherence remain unclear.
    • Resistance from providers: Concerns arise about the feasibility of regulatory measures if providers do not adhere to prescribed procedure rates, as seen in various health schemes.

• Weak implementation

• • Limitations of regulations: While price caps can influence behavior in the short term, weak enforcement mechanisms lead to temporary effects as the overall environment remains unchanged.
  • Enforcement challenges: Despite suggested measures, enforcement remains weak, with only a fraction of states and union territories implementing the Clinical Establishment Act.
• Data-related issues: Although the insurance industry initiated STGs for hospitals in 2010, progress was hindered by a lack of representative and accurate costing data due to limited participation from private hospitals.

Government Initiatives:

• Developing STGs: The Pradhan Mantri Jan Arogya Yojana and the Department of Health Research have made significant strides in developing STGs for common conditions and adopting a comprehensive costing framework.
• Efforts are also ongoing to create an Indian version of Diagnostics-Related Groups (DRGs)

Way Forward:

• Addressing anticipated challenges: Anticipated challenges in implementing rate standardization policies need to be identified and addressed proactively to ensure successful outcomes.
• Evidence-based policy: Conduct rigorous research and evaluation to generate evidence on the impact of regulatory measures on affordability, care quality, and provider behavior, informing future policy decisions.
• Ensuring broader stakeholder participation: It is essential to involve a wide range of stakeholders in the development and implementation of rate standardization policies to increase their effectiveness and acceptance.

Mains PYQ 

Q Public health system has limitation in providing universal health coverage. Do you think that private sector can help in bridging the gap? What other viable alternatives do you suggest? (UPSC IAS/2015)

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