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Most private hospitals are not looking to profiteer

As the pandemic has swept the country, the private sector has been an able partner of the government in providing beds for the treatment of patients.

Published: 15th June 2020 04:00 AM  |   Last Updated: 15th June 2020 05:55 AM   |  A+A-

A medical worker in PPE kit at the emergency ward at sant Parmanand hospital in New Delhi

A medical worker in PPE kit at the emergency ward at sant Parmanand hospital in New Delhi. (Photo | Parveen Negi, EPS)

Audi alteram partem is a Latin phrase meaning “Let the other side be heard as well”. It is a principle of fundamental justice or equity. This piece seeks to invoke this principle, in the matter of allegations of overcharging and profiteering against private sector hospitals that have been in the news recently.
When seeking to make a contrarian argument, it is best to dispel some myths.

First, the notion that all private sector hospitals have been built on land gifted free of cost by the government is a myth. Only a handful of hospitals spread across the country would have secured land at a low cost. Every other hospital has bought or leased its land at market prices.

Second, the sector gets no concessions on its input costs. For example, even while being a sector that is so critical to the health and well-being of the country, it pays commercial rates for power and water usage, and is not able to offset the GST paid on all the input services against its output.

Third, healthcare is a sector that is both capital-intensive and labour-intensive. There is a long gestation period, and quite a difficult path to breaking even. Medical technology is ever evolving, and if we need to be at the forefront of technology, we need to continuously provide funds for updating technology. We also face all the complexity of handling a large labour force, which needs to be trained to high standards of precision and hygiene, while managing service costs optimally. Unappreciated is the level of intensity and skills required in the healthcare industry. Another aspect to remember is that over 70% of a hospital’s operating costs are fixed and must be incurred whether there are patients or not.

Fourth, it is important to place on record that the sector is not making disproportionate profits, as seems to have been the public perception. In fact, profits after tax (PAT) margins for private healthcare players have been in low single-digits and return on investment (capital deployed) is also between 5-10% for the top players. This is quite muted compared to other benchmark sectors. Being a commercial enterprise, the pricing needs to generate enough funds to take care of debt servicing, market returns to the shareholder, and retain earnings for future expansion and development.

Now, to the current debate that is about overcharging Covid patients. To begin with, we need to understand Covid—this is a very new, virulent virus, whose effects are yet to be fully known. The severity of Covid in patients is also a factor. There are patients who have mild symptoms, those who have comorbidities or need light oxygen support, and those who need ventilator support. So, treatment options need to be flexible and adjusted according to individual patient needs. Secondly, it spreads rapidly, which means that healthcare workers working with Covid patients are at very high risk and several layers of precautions need to be taken.

Is the sector being considerate and humane and offering discounts when the patient cannot afford care? By and large—yes. There will always be those outliers who will give the sector a bad name, but in this time of national challenge, the private sector healthcare is not looking to profiteer.

Then why does the cost of Covid treatment appear high? There are three elements of treatment cost: Room rent (which is not real estate alone, but several service components like patient food, nursing care, etc.), investigations and procedures/equipment at ICU. If a patient is high risk, i.e. has severe symptoms, comorbidities, requiring a ventilator, etc., the second and third elements of cost will go up, as more frequent investigations and procedures at ICU will be needed, as will the cost of drugs. To see this in perspective, out of 160 Covid patient bills analysed at a leading tertiary care hospital in a metro city, only three bills exceeded `10 lakh for an average length of stay of 10-12 days, compared with 4-5 days for non-Covid cases.

As the pandemic has swept the country, the private sector has been an able partner of the government in providing beds for the treatment of patients. Covid beds are not unlimited—there are infrastructural specifications that need to be considered. Despite limitations, the private sector has offered beds and is continuing to treat thousands of patients. Due to the need for physical distancing during Covid, the optimum usage of space and beds has suffered. Staff can also not be easily or routinely switched between patients or departments and are also rendered unavailable for intermittent periods of time due to forced quarantine.

Those calling for caps on private sector billing or regulation of pricing should understand that quality healthcare comes at a cost—putting in place benchmarked international standards for outcomes, patient safety, infection control, clinical pathways, etc., as well as ensuring the highest quality of drugs and consumables.

Health is a national priority. And the private sector, which delivers a large part of the care in our country, is an important stakeholder in making Health for All a reality. In these times of the pandemic, the government’s priority is to flatten the Covid curve and to ensure that all patients are well cared for. In that endeavour, the private healthcare sector is duty-bound to help the vulnerable.

Dr T Rajgopal

Healthcare specialist and an expert on public health and health administration


Comments(2)

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  • Yash Pal

    Very sound arguments. However
    3 months ago reply
  • Arvind

    Actually Government is making biggest profit from medical industry. Government gets. IT 25%( till date 33%) GSt 12 to 18% on all material Custom duty 11 to 30 %. Patients paid tax paid money. If you count the tax paid by pharma and employees
    3 months ago reply
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