Over three decades, Liladharbhai Gada has hosted hundreds of medical camps at Bhojay Hospital in Kutch, Gujarat. Patients are seen free of charge. They are referred to outside hospitals when they need speciality care, and donors cover the costs. Structured as a charitable trust, the institution’s reputation is just that—charitable and trustworthy. Why would such an institution question the value of a national health insurance scheme which covers low-income Indians, the very population they serve?
In 2022, for the first time, private hospitals approached Gada, offering to sponsor medical camps. They would bring their own doctors. If patients needed further care, they would treat them at their facilities in nearby cities. The cost of procedures would be covered by Pradhan Mantri Jan Arogya Yojana (PMJAY), India’s health insurance scheme launched in 2018.
Gada hesitated to accept the offer. On the one hand, these hospitals would unlock new resources to care for his community. On the other hand, he questioned their motives. Would they conduct unnecessary, potentially harmful procedures in order to tap insurance payments?
Gada had heard reports that appendectomies surged in Gujarat under the scheme, with anecdotal evidence suggesting poor people were unnecessarily operated on. These suspicions are reminiscent of reports of unnecessary hysterectomies in the early years of the Aarogyasri insurance scheme in the undivided state of Andhra Pradesh.
Gada’s doubts point to a dilemma facing PMJAY: Will increased healthcare spending buy better health? At the root of that dilemma is the payment method—hospitals are paid for the volume of services rendered. PMJAY has little visibility when it comes to the appropriateness or quality of those services. It has established mechanisms to monitor fraud and apply standard treatment guidelines to overcome that.
PMJAY’s latest policy calls for a shift from volume-based to value-based care, introducing five metrics to assess hospitals by the “value” they generate for patients. The metrics include beneficiary satisfaction, health-related quality of life, grievance redressal, out-of-pocket expenditures, and hospital readmissions.
The intent is to make transparent how spending is linked to outcomes. Such transparency, in theory, could shape a marketplace where hospitals compete to achieve outcomes that matter to patients. Implementation is scheduled to start in 2023, starting with pilots in five states. As PMJAY proceeds, it needs to consider at least three strategic risks.
First, hospitals may ignore the incentives. Currently, PMJAY represents less than 10% of a typical private hospital’s revenue. Hospitals are more likely to respond to new incentives if there’s more at stake. A starting point would be for PMJAY to convince private insurers (which are also concerned about value) to participate, increasing the relevance of these metrics for hospitals. A prerequisite is an efficient data platform for public and private insurers and healthcare providers to track claims data, clinical parameters, and user feedback. The Health Claims Exchange, an emergent data platform, could eventually serve that function. Though it, too, faces the challenge of adoption.
A second risk is that the policy’s incentives may have unintended consequences, as we have seen elsewhere. For example, when blood banks started to pay people for blood, they hoped to resolve blood shortages. Instead, they discovered that the payments discouraged volunteers from donating blood. The incentives ultimately did little to strengthen supply chains. If weights of various outcomes are not chosen wisely, private hospitals may spend more effort to improve outcomes that are easy to influence (e.g., beneficiary satisfaction, grievances), than those which are harder to change (e.g., hospital readmission rate). We must closely observe how hospitals respond to the policy to understand unintended consequences. Academic institutions are well positioned to play this role, and PMJAY should make data available to them. Researchers can evaluate the pilots and recommend changes to the policy before it is implemented in other states.
A third risk is overlooking a bigger opportunity: increasing value in the primary care setting. Ayushman Bharat, India’s overarching universal health coverage framework, separates PMJAY (insurance covering hospital care) from Health and Wellness Centres (primary care). The value-based healthcare (VBHC) policy only has transparency in outcomes under PMJAY. The bigger opportunity is to improve the value of care in Health and Wellness Centres (HWCs). Heart and kidney conditions are the main cost drivers for PMJAY; both of these can be prevented and managed by high-quality care in HWCs. Intervening earlier in the primary care context not only leads to better outcomes butcan also reduce costly hospitalisations.
As the VBHC policy evolves, the health ministry should consider applying value-based principles that connect the full patient journey, improving value across HWCs to PMJAY. This won’t be easy as patient pathways often span both public and private health systems, where the latter is very fragmented, with limited penetration of IT systems to capture relevant metrics.
India’s experimentation can shine a light on other countries embarking on their path to universal health coverage. Innovators in South Africa, Kenya and Ghana are starting to experiment with value-based healthcare.
What unifies these efforts is a conviction that human-centred healthcare delivers better outcomes at a better cost. We believe that this is the kind of health system that healthcare workers would be proud of, that taxpayers would be excited to support, and that patients deserve.
Chintan Maru
Founder and CEO of Leapfrog to Value, and Managing Director at the Global Development Incubator
Sarang Deo
Professor, Operations Management, and Executive Director, Max Institute of Healthcare Management at ISB