Major CGHS reform: In a relief for both central government employees and pensioners as well as for private hospitals, the central government has made a major revision in the Central Government Health Scheme (CGHS) rates after a long time. These new rates will come into effect from October 13. The move is likely to benefit approximately 4.6 million CGHS beneficiaries.
The government says the new rates are based on the hospital’s accreditation, city category, hospital type, and patient ward.
Both sides were unhappy with the old rates
For years, CGHS patients have complained that hospitals were not offering cashless treatment. Consequently, patients had to pay out of pocket and receive refunds months later. Private hospitals, meanwhile, argued that the existing rates were too low for current medical expenses and were not enough to cover their expenses.
In fact, the last major change in CGHS rates was in 2014. Some amendments were made intermittently, but no comprehensive reforms had been implemented for over 10 years.
Impact of employee unions’ demands
In August this year, the National Federation of Central Government Employees’ Unions submitted a memorandum to the government, stating that the lack of cashless access was causing financial hardship to employees and pensioners, especially in emergencies. Following this, the government took this important decision.
What is the CGHS Scheme?
CGHS, or Central Government Health Scheme, is a government health scheme under which central government employees, pensioners, and their dependent family members can receive treatment at subsidised rates at empaneled hospitals under CGHS scheme.
This scheme covers diagnostic tests, surgeries, medications, doctor’s fees, and other medical services.
Currently, 4.6 million employees and pensioners are benefiting from this scheme in 80 cities across India.
Key points of the new CGHS rates
CGHS rates will now be determined based on four parameters: Hospital accreditation (NABH/NABL); Hospital type (super specialty or general); City category (X, Y, Z); and Patient ward type (general, semi-private, private).
According to the new guidelines:
Non-NABH or NABL hospitals will receive 15% lower rates than NABH/NABL hospitals.
Super specialty hospitals will receive 15% higher rates than NABH rates.
Rates will vary depending on the city category:
Y cities (Tier-II): 10% lower than X cities
Z cities (Tier-III): 20% lower than X cities
Northeastern states, Jammu and Kashmir, and Ladakh: Category Y cities will be considered.
Ward-wise rates:
General ward – 5% lower rates
Private ward – 5% higher than the applicable admissible claim amount.
Rates for outpatient treatment, radiotherapy, daycare, and minor procedures will remain the same.
Cancer surgery rates will remain the same, but chemotherapy and radiotherapy rates have been revised.
Hospitals must accept the new rates
The Ministry of Health has required all hospitals to confirm their acceptance of the new rates by October 13th. If a hospital fails to do so, it will be de-empanelled, meaning removed from the CGHS list.
Cashless treatment expected to improve
With the new rates, it is expected that hospitals will now offer cashless treatment to patients more easily. This will eliminate the need for employees and pensioners to pay and wait for refunds. This change will facilitate access to healthcare services.
What is included in the CGHS package?
The CGHS package covers almost all expenses related to the entire treatment: Room and board; admission fees; anesthesia fees; medicine and medical consumables costs; doctor and specialist fees; wound dressing and care; ICU/ICCU expenses; Oxygen, ventilator use; operation theater fees; physiotherapy, tests, blood transfusions, etc.
Impact on the hospital industry
According to brokerage house DAM Capital, the new rates represent an average increase of 25-30%. This will increase both hospital revenue and profits.
If 10% of revenues come from govt schemes and 20% EBITDA margins, a 25% hike could mean:
-2.5% revenue uplift for private hospitals and 10% EBITDA growth.
According to the report, this will benefit companies like Fortis, Max Healthcare, Narayana Health, and Apollo Hospitals, as a significant portion of their revenue comes from government schemes.
This impact was also felt in the stock market. Shares of these companies saw gains of up to 6% on October 6th.
A major reform after a decade
This major revision, after over a decade, has brought CGHS reimbursement rates closer to market rates.
Hospitals will be required to sign the new Memorandum of Agreement (MoA) within 90 days. The old agreements expire on October 13th.
A beneficial step for both employees and hospitals
This revision is considered a relief for both parties — employees and pensioners will receive better, cashless treatment. Hospitals will receive fair rates based on their expenses.
Overall, this reform is a major step towards making the CGHS system more practical, transparent, and reliable.