Capping a bad idea: Bombay HC does well to strike down caps on non-Covid charges

By: |
October 29, 2020 4:32 AM

In such a scenario, forcing hospitals to shoulder the subsidisation of healthcare could destabilise healthcare supply itself.

The HC pointed out that neither the central Epidemic Act nor state regulations gave the state government the power to impose such caps, observing that the order went against the fundamental freedom to conduct business.The HC pointed out that neither the central Epidemic Act nor state regulations gave the state government the power to impose such caps, observing that the order went against the fundamental freedom to conduct business.

Given how badly the country needs to harness its private healthcare capacity for mounting an effective corona response—Mumbai came dangerously close to running out of beds recently—you would have thought governments would facilitate private players rather than constraining them. The Maharashtra government, however, seems otherwise inclined. Even though it has commandeered 80% capacity at private hospitals, even 100% in some cases, for Covid-19 treatment at low charges, the state government thought it fit to cap charges that hospitals could levy for non-Covid treatment; thus, a hospital couldn’t charge more than Rs 12,000 for an angiography, Rs 75,000 for normal delivery and Rs 25,000 for cataract surgery. Also, it could not go beyond a 10% increase over normal charges for medical equipment.

At a time when hospital margins are hit because of having to cater for low-cost Covid-19 treatment, as well as a fall in demand for services such as elective surgery, the pinch from the caps could affect normal maintenance and operations, jeopardising capacity for Covid response as well. Therefore, the Nagpur bench of the Bombay High Court has done well to strike down the tariff-capping order. The HC pointed out that neither the central Epidemic Act nor state regulations gave the state government the power to impose such caps, observing that the order went against the fundamental freedom to conduct business.

To be sure, over-charging by hospitals is a genuine concern—indeed, a 2018 report by the National Pharmaceutical Pricing Authority claimed that some hospitals in Delhi were overcharging patients by as much as 1,700% by prescribing non-standard drugs to patients and other such modus operandi. But, the fact is that Covid-19 is an unusual circumstance for business, having hit operations and, consequently, revenues quite hard; Maharashtra’s ‘one size fits all’ approach would have exacerbated this pain. A Crisil study released last week estimated Covid-19 could hit operating profits of hospitals by 35-40% this fiscal. Although the Crisil analysis is predicated on the fact that there will be a revival in elective surgeries in the second half of the year, this shall only fructify if infections subside and there is no second wave. The report says a third of Crisil-rated hospitals opted for the Centre’s loan moratorium. In such a scenario, forcing hospitals to shoulder the subsidisation of healthcare could destabilise healthcare supply itself.

The government can address the issue of overcharging by hospitals after the situation normalises. Indeed, to support private healthcare, the government should be paying hospitals more for capacity commandeered by it for Covid-19 care. The recent move to allow co-operative hospitals could help supplement affordable healthcare supply, but there is little chance of healthcare supply becoming truly affordable and accessible if the government doesn’t invest significantly more in public healthcare.

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