Photo: Mint
Photo: Mint

Why private hospitals should join NHPM

The nationally prescribed rates are not intended to cover the cost of capital and infrastructure in the short run but the marginal cost

The government’s announcement of Ayushman Bharat-National Health Protection Mission (AB-NHPM)—is the most significant commitment to date for moving the country towards providing financial protection to all its citizens against catastrophic healthcare-related expenditure. AB-NHPM aims to provide a benefit cover of 5 lakh for more than 1,300 specified and other unspecified medical and surgical procedures to more than 100 million families.

As is expected for a scheme of such scale and ambition, it has sparked hope and triggered trepidation in equal measure among the stakeholders. It is only expected, and indeed welcome, that scrutiny, dialogue and discussions have focused on each design aspect of the scheme. In the past weeks, some healthcare provider networks have raised concerns about the viability of the pricing model. While the response to the empanelment drive for hospitals has been overwhelming so far, some private sector healthcare providers have shown reluctance in seeking empanelment under the initiative, saying the rates for treatment packages are too low. This article explains why they should reconsider their decision.

At the outset, let me deal with the elephant in the room—treatment rates. We can all agree that setting treatment rates at the national level is not an easy task, especially when it is being done for the first time. There is, admittedly, a dearth of national-level comprehensive costing studies; that will be one of the core research areas AB-NHPM will be looking into continuously. Nonetheless, the current rates have been determined following a rigorous process. There are large schemes running successfully in states such as Tamil Nadu, Maharashtra and Karnataka which can be a rich source of information for the mission. These schemes have no dearth of empanelled hospitals which are providing healthcare services at the rates so provisioned.

Recognizing the large variations in cost structures across the country, AB-NHPM gives states the flexibility to increase or decrease rates, depending on their contexts. By definition, these rates are median rates, and will need to be adjusted at the state level. A key feature of AB-NHPM’s strategic purchasing is the alignment of incentives to help improve quality as well as availability of service in poor areas. Hospitals accredited to the National Accreditation Board for Hospitals & Healthcare Providers (Nabh) will receive higher rates, as will those located in “aspirational districts".

As data become increasingly available during roll-out, AB-NHPM will refine its approach. The mission will continue to undertake costing studies and actuarial analysis besides periodically revisiting costing principles to reflect annual fluctuations in productivity and unit costs. The apprehensions of hospitals about the rates have been taken into consideration during the current costing exercise. As earlier, hospitals’ views will continue to be sought as the scheme evolves.

The price model based on the contract package is administratively simpler but is hampered by the inability to handle outliers and complicated cases within the prices specified. However, such cases are expected to average out, given the volumes. AB-NHPM plans to move on to more sophisticated provider payment mechanisms, including variants of diagnosis-related group (DRG) models, which can assuage such concerns.

It seeks to provide quality health services to all beneficiaries and, therefore, would urge all quality hospitals to participate in the process. They should carefully consider the following issues.

One, the hospitals should understand that the nationally prescribed rates are not intended to cover the cost of capital and infrastructure in the short run but the marginal cost. They seek to ensure that excess capacities are utilized, leading to greater efficiency in service utilization of hospitals. This efficiency is not just in terms of empty beds but also more efficient hospital administration, optimum utilization of professionals and easier process flows for the patients with quicker turnaround times.

Two, hospitals, especially the big ones, have a responsibility as well. They should not expect to strengthen their balance-sheets based on services to the bottom 40% people of the country. Universal health coverage is based on a social contract, where the rich need to pay for the poor, the healthy for the sick and the young for the elderly. Large and expensive hospitals need to do their bit as well.

Three, AB-NHPM wants a partnership with all quality hospitals so that the evolution of the scheme benefits from diverse inputs. This partnership will be a win-win situation. The mission will benefit from the private sector capacity to provide services to large numbers. At the same time, this provides the private sector an opportunity for shaping the most ambitious healthcare scheme in the world.

AB-NHPM is not about business as usual—it aims to disrupt the current system. We intend that within the next decade, the unacceptably high levels of out-of-pocket expenditures that poor households across the country currently incur in seeking healthcare—especially secondary- and tertiary-level care—will become a thing of the past. It is often said that the foot soldiers in a revolution are unaware of their role in historic change. I cannot help but feel that we are foot soldiers in this historic paradigm shift. It would be a shame if, 10 years on, we were to regret having lost this chance of working together to tangibly transform the lives of 500 million compatriots.

Indu Bhushan is chief executive officer of the Ayushman Bharat- National Health Protection Mission.

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