Reputation in ICU

Apet peeve of private hospitals is that no one recognises the fact that they are also doing business and need to generate enough returns in order to survive and attract more investments. That’s a fair point. But if the investment intentions are anything to go by, private hospitals are certainly not making their investors unhappy. According to a report by CRISIL, significant bed additions are being undertaken to capitalise on demand prospects. Large corporate chains are seen increasing capacity by 25 per cent between 2018 and 2019 fiscal years, entailing an investment of nearly ~50 billion or 50 per cent more than the annual average capital expenditure (capex) in the three years through March 2017.

Private hospitals also cite the example of Max Hospital, Shalimar Bagh, to say how the system treats them unfairly. They have a point here, as the Delhi government’s decision to cancel the licence of the hospital for declaring a premature newborn dead even though he was still alive was an extreme step indeed. There is no doubt that the doctor and the staff concerned at the hospital should have shown greater professionalism and empathy and need to be punished, but cases of such negligence should be tackled at the individual level and the remedial measures should not foreclose the very possibility of healthcare for other patients.

There is also merit in the argument that such claptrap actions conveniently ignore the fact that successive governments have miserably failed in providing affordable and quality healthcare. India has just one state-run hospital for every 90,000 people. That’s certainly a long way off from the mission of providing basic healthcare facilities to India’s citizens.

That said, private hospitals in India have certainly not covered themselves in glory and must take responsibility for the growing trust deficit. They have been routinely accused of excessive charges and acting like monopolies by controlling a specific market. Consider the following cases of two of the biggest private hospital chains.

A probe by the National Pharmaceutical Pricing Authority (NPPA) found that a Fortis Healthcare hospital in Gurugram overcharged as much as 1,700 per cent on most consumables prescribed to a dengue patient. Fortis, of course, contested this and said it does not charge any drug or consumable above the printed maximum retail price (MRP) and there is no violation of the Drug Price Control Order. Fortis is right in saying that it followed the existing rules, but the fact remains that manufacturers of medicines and other medicinal equipment offer deep discounts on MRPs on diverse medicines, allowing hospitals to make windfall profits. This loophole must be plugged.

Let’s look at another example. An investigation by the deputy director general of the Competition Commission of India concluded that Max Super Speciality Hospital, Patparganj, has been making 275525 per cent profit on sale of disposable syringes by “abusing its dominant position” to force in-patients to buy such products from its own pharmacy.

The manufacturer of the disposable syringes said during investigations that this is the “standard industry practice” followed by all companies. The hospital said the same. This is true, but such statements do nothing to counter the impression that in-patients at private hospitals are forced to pay up to five times the actual cost of products.

An analysis of trade margins made by the NPPA last year shows the regulator has data showing that MRPs allow profit margins from 30 per cent to more than 800 per cent on thousands of brands of medicines sold in India. NPPA also said that the level of average margins “indicates a failed market system where asymmetry of information has resulted in unethical practices”.

So what is the way out? Even if within the law on MRP, can private hospitals look at the extent of markup more closely and come out with some element of rationality in the pricing mechanism? The current system clearly needs to be fixed through some form of self-regulation, to begin with.

The problem of course is accentuated, as there are no clear guidelines or system of scrutinising surgical procedures and the prescribed line of treatment. There is also this widespread perception that in private hospitals, over-treatment is incentivised and doctors are under tremendous pressure to advise tests and surgery — it helps both as while doctors get commission, hospitals make money. Examples include fabricating blood test results; unwarranted C-sections and hysterectomies or cervical stitches based on false reports suggesting a pregnant woman might miscarry.

For each such incident in metros, there are hundreds of stand-alone private hospitals in small towns where medical negligence and overcharging are routine. These rarely attract public scrutiny as they escape the glare of national media.

In one of its investigation reports, the Competition Commission of India concluded: “The hospital was acting as a trader, whereby it purchased blister pack syringes from the market and sold it to in-patients at “unfair and excessive profits”. It may or may not be a correct observation, but private hospitals have a formidable task ahead if they have to bring their reputation out of the intensive care unit (ICU).