Reining in pvt hospitals: K'taka right, but has overreached

The strike by over 60,000 doctors in Karnataka last week protesting agai nst amendments to the Karnataka Private Medical Establishment Act of 2007 was not an insignificant event. It was the first time that such a united protest was drum med up against the government's attempts to make private sector hospital managem ents accountable. Why are they so angry?

In 2007, Karnataka enacted the KPME Act that aimed to register and license all private hospitals and diagnostic establishments that would, among other things, information on the services provided, personnel employed and adherence to standards. The establishments were to also display prices being charged for different services. It provided for a registering authority and penal provisions against any violations.

The provisions of the Act were quite routine and exist almost in every country in the world. Needless to say, even this was implemented reluctantly. In the meanwhile, the "exploitative price gouging" whether real or mere optics -- and the absence of any mechanism for redressal of grievances of the harried patients, slapped with substandard treatment and back-breaking costs, required a further government response.

The response was bold and commendable. The amendments make three important provisions: one, constitute district-level grievance redressal committees under the chairmanship of the CEO of the Zilla Parishad and consisting of the superintendent of police, district surgeon, public prosecutor, a representative of the private medical establishments and women (number unspecified) nominees of the government.

The committee is endowed with powers of a civil court, with authority to inspect facilities and issue directions to the registration authorities, levy fines and pronounce punishments. Second, expert committees are to be set up to set standards and fix prices to be charged, with non-compliance attracting an enhanced set of penalties - imprisonment, fines or both. Third, all establishments are required to display a patients' charter.

The private hospitals' protest is principally in respect of the first two provisions, based on: one, apprehensions that such provisions would lead to yet another layer of harassment in the old 'licence raj' style; and two, arbitrary price-fixing would cause them loss.

The government's compulsion to respond to the universally felt sentiment of an unaccountable and 'greedy' private healthcare sector is well taken. The arguments that there are civil courts, the Medical Council of India, the consumer courts and the CrPC to seek redressal from doesn't hold. The track record of the courts and the MCI in addressing grievances has been woeful, both in terms of delay as well as relief granted. The consumer courts are equally toothless and ineffective. Repeated instances of malpractice explain in part the long-felt demand for instituting an ombudsman and grievance redressal mechanisms against malpractice by care providers and unfair treatment by insurance companies. The absence of such mechanisms is one reason for the increasing instances of doctors being beaten up by agitated patients and their kin.

However, the rationale notwithstanding, the government seems to have gone overboard. The composition of the redressal committee is weird, with the SP and PP and women nominees as members. What do these people have to do with grievance redressal of medical treatment? In making the CEO ZP chair, the body does stand politicised. Such committees must be neutral and consist of persons of known integrity, domain knowledge and engaged with patient rights movements and so on.

The second issue is more complex. In Japan or Canada, all healthcare provisioning is by the private sector but at prices fixed by the government on an annual basis. But then, this is enforced as a monopsony, where the government is the sole buyer. This is why high-quality care is provided at reasonable costs.

In India, we have allowed markets to set prices although health is not amenable to forces of competition. Information asymmetry and other market failures in the healthcare sector result in monopoly price-setting. Pricing of health services are dicta ted by actual costs incurred, reputation of doctors working in a hospital and conveniences provided. However, the 71st Round of NSSO has clearly shown how prices of healthcare in private sector are galloping, with 17% CAGR at a time when the rest of the economy is slowing down. That there is price-gouging and non-transparency that public or private insurance have failed to mitigate is widely accepted.

But here again, the government has misfired. With varied financing and cost streams and other unpredictable variables, like surgeon's fees, etc, the government can't fix a one size-fits-all price. In fact, an internal study of the Karnataka government shows that it was underpaying the private sector under the government sponsored insurance schemes, resulting in the private sector "bridging their losses" by increasing volume of patients to reduce average costs, placing lower paid interns and residents to provide treatment to such patients, or charging the patient "under the table".

Therefore, given the complex system of financing prevailing in India, the government has only the single option of a three-pronged policy to force the private sector to behave: one, build its own capacity of financial, actuarial experts to cost the services and provide a rate card, in terms of a range, to apply differentially, depending on the type and location of services being provided.

Such a rate card could then also be adopted by all public and private insurance programmes; two, put the prices out in public domain so consumers know the prices they ought to pay, with the possibility of action against the hospital for overcharging; and three, invest on building public healthcare delivery capacity to provide choice to the patients. This, combined with grievance redressal mechanisms, will then force the private sector to be in check, in the knowledge that they could be hauled up.

(The writer is a former Union health secretary)