India needs a regulator for private hospitals and doctors, says Chief Economic Advisor

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India needs a regulator for private hospitals and doctors, says Chief Economic Advisor
India’s Chief Economic Advisor (CEA), KV SubramanianBCCL

  • India’s Chief Economic Advisor KV Subramanian claims that private sector healthcare is not much better than public sector healthcare even though it is much more expensive.
  • Coming a couple of days before the budget, this may be a shock for the likes of hospital chain operators like Apollo Hospitals, Fortis Health and Metropolis.
  • To address the information asymmetry in the healthcare system, the Economic Survey proposes setting up a central database for patient information and a regulator to oversee all stakeholders.
Private sector healthcare in India is considered to be superior to the public sector because it’s more expensive and the quality is better. However, the latest economic survey points out that may not necessarily be the case.

Therefore, India’s Chief Economic Advisor (CEA), KV Subramanian, has recommended the government must seriously consider a regulator for both private hospitals and doctors.

Coming a couple of days before the budget, this may be a shock for the likes of hospital chain operators like Apollo Hospitals, Fortis Health and Metropolis.
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CompanyPercentage change in stock price
Apollo Hospital-2.14%
Fortis Health-0.62%
Metropolis-1.06%
Source: NSE closing prices on January 29

Data shown by the CEA to back his argument
The rate of readmission — going back to a hospital for care after original admission — is higher in the private hospitals and healthcare facilities than in the public sector.

This is based on data collected from the government-funded health programme, Prime Minister’s Jan Arogya Yojana (PMJAY) — also called the Ayushman Bharat Yojana.

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Private sector admission ratePublic sector readmission rate
70%64%

According to the CEA, this is worrying not only because the private sector is more expensive, but also because readmissions tend to pinch the pocket more than original admissions and original.

MetricOriginal admissionReadmission
Average claim amount₹12,652 ₹19,295
Average length of stay6.6 days7.5 days

“So, a large proportion of deaths in India manifesting due to poor quality of healthcare is likely to reflect that the quality of treatment in the private sector may not be significantly better than that in the public sector in India,” said the Economic Survey.

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India needs a regulator for private hospitals and doctors, says Chief Economic Advisor
Variation in costs between private and public healthcare sectorEconomic Survey/BI India

The government now plans to increase public healthcare spend to 2.5% of GDP to reduce the out of pocket spend from 65% to 35%. “Given the market failure due to asymmetric information, regulation in the healthcare sector is required,” said Subramanian, during the press conference.

The CEA proposes this asymmetry can be mitigated using information from within the National Digital Health Mission, even within the framework of data privacy. “A standardised system for quality reporting on healthcare for hospitals, physicians, and insurance companies can start with basic input indicators to be reported mandatorily by healthcare stakeholders,” said the Survey.


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