Hospital Pricing Must be More Transparent

Most people in India are scared of hospitals, more for the unpredictable financial implications that hospitalisation engenders than anything else. While most folks stoically accept the medical outcome, many find accepting the hospital bill far more difficult. This should not be the case.

Hospital pricing in India continues to be shrouded in mystery and one pays pretty much whatever the hospital asks. Most people do not even have elementary knowledge about how the hospital charges. At the time of admission, the hospitals proffer an estimate of expenses for what they assume would be an uneventful stay in the hospital. The patients expect that the hospital bill would be around the indicated estimate and plan accordingly. They do not realise that a hospital estimate has a large number of variables, which can often lead to a higher bill and what the hospital is indicating is the best case scenario and what they need to be prepared for is perhaps the worst case scenario.

While there are often legitimate instances where one can understand the initial estimate going haywire, sadly their are also cases where the hospitals deliberately mislead the patient to make a fast buck. When my mother underwent a bypass surgery, she also contracted a serious chest infection and we had a very difficult time. The hospital did its best to see her through and the expenses mounted. However, in this instance since I was aware of the risk of infection, and had decided to go ahead with the surgery, paying more did not bother me and I certainly never felt that the hospital had cheated us.

While a few good, well established hospitals do not try to ‘reel in’ patients by indicating a lower than expected expense at the time the patient is making up his mind about the hospital, many unfortunately deliberately mislead the patient. This is a pernicious practice and actually amounts to taking undue advantage of the patient. Some hospitals also quote a higher price if a patient has an insurance cover and a much lower one if they are paying on their own. This is unfortunate and self defeating as insurance companies will soon start tightening the screws and once they have sufficient strength, they will drive a very hard bargain, which will have the hospitals cutting corners and the hapless patients paying the price literally and figuratively.

In the mad scramble for patients, hospitals have also started bargaining. As the patient walks in the hospital, the executives will discuss the likely expenses and if they find that the patient is likely to go ’shopping’ to other hospitals, will make an instant offer much lower than quoted initially. This is largely to entice the patient to choose their hospital. It works well as the patient is spared the hassle of going to other hospitals and he believes he has got a bargain. What he does not know is that at that price the hospital is likely to compromise on consumables like implants, which may later on have serious medical consequences. I remember a few years ago we had a patient at Artemis Hospital from Bangladesh for a cardiac valve replacement surgery, for which the hospital had quoted an estimate and explained to the patient in detail the implants it proposed to use and all the other associated costs. The patient went shopping and landed at another hospital in Delhi, where he was quoted a price roughly 50% of what we had quoted. He had no idea of the quality of the implant proposed by this hospital but felt he could trust the doctor and the hospital (in that order). He went ahead with the surgery not knowing that he would probably require corrective surgery in a few years, which would be a lot more expensive and riskier.

The answer to all this madness lies in a better educated customer and more hospitals with a conscience. Hospitals must spend in educating customers about the likely costs, the risk factors, which can push the costs up and explain the possible consequences of choosing a cheaper, though a sub optimal treatment option. Transparency and honest intent are the key to winning a patient’s confidence. And of course they should be driven by a motive, which is more than profits at all costs.

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Pricing Healthcare Services

The pricing of services in a hospital is perhaps one of the most complex and difficult exercise undertaken by the hospital managers. Pricing is  usually a Marketing function in most industries and the final call would usually rest with the Marketing chief. However, in hospitals this seldom happens. Pricing issues are generally discussed and debated in the executive committees and the leadership teams, views are sought from senior medical leaders and usually a consensus is arrived at. l,

Many hospitals follow a ‘market based’ pricing model, which simply means they comb through the pricing policies of their competitors, get pricing data from various labs and other diagnostic centres through their referral sales teams and establish their pricing either basis a premium or a discount from their chosen competitors.

Very few hospitals have a ‘cost plus’ pricing system. Developing an accurate costing of all medical procedures is next to impossible. This is simply because the medical consumables used vary from doctor to doctor and also depend on the complexity, age and general condition of the patient. The cost is also invariably a function of the training and competence of the concerned doctors and medical staff attending on the patient. Thus the cost of a bypass surgery may vary dramatically depending on the condition of the patient, the competence of the surgeon and his team and co-morbidities like diabetes.

The calculation of a price is usually based on a ’surgeon’s fee’. On top of this is added the cost of anaesthetic gases, the anesthetist’s fee, an OT fee and OT consumables. The surgeon’s fee is usually checked with the hospital’s surgeons and if it is Rs. X, the fee for surgery inclusive of gases, anaesthetist’s fee and the OT charges usually adds up to Rs. 2X. 

The patient on top of this is charged room rent depending on his choice of the hospital room, the cost of medicines and room/ward consumables and all diagnostics. The hospital also charges exorbitant consultant’s visiting fee every time he/she visits a patient in the hospital. (Some hospitals like Artemis cap this to a maximum of two chargeable visits). Strangely all hospitals charge a premium on all services if a patient chooses a single or higher category rooms. This simply means that if one opts for a single room one pays higher for everything, the surgeons fee, the cost of surgery and diagnostic tests. Most people do not know this and believe that the hospitals charge a premium only on room rent. Many would consider this a pernicious practice simply because a surgeon’s skill and time, which are the determinants of his fee has nothing to do with the room category a patient is in.  

Some hospitals like Max Hospitals create price bands for surgeries based on their complexity and average duration. Thus all surgeries in a particular band has the same basic surgeon’s fee. On top of it is added everything else.

Healthcare Pricing in India is still very unscientific and subjective. This is a far cry from the pricing models prevalent in the US, where ICD and other scientifically designed parameters help assess the cost of a procedure and patient billing. Health Insurance companies have been able to push through accurate and scientific billing procedures.

The need for a better system for patient billing in hospitals is acute. The government must establish a regulatory body to help fix the basic billing rules for all hospitals. The hospitals should than be allowed to price themselves as they wish keeping in mind their expenses etc. I would reckon once insurance companies gain prominence as payors, they would start dictating their terms to the hospitals.

And that would be a different story altogether.