Throughout history there have been many instances of governments wanting to control prices. In most of these instances, the often-well-intentioned price control has inadvertently hurt access or at least brought down the quality of the sector.
The attempt to control prices of medical services is not new. It dates back to several millennia.
The first medical technology was Religion. Because more than a couple of thousand years ago whenever a natural disaster occurred or a disease struck or even something unfathomable like a lightning struck or a thunder clapped, the question which the world asked was Who did it? The answer which came was some God or Goddess. The solution was some ritual, some mantras, some chants, some ceremony to appease the deity. The intermediary was the priest or the shaman, the pandit or the ojha. There were attempts by enlightened rulers to control their charges too!
Then in 500 BC in China and Greece, the question which people asked while facing incomprehensible natural phenomenon changed. From who did it to what caused it? This change in question changed the paradigm and caused a tectonic shift in the genre of the answers. The question what caused it paved the way for modern scientific thinking and led to the genesis of science, technology and medical technology.
The new medical technologist was the Physician. It is interesting to note that hospitals also owe their origin to pilgrimages – these establishments started as inns, hostels or hotels to rest the weary pilgrims on their way to their destination. Therefore, the common linguistic root of hospitals and hospitality. With the growth of modern medicine, as the hold of religion started receding, these establishments became centers of healing. Rulers now tried to control the prices of Physicians and hospitals.
In some countries, like India, businessmen gave away some of their profits to set up a center of healing to provide care to those in need. These hospitals ran as non-profit organisations as there weren’t any businessmen whose business was hospital running alone. This historical antecedent gives rise to the lingering sentiment in some Indians that hospitals should still be run as non-profits.
The reason why medical service delivery/hospitals are one of the first areas that governments want to price control is because medicine is considered a noble profession where the patient is almost at the mercy of doctors and care givers are held in high status as messiahs of life.
Today however, hospitals are usually the sole business of an entrepreneur offering not just basic care but healing, improving the quality of life and prolonging lives. These are complex organisations that require financial sustainability to continue operating effectively, bring the best manpower, provide access to latest medical technology and also make some profit in the process. Not to say that hospitals shouldn’t do good, but they have to do well too because, you can’t feed out from an empty vessel.
Throughout history there are many instances of governments wanting to control prices. In most of these instances, the often-well-intentioned price control has inadvertently hurt access or at least brought down the quality of the sector. For example, in Venezuela when the government brought in price control to combat inflation, it resulted in widespread shortages, black markets, and economic instability. Many businesses faced financial losses, leading to reduced production and supply of essential goods. The policy ultimately contributed to Venezuela’s economic crisis, which was characterised by hyperinflation, currency devaluation, and socio-economic turmoil.
Another example is the price control after the Soviet era, when CIS countries, trying to address inflation and the diktat of self-reliance, brought in price controls on essential goods and services including medical services. This made suppliers unwilling or unable to produce goods at that price, leading to shortages as demand outstripped supply. Price controls led to distortions in the market, inefficiencies, and reduced investment in production. At times, after announcing price ceilings, as a desperate counter measure the governments had to bring a price floor (a lowest guaranteed price of purchase by the government) or a subsidy to keep the production alive.
The specter of severe price control looms again in India. This time through judicial fiat where the supreme court has given a deadline to the state governments to regulate procedure prices, failing which it has warned of bringing Central Government Health Scheme (CHGS) rates to private hospital settings.
Hospitals constitute 60 per cent of overall healthcare sector in value terms which means that they cradle allied sectors like medical devices, pharmaceuticals, diagnostics etc. If arbitrary price cuts are brought in, the fall out will be also borne by all these sectors. Introduction of latest medical technological advancements in the market will suffer and the quality of personnel coming into the sector will also deteriorate. It will also impact Make in India investments which in medical device space, for example, come primarily from the West and Japan. It will most certainly hit the ability and inclination of global legacy medical device companies who create the market for new technologies. This will reduce the size of the pie available for import substitution by domestic companies as well as their enthusiasm to invest in this sunrise sector. Ultimately the patient will also be at a loss, as their access to quality healthcare will be impeded.
This is not to say that there is no proper way to reduce the financial burden of healthcare on patients. But it should be a holistic process like limiting diagnosis based on requirements, providing prescription efficiency and cost transparency data to patients, offering preventive care and screening programs aimed at early detection & management of chronic conditions, segregating hospitals into different tiers based on the quality of care they provide, etc. To ensure that any policy of such significance is not utopian, it should be brought in only after thorough consultation with the industry
It is vital that the hospital sector gets together and makes its compelling case. But bringing CGHS price rates – which apply to Government hospitals substantially subsidised by the government – will be a body blow which will put the private hospitals in the ICU!
– Pavan Choudary
First Published in Express Healthcare