Regulating the fees charged by hospitals:  Supreme Court

Private hospitals are often viewed as providing better service, comfort, and attention, making them preferable for those who can afford the costs. The Supreme Court of India, while hearing a Public Interest Litigation (PIL) in February this year, directed the central government to find ways to regulate the rates of hospital procedures in the private sector. The private sector is open to those who can afford it. But is it unregulated in terms of pricing, or are there any laws and regulations in place?  The Public Interest Litigation (PIL) prompting the Supreme Court of India to direct the regulation of hospital procedure rates in the private sector was filed by the NGO Veterans Forum for Transparency in Public Life Vishwanath Prasad Singh Vs—the Union of India (1). The PIL highlighted stark disparities in the costs of medical procedures, such as cataract surgeries, which ranged from ₹30,000 to ₹1,40,000 in private hospitals compared to ₹10,000 in government facilities.

Law regulating the Pricing of Services provided by Hospitals

The Supreme Court invoked provisions of the Clinical Establishments (Registration and Regulation) Act, 2010, and its associated rules to mandate standardized rates. The Supreme Court, after issuing notice in the matter, directed “the central government to implement measures for this purpose​. No doubt, as the learned counsel for the Central Government contends, that the implementation has to take place by the States, but then the Central Government has the responsibility to fix the rates.”

The trigger for the PIL and directive were the high procedure rates and their significant variations. The Court highlighted the problem using the procedure costs of cataract surgeries that cost only around ₹10,000 in a government set-up and between ₹30,000 to ₹1,40,000 in private hospitals. It invoked Rule 9 of the Clinical Establishments (Registration and Regulation) Act, 2010, of which Clause 2 requires that “clinical establishments shall charge the rates for each type of procedures and services within the range of rates determined and issued by the Central Government from time to time, in consultation with State Governments”. The Court ruled that the Central Government Health Scheme rates would be an interim measure if the government failed to find ways to regulate rates.

Clinical Establishments (Registration and Regulation) Act, 2010 (CEA):

• • This law mandates the registration of clinical establishments, including private hospitals, and aims to standardize healthcare services nationwide.
  • It provides guidelines for the rates of medical treatments and procedures, requiring them to be displayed publicly and ensuring transparency.
  • However, this Act has only been adopted by 12 states and Union Territories, limiting its national reach.
• Consumer Protection Act, 2019:
  • Patients can file complaints against hospitals for exorbitant charges or malpractice.
  • This mechanism provides recourse but does not proactively regulate pricing.
• National Pharmaceutical Pricing Authority (NPPA):
  • The NPPA caps the prices of essential drugs, medical devices (e.g., stents, implants), and consumables.
  • While this limits some cost escalation, the regulation of overall procedure costs is less robust.
• Ayushman Bharat Scheme:
  • Under this scheme, pre-defined rates for various procedures are applicable in empaneled private hospitals for eligible beneficiaries. However, these rates apply only to scheme beneficiaries.

Developments in Supreme Court

12.12.2022 Order

The Central Government contends that the implementation must take place by the States, but then the Central Government has the responsibility to fix the rates.

20.02.2024 Order

The Supreme Court’s directive on February 27, 2024, addressed the need to regulate medical procedure costs in India, criticizing the central government for failing to enforce the Clinical Establishments Act, 2010, and its 2012 rules. These provisions aim to standardize rates for medical procedures nationwide. The Court instructed the central government to collaborate with states and Union Territories to propose a pricing framework within six weeks. If no solution is presented, the Court indicated it might mandate the use of Central Government Health Scheme (CGHS) rates as a temporary measure.

Private healthcare providers have expressed concerns, arguing that enforcing uniform rates could compromise service quality, limit patient choice, and impact the financial viability of private hospitals. They advocate for strengthening public healthcare infrastructure and expanding health insurance coverage as alternative solutions to rate standardization.

Healthcare in India is primarily dominated by private providers operating under market-driven pricing, often resulting in inefficiencies and inequities. While the Court’s intervention acknowledges these systemic issues, critics note that imposing fixed rates oversimplifies a multifaceted challenge. Nonetheless, the directive is a significant step toward addressing healthcare access and affordability disparities, sparking necessary debate and action to develop a more equitable system.

February 27^th, 2024, order

The Supreme Court, in Paschim Bangal Khet Mazdoor Samity v. State of West Bengal, AIR 1996 SC 2426, and Pt. Parmanand Katara v. Union of India, (1995) 3 SCC 248, emphasized that the State must ensure medical assistance for its citizens. The Clinical Establishments (Registration and Regulation) Act of 2010 was introduced with the aim of providing affordable healthcare to the public. The Union Government must state that communication has been sent to the State Governments and Union Territories, urging their response.

Thus, the Court has directed the Secretary of the Department of Health, Government of India, to convene a meeting with health officials from the States and Union Territories to develop a concrete proposal before the next hearing.

The petitioner’s counsel highlighted that the Union Government has already established rates for CGHS-empaneled hospitals. As an interim solution, the Court suggested that these rates could be notified until a comprehensive plan is formulated. If no substantive proposal is presented by the next hearing, the Court will consider issuing directions to implement CGHS rates as a temporary measure.

What is the way out?

In conclusion, the high cost of private healthcare in India has rendered it inaccessible for economically disadvantaged groups, with many forced to travel significant distances to access even basic services, thereby compounding the financial burden. To address this, a comprehensive, multi-faceted approach is essential.

Key Recommendations:

1. Strengthen Public Healthcare Infrastructure: Increased government investment in public hospitals and universal coverage schemes, such as Ayushman Bharat, can reduce out-of-pocket expenses, as demonstrated in countries like Thailand and Germany.
2. Regulate Pricing Without Sacrificing Quality: Enforcing the Clinical Establishments Act nationwide, implementing tiered pricing models, and capping essential services can balance affordability and quality without stifling innovation.
3. Expand Insurance Coverage: Subsidized and standardized insurance policies can extend financial protection to middle- and low-income groups, reducing direct healthcare expenditures.
4. Increase Transparency and Accountability: Mandatory cost disclosures and strict oversight, as seen in the U.S., Singapore, and Australia, can prevent overcharging and promote trust in the healthcare system.
5. Promote Public-Private Partnerships (PPPs): Collaborative models can bridge public healthcare gaps by leveraging private sector efficiency while keeping treatments affordable through subsidies or tax incentives.
6. Emphasize Preventive Healthcare: Public awareness campaigns and free screening programs can reduce reliance on expensive treatments, fostering a healthier population.
7. Incentivize Affordability in the Private Sector: Offering tax breaks for affordable care providers and encouraging low-cost innovations can ensure healthcare remains accessible without compromising service quality.
8. Balancing Affordability and Quality: While cost regulation is crucial, ensuring private hospitals remain financially viable is equally essential. Robust laws, penalties for non-compliance by organizations or regulators are necessary to implement these solutions effectively. By addressing inefficiencies and fostering collaboration, India can move closer to equitable healthcare access.

1. Writ Petition of 648 of 2020
2. Writ Petition 648 of 2020, 27^th February 2022, order
3. Writ Petition 648 of 2020 -12.12.2022
4. Writ Petition 648 of 2020 of 20^th February 2024