Private hospitals thrive in a failed system

Seven years ago, and long before the Covid-19 pandemic was to bring devastation to India and the world, a consumer filed a complaint with the Competition Commission of India (CCI) against Max Super Specialty Hospital Ltd. in New Delhi. He noted that a syringe issued from the hospital’s in-house pharmacy had a marked-up MRP and was sold to in-patients at almost double the price at which it was available outside, and alleged collusion between the syringe manufacturers, Becton Dickinson India Pvt Ltd and the hospital chain. A six-member bench of the CCI in Nov. 2015 found merit in the case and ordered the Director General to investigate.

That marked the beginning of a long journey that has hit the headlines yet again now in the post-pandemic world, with reports that the CCI has issued show cause notices to three large hospital groups, Max Healthcare, Apollo Hospitals and Fortis Healthcare, seeking to know how they fix prices of drugs and medical devices used for their patients.

At one level, this looks like extraordinarily slow progress in a case that could have prevented a lot of misery to ordinary citizens from hospitals overcharging in all kinds of novel ways in the midst of the pandemic. Think of just how much was being added to patient bills on account of PPE kits alone, not to speak of a host of other consumables that doctors and surgeons use and are charged to patients, often at exorbitant rates.

It was the National Pharmaceutical Pricing Authority (NPPA) that in an unrelated 2018 investigation reported “unethical profiteering in a failed market system”, with some material and drugs being charged by hospitals to patients at margins of over 1,000%. This wasn’t a random figure; the NPPA report put out a table that listed, item by item, the extortionary mark-up prices that patients were forced to pay. As an example, “Iv infusion set non-vented (RMS infusion set),SS3062” by Romsons drew an unbelievable margin for hospitals of 2,112%; syringe disposable, 2ml, Luer lock”, by Lifelong Meditech Ltd., delivered a margin of 1,596%, laying bare what can only be called dacoity by daylight that the hospitals have been able to get away with for long. This was the data collected, investigated and reported by a government body as we, then unknowingly, headed into the pandemic that on official count alone killed over 500,000 people in India.

Think of just how much was being added to patient bills on account of PPE kits alone, not to speak of a host of other consumables that doctors and surgeons use and are charged to patients, often at exorbitant rates.

Slow as its actions have been, the Competition Commission also deserves to be complimented for widening its investigations from one hospital group named in the original complaint to more players after its investigations uncovered the deep rot in the super speciality system of hospitals. For example, CCI investigations reported that Max Super Speciality Hospital in Patparganj, New Delhi 110092, “had earned huge profit margins ranging from 269.84% to 527% in the financial year 2014-15 and ranging from 276.96% to 527% in the financial year 2015-16 by sale of different syringes.”

The numbers are astonishing and even more shocking when considered in the light of the fact that the hospital “has been compelling its in-patients to purchase products only from its in-house pharmacy once they are admitted…,” to quote a CCI three-bench follow-up order of Aug. 2018. The bare facts tell us of the minds at work at the highest levels in these hospitals – a systematic hunt for places and niches where bills can be inflated, a distortion of processes to defeat the very idea of price control and to gain unfair competitive advantage from those who are vulnerable and have no where else to go at a time of medical distress.

When large hospital chains are found in this exploitative behaviour, it brings the added disadvantage of tarring all private hospitals. The few good ones find themselves bracketed in public perception with the large number of bad ones, making this an unwanted and unwinnable game of private versus the public sector healthcare system. This builds a mob mentality, with issues that are entirely different being debated while the rogue players get away.

The Competition Commission also deserves to be complimented for widening its investigations from one hospital group named in the original complaint to more players after its investigations uncovered the deep rot in the super speciality system of hospitals.

Though this looks like a case against a few hospital chains, and the show-cause notices may not mean that guilt has been established, the reality is that hospitals big and small have now become part of a culture in which doctors have become money spinning machines in institutions that no longer hesitate to set targets and drive revenues. This trend has been normalised and it now needs to be put down with a heavy hand, not only in action by the CCI but by a plethora of agencies that must act together against extortionary behaviour.

The current set of practices heralds the death of the medical system in India, with the little focus on professional excellence and more on the number of patients signed off, surgeries completed and money collected. Active malpractice is just a step away at this stage. At one end, this will inevitably lead to runaway costs that India cannot live with. At another, it will lead to a precipitous decline in service quality. Doctors who are known to be good can’t get better in such a system because the moneybag doctors and managers/administrators will tend to get ahead. This also means our best medical professionals need voice and policy support to resist this ugly trend from within the wards and operations theatres where they work to fight disease and save lives. There are still any number of honest and well-meaning doctors who live by the Hippocratic Oath they take to serve but they find themselves increasingly crowded out.

As the CCI pushes its case against the biggies, and hopefully drives it to its logical conclusion, every single hospital in the country will be looking see how this pans out. Also watching will be manufacturers and international suppliers who would know that even syringes have space to make a margin of 1,500% and above in India. It was only recently that the international medical device manufacturers put up a stiff fight on stent pricing before the government acted and forced them down. All kinds of pressure was mounted on the government to not act then; having acted, the government delivered a signal achievement and sent out a strong message that India will not let its citizens be exploited. It must now do the same, if not more, against some of our hospitals and perform a thorough post-pandemic clean-up.