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Ayushman Bharat and the Role of Private Hospitals

  • 23 Jul 2018
  • 9 min read

This editorial appears in The Mint and addresses the brand new scheme Ayushman Bharat and how it is going to affect the role of private hospitals in the country.

Principally, India has committed to provide free and equitable healthcare facilities to all its citizens, regardless of their economic and social status. However, the real picture is far from this ideological commitment.

India’s expenditure on healthcare goods and services is only around ~3.9% of its national GDP, including the private sector (compared to 18% of the US). Further, it is met with fourfold challenges - (i) providing universal access to healthcare; (ii) arranging for fair and equitable distribution of cost of healthcare (iii) maintaining quality of healthcare by training practitioners and providers; and (iv) giving special attention to vulnerable groups like women, elderly, disabled and children. The present government has taken a bold step forward in this direction - launching a nationwide health protection scheme known as “Ayushman Bharat”.

Recently, the government initiated the empanelment process for public and private hospitals under the scheme for universal health coverage. However, some healthcare provider networks have expressed concerns over the viability of “pricing model” as proposed by the government as it is too low to be afforded by them.
About the scheme
Ayushman Bharat -National Health Protection Mission (AB-NHPM) is a Centrally Sponsored Scheme, with the central component anchored in the MoHFW.

Salient features:

  • AB-NHPM will have a defined benefit cover of Rs. 5 lakh per family per year and will take care of almost all secondary care and most of the tertiary care procedures.
  • Benefits of the scheme are portable across the country and a beneficiary covered under the scheme will be allowed to take cashless benefits from any public/private empanelled hospital across the country.
  • AB-NHPM will be an entitlement based scheme with entitlement decided on the basis of deprivation criteria in the SECC database.
  • The National Health Agency (NHA) is the apex body for the implementation of the ambitious Ayushman Bharat-National Health Protection Scheme


  • AB-NHPM will have a major impact on the reduction of Out Of Pocket (OOP) expenditure as it covers the poorest and the most vulnerable sections of the society, and almost all secondary and tertiary hospitals.
  • This will lead to increased access to quality health and medication.
  • This will lead to timely treatments, improvements in health outcomes, patient satisfaction, improvement in productivity and efficiency, job creation thus leading to a general improvement in the quality of life.

India’s Health Account

  • Low public expenditure: Public health expenditure in India (total of Centre and State governments) has remained constant at approximately 1.3% of the GDP between 2008 and 2015, and increased marginally to 1.4% in 2016-17. This is less than the world average of 6%.


  • Disparity among states: Low-income states with low revenue capacity spend significant lower on social services like health. Further, differences in the cost of delivering health services have contributed to health disparities among and within states. 

  • Out-of-pocket expenditures on healthcare: If cumulatively 30% of the total health expenditure is incurred by the public sector, the rest of the health expenditure, i.e. approximately 70% is borne by consumers.

  • Lack of health support coverage: 86% of the rural population and 82% of the urban population are not covered under any scheme of health expenditure support.
    Demand for Basic Primary Healthcare and Infrastructure: India faces a growing need to fix its basic health concerns in the areas of HIV, malaria, tuberculosis, and diarrhoea. More than one-third of the world's malnourished children live in India. Half of the children under three years old are underweight.
  • Underdeveloped Medical Devices Sector: The medical devices sector faces a number of regulatory challenges which has prevented its growth and development.

Why Is the “Pricing Model” Right?

  • First of its kind: As there is a dearth of national-level comprehensive costing studies, the current rates do have some loopholes. However, the rates are subject to revision which should be done after taking help from similar successfully running schemes in states such as Tamil Nadu, Maharashtra and Karnataka. These schemes have many empanelled hospitals which are providing healthcare services at the rates so provisioned.
  • Flexibility across states: The rates prescribed are median rates and can be adjusted according to the states. Hospitals accredited to the National Accreditation Board for Hospitals & Healthcare Providers (NABH) and those located in “aspirational districts” will receive higher rates.

    NABH: National Accreditation Board for Hospitals & Healthcare Providers (NABH) is a constituent board of Quality Council of India, set up to establish and operate accreditation programmes for healthcare organisations.

    Scope of NABH /Objectives

    • Accreditation of healthcare facilities
    • Quality promotion: initiatives like Safe-I, Nursing Excellence, Laboratory certification programs (but not limited to these)
    • IEC activities: public lecture, advertisement, workshops/ seminars
    • Education and Training for Quality & Patient Safety
    • Recognition: Endorsement of various healthcare quality courses/ workshops
  • Adjustment of prices: Although the price model doesn’t incorporate complicated cases, AB-NHPM plans to move to provider payment mechanisms, including Diagnosis-Related Group models.
    Diagnosis-Related Grouping categorizes the hospital services used for “reimbursement” to patients. This is in contrast to the “cost-plus-profit-based-system” as it is fixed on a case to case basis.

What Do the Hospitals Need to Do?

  • The hospitals should understand that the nationally prescribed rates are not intended to cover the cost of capital and infrastructure in the short run but only the marginal cost. This means that the scheme will ensure that the surplus capacities of hospitals will be utilized.
  • The hospitals should not seek to drive their profit regime by the poor of the country. As it goes for other corporate entities, the hospitals too have a responsibility towards the poor and marginalized of the country.
  • The private hospitals should view this as an opportunity to do their bit in shaping the most ambitious healthcare scheme in the world.

In view of the perilous health scenario of the country, AB-NHPM is a bold and courageous step which dares to take private hospitals under its ambit. Blockading its way is going to cost the whole country. The aim of overturning healthcare from market-based sector to its recognition as a public good and a universal right can be fulfilled only when the private entities take up their responsibility as agents of this change.

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