Wrong medicine for a nasty disease

Wrong medicine for a nasty disease

Capping hospital profits cannot help patients.

The Delhi government reportedly plans to cap the profits of hospitals, in a bid to make healthcare more affordable. The move is ill-conceived, both in itself and in its potential to inspire imitation in other states, creating a nationwide mess. Of course, healthcare has to be made more affordable than it is today. And yes, unethical practices in hospitals must be rooted out through intrusive regulation, if self-regulation does not work. But the process must be informed by knowledge and intelligence, not by a desire to score brownie points.

The surest and most practical way to make healthcare affordable is to pre-pay healthcare costs from pools of payments, fortified by measures such as bulk purchase of drugs and other healthcare inputs and by policy that makes land, which can account for as much as 60% of a hospital’s capital costs, far less expensive than it is in most towns. In India, the government spends 1% of GDP on healthcare, one of the lowest figures for any part of the world. Most payments are out of pocket. This is a recipe for pushing people into poverty and/or denying the poor healthcare. Pooled pre-payment can be achieved in several ways. A state run healthcare system, as in Britain and Canada, is one. Mandating everyone to buy health insurance is another, the younger, healthier folk enrolled cross-subsidising the old and the ailing, and the state paying for the poor. Even better is a system of accountable care, in which healthcare providers take on the responsibility of keeping healthy or, failing that, treating a given patient population, in return for a per capita fee, calculated on the basis of actuarial principles. In this system, the care provider has no incentive to inflate treatment costs or prescribe unnecessary investigations, procedures or medication.

Hospitals do not have flattering operating profits. Capping them will not make care more affordable. Hospitals must stop recovering their high capital costs per bed via inflated consumable prices. Where hospitals need some tough love is on mandatory reporting of clinical inputs and outcomes.