Recently, in a populist but questionably impactful move, the central government has capped the prices of the knee implants which are to be sold in various hospitals across the country in a bid to bring parity at material cost and removing discrepancy in the cost of implant from the dealer to end user via various healthcare providers. A very welcome step, although a tad bit delayed needs to be evaluated for the impact it would have on the end user and on the service provider.
Knee replacement surgery in our country has been a highly subsidised unless carried out in cushy deluxe rooms of our ever evolving private healthcare centres. The subsidy traditionally has been in the low manpower cost factorization and the establishment cost passed on to the end user (patient) in order to make the treatment affordable.
This was only possible because the part of this cost was offset by about 10 to 20% service charges and handling costs which various institutions charged for investing, holding, storing and training manpower to keep the latest and best implants ready for the patients. This had to be done against value of the implant which was fixed by the implant companies which was well below the maximum retail price sold in the western world.
Now this cap is around 4% ‒ 8% from the government directive. So the hospitals do not really lose everything in this situation as has been portrayed in various health reports flashed in the media. If and when the health care institutions rationalize their manpower cost and start adding all the actual costs incurred in the treatment to the patient on cash basis, the impact of this move would be marginal at the most to the end user. There is an important flip side of a very proactive slashing of implant prices which need to be understood and which is already rearing its head.
As an economic layman and ground level healthcare provider, I feel that there will be a general slowdown in private health sector due to various populist measures being adopted without laying the groundwork for such decisions. Every rupee which enters the health system is the money which loses all taint and flows into circulation. It forms the basis of jobs being provided in private healthcare. With several industries going into a very uncertain we have health and food sector, which due to the fact that they cater to the bare necessities, being still able to sustain a semblance of growth in our economy.
There is always a pressure to keep the cost down due to peer competition among private healthcare providers. This by itself takes care of cost rationalization of healthcare in private space. Hence reducing the trade margins of various implants may add to the pressure on manpower rationalisation to curtail costs so as not to affect the cost of services for the end user. This is because there is no other place to work on in very tightly controlled packages which are getting increasingly suffocating due to insurance cartelization. This is another area which has to be seriously looked into.
Successive governments have fared questionably in their health insurance outreach and have out sourced the insurance service provision to private third party operatives, who work like any other profit making organization. Forcing ridiculously low package rates, taking discounts from the back end on the implants and packages from the hospitals and delaying payments on flimsy pretexts for up to six months lead to huge losses on the static unrealized treatment costs for the hospitals.
While the cost capping has had its biggest impact on the implant companies, it will also have a cascading impact on the dealer/ distributor and hospital trade margins. Several such measures inclu-ding this in simple terms will lead to cost rationalization exercises affecting the new job creation, layoffs and salary revisions of healthcare workers because nothing else is going to be cheaper anymore including the food for the admitted patients which comes unsubsidized off the rack on daily basis. In the end, an unhappy health worker is the weakest link in the healthcare delivery which unless strengthened and reassured of a decent survival, is going to affect the core health of the nation in the true sense of the word. In my humble opinion all economic policies and populism would fail if the providers on the ground are seriously marginalized and unhappy while trying to deliver health to the ailing with a plastic smile.
If health is wealth then reverse is the truth too! The sooner we realize that, the better it is.