Insurers to introduce Package Deal Pricing to prevent inflated bills

Healthcare providers resist the move

Falaknaaz Syed - Mumbai

In an attempt to curb inflated bills and control the abnormal claims ratio, insurers and TPAs under the aegis of the General Insurance Council and the Insurance Regulatory Development Authority of India (IRDA) are about to launch ‘The Package Deal Pricing’ (PDP), i.e. a range of prices for various medical services and procedures. The charges will be finalised as per the grade of the healthcare institute. Though a list of charges and a gradation procedure has been suggested by Paramount Healthcare, the nodal TPA for the country’s western zone, medical providers have found the charges abysmally low and the two are yet to arrive at a consensus. PDP will act as a ceiling and prevent healthcare providers and hospitals to charge above a certain limit. Volume of business will be given to those hospitals and nursing homes that have signed the MoU and follow the PDP. So far, 75 nursing homes and several hospitals have signed the MoU with Paramount Healthcare. Talks are also on with various hospitals and medical associations.

The package was thought upon after an exhaustive study of 3,95000 claims undertaken by Paramount Healthcare, which revealed that 90 percent of the bills were inflated. Says Dr Nayan Shah, director, Paramount Healthcare, “Data showed for the same ailment, charges were very high in many hospitals and nursing homes. For example, a cataract surgery normally costs Rs 16,000, but the average bill for the operation was Rs 29,000 in the cashless variety.”

How will hospitals and nursing homes be graded?

	Regarding package charges and non-package charges proposed by Paramount, AMC has sent the modifications in it to Paramount after taking the consensus of its members. It has been made amply clear to the TPAs that the healthcare providers will not accept unilaterally determined charges sought to be foisted on them
Dr Lalit Kapoor, managing trustee of AMC

In all nine grades have been worked out for hospitals and nursing homes. To start with, based on various parameters such as number of beds, infrastructure, facilities, equipment, space, staffing and location; hospitals and nursing homes will be graded into three main categories: primary nursing home, secondary nursing home and a tertiary hospital.

Each main category will be further divided into three levels. For instance, a primary nursing home will be divided into three levels i.e. Primary nursing home of level1, level 2 and level3. Each level will further have three admission categories. Similarly, hospitals will be allowed three categories of admission, i.e. single room AC, twin sharing and general ward.

Association of Medical Consultants, a body of 5000 consultants practicing in and around Mumbai, many of whom own or are associated with 1500 nursing homes has been working towards creating an accreditation system and standardising the charges of nursing homes.

Disagreement on package and non-package charges between healthcare providers and TPAs

	Charges have been decided from the claims database. We have decided reasonably customary charges. Since insurance companies are the payers, they will decide if the charges suggested by us are reasonable or not
Dr Nayan Shah, director, Paramount Healthcare

Package charges will depend on the grade of the healthcare institute. “For example- An AC room in a tertiary hospital will be allowed to charge Rs 2500 per day, beyond that it won’t be paid,” says Dr Shah.

Speaking about the range of charges suggested by Paramount, Dr Lalit Kapoor, said, “Regarding package charges and non-package charges proposed by Paramount, AMC has sent the modifications in it to Paramount after taking the consensus of its members. It has been made amply clear to the TPAs that the healthcare providers will not accept unilaterally determined charges sought to be foisted on them. Healthcare providers would necessarily have to be part of the exercise of determining the charges-package or otherwise. Attempts to do so will be opposed by AMC and in the process, cashless services could be boycotted. Unreasonably low charges will result in poor quality care to the consumer.”

We have suggested that the actual cost of medicines and the charges of the investigation procedures not be included in the package charges. Package charges for the services should be separate. Though preferably, Paramount wants the cost of medicine and investigation procedures to be included in the package charges, he added.

A similar tone is heard in Association of Hospitals (AoH), a body of 42 trust-run-hospitals in Mumbai. Says Dr Pandurang Bhujang, honorary secretary, AoH, “Its difficult to achieve price standardisation as infrastructure is different in each hospital. The skill and expertise of the doctors also vary. We are open to discuss the problems faced by the TPAs and insurance companies. But we can not accept any unilateral decision imposed on us.”

Echoes Dr Parvez Sheikh, secretary of Bombay Nursing Home Association (BNHA), a body of private nursing homes in Mumbai, “All medical associations like AMC, BNHA, AoH and IMA came together and arrived at a consensus on MoU and rates. Like us, all TPAs too should come together and submit standardised rates by consensus amongst themselves. But sadly, there is no consensus among TPAs. Each TPA has different rates, its own MoU, its own form, which makes matter difficult for healthcare providers. The sad part is that, in spite of GIPSA appointing Paramount as the representative in Western India, to standardise rates & finalise the MoU, many TPAs don’t accept Paramount and remain absent from the meetings.

In one instance, last year, after a series of meeting, when a standardised MoU representing all TPAs was prepared, hospitals were asked to buy the MoU only from Paramount for Rs 2000, but some other TPAs like Medsafe are also asking for Rs 2000 for its MOU. Imagine we dealing with more than 20 TPA paying Rs 2000 to every TPA.”

“Four major solutions to the problem are that all TPAs come together on one platform and arrive at a consensus on all issues (2) The representative(s) from the TPA should sit across the table and jointly discuss the rates with the healthcare providers. (3) There should be a tripartite agreement between GIPSA, medical providers and TPAs. (4) GIPSA should ensure that TPAs in Western India arrive at a common consensus on all issues.”

Speaking about the charges offered by Paramount, Dr Sheikh said that they are low and should be reasonable.

Dr Suresh Rao, president of AMC said, “Paramount has ambigously classified nursing homes and hospitals and graded them. So also the charges have been arbitrarily worked out by Paramount without involving healthcare providers. We want fair charging. Our opinion should be taken before deciding the charges.”

Differs Dr Nayan Shah, “Charges have been decided from the claims database. We have decided reasonably customary charges. Since insurance companies are the payers, they will decide if the charges suggested by us are reasonable or not.”

Experts believe that a resistance will come from big hospitals. Says an expert of an insurance company, “We pay around 700 to 800 crores as claims to the healthcare industry annually of which big hospitals get around Rs 600 crores. Since big hospitals are normally charging double amounts, they tend to lose in the bargain and will hence resist the ceiling while smaller ones will gain from the package and agree to it.”

Benefits of standardising charges

Currently, the claims ratio in health insurance is 140 per cent which is expected to come down by 15 to 20 percent after the introduction of package charges. The initiative will bring transparency and ethics in the healthcare industry according to experts.

Says an expert of an insurance company, “The problem of over billing, unnecessary administrative charges, extended stay, too many doctors charging for one sickness will all come to an end with package deal pricing.” “All private insurance companies and public companies have shown interest. It’s a national requirement and in interest of the insurance companies and the general public, because when charges are high, customers have to pay a higher premium. Therefore it’s the duty of all stakeholders to bring in clarity,” said Dr Shah. A series of meeting are to be held in the next few months between Paramount Healthcare, insurers and the healthcare providers to work towards corrections and reducing costing.

falak@expresshealthcaremgmt.com