Surge Pricing In Healthcare Burdens Patients And Insurers As Hospitals Lay 'Peak Charges'

Indian Healthcare prices are touching the roof which is financially burdening both the patients and the insurers. Now, hospitals have started to implement surge pricing mechanisms for various medical procedures, according to a report by the Economic Times. Just like how surge pricing mechanisms are practiced by ride-hailing apps during peak hours and rush areas, hospitals are now adding fees for operating room (OT) time during high-demand periods, alongside additional charges for services that were once part of a single comprehensive package.

As a result, patients and insurers are now shouldering these high costs, leading to financial strain and frustration.

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Unpacking The New Pricing Structure

"Medical inflation has been growing at higher than general inflation at 14 per cent and new billing practices are adding around 20 per cent to the overall rise," a head of health insurance underwriting at an insurance company told the ET. The official further added that even routine procedures, such as laparoscopies or hysterectomies, are now being subjected to inflated pricing structures.

Traditionally, medical procedures such as angioplasties were offered as a package including both pre-and post-procedure services. Today, however, hospitals are charging separately for services like stenting, even when performed as part of the same procedure.

Such change in billing structure is also challenging for insurers, for whom what used to be predictable is now arbitrary as bundled costs are now broken down into itemised charges.

How Does The ‘Surge Pricing’ Approach Work?

One critical and troubling aspect of this shift is the introduction of ‘peak charges’ for operating room time. Hospitals are now adding premiums for procedures performed during high-demand hours, turning essential healthcare services into some sort of premium-priced offerings.

“In some cases, hospitals are charging patience for priority access to OTs, where essential medical services are now changing into premium offerings,” a source told ET.

This peak pricing technique is similar to what ride-hailing apps do, where customers pay more for services during peak times. But the stakes of following such a tactic in healthcare are far higher, where a patient’s life could be at risk. Such a model raises ethical questions if hospitals are going to prioritise patients’ needs based on their ability to pay.

Can Regulatory Standardisation Help?

In 2020, the Insurance Regulatory and Development Authority of India (Irdai) tried to address this issue with a circular that mandated standard billing practices. This circular set guidelines for room rent charges, ensuring that fees for services like nursing and doctors were included in the room cost. However, it did not regularise any pricing mechanism related to additional and various medical services associated with patient hospitalisation.

Hospitals have found ways around these regulations, breaking down charges into separate line items like recovery fees, injection administration charges, and medical history assessments which were traditionally all part of the package.

An insurance executive told ET, “This puts patients in a difficult position, which is to either cover the disallowed costs out of pocket or engage in a lengthy dispute with their insurer”. Hospitals, on the other hand, argued that these additional charges improve care quality or enhance operational efficiency, but patients and insurers are often left questioning the transparency and fairness of these practices.

Can Negotiation Bring Some Relief?

The report notes that some efforts are underway to bring consistency back to the healthcare billing system. The General Insurance Council is currently in discussions with hospitals and hospital associations to negotiate standard costs. However, these discussions have yet to yield any solution.

Meanwhile, patients and insurers continue to remain in a state of uncertainty, dealing with arbitrary costs for their treatments. Though hospitals justify their new pricing structures, the critical question is whether such a healthcare system can serve all regardless of their financial means.