SC diktat creates uncertainty for hospitals amidst high valuations

Amid steep valuations, legal diktat creates overhang on future price hikes, expansion for hospitals

New Delhi, March 1 (IANS) – Citing practical challenges and unviability, a brokerage firm in its report has expressed that implementing uniform pricing across hospitals is very difficult. The Supreme Court recently directed the Central government to propose hospital rates in line with the Clinical Establishment Act (CEA) or implement CGHS rates as an interim measure.

Kotak Institutional Equities highlighted that the SC’s directive poses challenges for future price hikes and expansion for hospitals, especially with regulatory interventions decreasing lately. The firm expressed skepticism about the implementation of uniform pricing across all hospitals, given the practical challenges and legislation requirements.

The brokerage firm emphasized that only 12 states and 7 union territories have adopted the CEA, making pan-India implementation of uniform pricing difficult. Even though the SC’s stance on the issue is strong, the likelihood of successful implementation remains low, according to the report.

If CGHS rates are imposed, several hospitals could face financial strain, with many potentially turning EBITDA negative. The report also pointed out the subjectivity and variance involved in clinical outcomes, quality of doctors, and infrastructure, which could further complicate the situation.

The SC had previously stated that no government can fix rates for patients in private hospitals, indicating a reluctance from the government to manage public healthcare services actively. With the current legal diktat and challenges in implementation, the future of hospital pricing and expansion remains uncertain.