Cut Cost, Grow Stronger

Hospitals are adopting innovative strategies to bring about operational efficiency and counter the erosion of margins due to price capping

- Rita Dutta

 

The private health sector in India has come under intense scrutiny in recent times for lack of transparency in pricing. To course correct, the Government has been taking several steps to usher in transparency in pricing and make healthcare more affordable, whether it is capping price of stents, implants and other consumables. The Delhi government has proposed regulations that would restrict hospitals and nursing homes from marking up prices of several medicines and consumables over 50% from their procurement price in a move to curb alleged profiteering.

The DOP report has observed that high trade margins enjoyed by distributors-hospitals/ retailers are the main reason for cost escalation of drugs including medical devices. It has been notified that margin escalation has largely happened between the Price to the Hospital & MRP (the price at which the hospitals buy and then sell the medical device to the patients).

According to experts, the headwinds affecting healthcare profitability in the current times are probably the highest in the last two decades. Says Dr Lloyd Nazareth, COO, American Oncology Institute, “There is an erroneous perception in Government and the general public that healthcare organisations are highly profitable. Many large organisations are struggling to get fair returns on capital.”