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

New Delhi, March 1: Citing "practical challenges and unviability", a brokerage firm in its report has said that it is "very difficult" to implement uniform pricing across hospitals.

The Supreme Court (SC), hearing a public interest litigation (PIL), recently directed the Central government that if it does not come out with a proposal for hospital rates in line with the Clinical Establishment Act (CEA) it will implement CGHS rates across hospitals as an interim measure.

Reacting to this, Kotak Institutional Equities in a report said: "Nevertheless, amid steep valuations, this diktat creates an overhang (especially on future price hikes and expansion) and assumes more relevance, particularly as regulatory interventions reduced in the recent past."

"While this issue cannot be taken lightly given the SC's strong diktat, we believe it is very difficult to implement uniform pricing across hospitals (public and private)," the report added.

"Apart from practical challenges and the unviability of uniform rates for prominent hospitals, implementation of this pan-India might also likely warrant a change in legislation, as only 12 states and 7 union territories (UTs) have adopted the Act... Hence, we expect a very low probability of implementation," the brokerage firm said.

"Even as uniform pricing is difficult to implement, we cannot take this issue lightly, given the SC's stringent tone," the report said.

"In the worst case, if CGHS rates are levied, almost all hospitals under our coverage will turn EBITDA negative (assuming insurance companies also negotiate lower prices). Apart from challenges such as subjectivity and variance involved in clinical outcomes, quality of doctors, infrastructure and implementation of this pan-India might also likely warrant a change in legislation," the report said.

"Two years ago, the SC had clearly said that no government can fix rates for patients in private hospitals. Looking at past precedents, including during Covid, we do not believe the government (Centre and States) would be keen to actively manage public healthcare services," it said.