Reforming provider payments, price setting for Ayushman Bharat

With the advent of health care transformation within the mainstream medical fraternity, the scope for innovation, rectification and revision of age-old concepts has found a new bearing in India. Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), India’s flagship health insurance scheme, has trail blazed this perceptible change into a movement for providing egalitarian resources for accessing quality health care by all. It has also pushed the envelope for activating necessary digital literacy among the beneficiaries and the health care stakeholders alike.

An important building block of the health system striving to achieve universal health coverage is the way it is financed. Within the financing system, the way health care providers are paid, and the price that they are paid, has significant bearing on the success of any programme. These two factors independently influence the utilisation of services, their quality, efficiency as well as the ability to control health care costs. As a result, it is very important to take careful note of the delicate features of such provider payment systems.

Echoing these sentiments, the National Health Authority (NHA) recently released a consultation paper on the “Provider Payments and Price Setting under Ayushman Bharat Pradhan Mantri Jan Arogya Yojana”. The consultation paper can be accessed at https://pmjay.gov.in/resources/publication. The paper is a comprehensive compilation of the state-of-the-art knowledge which exists on this subject, additional analytic approaches which can be used to further fine-tune the PMJAY pricing policy, and strategies to truly transform the NHA into a strategic purchaser of health care services in India.

The paper highlights the need that the “Provider Payment” mechanism should efficiently compensate the providers for the cost they incur in providing medical or surgical procedure availed of during treatment. An inadequacy of prices may deter providers from empanelment, or lead to compromise in the quality of care to reduce cost, or pass the balance bill to patients when the services are supposed to be cashless for patients. Accord­ingly, the NHA has made use of a compre­hensive cost analysis to determine its prices.

Despite best efforts, cost disparities among similar procedures can likely occur due to different hospital characteristics. This implies that a uniformity in pricing may not be appropriate for all hospitals. To accommodate for this variation, the paper recommends, and the NHA had introduced, a “Differential Pricing System”. Under this, the hospitals performing similar procedures in hospitals at different locations, such as Tier 1, Tier 2 or Tier 3 cities, will be paid differently, which will represent their costing characteristics. Such a differentiation has been done separately for medical and surgical procedures. In addition, the NHA proposes to adjust for other factors like difference of procedure price for tertiary and secondary care.

The third reform discussed in the paper, which the NHA has announced, is to roll out DRG-based (diagnosis-related group) grouping and payment system under AB-PMJAY, a thoughtful step in this right direction. Such a system of payment will enable hospitals treat­ing sicker or comorbid patients to be paid at a higher rate compared to those treating relative­ly less complicated patients with the same disease. The paper seeks views from stake­holders on the proposed approach to run a DRG simulation pilot, which will help demonstrate the impact of such a potential shift in payment system for both the hospitals and the NHA.

Besides merely considering the cost of providing services, the NHA proposes to develop a system to pay for procedures and services in line with the “value” which it creates within the health ecosystem. By value, it is meant the extent to which health is improved with the application of a particular procedure. Hence, is it worth spending money on interventions, drugs or diagnostics if the gains in patient survival and quality of life are not commensurate? The answer can be a subject of great polarisation. Hence, the principles of “Health Technology Assessment” or “Cost Effectiveness Analysis” can help eliminate this confusion and aid in the development of a strategy to address it. These principles will also help in determining which procedure/ service or drug will be next included in the HBP (health benefit package) at the time of revision and updation. This will further enhance NHA’s ability to reduce the prices of procedures that are currently not cost-effective, and in-turn make them more cost-effective by developing a mechanism of price negotiation under AB-PMJAY. This will further enhance the NHA’s capability to become a strategic purchaser of health care services in the Indian health system, as well as influence health care prices in general. 

We also acknowledge that the prices need to be constantly updated to account for the annual impact of inflation on the price of procedures (medical and surgical) in the health care sector. The paper discusses how the “inflation factor” will be used for annual price adjustments. 

Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana is a dynamic by-product of many minds. I earnestly believe the success and progress of the same is directly dependent on the quality of our relationship with two of our most important stakeholders — beneficiaries and hospitals. I hope this paper contributes to this meditation and helps in the development of a standardised and transparent pricing policy, which will ensure efficiency, acceptability, quality and sustainability within the Indian health care ecosystem for PMJAY.

The writer is CEO, National Health Authority