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All kinds of news are currently floating in the media and the industry regarding the Cashless Mediclaim. After PSU Insurance Companies taking a stand to stop Cashless at some high ended hospitals in top cities, as a reverse salvo Hospitals in Mumbai have united against Insurance companies and decided to refuse cashless hospitalization.

There is always a danger of adverse reactions against unilateral decisions. A PPN can be successful only if it is a buyer’s market. Else there has to be a genuine consensus between the carriers and the providers. Here are some facts to get a perspective:

  • Currently India has beds to population ratio of 0.9 : 1000. The recommended WHO beds to population ratio is 3 : 1000 and in India, the recommended ratio is 2 : 1000. This deficit is over 50%. Critical care beds are generally 20% of the total beds. In India apart from the new breed hospitals most centers have up to 10-13% so one can imagine the paucity of critical and life saving beds in India.
  • Insurance penetration is mostly in the urban and semi urban sector and among the middle class and above population.

  • Internationally, in the USA the current government is looking at 85 cents per dollar claim out go. Brazil, an economy similar to ours also has a similar outgo. In comparison, Indian health insurance claims are about 130%.
  • All the beds are not equitable. A general ward in a government hospital is crammed beyond capacity and sometimes over 1 one patient per bed. The nurse to patient ratio is probably 1 nurse for 15 patients. As opposed to this the private hospitals have a better nurse to patient ratio and super-specialty hospitals have close to 3 nurses per patient.
  • In the absence of a concerted governance mechanism, all the players (Carriers, TPAs and Providers) are pulling in their own direction stretching this social measure to break point.


  • India is clearly not a buyer’s market and the healthcare providers will continue to dictate the price at least for some time.
  • Insurance companies are here to making profits albeit marginal on this portfolio, but certainly losses are not acceptable.
  • With over 80% of the paid claims being for private hospitals, the preference of the customer is very obvious. This is a reality and hence a consensus most desired. One of the methods to do this is the RBRVS. This is the Resource Based Relative Value System. Giving a layman perspective, in this system, the pricing is done based on the resources used for a particular procedure. The insurer could identify a hospital well know for quality and ethics as the bench mark. In tandem with this hospital, the insurer could identify various procedures, the complexities involved, the resources utilized and the costing. This should cover the entire spectrum of hospitalization. Once this is done a tariff card can be brought out. This tariff is a relative value and will change with the type of hospital and the region.
  • A strong governance mechanism should be put in place (this is the responsibility of the health ministry) to ensure that at the end of the day the average citizen is not taken for a ride.

Cashles Chaos: Making sense of it all

News Flash:  “The General Insurance Public Sector Association consisting of four major state-run insurance companies - United India, New India, Oriental Insurance and National Insurance have decided to stop cash-less hospitalization in most hospitals”

Shock and outrage are the two words that describe the reaction of most of the customers and media reports on this piece of news.  We demanded to know how insurance companies could take such a decision one fine day, and what would the customer do. 

Before creation of PPN (Preferred Provider Network  by the Public health insurance companies, media and the industry experts were congratulating the sector for the phenomenal growth. It is this decision which has caused a huge backlash from all around- ustomers, hospitals, media and other insurance experts.

Cashless Chaos: The Blame Game

Let’s understand the issue:

There have been various reports about overcharging by the hospitals and the lack of standard pricing. The TPAs as well as the hospitals have been blamed by everyone for being the perpetrators for the huge losses faced by the insurance industry in their health portfolio. And now, without as much as a warning, the public health insurers have delisted most of the hospitals from their existing network of hospitals, creating PPN.

Insurers’ Stand: Insurance industry faces losses amounting to  thousands of crores each year now. Last year the losses further skyrocketed  and for these losses the Insurance industry is blaming the lack of standardized pricing in hospitals along with the trend of hospitals to overcharge the insured patients.  GIPSA has also criticized the TPAs overall efficiency in keeping the claims down.

Hospitals’ Stand: The corporate hospitals believe that they are being unfairly targeted by the health insurance companies., They argue that the price they charge is proportional to the quality of care they provide. Since the kind of care in a 100 bed hospital with latest technology will be different from that in a 15 bed hospital, cost of healthcare in a large, private hospital is more.

TPA’s Stand: TPAs are being blamed of everything from inefficiency to not controlling fraudulent claims. There is immense amount of pressure on TPAs to bring down the claims and there is talk that the PSUs may opt for a single common TPA. Abhitabh Gupta, CEO, Paramount TPA says “ TPAs cannot be blamed for the losses primarily because, most of the PSU Insurance companies had underwritten health insurance at an extremely low cost sometimes even selling Rs. 1 policies, so it is but natural that they would suffer from losses. Further medical inflation has been increasing at a rate of 10-15 % while the premiums are not increasing at the same rate.” He says TPAs weren’t given the rights to meddle with the treatment and unless there is some change in their role, TPAs can’t do much.

Customer’s stand: Customers are caught in the crossfire between Hospitals and Health insurance companies and they feel cheated. Since Cashless facility is now limited to extremely small number of hospitals; customers have to pay the medical bills from their own pockets and then claim reimbursement.

With Brokers being the neutral catalysts in the health insurance domain, we sought theopinion of Sudhir Sarnobat, Founder of Medimanage Insurance Broking Pvt. Ltd on this issue:

Whether Health insurance companies are justified in delisting the hospitals in the middle of the policy:“The policy periods are of one year and at any point you take a decision, itwill be mid-term for some members and hence, we cannot hold insurer responsible for this. People look at benefit of insurance claim and that’s the core product which insurer is not refusing. If insurer finds issues with non-core benefits, they have the right to tinker with them.

Also, Health Insurance in India is currently in nascent stage and hence, the stable decision making would take a little time. One MUST not forget that this portfolio is loss-making and hence, under pressure to reduce losses, insurers are taking some sudden decisions as they are not too worried about consumer reactions”  

Blame game between insurance companies and hospitals

On Corporate Hospitals taking advantage of the system:I think that these corporate hospitals have taken advantage of the system and not offered negotiated rates when insurance is their single largest customer. It’s actually clash of egos and I think after 3-6 months, both Insurers as well as Hospitals will come to sense and will resolve this in an amicable manner when the industry bodies will act as mediators. I think IRDA may also step in”.

 On Grading of Hospitals: “The grading is a very common concept and it will help manage the cost of treatment well and will help in creation of centers of excellence. Why should a person go to Lilavati (Premium hospital in Mumbai) hospital for Hernia just because he has bought 5 Lakh or 10 Lakh cover. It’s a secondary care procedure and hence, should be managed in a  secondary care hospital.”

On the impact of this move on the customer: This (move) may bring the malpractices and over-billing to check. However, I would maintain that you need to have tertiary care hospitals in network as smaller hospitals do not have the facilities, infrastructure and manpower to manage complex procedures. “

On 10.3% of Service tax for Cashless Facility: “That’s not fair as its an additional burden. It’s discriminatory as it’s meant for Cashless Insurance patients only. But as it’s a decision by Union Government, the consumer forums/bodies should take it up with Government.”

On whether this move to curtail hospitals in the Network list will make Health insurance unattractive:
“It’s a need of the hour and once the insurance penetration and clout increases, hospitals will try to be compliant with Insurers’ requirements. This would bring in cost consciousness along with customer focus. The churning what we are seeing now is good for long term sustained development of the industry and hence, one should not look at this as negative or unattractive”


Timeline for Cashless Hospitalization issue:

July 1: GIPSA (General Insurance Public Sector Association) delists most of the Private hospitals in Delhi, Mumbai, Bangalore and Chennai from their PPN (Preferred Provider Network) list. (Of the 800 hospitals in Mumbai only 90 remained)

July 13: Insurance Company leaders and Top Corporate hospitals met to increase the number of hospitals in the list.

  • It was decided that there would different grades of hospitals depending on the quality of health care provided; there would also be a common rate card across the hospitals.
  • It was decided to revive the cashless facility on a case to case basis.

July 15: A Public notice by Public Insurance companies made it clear that Cashless Facility will only be resumed once the hospitals adhered to the conditions of the Insurance companies. 

July 18: There is news that even Private insurance companies are looking at joining the PPN Network.


Financial losses by health insruance company

Health insurance companies are trying to salvage the losses which are just increasing each year and here is another of their moves. Public Health insurance Companies (Oriental, New India Assurance, United, National) have announced that they are taking down large number of the hospitals from their list of network hospitals to access Cashless service. From the 800 hospitals which were in the Preferred Provider Network in Mumbai, only 90 remain, all others have been delisted.

Even some of the most reputed hospitals- Breach Candy, Bhatia Hospital, Jupiter, Lilavati and Hinduja have been removed from their lists. There are similar names which have been omitted from other metros like Chennai, Bangalore and Delhi.

So what caused this move?

fradulent claims by health insurance companies

Cashless service is offered by health insurance to the customers to avail hospitalization in select hospitals without paying any fees. The customers show their TPA card, fill a form and the hospital then receive the amount from the TPA, which is an intermediary between Health Insurance Company and the customer. Since the TAT or the Turn Around time, for the entire transaction is just few hours, there is less- than-effective examination of the documents and the some hospitals and some customers manage to file fraudulent claims. Most of the times, hospitals used to inflate their bills and in absence of rate cards could charge different rates for the same treatment.

Since the losses faced by health insurance are now running into hundreds of crores, health insurance companies are tightening the reins around the TPAs and hospitals. After examining the claims they found many Hospitals had filed fake claims and some TPAs were also hands in glove in the exercise. General Insurance Public Sector Association (GIPSA) has come decided to take stringent measures and delist all hospitals which are guilty of these practices as well as have implemented a rate card for treatments across all the hospitals.

This move is surely going to affect the consumers who had many options to choose the hospitals to avail cashless service. Now they will be forced to travel far or go for reimbursement claims. We ask our experts about this move and its impact on the customer.

Sudhir Sarnobat, co-founder of Medimange Health Insurance Broking Ltd, agrees that this move seems to be a knee jerk reaction to the losses faced, he says “Though TPAs have identified some incidences where over charging has happened, one cannot ignore the fact that the Tertiary care treatment facilities are available in these(big) hospitals only.”

He says that the basic essence of Mediclaim is to take cover against large, unforeseen health risks which are being treated at such hospitals. “Raising Rs. 10,000-20,000 is possible but the cashless really becomes useful when the claim amounts are large. Insurance companies are hitting that part and creating major inconvenience (for the customer)” he rues.

As a solution to the problem of overcharging, he suggests that Insurers should have created a list of diseases which can be treated at such hospitals and negotiated rates based on the Sum Insured.

Should there be Talks?

Reports suggest that the hospitals are still not aware of their status in the network hospitals, which suggests that there were no talks between the hospitals and the health insurance companies. So we asked the experts whether there should have been discussions between the parties.

Mr. Sarnobat replied, “As the insurers are essential for health market to grow, so are the healthcare delivery institutions (read Hospitals and Nursing Homes). Currently, the insurers view the hospital with antagonized view which needs to be altered.” He feels that Association of the hospitals should take a pro-active measure and self regulate and engage in a dialogue with the insurers to get a fairer deal.

He thinks it is the individual ego that is stopping the two parties from an honest dialogue and the decisions are based on few incidences more than wide spread activities.

Customers- the ultimate losers

While taking the policies, most customers were told that they had plenty of options to choose their network hospitals from (many boosted as high as 4000 hospitals), suddenly they will find themselves in a soup where either they need to travel far for Cashless or pay from their own pockets through the reimbursement route.

So for now, it’s bad news for the Hospitals and even more so for the Customers!

Health check ups can be bad for you

We all know that prevention is better than cure, and this is one of the reasons that executive health checkups have become so popular. They promise to help your doctor to pickup medical problems early, so they can be treated more effectively.

Unfortunately, even though the logic is very appealing, the sad truth is that in real life, health checkups are good for hospitals and diagnostic centers, but not for patients! In fact, most doctors never do a health checkup for themselves, because they know how useless they are!

So what is your doctor not telling you ?

Let's look at why hospitals promote health checkups so aggressively. The checkup is great way of converting well people into patients; and creates a constant stream of customers for the healthcare system.

How ?

It's a mathematical certainty that if you run a sufficient number of tests, you are bound to find abnormalities. Once you find an abnormality, then the person is snared into the healthcare system, and the vicious cycle starts.

Abnormality = more tests = more consultations = more treatment - more surgery, often unnecessary

Let's consider a 40 year old asymptomatic woman who goes for a deluxe super-duper health checkup at a local 5-star hospital. Because she has opted for the Platinum scheme, the doctors does a vaginal ultrasound scan to check her uterus. She finds a 4 cm fibroid and then advises the patient to undergo surgery to remove it. Since most patients are (understandably!) reluctant to undergo surgery, the soft-sell is that this is going to be " minimally invasive" surgery done through a laparoscope, so that there is no cut and this can be done on a day-care basis. Also, the insurance will pick up the tab!

It's very common to do this for ovarian cysts as well. Cysts are very common in women; and most are functional and will resolve on their own. However, the doctor scares the patient into doing surgery, using a number of fear-inducing techniques, such as : it may increase in size; it may burst; or, it may become cancerous. The sonographer is also a part of this scam, and magnifies the findings by highlighting them and by reporting the size in mm, instead of cm ( a 4 cm cyst is reported as a 40 mm cyst , to make it seem bigger!)

The truth is that you cannot make an asymptomatic patient happier - and if she has no complaints to start with, she most probably does not need any intervention at all! The right advise would be masterly inactivity. However, few doctors have the maturity to advise this.

In fact, they tell the patient that thanks to this checkup, they have picked up a problem which could have snow-balled in the future. The amazing thing is that patients are happy when an abnormality is picked up ( they can justify the money they spent on the health checkup !). Most patients are very pleased that the problem was spotted before it became a major issue.

The truth is that most of these so-called abnormalities are not really problems at all - they are just incidental red herrings discovered with modern medical technology, which the patient would have happily carried to her grave if she had been unaware of them.

All this overtesting is leading to an epidemic of overtreatment. Is this going to change ?

No - it will just become worse as time goes by. Thanks to better technology , it's becoming easier and cheaper to produce high quality images of practically any nook and corner of the human body. However, better pictures does not equal better clinical outcome. A lot of these images will pickup problems, which are just anatomical variants, but which will be "treated" by over-enthusiastic doctors. There is too much money at stake !

Also, remember that if an "abnormality" is detected, it requires a very courageous doctor to advise against treating it with surgery ! In reality, it's s much easier for the doctor to advise surgery and "fix" the problem. After all, if he does the surgery, no one will object ( whether the surgery was needed or not is never discussed). Find a problem - fix the problem, is a common knee jerk response. It's also much more profitable for him !

However , if he advises against surgery and the problem worsens over time ( as it will in a very small minority of patients), the patient is quite likely to sue the doctor for not taking care of it when it was first pointed out ! Even good doctors will advise surgery to protect themselves, even when they know in their heart of hearts that this surgery is

not in the patient's best interests !

Dr. Aniruddha Malpani is a renowned IVF Specialist based out of Mumbai, India. He also runs the world's largest free patient library - HELP (http://www.healthlibrary.com). Dr. Malpani is also a Director on Board of a series of healthcare organizations and websites. He can be contacted at info@dr.malpani.com


overcharging hospitals

What is the first thing that the hospital staff asks you as you try to get your close one admitted? Along with the other questions about name, age, symptoms experienced, there is one question that they do not fail to ask, “Do you have health insurance?” The answer to this question has more implications on your final bill than you can imagine. We try to understand what goes behind if the answer to the question is yes!

The Trend:

The scenario today is that health insurance which is meant to relieve the financial burden incurred as a result of hospitalization actually has become a source of malpractice and mismanagement. 

Due to the inefficiency of the Public healthcare system, patients have increasingly started to opt for the private health care institutions their health needs. In the absence of a body controlling their rates, some of the hospitals are found to charge their patients in an ad-hoc manner. There is no rate card that will serve as a bench mark for charging customers. Thus the hospitals have the liberty to charge different rates to different patients gauging their paying power.

Malpractice by Hospitals, Doctors

The gross inefficiency does not end here, some hospitals hike up their fees when it is clear that a patient is covered under health insurance.

Sometimes the doctors hike up their fees as much by 3 times when he is charging an insured patient as the medical charges do not come under the income tax purview.

Sudhir Sarnobat, Co-founder and Director of Medimanage Insurance Broking Ltd gives insights into the way hospitals go about overcharging an insured patient,

No Choice of Room: All hospitals have separate standards for rooms viz of rooms like common, twin-sharing, deluxe and super deluxe. A patient should get to choose his /her room based on their budget and acceptability of comfort required during hospitalization.

Many of the hospitals deny the common and twin sharing class to members who have insurance under the pretext that it’s their policy. Even if the patient is not availing cashless facility, the doctors ask the patients whether they have insurance (and all patients without understanding the implication, nod in affirmative) and then direct them to a room category that is more expensive.

Different rate cards: Some small and medium hospitals maintain different tariffs which are mainly classified in three categories viz. Self-Paying, Insurance (Reimbursement) and Insurance (Cashless). The tariff is lowest for the self-paying patient and is called as base tariff. It’s loaded by 10-15% for Reimbursement Patients and then loaded by another 10-15% for cashless patients.  Some big hospitals do have similar practices but they do it in a subtle manner.

medical bills

Doctor’s Consultation charges: Small hospitals have visiting surgeons whose fees are mostly never published in standard tariff. Some of these hospitals inflate the doctor’s fees based on the patient’s status i.e. charge higher fees for those patients with health insurance. There are two management modalities followed in India, one is Full Time Consultant model where the doctors who are attached at one hospital cannot work for any other hospital. The doctor’s fees are generally fixed in such models. Second model is visiting consultants who are attached to multiple hospitals and admit their patients based on patient’s capacity to pay. Big hospitals have visiting surgeons who do not have fixed fees and hence doctors themselves decide the fees to charge.

Unnecessary Hospitalization: Some hospitals also push an insured patient for admission in the hospital (as only then insurance pays for treatment) where the same may not be needed. This is another form of exploitation of insured patients.

Unnecessary medical tests: Some hospitals go for excessive investigations when the patient is insured. They also make patient get involved in investigation chasing (due to structure of Human body, some or other parameters are going to be up or down based on various conditions). This is normally acceptable so long there is no major complaint from the patient. But in cases where doctors find insured patient’s parameters little excessive, they ask for further investigation and go for treating these parameters through medications and interventions.

With all the kind of malpractices rampant with the hospital bills, it is the insurance companies who are facing enormous losses due to both high claims ratio and fraudulent claims.

What do the TPAs say?


Third Party Administrators are given the responsibility of accepting the claims and settling the valid ones by the Insurance Companies hence we asked, Mr. Madhavan, COO of Mediassist one of the leading TPAs about this problem. Mr. Madhavan said “there is some discrepancy in the charges between the bill of insured and uninsured but only in some hospitals.  Initially there was a lot of discrepancy in the charges but after the intervention of the TPAs we find that mostly only Tier 2 Hospitals indulge in it than the Tier 1 companies.” He believes that once the industry observed the trend and presented the hospitals with the data about the inconsistency, the hospitals agreed to follow a tariff and TPA with their consolidated data have a control over the costs.

 On where does the discrepancy creep in, Mr. Madhavan believes that it is more in cashless claims where it is a kind of emergency and there is very little time frame in passing the claims, in reimbursement claims the patient pays the bills from his pocket so he negotiates with the hospital and the additional time frame gives a good chance for the TPA to review the case. 

Effect of this trend

Short Term:

This trend of overcharging patients with health insurance coverage will affect the customer both in the long term and short term. In the short term, if he is charged for a disease for example for cataract for about Rs. 50,000 then he is left only with Rs.50, 000 cover if he has taken a 1 lakh cover. Thus an overcharged bill has a negative impact on your cover amount especially if it is a family floater or if the sum assured is less.

Long term:

Sudhir Sarnobat explains the long term effect of extorting money from the insurance cases, he says that the higher cost of treatments of insured patient means that the claims are higher; this he feels will either force the insurance company to limit the benefits or increase the premium. Both of these conditions will affect the penetration or viability of health insurance to people. He says, “The important element of success of insurance is to have the maximum population insured but that gets defeated when insurance becomes unattractive to buy. That further leads to only needy buying the insurance because they only see the benefit in buying costly and restrictive cover, who in turn go for claim which further increases claims.”

What are the TPAs/Insurance companies doing to tackle this problem?

Mr. Madhavan says “We are constantly in talks with the hospitals which are in our network; they share the tariff card with us so we know about their standard charges.” About the Doctor’s consultation fees, he says, “when we make package deals with the hospitals in our network, we not only negotiate the tariff but also fix the rate of consultation charges.”

About the further measures to be taken, he says, “there is lot that can be done to tackle this problem, TPA can convince more hospitals especially the commercial hospitals to give discounts and other measures to reduce the prices.”

On the other hand, Sudhir Sarnobat feels that the problem can be tackled through the education of the insured so that they know what are the limits to the expense for a particular disease for example, if the patient informs the hospitals that the limit on the cataract treatment in his policy is Rs. 20,000, the hospital either has to charge reasonably or the patient shifts to other hospital. The other solution that he provides is that there should be a regulatory board for hospitals like IRDA in insurance that will control the hospitals and bring some transparency in its operations.

With no near end of this problem of overcharging insured patients, the Insurance companies and the TPAs have to do their best to reduce the claims, whatever they do, it is the insured who faces the brunt.

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