The Malaise of Profit and Capital Driven Healthcare

Of late, the medical community has been in the news for all the wrong reasons including a day-long pan-India strike protesting violence against doctors. It was the straw that finally broke the camel’s back – the outcome of a deep malaise that unfortunately has still not been corrected in the present budgetary allocation for health which is one of the lowest in the world.

With the perceptional decline in state-run medical services, corporate hospitals are the new poster boys for healthcare in India today. Modern India goes to private hospitals for treatment that it considers to be the best in the country and even the world. However, private hospitals are capital intensive, driven by capital and assessed by a return on investment. Capital has a life of its own – its own logic and convolution. How does its inexorable logic interface with healthcare and economy?

Capital is increasingly decoupled from skill. Most hospital promoters are not doctors and doctors who are promoters are elbowed out after some time. Capital has a tendency of treating its workers, patients and doctors as commodities and they are valued as per their contribution to return.

Investment for a hospital with 300 beds will be Rs 300 crore, Rs 2.5 crore per month as interest cost and Rs 6 crore per month as monthly maintenance expenditure. Ordinarily, only a small percentage of personal capital is leveraged with capital from other sources including banks and cheap land, often taken from the government on the pretext of social service, produces a corporate hospital.

Capital makes surplus by two methods i.e. keeping the cost down and efficiently increasing earnings and profits. A 300 bedded hospital will have 40 consultant specialists, 150 rookie doctors with limited experience, 200 people in billing and administration, 200 paramedics and nurses and most importantly, 200 in the marketing department.

Marketing plays the most important role in the hospital. If doctors are not permitted to advertise, the marketing guys organise indirect promotion by organising meetings with the doctors, get-togethers and camps. These are the platforms where a supplier induced demand (SID) takes place.

Also read: A Doctor’s Strike Was Inevitable in West Bengal’s Broken Health System

A doctor-patient relationship is premised upon overarching consideration of the patient’s wellbeing, on a one-on-one relationship and not an assembly line. In a corporate hospital, a doctor as an employee loses his capacity to make independent decisions in the best interest of the patient.

The application of commercial imperative and incentive to maximise the group’s revenue or profit may not undermine clinical decisions. But it is certainly used by management to pressurise the doctor and either goad him into making unethical decisions or keep his pay at an abysmally low level while the patient shells out exorbitant sums for treatment.

Thereafter, the interest of the patient and the doctor no longer converges and neither does the sacred covenant of a mutual doctor-patient relationship and trust exist anymore with both parties scrutinising the other with suspicion.

Supplier induced demand takes place when there exists an asymmetry of information between the supplier and the consumer. The supplier i.e. the hospital stewarded by the marketing guys and supported by some doctors who do it for meal tickets motives use superior information to encourage patients to demand a greater quantity of tests, domiciliary stay and intervention than is actually required or is Pareto efficient.

This is done to optimise occupancy, maximise tests by manipulating demand for revenue maximisation which is in the interest of the corporate hospitals. A majority of patients have also been conditioned to believe that this is the ideal means for treatment and are not satisfied if the doctors fail to fulfil these demands. This is especially true for two categories – the superrich with money to burn and those whose investigations are paid for either by the government or insurance companies.

This even happens when improved quality and outcomes are uncertain. Research shows that hospitals that invest in MRI and CT scan facilities prescribe more tests for patients compared to hospitals that do not have such facilities. Given the marketing of treatment options from the hospitals, patients consume more healthcare than required as corporate hospitals homogenise all the submarkets like preventive, general, specialist, emergency and remedial services where demand shifting and inducement activities can take place.

Also read: Is Ayushman Bharat Incompatible with Capitalism?

It is an entirely different matter that the doctor gets a fraction (about 6-8%) of the revenue earned but continues to be the face of the enterprise. However, his remuneration essentially consists of a retainership which is based on diagnostic tests prescribed by him, fee-for-service and a bonus which makes him a participant in the model of a SID.

From the patient’s side, he is paying for the building which will last for 50 years as if it will last for 10 years, undergoes more tests and interventions to amortize the cost of machinery and equipment in an oligopolistic market where quick amortisation and return on capital drives hospital billing. In health economics, normal demand and supply do not work nor does price equal marginal cost as competitive behaviour here is wishful thinking.

The incentive structure leads to an over-provision of unnecessary care and the resultant cost escalates. Unnecessary care comes with additional risk to the patient and cost escalation leads to some people foregoing the service because of the higher cost involved. This accentuates inequity in access and prevents the potentiality of healthcare from being accessed.

The health-seeking behaviour too changes in the process. Though medical care is often not a public good which is non-rivalrous, the economic actors derive a value by paying for a system as if it is a public good. It is based on empathy for fellow human beings under the solidarity principle. All these get negated under the corporate healthcare model creating unnecessary care and cost escalation.

What about the Hippocratic Oath of “avoiding the twin trap of overtreatment and therapeutic nihilism”? The oath was mandated when the doctor had substantial agency over his action. Many doctors are ethically not comfortable with this egregious component of health care but can do precious little.

Constant bombarding of bottom lines makes them accept the system for survival motives despite having an ethical revulsion of the order. In such a system, attending camps for inducing SID and other stakeholders pushing the agenda of profit maximisation makes the doctor a somewhat helpless participant-beneficiary.

Also read: India’s Healthcare System Is Becoming More and More Unequal

The biggest share of profit is taken by persons who have deployed his capital. The doctors will have to go along as the de minimis of their job is the conversion ratio of patient to tests and attending medical camps to create a supply-driven demand. Eventually, a doctor of even average ethics gets drawn into the vortex of this play of capital, forgetting his leitmotif. They become the face of the hospital for the patients and remain in the frontline of predatorial practices on unsuspecting patients.

Pervasive demand inducement will impact increased health expenditure without any commensurate improvement in health outcomes But will it meet the need of a country where 70% of the population’s income, wealth, health and information is insecure? Meanwhile, patients and doctors have been shortchanged.

Satya Mohanty is a former secretary to the government of India and currently an Adjunct Professor of Economics at Jamia Millia Islamia, Dr Salil Garg is a former Senior Interventional Cardiologist of the Indian Army and Mahima Thakur is a Professor of Economics at FMS.