The proposed health cess on medical equipment to fund hospitals under the Ayushman Bharat scheme would adversely affect quality healthcare, say hospital owners in Telangana. 

In her Union Budget speech, Finance Minister Nirmala Sitharaman said that the 5% cess on imports of medical equipment is being levied to fund hospitals in backward districts. The aim is to give an impetus to the domestic industry, and to generate a resource for health services, the minister said on Saturday. The budget proposes a Viability Gap Funding window for setting up these hospitals in a Public-Private Partnership (PPP) model. The government hopes to build these hospitals at 112 aspirational or backward districts, as part of expanding the Ayushman Bharat scheme under the PM Jan Arojya Yojana (PMJAY). 

However, hospital owners in Telangana say the scheme will only put more financial stress on them, and has not been thought through. Hospitals at present pay a customs duty of 7.5% when buying certain medical equipment. With the added 5% cess, that total tax goes to 12.5% for imported devices. India imports over 70% of its medical devices.

“This would have an adverse impact on healthcare quality in Telangana and across other states in the country. This will be a huge pinch on the people. We are a country where, as we move to rural areas, the access and quality of healthcare decreases,” said Dr V Rakesh, president, Telangana Network Hospitals Association, who added that hospitals in Telangana bear 30 to 40% of the “scientific cost” of treatment already and the additional 5% cess would impact their ability to subsidise costs any further.

For example, a lab appendicectomy, as per the scientific costing, costs the hospital around Rs 60,000 to Rs 63,000 but the procedure is performed at a cost of Rs 20,000 to Rs 23,000 to the patient, Dr Rakesh said. “Many even struggle to afford that despite us bearing 40% of the actual costs. Hospitals don’t have huge overhead costs, most of the high cost is on medical equipment. If the Centre keeps increasing the cost of medical equipment then we have no choice but to pass on the cost to the patients,” he added.

The government in the Union Budget has allocated Rs 69,000 crore for the health sector with the hope to expand the network of hospitals under the Ayushman Bharat scheme. But network hospitals feel the government may not achieve their desired results as hospitals may not find the rates provided for treatments under the scheme attractive. Private hospitals are also averse to the idea of adopting government schemes as they often face payment delays, like with the Aarogyasri scheme in Telangana.

There are an estimated 20,000 hospitals across the country under the Union government’s scheme, fashioned after the Arogyashree scheme. The Ayushman Bharat scheme provides a cover of Rs 5 lakh per family per year, with tighter eligibility criteria than Aarogyasri scheme – which provides health insurance to 80 lakh families that are below the poverty line, state government employees, and others, with covers ranging from 2 to 13 lakhs.

“The Ayushman Bharat rates are lower than that of the Aarogyasri and thus not attractive for hospitals. There is a need for a detailed study before such a tax is levied. In Telangana, the Aarogyasri has been running for 13 years but till date, there has been no study on the impact of spending on the scheme, while there already exists primary and secondary healthcare in the state,” said Dr Rakesh. 

The hospitals are of the view that they should not have to bear the subsidy cost of providing healthcare through government schemes like Ayushman Bharat and Aarogyasri, and that such schemes should be limited to just government-run hospitals. 

Another aspect that disappointed the hospitals is that the budget that was to set the economic development tone for the coming decade did not address any of the key issues presently facing the medical devices industry. 

“Most government-run peripheral hospitals don’t have medical equipment even now. For private hospitals, there is no price or quality control when we go to buy equipment for the hospitals,” pointed out the doctor. “Now a doctor turned entrepreneur like me doesn’t know which equipment is standardised,” he added. 

Fazlur Rahman, the owner of F7 Medical equipment in Hyderabad said, “There could be a 5 to 10 points difference in units between products depending on the maker.” The firm often gives out medical equipment to patients on rental basis. “Not everyone can afford to buy a BP or sugar level testing machine for daily use, some rent it. Many of these products are imported. If there is a new tax, it means even giving these equipments out on rent could become expensive by that much,” added Fazlur. 

The network hospitals say, they have often tried to communicate with the Union government through meetings but with little result. “We are not even able to communicate these issues to the Centre. In this context, if you are raising cost, it will deteriorate healthcare in the country. Hospitals will be forced to go for cheaper equipment which may be of inferior quality, and far below standards when there is no standardisation in any type of equipment being sold in the markets,” he added.