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Healthcare | Should governments regulate private hospitals?

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Though the medical industry needs to be regulated, worse can be the cure through the unleashing of a mindless ‘inspector raj’ driven less by the keenness to protect patient interests, and more by rent seeking Healthcare | Should governments regulate private hospitals?

In July, the Competition Commission of India (CCI) released its report on the pricing practices of 12 corporate hospitals. Though not surprising that these hospital chains were overcharging patients, what drew peoples’ attention was that for the first time an audit of sorts was carried by an arm of the government with powers to penalise ‘wrongful’ gains.

It was a report long overdue, and so welcomed by citizens struggling with the issue of exploitative prices without accountability to outcomes or ethical considerations. This then raises the issue whether it is time for government to regulate the pricing of services charged by private hospitals with the attendant question of should it, and can it.

Theory For Government Intervention

Asymmetry of information that creates an unequal power structure between care providers and patients is a typical characteristic of the health sector, providing a compelling argument for government intervention. It is basic economics that tells us that perfect competition and markets can only function when there are certain conditions such as perfect knowledge between suppliers and buyers, and no barriers to entry among others. Therefore, says economic theory, since health is not amenable to the fair allocation of resources between competing interests, it quickly slips into exploitation and exclusivity, unless controlled. This then sets the stage for the entry of the State.

In July, the Competition Commission of India (CCI) released its report on the pricing practices of 12 corporate hospitals. Though not surprising that these hospital chains were overcharging patients, what drew peoples’ attention was that for the first time an audit of sorts was carried by an arm of the government with powers to penalise ‘wrongful’ gains.

It was a report long overdue, and so welcomed by citizens struggling with the issue of exploitative prices without accountability to outcomes or ethical considerations. This then raises the issue whether it is time for government to regulate the pricing of services charged by private hospitals with the attendant question of should it, and can it.

Theory For Government Intervention

Asymmetry of information that creates an unequal power structure between care providers and patients is a typical characteristic of the health sector, providing a compelling argument for government intervention. It is basic economics that tells us that perfect competition and markets can only function when there are certain conditions such as perfect knowledge between suppliers and buyers, and no barriers to entry among others. Therefore, says economic theory, since health is not amenable to the fair allocation of resources between competing interests, it quickly slips into exploitation and exclusivity, unless controlled. This then sets the stage for the entry of the State.

Building value-based and non-adversarial work environments in the health sector is critical since all stakeholders have in the ultimate analysis one primary goal — the benefit of the patients, and their well-being as all are dependent on each other, and cannot do without the other.

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