Modi government’s insurance scheme pushes hospitals into debt – threatening patient admissions

For six years, the Bodyline Multispecialty Hospital in Ahmedabad has been providing free dialysis sessions every month to over 600 patients. The hospital also pays Rs 300 per session for transport to these patients.

In return, the government pays the hospital Rs 2,200 per dialysis session under the Centre’s Pradhan Mantri Jan Arogya Yojana, a cashless insurance scheme for the poor that offers a cover of up to Rs 5 lakh for medical treatments. Bodyline Hospital empanelled itself under the scheme in 2018.

But, over the last two years, government reimbursements have been declining, said Dr Chintan Dwivedi, the hospital’s chief executive officer.

“Most of the patients in our hospital are beneficiaries of PMJAY,” said Dwivedi. “Only a small percentage are private patients who pay.”

With expenditures on dialysis machines, consumables and salaries remaining steady, Bodyline Hospital’s finances are under stress.

As of February 26, it is awaiting Rs 3.4 crore for procedures it conducted over the last three to four months under the Pradhan Mantri Jan Arogya Yojana.

“If we spend on 100 patients, we only earn back from, say, 30 patients,” said Dwivedi. “Financially, we can’t survive for long.”

Dwivedi’s challenge is not unique. In Gujarat alone, as of February 26, hospitals empaneled under the Centre’s insurance scheme are awaiting payments to the tune of Rs 300 crore from 2021 till July 2023. Some of the funds were cleared in the last one week.

Gujarat state officials, who did not wish to be identified, claim that the dues amount to Rs 120 crore since in some cases the treatment was never provided to beneficiaries.

Even so, the massive amount has forced at least 300 empanelled hospitals in Gujarat to form an association late last year and collectively push for recovery of the pending amount.

“Several hospitals are looking at shutting down services under the scheme,” said Dr Ramesh Chaudhary, spokesperson for the PMJAY Empanelled Private Hospital Association in Gujarat.

Chaudhary, who owns Mahadev Orthopedic and Cancer Care Hospital in Palanpur, said the delay in payments and rejection of claims had pushed him to the verge of bankruptcy and he was forced to shut down his intensive care unit.

The problem extends far beyond Gujarat.

On February 29, private hospitals in Haryana threatened to stop patient admissions under PMJAY if their dues are not paid by March 15. The state has 983 empanelled private hospitals.

The hospitals were owed Rs 200 crore, said Dr Dhirendar Soni, secretary of Indian Medical Association in Haryana.

Hospitals in Kerala, where doctors have approached the Kerala High Court, and Tamil Nadu have also flagged mounting unpaid dues under the scheme.

“Private hospitals under PMJAY are bleeding,” said Dr Jayesh Lele, secretary general of the Indian Medical Association, an umbrella body of doctors.

The delay in payments, hospital authorities told Scroll, is pushing them to reconsider admitting patients under the flagship insurance scheme.

PMJAY and funding

The Centre and state together fund PMJAY with the Centre taking responsibility for a greater share.

The state can implement the scheme through a trust, or through insurance companies, or using a mixed approach.

Most states appoint an insurance company as a third-party authority to settle claims for hospitals. For each beneficiary, the state pays the premium amount to the insurance company.

In return, the insurance provider has to pay the hospital where the beneficiary seeks treatment. In some states, like Kerala, the third party authority only scrutinises and approves the claims and the government makes direct payment to hospitals.

Of 31.5 crore Ayushman Bharat beneficiaries, 6.3 crore have received treatment across India as of March 1. The insurance scheme covers 1,400 medical procedures. Of the 29,811 empanelled hospitals across India, 12,631 are private hospitals.

When PMJAY was launched in 2018, small and medium-scale hospitals, which usually have a 10- to 25-bed capacity, hoped that there would be a large volume of patients under the scheme that would help them make some profit as well as treat the poor and needy.

But empanelment has pushed many hospitals into losses. “We spend most of our time chasing the government for payment,” said Chaudhary of the association of empanelled hospitals in Gujarat. “Most hospitals regret getting empanelled.”

At least 3,543 hospitals across India have not admitted any patient under the scheme since the last six months and another 6,551 hospitals have been inactive since their empanelment.

Gujarat hospitals

On February 13, the PMJAY Empanelled Private Hospital Association, Gujarat, warned of a symbolic protest from February 26-29.

The protest was called off after Union Health Minister Mansukh Mandaviya met Gujarat doctors and assured them that the dues will be paid. Only Though some of the dues have been cleared, and hospitals are now considering discontinuing their empanelment.

According to the association, hospitals had been following up on unpaid dues with the state government for more than a year.

The owners of multiple hospitals told Scroll that there have been two problems since 2021: delay in processing of claims and multiple rejections or deductions in payments.

Chaudhary, the association’s spokesperson, said that before a patient undergoes a surgery, they submit documents for approval from the state and the third-party authority, which is usually the insurance company. This process is online.

Once the approval comes through, the surgery has to be conducted within 30 days by private hospitals and 60 days by public hospitals. According to the scheme, the hospital has to be paid within 15 days of the surgery. But data from Gujarat shows only 5% of payments are made within that timeframe.

“The patients are treated for free under the cashless service,” Chaudhary said. “But if, after their discharge, the TPA [third-party authority] rejects our claim or deducts amount, there is nothing we can do.”

Chaudhary was referring to instances where the third-party authority makes deductions before releasing the final payment on account of minor discrepancies in paperwork.

The payment process is offline, said Chaudhary, which means that it cannot be tracked on any portal. In 2021, Gujarat had appointed Oriental Insurance Company as the third party authority. In 2023, the state government appointed Bajaj Allianz. The insurance company did not respond to an email and a query about the high rate of rejections.

Arbitrary rejections

Hospitals have highlighted that insurance companies frequently reject claims due to minor reasons.

“They say the admission and discharge date don’t match on documents, or some document is missing, or there is some clerical error,” said Mulesh Bhati, owner of Manavta Hospital in Faridabad. Bhati said the hospital appeals against the decision with district authorities, “but they don’t do anything”.

Manavta Hospital’s claims worth Rs 60 lakh have been rejected since 2018, said Bhati. The hospital admits 70 to 80 patients under the scheme per month. “Slowly, we have been forced to reduce the number of patients we admit under PMJAY,” he said. “I got my hospital empaneled to serve the poor, but it is difficult to sustain.”

In multiple cases, insurance companies provide approval to conduct a patient’s surgery but deduct payments later, citing errors in documentation or lack of certain documents.

There is a grievance redressal mechanism under which hospitals can approach a nodal officer in the health department. But district or state officials have not been proactive in dealing with these complaints.

Hospitals put brakes on PMJAY

Hospital admissions under PMJAY had increased sharply across India since mid-2021, but have declined since. Data from the portal shows that hospital admissions decreased from 13.16 lakh in October 2023 to 6.4 lakh in November 2023.

The decrease, several hospitals told Scroll, is due to a frustrating wait for the recovery of claims. In at least 10 states, for more than 50% of the cases, it takes longer than 45 days to settle claims.

In Haryana, several hospitals said they have limited or stopped patient admission under the scheme because of the delay in the disbursement of funds.

Pawan Hospital, a 55-bed facility in Faridabad, empanelled itself under PMJAY in 2018. The hospital’s chief executive officer, Madhav Gadasiya, said around Rs 5 lakh is pending for surgeries done in the last three months. “We have reduced (PMJAY procedures) to 10 in a month,” said Gadasiya.

“For every surgery, we pay the doctor immediately,” he said. But it takes months for us to recover that cost from the government.”

In addition to the delayed payments and rejected claims, the low cost of treatment packages under the scheme, set by the government, is adding to the financial problems of hospitals.

“The scheme is mostly supported by small and medium-scale hospitals,” said Dr AK Ravikumar, chairman of IMA Hospitals Board of India. “If the government does not increase the rates or make timely payments, these hospitals will find it hard to survive.”

Gadasiya of Faridabad’s Pawan Hospital said the fixed rates are already low and further deductions from the final claim makes it impossible to earn any profit.

Fund allocation

Doctors and hospital owners said the poor financial management of PMJAY has resulted in these problems.

Ravikumar said a major reason why PMJAY is failing in multiple states is “a mismatch in demand and outflow”. “The budgeted allocation is less than the required demand and even that allocation is not fully utilised,” he told Scroll.

The government’s yearly records reflect what Ravikumar says. Last February, the government allocated Rs 7,200 crore for 2023-’24 for PMJAY, but revised it to Rs 6,800 crore by this year.

In 2022-’23, the budget for the scheme was Rs 6,412 crore. But for nine months of 2022, the government had released only 18% of the funds. Though allocation is high, spending remains low. “This is a good scheme on paper,” said Ravikumar. “But financial management is poor.”

Chaudhary, of the association of Gujarat hospitals, said it appears that the government “does not really intend to spend on the scheme”.

Data from the Kerala Private Hospital Association shows that private hospitals in the state are owed over Rs 400 crore under PMJAY. Last month, the association filed a writ petition in Kerala High court demanding payment of the dues. “We have been made to understand that the government has absolutely no funds for PMJAY,” advocate Hussain Thangal, who is representing the association, told Scroll. “For public hospitals, the pending dues could be over Rs 1,000 crore,” he said.

Forty-two private hospitals have removed their names from the scheme in the last six months in Kerala, Thangal said.

In Thiruvananthapuram, Sree Gokulam Medical College and Research Foundation is waiting for a payment of Rs 5 crore. “The amount is pending for the last six months,” said Anant Kumar, the hospital’s public relations officer.

“When we signed the MoU with the government, it stated payments will be made within 15 days of surgery,” he said.

Kumar said the hospital empaneled itself under PMJAY to serve the poor. “We don’t expect huge profits,” said Kumar. “But at least don’t reject our claims and pay us on time.”

This reporting was supported by a grant from the Thakur Family Foundation. Thakur Family Foundation has not exercised any editorial control over the contents of this article.