One issue that’s drawing some attention in the healthcare space is that of pending dues of hospitals and nursing homes from government schemes. Some news reports peg the receivables of the industry at near Rs 1,000 crore, but a senior executive at a leading hospital chain who spoke on condition of anonymity pegged this number higher, at about Rs 1500-2000 crore. While pending dues on services rendered under government schemes has been a problem for hospitals for some years now, the reason for renewed attention is that the accumulation of dues has now resulted in them acquiring a significant size, especially for smaller healthcare providers. And this is starting to really hurt their cash flows.
Industry sources in private also confess that they aren’t hopeful of any payments for at least another two months. Indications are that payments will come through, perhaps, only later in January, following fresh fund allocations to the key healthcare schemes.
Average delay is 4 to 6 months
Along with Ayushman Bharat there are mainly three government schemes that hospitals and nursing homes cover. The Central Government Health Scheme or CGHS, the Ex-Serviceman Contributory Health Scheme or ECHS and the Employee State Insurance or the ESI. The CGHS covers government employees and pensioners, the ECHS covers ex-service personnel and the ESI covers those working in factories, etc. The
CGHS scheme presently covers about 3.5 million people while ECHS covers 5.5 million ex-servicemen. The delays according to Healthcare Global, the cancer hospital chain, are seen mostly from the ECI scheme, which despite being flushed for funds delays payments. Some industry observers say the biggest problem is from the ECHS scheme which is awaiting more funds from the government.
According to the CGHS scheme, dues have to be cleared in 45 days, 70 percent of payments have to be cleared in five working days after submission of a bill and the balance in the remaining 30 days. Currently, the average delay in payments is 4 to 6 months, with the trend having only worsened in recent times. Stalling of payment processing ahead of the elections and the addition of a large number of hospitals under the schemes are cited as two reasons for the high accumulation. And this is making some hospitals wary of joining government schemes.
Narayana Health, Apollo, Fortis, Max and HCG are a few of the listed private hospital companies with pending government dues. Narayana’s dues are to the tune of Rs 170 crore, about Rs 20 crore and another Rs 20-30 crore pending from CGHS, ECHS and ESI, respectively. Healthcare Global, the cancer-focused hospital chain, awaits settlement of about Rs 200 crore in dues, while for Delhi-based Max Health the outstanding amounts to about Rs 150 crore. Even Fortis, which is mired in a legal battle, is yet to receive about Rs 60 crore, as of end-July. For Apollo Hospitals, though, the impact is limited as only 5 percent of its customer base comprises patients covered under government schemes.
The impact is most severe for small hospitals and nursing homes who cater to a large share of customers covered under these schemes. One of the reasons is because smaller healthcare facilities conduct more routine operations, which are covered under these schemes. Large private hospitals, on the other hand, prefer to focus on high-end procedures. According to a senior executive with a large healthcare provider, who wished not to be quoted, the cash crunch faced by smaller facilities is so severe that many are shutting down, scaling back operations or even putting themselves on the block, despite high occupancies.
Impact on cash flow
Treating patients under a government scheme is a choice that healthcare facilities have. They can choose not to treat patients under government schemes. Then why do they do it? Besides a moral obligation, not treating patients would result in losing out on a bulk of customers, especially if your hospital is located in an area with a large beneficiary population. An industry veteran cites the example of Delhi, where a large pool of patients are those with government jobs.To address the cash flow impact, industry has proposed emergency solutions. One such proposal is to stop cashless payments till the earlier dues are paid. This means that a patient pays the hospital or nursing home and is later reimbursed by the government. But stopping cashless payments can impact patients, as many do not have the required liquidity to pay high medical bills for procedures. What also makes this proposal difficult to implement is that hospitals are clamouring for a revision in rates for their services. Industry players point out that CGHS scheme rates, for instance, have not seen rates revised since 2014.