AB PM JAY health scheme was introduced to ensure that billions of Indian citizens have access to quality healthcare options across private facilities with the expenditure being covered by the government. Since its introduction, there has been a massive rise in the number of people enrolling in the noteworthy scheme. As of January 2024, the program has officially created over 30 crore Ayushman cards that help citizens avail nearly 6.2 crore free hospital admissions across hospitals in the country. The latest addition to the scheme entails senior citizens above 70 to get an additional 5 lakh coverage for themselves.

While India’s push to provide universal healthcare is a welcome move, there are hurdles and challenges that empanelled caregivers face to facilitate such a massive free health program at a national level. Empanelled hospitals, clinics, and private medical colleges are legally bound to adhere to compliance norms outlined for AB PM-JAY schemes. With more beneficial features added to the mix by the government over time, there is a rising concern from care providers that they are finding it hard to honour treatment commitments as agreed initially.

The fundamental problem – the lack of a costing strategy

The universal health scheme offered by the Government of India mandates hospitals to adhere to strict pricing norms for many standard medical procedures and services. Reimbursements from the government will be made only against budgeted procedures and clinical workflows with each having further granular breakups and maxed-out allowances.

In addition to instances of delayed payments, hospitals that run with tight margins are finding it extremely difficult to counter the lost profits with inflexible costing of their operations that power care delivery. Adding newer benefit features like free extended coverage for senior citizens will result in even more complications and many private healthcare providers will be forced to delist themselves from the empanelled hospital list.

The key challenge that private hospital CEOs face is the deviations in costs faced when delivering services. This, ultimately, leads to mismatches with reimbursement workflows agreed upon by government bodies. They have to take measures that ensure a balance between profits and service delivery for beneficiaries under such schemes.

Under such circumstances ignoring the true potential of having an effective costing strategy will be a huge problem. Let us explore a few reasons why:

Why is strategic costing of services critical for hospitals empanelled to deliver government-funded health programs?

Understand the core elements of costing

An effective cost strategy helps CFOs break down costs for services under different schemes like the AB PM-JAY. This allows them to have clear visibility into how individual constituents of a care package for beneficiaries is contributing to the overall costs. They can then use the insights to design more efficient procurement, operational, and management techniques that lower costs.

Easily decide on pricing models

Discover profitable care flows

The detailed scope of major government health programs like the AB PM-JAY allows private hospitals to understand the maximum allowable expenditure under different care practices. Using this data, it is easier to optimize service and care flow delivery. It can be done in a way that prioritizes both profits for the business and affordability for patients. For example, calls on scenarios like duration of admissions and admissible services can be decided after consultative data-driven discussions facilitated by an effective costing solution as well.

Eliminate inefficiencies

In addition to optimizing expenses, an effective costing solution will strategically eliminate inefficiencies by throwing light on areas prone to revenue leakage or profit erosion, lower value-add, diversion of care to other departments, etc. It can also shed light on how different operational workflows are leading to costing escalations like for example- staff overutilization or underutilization.

Fix the right pricing model

Ultimately, a cost strategy helps private hospitals get a flexible breather on their pricing models. By adjusting for growth and accommodating market trends, care providers can bill patients for services as agreed when opting for empanelment in programs like the AB PM-JAY. The right pricing allows better coverage for patients while the increased transparency helps in reconciliation and financial auditing.

When the Narendra Modi government introduced the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) health insurance initiative, it was seen as one of the most fundamental changes to India’s healthcare system in decades. Given that the country’s percentage of people with private health insurance is not even in double digits, the surge in healthcare costs created unrest. The situation badly needed a new dimension of helping patients while ensuring the hospital had enough to sustain operations. This is where trusted solutions like ABIS Pro from Proactive Solutech can be a major asset.

Get in touch with us to learn more.