Understanding How Markets and State Action Shape Costs and Prices of Healthcare in Post-globalization India: A Study of High-end Imaging Services in Kerala

Abstract

Globalization has pressurized the developing nations to open their health sector for profit-driven private investors—both domestic and foreign. In a private sector dominant unregulated healthcare market like India, the service providers are free to determine the fee for services. In the present policy context of the role of central government shifting to strategic purchasing of services from the private sector (National Health Policy, 2017) and discussions on regulation of prices in private healthcare markets, an understanding of the cost of services and its relationship to prices is essential. Very few attempts have been made to estimate the cost of advanced diagnostic services; those done have most often used the traditional costing methods. Bottom-up micro-costing method which is considered as the gold standard in hospital costing is used in this study to estimate the cost of three services: CT scan, MRI scan and Cath-Lab in three districts of Kerala. A comparison with the per capita income of the population is also attempted to analyse the contextual differences in costs and prices. Using the bottom-up micro-costing method, the lowest estimated cost of service for a brain CT scan in Kerala is ₹667, for MRI scan of the brain is ₹1,177, for angiogram is ₹4,344 and for Angioplasty is ₹11,291. The costs of services are higher in locations of lower per capita income. However, the price for services is higher in locations of higher per capita income. The market prices appear to be driven by commercial interests that decide on what prices the market can bear, rather than on competition or costs of producing the services. The presence of public facilities offering the selected services at a certain fixed rate influences market prices by influencing private players to limit their prices at a level very close to the public co-players—but prices in public sector are itself significant—and could be exclusionary.