Pending govt payments to hospitals take a toll on med-tech firms

The government’s outstanding payments to healthcare providers is affecting not just hospitals, but also medical technology companies that provide products and services to them, say industry representatives.

“The needle has not moved on that,” said Pavan Choudary, Chairman and Director General of the Medical Technology Association of India, regarding the reported ₹1,700-crore pending payments to healthcare service providers enrolled in government schemes like the Central Government Health Scheme and the Rashtriya Swasthya Bima Yojana.

Domino effect

With funds locked up, the private sector will find it difficult to take another “blow”, he told BusinessLine , pointing to added costs hospitals incurred on increased procurement of protective gear or creation of “Covid corridors” etc to prevent the spread of the coronavirus.

“Current hospital occupancy is only 30 per cent because of restrictions on elective surgeries and demarcation of capacity for Covid-19 patients. As a result, the hospitals are facing a steep decline in revenue. This is having a domino effect on the medical devices sector, as its overall revenues are depressed deeply and its payments are not coming on time,” the Association said.

“At least what has been spent should be paid,” Choudary said. Hospital products and equipment like ventilators etc, need regular servicing. In fact, this time of year is when most equipment are given for regular servicing, said another industry representative, adding that such services continue through the lockdown.

“The boat is leaking, but instead of a rescue, it should not end up drowning or capsize itself,”says Choudary. Some of these payments have been pending for over five years, he said, and their release would improve the healthcare industry’s cash flow.

Medical devices cess

Representing largely global medical technology firms with a base in India, the MTaI is also seeking a removal of the 5 per cent health cess on medical devices, or at least those used in the management of Covid. While the extended medical devices industry is divided on this suggestion, Choudary said, there are at least 130 such products used in Covid management, ranging from specimen collection and management devices like swabs, safety arterial blood gas syringes to in-patient devices like personal protective equipment, oxygen masks, catheters, cardiac monitors, infection control devices and respiratory care devices.

Though a lion’s share of medical devices in the country is imported, he said, there are at least 15 large plants in India that make products for the local market. Besides, he added, exports of many Covid-related products are disallowed anyway. According to the MTaI, the products made in the country include syringes and needles, disposable respirators, IV sets and fluids, sutures, blood bags and trauma products like nails, plates etc.

But the extended lockdown has seen factories and warehouses operate at 20-30 percent capacity, he said. And adding to this were logistic and clearance issues at ports, besides road transport being far from smooth between the states, said another industry-hand, calling for Government support so supplies are not disrupted.

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