After Jaslok Hospital, other hospitals are lining up to join the preferred provider network in a major breakthrough for insurers that will bring relief to mediclaim policyholders

To the relief of the consumers, more and more hospitals are joining the Preferred Provider Network (PPN). Jaslok of Mumbai has just joined and Fortis is likely to sign up soon. A couple of other big institutions are also in negotiations with the General Insurance Public Sector Association (GIPSA).

Colonel Manesh Masand, chief executive officer of Jaslok Hospital, which is the first premier institute in south Mumbai to join the PPN, told Moneylife, "We have mutually agreed to the rates for 43 packages. The removal of the cashless feature did not impact our business, but we are joining PPN to help patients. PPN rates to the cashless mediclaim policyholders will be effective from 15th January. If anything exceeds the package, we will give proper justification for it. Either the insurance company or patient will have to bear the same."

Policyholders with public sector (PSU) insurance companies will certainly benefit with the resumption of the cashless facility at Jaslok Hospital. It also raises hopes for PSU insurers to cajole other hospitals to join PPN.

According to M Ramadoss, chairman and managing director, New India Assurance Co Ltd, "Rates could vary from hospital to hospital, based on location, facilities, and equipment. It's not a one-size-fits-all solution. If there is an industry standard for standard rates, we will welcome it. Due to the absence of it, I have to step in, but not to rob hospitals of their profits. We have benchmarked average costs of the previous two-three years and have used recommendations of doctors on panels for frozen standard rates for procedures and treatments."

In a bid to curb the increasing losses incurred by hospitals due to fraudulent and inflated claims, General Insurance Public Sector Association (GIPSA), a group of four public-sector insurance companies had decided to restrict the cashless medical facility only to hospitals that agree to join the PPN. The rule, which was implemented on 1 July 2010, offers a negotiated rate for 43 treatments that are covered under the cashless policy. The four insurance companies are New India Assurance Company Ltd, United India Insurance Company Ltd, Oriental Insurance Company Ltd and National Insurance Company Ltd.

According to a third party administrator (TPA), "Every hospital is eager for business and Jaslok will surely benefit by joining PPN. Many hospitals have stagnant growth even when they add new patients. PSU insurers will benefit by getting discounts for bulk business."

Deepak Mendiratta, a health benefits expert, said, "Packages are possible in surgical ailments (hernia, knee replacement, bypass, and so on) but not for medical management. These are high-cost surgeries. Given the option to pay from pocket (for later reimbursement) or getting cashless (benefit), the obvious choice is cashless, unless there is high doctor loyalty. There is always uncertainty of not getting reimbursement from insurers due to various reasons."

"The hospitals are making a business decision to join PPN or not (to join) based on the level of shift in customers due to absence of PPN. Medanta (in Delhi, and has joined PPN) is a newer hospital that will eventually be a 1,300 bed facility and needs customers," Mr Mendiratta said. "Sir Ganga Ram (also in Delhi) recently had seven top doctors leaving them and it was enough of a reason to join PPN. The rates these hospitals accept to join PPN also serves as a benchmark for other hospitals as well as for insurers to help them bring more hospitals onboard. It ultimately helps to reduce rates for surgeries and hence controlling the claims ratio."

The packages are designed within the given parameters and defined limits. The agreement of package rates after negotiation with GIPSA can give hospitals what they expect, if the expectation is reasonable. The tightly-defined packages, clearly explaining what they include and exclude, also helps insurers to know that there will not be inflated, fraudulent or unwarranted claims. As long as there are no major exclusions, policyholders will not have to pay from their own pocket in case insurers don't cover it.

GIPSA expects 70% of hospitals in Mumbai to join its PPN for the cashless mediclaim scheme in the coming months. After Jaslok, many other major hospitals are likely to join the PPN as they do not want to lose business to Jaslok. Kokilaben Dhirubhai Ambani Hospital, Bombay Hospital and the Fortis group are in the process of negotiations.

But Fortis group Ranjana Smetacek, director of marketing and corporate communications said, "As of now, the Fortis Group is not joining the PPN. The association of hospitals and nursing homes in Mumbai has made a decision not to join the PPN and our hospitals in Mumbai are abiding with this decision."

There are 169 hospitals in Mumbai on the cashless mediclaim network. Among them are such big names as Jupiter Hospital in Thane, MGM Vashi, Sterling Wockhardt in Vashi, Kohinoor Hospital in Kurla, SevenHills in Andheri (East), S R Mehta Cardiac Hospital at King's Circle, Joy Hospital in Chembur, and Surana hospitals in Malad as well as Chembur.