Why many patients leave hospitals financially drained: The rising cost of healthcare explained

Hospitalisation is meant to restore health. But for many Indian families, discharge often comes with financial stress that lingers long after recovery. Rising medical inflation, complex billing structures and insurance gaps mean that even insured patients can face significant out-of-pocket expenses.

According to chartered accountant CA Kanan Bahl, the problem is not limited to medical inflation alone but reflects deeper structural changes in the country’s healthcare ecosystem.

“Healthcare inflation in India has been hovering in double digits, often around 12–14%, far above general consumer inflation,” Bahl observes. “For a middle-income household, a single hospitalization can wipe out years of savings.”

Here’s what patients, attendants and policyholders need to understand.

1. Healthcare Inflation

Healthcare inflation in India has consistently remained in double digits, often between 10–14% annually — significantly higher than general consumer inflation.

Bahl notes that itemized billing often includes multiple layers of charges — procedure fees, room rent, diagnostics, consumables, specialist visits, and pharmacy margins — making it difficult for patients to assess reasonableness in real time.

“The opacity of billing structures means families only fully understand the cost burden at discharge, when the bill is presented,” he says.

What this means for you:

Treatment costs rise every year.

Insurance premiums increase.

Coverage purchased 3–5 years ago may no longer be adequate.

A Rs 5 lakh health policy that felt sufficient earlier may now fall short for major surgeries or prolonged ICU stays in metro hospitals.

2. Escalating hospital bills

Many families assume the biggest cost is the surgery itself. In reality, the bill is made up of multiple components:

Room rent (which can determine overall package pricing)

ICU charges

Doctor and specialist visit fees

Nursing charges

Diagnostics and lab tests

Pharmacy and consumables (gloves, masks, syringes, PPE kits)

Equipment usage

Procedure charges

Consumables often surprise families. During critical care or infection-controlled procedures, usage can be high. However, the absence of real-time transparency means many families only see the full financial impact at discharge.

Tip: Ask for interim bills every 24–48 hours to avoid last-minute shocks.

3. Insurance does not mean zero payment

Cashless hospitalisation reduces immediate cash outflow, but it does not eliminate all expenses.

Common reasons for additional payment:

Non-medical items not covered (gloves, PPE, registration fees, etc.)

Sub-limits on room rent or specific treatments

Policy exclusions

Co-pay clauses

Exhaustion of sum insured

If your room rent exceeds policy eligibility, it can proportionately reduce claim settlement across the entire bill.

Tip: Always check:

Room rent eligibility

ICU limits

Disease-specific caps

Waiting periods

Co-pay percentage

4. Insurance effect

Healthcare economists refer to a phenomenon called “third-party payer distortion.” “The presence of a third-party payer can distort pricing discipline,” Bahl says. “When insurers negotiate later and patients aren’t directly paying upfront, transparency weakens.”

This dynamic can lead to higher initial billing, discharge delays, and partial claim settlements.

When an insurer is involved:

The patient is not directly negotiating prices.

The hospital bills the insurer.

Final negotiations happen between hospital and insurer.

This can result in:

Higher initial billing

Delays in discharge approval

Partial claim settlement

Post-discharge recovery demands

This also contributes to rising claim ratios and, ultimately, higher insurance premiums.

5. Corporate hospitalisation and investment-driven growth

In recent years, many leading hospital chains have attracted investments from private equity and global funds. This has enabled expansion, advanced technology adoption, and improved infrastructure.

While PE capital has enabled rapid expansion, improved infrastructure, and access to advanced technology, Bahl suggests the ownership shift may also alter incentive structures.

Hospitals today track metrics such as:

Bed occupancy rates

Revenue per occupied bed

Procedure volumes

Operational efficiency

Patients may not see these metrics directly, but they influence pricing frameworks and service structuring.

However, hospitals are also businesses. They track:

Bed occupancy

Revenue per occupied bed

Procedure volumes

Operational margins

This does not automatically imply overcharging. But financial performance metrics influence pricing strategies, especially in metro markets with limited competition. “Private equity operates on defined return expectations and exit timelines,” he explains. “That doesn’t mean hospitals compromise care, but it does introduce financial performance metrics — such as occupancy rates and revenue per bed — that influence business decisions.”

6. Uninsured families -- most vulnerable

India still has high out-of-pocket healthcare expenditure. Without insurance:

Families may rely on savings or loans.

Gold or assets may be liquidated.

Long-term financial stability may be disrupted.

A prolonged ICU stay can cost several lakhs per week in private hospitals.

7. How patients and families can protect themselves

Before Hospitalisation:

Review your insurance coverage annually.

Increase sum insured in line with healthcare inflation.

Consider a super top-up plan.

During Admission:

Request a cost estimate in writing.

Seek clarity on packages and exclusions.

Ask for daily billing updates.

At Discharge:

Review itemised bills carefully.

Cross-check non-medical exclusions.

Raise discrepancies immediately before payment.

What's the bigger issue

Healthcare is an essential service. Yet it operates within a capital-intensive, high-cost ecosystem. Without transparent billing, strong regulation and informed patients, financial stress after discharge may continue to be common. Being medically prepared is important. Being financially prepared is equally critical.