Is Ayushman Bharat (PM-JAY)
Financially Viable?
Universal health coverage is a noble goal. But for doctors, it often means more paperwork, less time per patient, and fewer rewards. Ayushman Bharat (PM-JAY), India’s biggest national health insurance scheme, is at the center of this challenge.
This article examines the many hurdles of PM-JAY to answer one question: Is it financially viable for private healthcare providers?
Progress matters, but not at the expense of your well-being. Read on to explore the scheme's challenges, or find our other guides for an overview, best practices, and how to get empaneled.
#1. Systematic Delays
Cash flow is the lifeblood of any organisation, and hospitals have always struggled to stay afloat. Massive investments, uncertain flow of patients, and regulations are just some of the constant challenges.
Yet, government systems just don’t move as fast as private companies. Under PM-JAY, private Healthcare Providers (HCPs) risk their already precarious revenue cycle to potential delays.
Every step in the PM-JAY process has an official Turnaround Time (TAT).
Empanelment = simple 30-45 days. (varies greatly)
Beneficiary verification = Automatic
Pre-Authorization = 6-12 hours
Claim settlement = 15-30 days
Yet, on-ground reports suggest otherwise:
Empanelment process is said to be slow, opaque, and burdensome.
There have been reports of delays due to IT glitches on holidays.
Delayed pre-authorization that directly affects treatment.
Notorious payment delays, to the point of severe disruptions.
The IT ecosystem has improved with the launch of BIS 2.0 & HEM 2.0, but the claims system (TMS) still has a long way to go. A key issue is the lack of prompts for incomplete submissions, leading hospitals to develop their own software.
#2. Constant Scrutiny
No one becomes a doctor to do administrative work. Unfortunately, medico-legal cases are rising, and most patients are dependent on health insurance. Even HCPs are forced to maintain detailed notes and accurate documents.
In AB-PMJAY, empanelment hassles are just the beginning. Long after joining, private hospitals are subject to audits, policy changes, and surprise visits.
Thousands of hospitals have been de-empaneled for various issues.
Claims are rightfully scrutinised as well. To the extent that dedicated staff needs to be hired for PM-JAY administrative work (Arogyamitras).
Up-to-date information must be filled in the Hospital Empanlement Module (HEM). Keeping up with policy changes is additional work.
For example, the govt. is currently pushing the Ayushman Bharat Digital Mission (ABDM). While participation is not mandatory, savvy managers will recognize the potential benefits, especially under the PM-JAY scheme.
#3. Cashflow Disruptions
It’s no secret that the scheme is notorious for delayed payments (on average, 6-9 months). Mid to small-sized healthcare providers cannot afford such delays, as they cripple the cash flow.
Tertiary healthcare professionals (specialists) are especially vulnerable due to their dependence on short-term revenue to maintain operations. Recently, private doctors in Haryana were forced to go on strike due to these delayed payments.
The Comptroller and Auditor General of India (CAG) did a revealing audit of the scheme’s performance covering the period from 2018 to 2021:
A shocking 39.57 lakh claims for pre-authorisation took longer than the stipulated 12-hour period. This delays care while taking up hospital resources.
As of Nov 2022, 40.23 lakh claims worth Rs 6,052.47 crore were still under process, awaiting approval or rejection.
Inconsistencies were noted (eg, some late claims being rejected) while 2,04,654 late claims worth Rs 201.55 crore were approved in UP alone.
#4. Inadequate Package Rates
AB (PM-JAY) groups healthcare services into “treatment packages” for simpler claims. But these package rates are often 40-50% lower than the market prices. This is the scheme’s biggest criticism, leading to several issues:
Treating chronic diseases → often costs more than PM-JAY pays, since care is long-term and resource-heavy.
Complex surgeries (e.g., cardiac) → offer better rates, making them more profitable. So, clinic owners might favor these procedures.
To avoid this “cherry-picking” of patients, PM-JAY mandates that hospitals provide all treatments that their infrastructure & resources allow.
“Standardisation” means that the quality of care in private and public hospitals is similar for beneficiaries. Yet, private hospitals tend to have better, more expensive facilities. Thus, private hospitals often end up absorbing losses, with little flexibility.
#5. Cycle of Distrust
These issues snowball and pressure hospital owners. Many of them join the scheme to improve occupancy rates and get more patients. When facing cripping delays, HCPs might be tempted to engage in shady practices, like:
Performing one procedure, but documenting two, citing medical complications.
Additional charges for things not covered by the scheme (like certain valves).
Providing unnecessary procedures to “make up” for losses.
In fact, this is quite common in certain places and is casually swept under the rug with bribes. This leads to even stricter reforms and lengthy procedures that further delay the claims process, creating a vicious cycle of distrust.
#6. Logistics & STGs
So far, we’ve covered “top-down” issues with the policy, highly relevant to clinic owners. However, the scheme is implemented on the ground, and HCPs also struggle with numerous problems.
The scheme’s Standard Treatment Guidelines (STGs) note the “ideal” treatment for any package. Sticking to STGs ensures smoother claims.
But in practice, STGs often prioritize logistics over patient experience.
In Madhya Pradesh, 472 packages (mostly non-surgical) are reserved only for public hospitals. This creates gaps in multi-package treatments, for example:
A cancer patient gets surgery in a private hospital, but must get chemo at a public one.
Patients usually refuse, since public hospitals may lack oncologists.
Result: patients pay out of pocket, hurting the private hospital’s goodwill.
In public hospitals, Arogyamitras (AMs) often have a medical background, enabling them to navigate STGs & claims better. But in private hospitals, it’s not always possible to get such an ideal candidate.
#7. Indirect Issues
Some other challenges hampering the scheme’s smooth operation:
A lack of any feedback mechanism for Empaneled Healthcare Providers (EHPs).
The culture of believing that “Hospitals are only for worst-case scenarios.”
Beneficiaries delay treatment until ailments become emergencies.
Each state has its own set of unique roadblocks and ecosystems.
The Other Side of PM-JAY
So, if there are so many issues, why should a private hospital join Ayushman Bharat? Putting aside the benefit of the public, a popular study published in Springer Medizin might shed some light.
The study ran 10-year projections for a hypothetical 100-bed hospital running PM-JAY rates only.
Annual Expenditure: Rs 8.527 crore, with HR (40%) & drugs/consumables (20%) being the most significant cost centers.
Annual Revenue: Rs 10.436 crore, based on PM-JAY package rates and patient volume data.
Break-Even Point: 4th year of operation.
High occupancy rates and government subsidies (like free land for construction) can reduce the break-even point to the second operational year.
While idealistic, the study challenges the popular narrative of unviability with concrete information. Another excellent example is the real case study of a successful tertiary HCP based in New Delhi: (download full PDF)
High success rate: 1,255 claims filed → 1,210 settled (~96% success).
Specialty-driven: Neurosurgery (28.9%), Orthopedics (20.8%), & Cardiology (17.1%) dominated claims = lucrative specialties.
Cross-subsidization: 21 package costs exceeded the official rates. The losses were balanced by profits on other packages, keeping services viable.
Flexibility in Packages: 32 unspecified surgeries were approved, showing the potential to expand beyond fixed packages.
Zero-denial policy: No patients were turned away = reputation + patient trust.
Conclusion
While the challenges are very real, the financial viability of empaneling under PM-JAY depends on many factors. The real determining factor of any such project is the people on the ground.
How is the situation in your state, area, and district? Who is your target patient base? What do you have to offer in terms of human resources and infrastructure?
Depending on your answers, participation could sink or swim your practice. To learn more, read our articles on PM-JAY best practices, the empanelment process, and the overview.
FAQs
Q1. What are the biggest challenges of PM-JAY for private hospitals?
A: Key issues include payment delays, inadequate package rates, heavy scrutiny, logistical hurdles in STGs, and cash flow disruptions.
Q2. How long do PM-JAY payments take?
A: Officially 15–30 days, but reports suggest payments are often delayed for 6–9 months, creating severe cash flow problems for smaller hospitals.
Q3. Why are package rates under PM-JAY considered inadequate?
A: Package rates are often said to be 40–50% lower than market prices. This makes chronic disease care unprofitable, forcing hospitals to cross-subsidize treatments.
Q4. Can private hospitals be profitable under PM-JAY?
A: Yes. Studies show profitability is possible with high occupancy, efficient operations, and government subsidies, though challenges remain.
Q5. Should small hospitals join PM-JAY?
A: It depends on factors like patient base, infrastructure, local implementation, and ability to manage delayed payments.
For some, it’s viable; for others, it’s not.
