Why no penal action against hospitals for inflated bills: CAG

  • Bhartesh Singh Thakur, Hindustan Times
  • Updated: Jan 01, 2016 12:59 IST


The Comptroller and Auditor General has picked holes in the implementation of Ex-servicemen Contributory Health Scheme (ECHS) under the Regional Centre, Chandimandir, and questioned why no penal action has been taken against the empanelled hospitals despite over 1 lakh cases where inflated claims were made and a demand for Rs 29 crore in excess was raised.

Empanelment of hospitals, nursing homes and diagnostic centres in ECHS is done by entering into a memorandum of agreement (MoA) between the hospital and Regional Centre, ECHS. The expenditure incurred on services provided by an empanelled hospital is paid directly to the empanelled facility concerned by Regional Centres as per approved rates.

The audit report, which was tabled in the Parliament on December 22 found that about 2.39-lakh claims were raised from Chandigarh and nearby empanelled hospitals in the last three financial years and an amount of Rs 355 crore was demanded but only Rs 326 crore was approved, i.e. Rs 29 crore less.

There were 1.04 lakh claims (about 44%) where deductions were made. In these bills, Rs 241 crore was demanded but the approved amount was Rs 212 crore.

The CAG has found that the percentage of deductions in the bills is by 12%. In 79% of claims where the deductions were made was up to 25%, while in 21% claims the deductions were beyond 25% of the amount.


The post-audit of bills raised by empanelled hospitals is done by controller of defence accounts after payment. Regarding overpayments, in 2013 Rs 18.6 crore was detected, Rs 10.5 crore in 2014 and for first three months of 2015, Rs 1.3 crore overpayment was detected but the amount recovered was just Rs 5.41 crore. Though, CAG pointed out there was only meagre post-audit of bills due to shortage of staff which prevents exact detection of overpayment.

In accordance with the memorandum of agreement (MoA), empanelled hospitals are to provide cashless facility to the ECHS beneficiaries. In case of violation of the provisions of MoA by the empanelled hospital, the performance bank guarantee (PBG) submitted by the hospital could have been forfeited and the hospital be removed from the list of empanelled hospitals with the approval of MoD. Besides, in case of initial violation of the provisions of the MoA by the hospitals, an amount equivalent to 15% of the amount of PBG shall be charged as agreed liquidated damages.

“Though the claims for the over billed amount were eventually rejected by the chief financial authority, no penal action as provided in MoA was taken against the defaulting hospitals,” said CAG.


In emergencies and life threatening conditions, the patients are permitted to be admitted to nearest empanelled hospital.

The hospital assesses the emergency and generates an emergency information report (EIR) within 48 hours, informing the particulars of patient and the nature of admission.

It has been found that at a number of hospitals in Mohali and Panchkula, the EIRs were raised by the empanelled hospitals and referrals made by other than nearest polyclinics. “Since the procedure says that only the nearest polyclinic can make such referrals after carrying out necessary verifications, the issue of referrals by other than the nearest polyclinics was in violation of the laid down procedure,” says CAG.

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