The already expensive medical bills at private hospitals are set to get costlier. The imposition of 5 per cent service tax on all medical services including diagnostic tests offered by air-conditioned hospitals with more than 25 beds in the Union Budget 2011-12 will force hospitals to pass on the burden to patients.

The additional 5 per cent service tax has not gone down well with patients, doctors, hospital managements and associations representing doctors and hospitals. Many have termed the decision as ‘unfair' and added that ultimately the patients will have to bear the additional costs.

Till recently, patients under insurance coverage were under the service tax net. However, from now on, individual patients with no medical insurance cover will have to pay 5 per cent more on medical bills. The service tax will be imposed on all kinds of diagnostic services too.

“India's healthcare financing mechanisms are poor with 66 per cent of healthcare expenditure being made out of the pocket. A 5 per cent service tax would add a significant cost burden to the end consumers, thereby making access to quality healthcare even more difficult for a large majority of population,” says Dr. G. S. Rao, Managing Director, Yashoda Hospitals.

Sharp reaction

Experts also reacted sharply to the mention of ‘air conditioned' hospitals in budget. “Air conditioners are not luxury but they are needed to bring down infections and maintain ICU and other vital wards infection proof. The decision is unfair. Almost all medium sized hospitals in the capital have more than 25 beds and this will put a lot of financial burden on the needy,” says immediate former president, Andhra Pradesh Private Nursing Homes Association (APNA), Dr. D. Kantha Reddy.

Representatives of private hospitals too were not pleased with such a decision.


  • Patients with no medical insurance will pay 5 per cent more on bills
  • The service tax will be imposed on all kinds of diagnostic services as well