The mounting arrears owed by the state government have strained the financial capabilities of private hospitals, prompting this drastic measure. The hospitals claim that despite repeated pleas and negotiations, the government has failed to address the long-pending arrears, which now threaten the continuous provision of healthcare services to KASP beneficiaries.

The KASP, which went into effect in 2020, is a combination of many federal and state health insurance programmes. It provides yearly health coverage for secondary and tertiary hospitalization of up to Rs 5 lakh per household. According to the State Health Agency, Kerala, it serves over 64 lakh beneficiaries, or 42 lakh impoverished and vulnerable families, who make up the lowest 40% of the state's population.

The government's reluctance to switch to HBP 2.2, which provides improved benefits to beneficiaries and empaneled hospitals, particularly in terms of procedures and package rates, is another concern for KPHA. Hussain Koya Thangal told The New Indian Express," We have no option but to withdraw from the scheme. It is straining our resources, and small hospitals, particularly in rural areas, are finding it difficult to survive." He further added that Kerala is still following the HBP 2.0 rules, which is not in favour of hospitals or beneficiaries. Significant improvements have been made to the new version, which should soon be implemented in Kerala.

Previously KPHA filed a contempt petition regarding the implementation of HBP's new updated version, the government issued an order on November 15 and clarifies that the government would not implement the revised HBP. The order stated that the state's current financial position precluded the implementation of the amended rates and that the issue may be revisited when Central aid is increased. The existing rates, the association argues, are not reflective of the complexities and expenses associated with healthcare delivery, leading to financial problems for private healthcare facilities participating in the KASP initiative, reports the Daily.

Dr. E K Ramachandran, Chairman of TM Hospital in Chettuva, highlighted the precarious situation faced by hospitals in rural areas, particularly those unable to turn away critically-ill patients or those requiring essential procedures such as dialysis. TM Hospital, situated in the coastal and rural region of Thrissur, disclosed a burden of pending arrears amounting to Rs 45 lakh, underlining the financial strain faced by healthcare providers in these areas. Dr. Ramachandran emphasized the critical need for a sustainable financial model to ensure the continued provision of quality healthcare services.

“Presently, 50 hospitals have stopped admitting patients covered under the scheme. We will be compelled to cease cooperation with the government unless there is an enhancement to the scheme and the pending amount is cleared in a timely manner,” he said.