Hospital overbilling — CGHS rates and how to dispute them

India does not have a price-regulated private hospital sector. Private hospitals are free to fix their own tariffs; the Clinical Establishments (Registration and Regulation) Act, 2010 provides a framework for prescribing ranges of rates in the states that have adopted it, but the operative rate-setting has been thin. Into that vacuum, the high courts and the Supreme Court have read the Central Government Health Scheme rate schedule — the rates at which the Government of India reimburses central-government employees — as a judicial benchmark for "reasonable and customary charges". The Delhi High Court in Siddharth Dalmia v Union of India, W.P.(C) 1031/2019 directed the Centre to constitute a committee on standardised hospital charges. The Madras High Court in S Subramaniam v Director of Health Services recognised the CGHS schedule as a working benchmark. The Supreme Court in Avishek Goenka v Union of India, in a series of orders during the COVID-19 second wave in 2020, capped private hospital charges for COVID-19 treatment by reference to the CGHS-derived rates. This guide sets out the statutory architecture, the CGHS-rate doctrine, the NABH and non-NABH rate tiers, the IRDAI Health Insurance Regulations, 2016 standardisation, and the routes for disputing an overpriced hospital bill.

A patient who looks at a Rs 18 lakh hospital bill at the end of a fortnight of ICU treatment, and is told that the CGHS rate for the same package is Rs 4.5 lakh, is looking at the central regulatory gap in Indian health-services law. There is no statute that fixes the price of a private hospital admission. The Clinical Establishments (Registration and Regulation) Act, 2010 provides for the prescription of "the range of rates to be charged" by clinical establishments — but the rates have, in practice, not been prescribed; the section enables it, not commands it. The Insurance Regulatory and Development Authority of India under the IRDAI (Health Insurance) Regulations, 2016 standardised the definitions of "hospital" and "reasonable and customary charges" and the cashless-claim framework, but did not price treatment. What has emerged in the absence of statutory price-setting is a judicial benchmark — the CGHS rate, used by the Government of India to reimburse central-government employees, taken by the consumer forums and the writ courts as the working yardstick for what a private hospital can reasonably charge. That benchmark is the operating line in hospital-bill disputes in India today.

The statutory frame — Clinical Establishments Act, 2010

The Clinical Establishments (Registration and Regulation) Act, 2010 is the central statute on private-hospital regulation in India. Section 2(c) defines a "clinical establishment" to include a hospital, maternity home, nursing home, dispensary, clinic, sanatorium or any institution offering services for diagnosis, treatment or care of illness, injury or pregnancy. Sections 11 to 13 lay down the registration regime — every clinical establishment, regardless of size, must be registered with the District Registering Authority; provisional registration is followed by permanent registration on compliance with the minimum standards. Sections 51 and 52 confer the rule-making power; the Clinical Establishments (Central Government) Rules, 2012 lay down the minimum standards and the registration procedure. Critically, Section 12(1)(i) and the rules made under it provide for the clinical establishment to "charge the rates for each type of service provided and facilities available, for the treatment of patients within the range of rates determined and issued by the Central Government from time to time, in consultation with the State Governments".

The Act applies to the four Union Territories — Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep — and to the states that have adopted it under Article 252 of the Constitution: Arunachal Pradesh, Himachal Pradesh, Mizoram, Sikkim, Uttar Pradesh, Rajasthan, Bihar, Jharkhand, Assam, Haryana and Uttarakhand are among those that have. Major hospital-market states — Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Telangana, West Bengal, Kerala — have not adopted the central Act but have their own state-specific clinical-establishments legislation. The framework for prescribing ranges of rates exists; the prescription itself, in working language, has been slow. The National Council for Clinical Establishments has issued advisories and circulated draft standard treatment guidelines, but the binding price-list contemplated by the Act has not, for the most-litigated procedures, been operationalised. That regulatory thinness is the gap into which the CGHS-rate doctrine has stepped.

The CGHS rate — what it is, why the courts use it

The Central Government Health Scheme is the Government of India's medical-benefit scheme for serving and retired central-government employees, members of Parliament and certain other classes of beneficiaries. Administered by the Directorate General of the Central Government Health Scheme under the Ministry of Health and Family Welfare, CGHS empanels private hospitals at agreed rates and reimburses listed procedures at those rates. The rate schedule — revised periodically — covers a long list of procedures from a consultation visit and a basic blood test through to a coronary artery bypass graft and an organ transplant. The rates are two-tiered: a higher rate for hospitals accredited by the National Accreditation Board for Hospitals and Healthcare Providers (NABH), and a lower rate for non-NABH-accredited hospitals. The two-tier structure recognises that accreditation imposes process and quality costs and that the rate must accommodate them.

The CGHS rate is, in formal terms, a reimbursement rate — the rate at which the Government of India is willing to pay for treatment of its employees. It was not designed as a price-control schedule for the wider private-hospital sector. Three doctrinal moves have, however, converted it into the de-facto judicial benchmark for reasonable hospital charges. The first move is the consumer-forum analysis under the Consumer Protection Act, 2019 — read with the three-judge Bench decision in Indian Medical Association v V P Shantha, (1995) 6 SCC 651, which placed medical services within "service" under the consumer-protection regime. Once a billing dispute is a "deficiency in service" or an "unfair trade practice" claim, the forum has to decide whether the charge was reasonable; in the absence of a statutory price-list, it reaches for a benchmark, and the CGHS schedule is the schedule that exists. The second move is the IRDAI (Health Insurance) Regulations, 2016 standardisation of "reasonable and customary charges" — which the insurance ombudsman and the consumer forums interpret with reference to comparable schedules, including the CGHS schedule. The third move is the high-court and Supreme-Court writ jurisdiction — where, in the absence of regulation, the courts have themselves anchored on the CGHS rate as a starting point for "reasonableness".

The CGHS-rate doctrine has been articulated, with variations, in a line of high-court orders. The Delhi High Court in Siddharth Dalmia v Union of India, W.P.(C) 1031/2019 — a writ challenge to unchecked private-hospital billing — directed the Centre to constitute a committee to consider standardised hospital charges and to operationalise Section 12 of the Clinical Establishments Act, 2010 in this regard. The Madras High Court in S Subramaniam v Director of Health Services recognised the CGHS schedule as a working benchmark in the context of a complaint against private-hospital billing for treatment that should have been reimbursed under a state-government employee scheme. The orders are not a uniform tariff — different benches have read the schedule with different qualifications — but the consolidated direction has been clear: where a patient alleges overbilling, the CGHS rate is the schedule the court will read against the hospital's invoice.

NABH and non-NABH rate tiers

The NABH/non-NABH split inside the CGHS schedule is doctrinally important because it explains how a court can apply a rate-comparison without flattening every hospital into a single rate. Accreditation by the National Accreditation Board for Hospitals and Healthcare Providers — a constituent board of the Quality Council of India — is a voluntary process under which a hospital is audited against published standards on infrastructure, infection control, patient safety, staffing and quality systems. NABH accreditation drives the higher CGHS rate; non-accredited hospitals are reimbursed at a lower rate for the same procedure. The differential acknowledges that the cost-base of an accredited hospital is higher and that the consumer is, in working terms, paying for a quality-assurance overlay.

The differential matters in a billing dispute. A patient admitted to a NABH-accredited hospital cannot legitimately demand that the bill be reduced to the non-NABH rate; the bill is to be read against the NABH rate. A patient admitted to a non-NABH-accredited hospital cannot legitimately be charged the NABH rate. Consumer forums have applied this two-tier framework with some consistency. The further refinement — that some procedures are not on the CGHS schedule at all, that some are on the schedule at rates that have not been revised in line with inflation, that the CGHS rate sometimes lags the actual cost of a recently-introduced therapy — is one the forums acknowledge with case-by-case adjustments. The starting point, however, is the CGHS rate at the tier appropriate to the hospital, and the burden of justifying a substantial departure shifts to the hospital.

The COVID-19 turning point — Avishek Goenka v Union of India

The CGHS-rate doctrine moved from high-court orders into the Supreme Court's working jurisprudence during the COVID-19 second wave. Avishek Goenka v Union of India — a public-interest petition under Article 32 — sought directions to cap the charges levied by private hospitals for treatment of COVID-19 patients. The Court, in a series of orders during 2020, directed the Centre and the states to ensure that COVID-19 treatment in private hospitals was capped by reference to the CGHS-derived rates or the state-government scheme rates, whichever applied. The state governments, taking the direction forward, issued capped-rate notifications — Delhi, Maharashtra, Tamil Nadu and several others fixed maximum charges for ICU admission, ventilator support and oxygen-supported beds, with the rates anchored on the CGHS schedule plus a defined uplift to cover personal-protective-equipment and infection-control overheads.

The Avishek Goenka orders are doctrinally important for three reasons. First, they confirmed that the Supreme Court is willing to cap private-hospital charges in the public-health emergency context, with reference to the CGHS schedule and on the constitutional anchor of Article 21. Second, they confirmed that the state governments have the executive capacity to operationalise such a cap on short notice when ordered. Third, they made the CGHS schedule available as an articulated benchmark — the schedule had always been published, but the Goenka orders made it a constitutional reference point. The orders were emergency-context orders; they did not survive the emergency as a permanent price-cap. But the doctrinal pathway they opened — that the CGHS rate is a constitutional benchmark for reasonableness in a hospital-billing dispute — has continued to operate in the consumer-forum and writ jurisprudence.

The IRDAI Health Insurance Regulations, 2016 — the cashless layer

The Insurance Regulatory and Development Authority of India (Health Insurance) Regulations, 2016 — issued under the IRDAI Act, 1999 — supply the parallel regulatory framework for cashless hospitalisation. The Regulations standardised the definition of "hospital" (a clinical establishment registered under the Clinical Establishments Act, 2010 or its state equivalent, with prescribed minimum beds, qualified staff, operation theatre and round-the-clock medical officer presence); standardised the definition of "reasonable and customary charges" (charges that, in the locality where the medical service is provided, are comparable with the charges of similarly-situated providers for similar services); and standardised the cashless-claim procedure under which the insurer pays the hospital directly through a Third Party Administrator. The Regulations operationalise the bill-vetting that an insurer does at the cashless desk — line items are checked, non-allowed items (registration fees, surcharges, items personal to the patient) are deducted, charges in excess of the package rate are queried.

The IRDAI framework operates upstream of the consumer-forum stage. A patient who has health insurance and is admitted to a cashless-empanelled hospital will have the bill vetted by the TPA in the first instance; the TPA's allowed amount is paid by the insurer, the disallowed amount is the patient's exposure. A dispute about the disallowed amount runs through the insurer's grievance mechanism, the IRDAI Insurance Ombudsman under the Insurance Ombudsman Rules, 2017, and finally to the consumer forum or the high court. The CGHS-rate benchmark feeds back into this chain: the TPA's vetting is more defensible where the package rate corresponds to the CGHS rate at the appropriate tier; the consumer forum reviewing the insurer's repudiation will look at the same CGHS rate; the high court hearing an Article 226 challenge to a hospital's bill will read the IRDAI definition of "reasonable and customary charges" against the CGHS schedule.

The four dispute routes

A patient facing an overpriced hospital bill in India has four routes. The first is the consumer-forum route under the Consumer Protection Act, 2019. Medical services are "service" within Section 2(42) of the 2019 Act after Indian Medical Association v V P Shantha, (1995) 6 SCC 651, and overcharging — whether dressed as "deficiency in service" or as an "unfair trade practice" under Section 2(47) — falls within the jurisdiction of the District Commission for claims up to Rs 50 lakh, the State Commission for claims up to Rs 2 crore, and the National Commission above that. The summary procedure under Section 38 of the 2019 Act and the structured timelines under Section 35 make the consumer forum the default route. The companion procedural questions — forum architecture, limitation, appeal — are taken up in detail in our companion guide on the five forums for medical-services complaints.

The second is the IRDAI ombudsman route. Where the patient is insured and the dispute is with the insurer over the disallowed amount, the Insurance Ombudsman under the Insurance Ombudsman Rules, 2017 is the prescribed forum. The ombudsman's award, where accepted by the complainant, binds the insurer; the patient retains the right to approach the consumer forum if the award is unacceptable. The ombudsman applies the IRDAI (Health Insurance) Regulations, 2016 definition of "reasonable and customary charges" — and, in practice, reads it with reference to the CGHS schedule.

The third is the writ route under Article 226. A patient who alleges that a state-run or state-aided hospital has overcharged, or that a private hospital has overcharged in contravention of a state-government capped-rate notification (the post-Avishek Goenka COVID-19 caps were the principal example, but state-government notifications have since covered other procedures from time to time), can move the high court on the Article 21 health-rights anchor combined with the specific statutory or notification breach. The writ route is the appropriate route for structural relief — striking down or modifying a hospital's tariff schedule, directing the state to operationalise Section 12 of the Clinical Establishments Act, 2010 — as well as for individual bill-reduction in exceptional cases.

The fourth is the civil-suit route, which is residual. Where the consumer-forum limitation period has expired or the relief sought exceeds the consumer-forum's pecuniary jurisdiction, a regular suit under Section 9 of the Code of Civil Procedure, 1908 lies. The suit is slower, requires court-fees and full evidence, and is not the route of choice. It exists, however, as a backstop.

The bill-review framework — what to look for

The working framework a consumer forum or the IRDAI ombudsman applies to a hospital bill, drawn from the CGHS schedule and the IRDAI definitions, runs on five questions. First, is each line item a medically-indicated and contemporaneously-prescribed item, or is it duplicated, non-prescribed or a registration-type fee that the IRDAI Regulations carve out as non-payable? Second, where the procedure is on the CGHS schedule, is the charge within the tier-appropriate CGHS rate plus a defensible uplift for the locality and the inflation lag? Third, where the procedure is not on the CGHS schedule, is the charge within the range of charges levied by similarly-situated providers in the locality — the IRDAI "reasonable and customary" test? Fourth, are the consumables, implants and pharmaceuticals charged at MRP or at the pre-discount rate — and, for medicines, are they within the Drugs (Prices Control) Order ceilings where the molecule is a scheduled drug? Fifth, are there separate charges for items that should have been included in the procedure package — for example, separate charges for OT-room time on top of a package that already includes the surgical fee, or separate charges for nursing on top of a per-day room rate.

The Bolam-Jacob Mathew framework — the standard-of-care test laid down by McNair J in Bolam v Friern Hospital Management Committee, [1957] 1 WLR 582 and adopted for India by the three-judge Bench in Jacob Mathew v State of Punjab, (2005) 6 SCC 1, with the eleven working principles distilled in Kusum Sharma v Batra Hospital and Medical Research Centre, (2010) 3 SCC 480 — applies parallelly where the dispute is not only about price but about the medical indication itself. A hospital that performs procedures that were not medically indicated, or that prolongs an ICU stay without indication, is open to a "deficiency in service" claim that runs on both the standard-of-care axis and the billing axis. The consumer forums have, in working practice, allowed claimants to plead both — the un-indicated treatment and the overpriced bill — in the same complaint.

What the framework produces — and what it does not

The hospital-billing framework in India is, doctrinally, a benchmark-driven framework rather than a price-control framework. The CGHS schedule, the NABH/non-NABH tiers and the IRDAI "reasonable and customary" definition supply the benchmarks. The Consumer Protection Act, 2019, the IRDAI Insurance Ombudsman Rules, 2017, the Clinical Establishments Act, 2010 and Articles 21 and 226 of the Constitution supply the forums. The Siddharth Dalmia line of high-court orders and the Avishek Goenka Supreme Court orders supply the constitutional anchor. What the framework does not produce is a hospital-by-hospital tariff. A patient cannot read the CGHS schedule and walk into a Mumbai super-speciality demanding to be charged at the listed rate. The hospital is free to price; the patient is free to challenge the bill after the fact, on the benchmark.

The contested operational questions — whether the central government should operationalise Section 12 of the Clinical Establishments Act, 2010 to prescribe binding rates (the Siddharth Dalmia direction is still working its way through the executive machinery), whether the state-government rate caps issued during the COVID-19 emergency should be carried forward as permanent caps for the listed procedures, whether the CGHS schedule should be revised more frequently to keep up with treatment costs, and whether the IRDAI's "reasonable and customary" standard should be tightened to a published range — continue to work themselves out. The Insurance Regulatory and Development Authority's Bima Sugam framework and the recent National Health Authority moves to standardise package rates under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana have, in working terms, pushed in the direction of more standardisation; the regulatory choice between a binding price-list and a benchmark-driven framework has not yet been made.

The working takeaway for a researcher reading the cases is that the CGHS rate is not a statute and is not a tariff. It is a judicial benchmark — the schedule the consumer forums, the IRDAI ombudsman and the writ courts read against a hospital's bill when they are asked whether the bill is reasonable. Used as a benchmark, it does most of what a price-control regime would do: it shifts the evidential burden to the hospital to justify a substantial departure, it normalises insurer-vetting at the cashless desk, and it gives the patient a defensible starting figure. Used as a tariff, it would do less — the rate would lag the cost, the standardisation would flatten quality, and the benchmark would lose its calibrating force. The framework that has emerged is the framework of a benchmark, and the CGHS line is the line.