Inside the cost-plus-arbitrary-multiplier model that drives most Indian private hospital pricing.

Most patients assume hospital prices are set by some combination of cost, quality, and market rates. The reality is messier.

The actual pricing formula

Through interviews with finance staff at 14 private hospitals, a pattern emerged: cost of consumables × 2.8 to 4.2 + fixed OT charge + room category + doctor fee. The multiplier is, in essence, arbitrary — set by the CFO based on competitive positioning and historical margin targets.

There is no clinical justification for a 3.5x consumables multiplier. There is only a financial one.

What this means for you

Bargaining works because the multiplier is not protected by science. The first quote is always negotiable.