Private hospitals functioning in Jammu and Kashmir have often been accused of flouting government norms in the past. Amid these complaints, the suspension of Shifa Medical Centre and Florence Hospital in Srinagar from the empanelment list of the State Health Agency (SHA) is a step towards maintaining transparency and accountability in public healthcare schemes. These actions, coupled with financial penalties, point towards the importance of adhering to the guidelines of the National Health Authority (NHA) under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) and its SEHAT extension. The SHA acted on multiple complaints regarding violations at these hospitals. Shifa Medical Centre faced allegations of forcing patients to bear additional expenses and denying treatment, which contradicts the principles of the scheme. Despite being issued several show-cause notices, the hospital failed to provide timely responses, demonstrating a lack of cooperation. Florence Hospital faced similar charges, and both institutions were found to have collected unauthorized payments from beneficiaries. The penalties—over Rs 26 lakh for Shifa Medical Centre and nearly Rs 3 lakh for Florence Hospital—serve as a response to these violations. The decision to suspend the hospitals for six months reflects a firm approach to enforcing accountability. However, the SHA also allowed these facilities to continue providing dialysis treatment to existing patients under the AB PM-JAY/SEHAT schemes. This decision prioritizes patient welfare, ensuring that those in need of regular dialysis are not left without essential care. This development also highlights challenges in implementing large-scale health insurance schemes. While AB PM-JAY aims to offer free healthcare to economically weaker sections, incidents of malpractice can erode trust in the system. Such cases underline the need for stronger oversight mechanisms, including regular inspections, audits, and effective grievance redressal systems to ensure compliance and deter unethical practices. The role of private hospitals in public health initiatives is crucial, but it must align with the values of equity and fairness. Empaneled hospitals have a responsibility to provide quality care without exploiting beneficiaries. The penalties imposed on these two institutions send a clear message about the consequences of disregarding these responsibilities. This case also raises questions about the broader accountability framework within public health schemes. Ensuring ethical practices among healthcare providers is essential for maintaining the credibility of these initiatives. The SHA’s actions to protect the interests of patients while reinforcing the need for healthcare providers to act within the framework of established guidelines is a step in the right direction. As AB PM-JAY and SEHAT expand their reach, the need for vigilance and a patient-focused approach becomes even more evident. Ensuring that the objectives of these schemes are met requires a balance between enforcement, monitoring and a commitment to ethical healthcare delivery. This incident highlights the importance of safeguarding the integrity of public health systems. It is hoped that other private hospitals take a cue and adhere to the guidelines and rules set by the government. It is also hoped that the government takes action against other private hospitals found flouting rules.