Operating profitability of hospital firms is also expected to improve to 16 pc
Operating profitability of hospital firms is also expected to improve to 16 pc

Revenue growth of hospitals seen up 14 to 15 pc: Crisil

ANI | Updated: Dec 23, 2019 16:49 IST

Mumbai (Maharashtra) [India], Dec 23 (ANI): Revenue and profitability of India's hospital sector should continue to improve between fiscals 2020 and 2021, sustaining the recovery witnessed last fiscal, global analytics company Crisil said on Monday.

The improvement in demand will be driven by enhanced coverage under Ayushman Bharat and deeper penetration of hospitals into tier two cities as well as alterations made to healthcare delivery models by hospital chains to align with regulatory changes.
Other structural factors like increasing lifestyle diseases and medical tourism will continue to aid demand, said Crisil.

With insurance coverage of Rs 5 lakh under the Ayushman Bharat scheme (up from Rs 1 lakh to 3 lakh under various government schemes), preference for private hospitals (account for 70 per cent of sector's revenues by value) is rising.
Since the launch of the scheme in September 2018, high-value claims of Rs 30,000 and above have accounted for 8 per cent of total claims and 75 to 80 per cent of these treatments were undertaken by private hospitals.
Increase in treatment package rates under Ayushman Bharat scheme can ensure better participation by even larger private hospitals who have not enrolled in the scheme, further aiding revenue growth.

Further, Crisil's study covering 41 leading domestic hospital firms (revenues Rs 32,000 crore) shows that the bed additions in tier two cities will be higher in future, resulting in better materialisation of latent demand and adoption of Ayushman Bharat schemes.
"CRISIL expects 60 to 70 per cent of bed additions to come up in tier two locations in the next two to three fiscals. Currently, healthcare facilities are clustered around tier one cities such as Chennai, New Delhi, Bengaluru, Kolkata and Mumbai," said Senior Director Anuj Sethi.

Even as revenue growth is set to increase by 300 to 400 basis points to 14 to 15 per cent over fiscals 2020 and 2021, operating profitability of hospital firms is also expected to improve to 16 per cent over this period.
This will be supported by a rise in bed occupancy rates to 75 per cent from 60 to 65 per cent, automation and optimisation of clinical procedures, efficient sourcing, and continuing recalibration of pricing of services.

A series of regulatory events in fiscals 2017 and 2018 had impacted revenue growth and profitability of private hospitals. While demonetisation and the ban on large cash transactions impacted occupancy, implementation of the Goods and Services Tax, price cap on medical implants, and increase in minimum wages for nurses and staff moderated profitability.