Hospital sector could grow at 18% when Covid ends: Manipal Hospitals CEO

The Omicron situation is still evolving but the early signs are ominous, says Jose

After the crippling second wave, the hospital sector bounced back in September as patients returned for non-covid care. Dilip Jose, MD and CEO of Manipal Hospitals, the country’s second largest hospital network, speaks to Sohini Das on the outlook for 2022.

How bad was 2021?

The second wave was a very testing period. Apart from the severe strain on infrastructure, disruptions in the supply chain even for vital items constrained cash flows. Even more challenging were the demands on our frontline clinical teams.

But there was a big positive. While hospitals took the lead, the entire healthcare ecosystem, including pharma, medtech and insurance companies, collaborated to put up an agile response. Hopefully, the momentum will sustain and as a country we will be better placed to tackle any other pandemic, should that occur. 

What does Omicron presage for 2022?

The Omicron situation is still evolving but the early signs are ominous. Although the caseload is low at the moment, the rate of growth is alarming and experts are warning of a third wave, possibly bigger than the second.

While we saw a swift recovery from September onwards, with non-Covid care at hospitals reaching pre-pandemic levels, if the third wave turns out to be big, this will be a setback to the sector’s recovery. A more realistic view of 2022 in terms of revenues and margins may only emerge after Q1 of the year.

How is the pandemic affecting expansion plans?

It is true that there was a pause, especially in 2020, to assess the situation before committing to further investments. However, as more clarity emerged on the pandemic and treatment options and vaccines became available, there was confidence that although there might be an impact for two or three years, the fundamentals are likely to be intact.

The drivers of growth of hospitals are: a shift in demographics to an aging population, a sharp increase in non-communicable or lifestyle diseases (as opposed to infectious), an increase in access as well as affordability, and a rising awareness of health issues.

These are sustainable drivers and agnostic to the impact of pandemic. Therefore, once covid recedes to an endemic stage, the healthcare sector should resume its past growth trajectory, i.e., an annual growth of about 15-18 per cent.  

Consequently, investment plans need not be postponed since such decisions are always made on long-term considerations. Hospitals will need to invest in tapping into the expected rise in demand by creating additional capacities, especially in under-served parts of the country.

Do you think 2022 will be driven by covid or non-covid business?

We saw from September 2021, a significant revival of non-covid patient footfalls. While a part of that might be on account of a pent-up demand in certain specialties, the consistency of it till early December indicated that if a third wave does not become a big concern, then next year will see hospitals mostly treating non-covid patients. However, given the rapid rise of cases, this situation may have changed. If it is a shorter wave, albeit with a high peak, we could still see a quick reversal of the proportions and see non-covid care leading again from the second quarter.

At the peak of the second wave, 85 per cent of all our in-patients were on account of covid. This fell to five per cent in the last four months. Once the virus becomes endemic, this might end up as the trend that we see for the next few years as the population adjusts to it as yet another seasonal illness.

Medical tourism took a hit during the pandemic. What is the outlook for 2022? 

The last year saw only a fraction of overseas patients, as compared to 2019.  This had just begun to reverse in October and it seemed a normal recovery was imminent once international travel opened up. Now, with fresh restrictions on travel, we may have been pushed back by another four to six months. A more structural concern is whether the countries that viewed India as a destination for medical value travel will opt for other nations that might now be open to such traffic. While India’s price advantage is compelling, urgency of treatment and the long wait could impact their choice.

 Will there be more consolidation in the hospital industry? 

The financial and operating stress that many standalone hospitals and even small chains faced in the last two years have resulted in several taking a fresh look at their future. There is an emerging thought that quite a few may opt to join hands with larger groups to de-risk their own operations. This will provide an opportunity for consolidation as well as growth.