Private hospitals to clock 10-11% revenue growth in FY23, FY24: Report

Revenue of private hospitals will grow 10-11 per cent in financial year 2022-23 and 2023-24, supported by increasing domestic demand and pick-up in medical tourism, says a report.

According to the Crisil Ratings report, revenue of private hospitals will grow on the back of healthy bed occupancy and sustenance of high average revenue per occupied bed (ARPOB).

In FY22, private hospitals had reported an all-time high operating profitability of 19 per cent due to a surge in treatment during the second wave of the Covid-19 pandemic, which also pushed up occupancy levels, and, later, pent-up demand for elective surgeries, it said.

 

"Growing health awareness, especially after Covid-19, leading to increase in domestic demand together with recovery in medical tourism, will ensure bed occupancy being maintained at almost similar levels of 60 per cent (past five fiscals average) even as bed addition continues," Crisil Ratings Senior Director Anuj Sethi said.

Sethi further noted that occupancy dipped only once during this period to 53 per cent due to lockdown enforced during the first phase of the pandemic.

Healthy cash generation, leading to limited reliance on external borrowing to fund higher capex (both greenfield and brownfield) will in turn help private hospitals maintain adequate debt protection metrics and keep credit risk profiles stable, Crisil Ratings added.

Further, rising insurance coverage will make quality treatment more accessible, and support demand as well, he said adding that ARPOB which grew 20 per cent in FY22, will continue to register modest growth, supporting revenues.

The report further said private hospitals are seeing a gradual return of medical tourism - accounting for 10-12 per cent of revenue pre-pandemic - that got affected considerably during the pandemic, amid travel restrictions.

Lower cost of treatments, modern facilities with well-trained personnel, and increasing air-connectivity are expected to restore revenue from medical tourism to pre-pandemic levels. This will further support occupancy levels despite aggressive bed additions, Crisil Ratings noted.

However, the report noted any resurgence of Covid-19 or intense viral cases that triggers lockdown and restricts travel, or any regulatory intervention that impedes the performance of private hospitals, will bear watching in the road ahead.