Following the spread of Covid-19 pandemic, the revenues of healthcare entities is likely to fall by 15-20 per cent in FY21, rating agency Icra said on Wednesday.
The entities in healthcare sector are expected to report an over 50 per cent drop in revenues in April and May with a gradual pick-up thereafter, the agency said in a statement.
The monthly revenue run rate is expected to reach the pre-Covid-19 levels in the second half of FY21, subject to the return to normalcy and revival of medical tourism, it added.
However, the performance in H2FY2021 will not be adequate to compensate for the drop in H1FY2021, leading to a full-year drop of 15-20 per cent, Icra said.
Similarly, the occupancies that have currently dropped to 25-30 per cent are likely to inch up gradually as people stay cautious in visiting hospitals and the hospitals themselves remain selective while taking in more patients, it added.
"The performance has taken a hit due to the impact of the COVID-19 pandemic. The short-term outlook for the sector has turned negative due to the sharp fall in volumes - both in the OPD and the IPD," Icra Assistant VP Kapil Banga said.
Due to the steep fall in revenues, high fixed costs and the increase in expenses, the hospitals are likely to report a first-quarter EBITDA loss of 20 per cent, he added.
The profitability margin is likely to be hit hard because of both the revenue and cost pressures, Icra said.
While the revenues are down, the costs have gone up due to higher outlay towards the personal protective equipment (PPE), additional testing requirement and staff transportation costs in the absence of a public transport system, it added.
About the Ayushman Bharat - Pradhan Mantri Jan Aarogya Yojna (AB-PMJAY), Icra said that though it was announced in February 2018 and was formally launched in September 2018, the scheme faces several challenges.
The scheme, however, holds promise to provide much-needed healthcare coverage to the marginalised sections of the society given the low insurance penetration in the country, the large out-of-pocket expenses on healthcare and low public sector spend on healthcare, it added.
The introduction of the AB-PMJAY is likely to improve the occupancies at implementing hospitals, albeit with lower profit margins, Icra said.
On the outlook for the sector, Banga said: "On the back of an expected ramp-up in occupancies, the profitability is likely to improve in the rest of the year, subject to lifting of the restrictions on the movement of people and on international travel".
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