Editorial: Hospital-ity

Jan 03 2014, 03:35 IST
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SummaryEfficient low-budget hospitals are critical

Though government-created hospital care is obviously the lowest-cost for patients, between 2002 and 2010, it has been the private sector that has created over 70% of the extra bed capacity in the country. Add to this a McKinsey estimate that hospitalisation levels in India will rise from 4.8 per 100 people to 6.5 people by 2022, and you’re talking of a fairly significant jump in healthcare costs in the country—it’s ironic that while the government remains focused on keeping costs of medicines even lower than they already are, it is hospitalisation costs that are skyrocketing. And not surprisingly, given the investment for setting up these hospitals is estimated at around $70 billion.

This is where there’s some good news, as FE reported on Thursday. While large private hospitals are growing at a fast pace—Apollo Hospitals’ turnover rose from R2,350 crore in FY11 to R3,350 crore in FY13 and Fortis Hospitals from R1,500 crore to R4,243 crore—smaller hospitals are growing equally fast. Narayana Hrudayalaya, for instance, has seen its turnover rise from R475 crore to R830 crore in the same period and Manipal Health from R310 crore to R690 crore. While that looks minuscule in comparison to the big chains, a more relevant comparison is that of hospital beds—while Apollo leads at 8,420 beds across 51 hospitals, Narayana Hrudayalaya is second at 6,380 beds across 17 hospitals. Manipal is behind Fortis’ 5,400 beds across 54 hospitals, but it isn’t that far behind since it has 5,000 beds across 15 hospitals.

What is more important, the revenue models of the hospitals are very different. While the top hospitals focus on cutting-edge surgery, the Hrudayalaya/Manipal models are more budget-oriented—while the revenue-per-bed was R79 lakh for Fortis in FY13, it was R13 lakh for Hrudayalaya. As a JP Morgan research note points out, a low-cost hospital bed can cost R25 lakh in tier-2 and tier-3 cities as compared to the industry average of R35-60 lakh. That’s good news for middle-income India.

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