Large hospitals recover from Covid blow, small ones struggle

The revival, which started in mid-February this year, continued in the first quarter of FY23. Large hospitals are reporting improved occupancy levels as patients are returning for surgical operations and international medical tourism is opening up.

covid 19 private hospitals
Hospital revenues took a big hit in the last two years with a strict cap on Covid treatment charges and non-Covid patients mostly staying away. (Representational image)

Large private hospital chains across the country are on the road to recovery after Covid-19. The revival, which started in mid-February this year, continued in the first quarter of FY23. Large hospitals are reporting improved occupancy levels as patients are returning for surgical operations and international medical tourism is opening up.

However, smaller hospitals and nursing homes are struggling to recover from the pandemic pain, with many looking for buyers. Dilip Jose, MD and CEO, Manipal Hospitals, said these hospitals faced severe stress as revenues as well as patient volumes fell and they were forced to bear the high fixed costs for medical personnel, maintenance, payment to suppliers and people migrating from smaller nursing homes to larger hospitals, Jose said. “Many standalone hospitals are looking to be part of a larger network. Hospitals are coming to the market for sale,” he added. Manipal acquired Columbia Asia Hospital and Vikram Hospital during the pandemic.

Hospital revenues took a big hit in the last two years with a strict cap on Covid treatment charges and non-Covid patients mostly staying away. This impacted the hospitals’ average revenue per occupied bed (ARPOB). With occupancy levels now going up, the ARPOB is also on the rise.

Apollo Hospitals, the country’s largest private healthcare provider, reported 63% occupancy in FY22, nearing the pre-Covid level of 67%. In FY21, the bed occupancy had dropped to 55%. ARPOB has recovered from 40,214 in FY21 to45,327 in FY22. Apollo’s revenues rose by 38.9% year-on-year in FY22 to 14,662 crore, while PAT was up 602% to1,055 crore.

Santosh Marathe, regional CEO, Apollo Hospitals, Navi Mumbai, said revenues dropped during the pandemic as there was a gap between the pricing cap and the actual cost of providing care. Barring oncology and gynecology, revenue from routine work fell significantly, he said. Patients who come from peripheral areas, which account for 35-40% of volumes, could not reach the hospitals.

However, non-Covid patient occupancy and surgical volumes have now picked up, Marathe said. With international travel also reviving, patients from West Asia, Africa and nearby island countries are also coming back. Medical tourism contributed around 8-10% of occupancy, he added.

Jose of Manipal Hospitals, a 27-hospital chain with 7,600 beds, said it has returned to the pre-pandemic levels. “At Manipal Hospitals, we have seen a return to pre-Covid levels as far as surgeries are concerned. There has been a gradual increase in elective admissions after the Delta wave receded and the uptrend has continued till now across all specialties. Once the international medical travel reaches normalcy, we should see further growth in elective procedures,” Jose said. Manipal has seen international patients return and reach 85-90% levels.

Alok Roy, chairman of Medica Group of Hospitals, a hospital chain in eastern India, said prior to Covid, Medica Superspecialty Hospital saw bed occupancy falling from 80% to 30% in the first three months of 2020. It returned to 100% by the end of 2021 but again dropped to 50% in February 2022. Occupancy has since rebounded to 80%. Medica suffered significant losses because of a drop in the number of both elective and emergency cases. There was also a noticeable drop in cash and insurance patients, who provide most of the liquidity and revenue for hospitals, Roy said. Medica is now seeing a significant increase in elective surgeries and is now 20% higher than pre-Covid levels, he added.

Fortis Healthcare reached 65% occupancy from 63% in March 2022 and 54% in January 2022. The Q1FY23 occupancy was expected to be at 70%. Medical tourism has recovered to around 70-80% of pre-Covid levels, it said.

Narayana Health also reported a strong comeback and surpassed the pre-Covid highs. During March, it conducted 754 cardiac surgeries in Bengaluru alone. This was the highest-ever monthly volume achieved by the company. Narayana reported its highest-ever PAT of 342 crore in FY22 on revenues of3,701 crore, against a loss of 14.3 crore in FY21 on revenues of2,582 crore.

Max Healthcare has seen occupancy bounce back sharply. It was at 75% in FY22 after falling to 65% in FY21. International medical tourism in March 2022 was at 90% of the pre-Covid levels. ARPOB has grown to 59,000 in FY22 compared with50,000 in FY21.

There are a few small hospitals which have witnessed a rebound. Pune’s 350-bed Jehangir Hospital was among the first to be converted into a Covid hospital in March 2020, admitting close to 220 patients each day. The pressure on the critical care infrastructure was overwhelming, CEO Vinod Sawantwadkar said. Barring a few categories, patients had stopped coming to the hospital and surgeries were down to 30-40% of capacity. Revenues, too, fell by 40-50%. However, tertiary care is now at 110%, while surgery is back to 95% of pre-Covid levels and margins have been restored, Sawantwadkar said.

Cancer care specialist Healthcare Global said they are back on the growth trajectory. The full resumption of flights has led to international business returning to pre-Covid levels. Total occupancy in Q4FY22 was at 59.9% versus 54% during the last year same quarter. ARPOB grew by 11.8% to Rs 35,543. While several hospitals are on the recovery path, they remain in a wait-and-watch mode for the rest of the year, with a clearer picture expected in Q2FY23.

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