The domestic healthcare industry is expected to expand 10% to 15% in the current year. Revenue will increase as occupancy rates will go up for existing hospitals and newly commissioned facilities will become operational, said Fitch.

As healthcare is a high-operating-leverage business, Ebitda margins are likely to improve with capacity utilisation, hospitals increasing their focus on high-margin tertiary and quaternary services. Expansion will continue to be driven by a persistent demand-supply gap and significant investments funded by private sources. However, credit profiles of many players would remain affected by their dependence on debt for capex and acquisition plans.

Increasing concentration of reputed players in metropolitan cities should see many established players chalking out plans to spread to tier-I and tier-II cities to increase their catchment area. However, a limited supply of doctors and trained medical staff would continue to restrict industry growth.

Demand for healthcare facilities in 2010 should arise from more frequent instances of lifestyle-related diseases, a greater awareness of healthcare issues, higher income levels, an improved health insurance business and an escalating theme of medical tourism. The higher demand and an existing under-supply situation would help healthcare providers to record robust revenue growth rates. As occupancy metrics improve for existing hospitals and in-patient traffic starts catching up in recently commissioned facilities. Cardiac, oncology and diabetes are expected to continue to remain frontrunners in terms of revenue from hospitalisation cases.

Average revenue per occupied bed (ARPOB) is likely to improve for established players with an increased focus on higher-margin tertiary and quaternary (specialised, highly technical and advanced levels of healthcare) in-patient procedures. Companies providing hospital management and consultation services will also benefit as smaller players try to streamline their processes to enhance gains from the booming market. With a considerably high portion of healthcare providers’ costs being of a fixed nature, more revenue will directly translate into enhanced Ebitda margins and improved cash flow from operations.

Indian healthcare infrastructure lags the world average in terms of the number of beds (1x) or doctors and nurses (2x) per thousand of population.