The Investment Information and Credit Rating (ICRA) agency expects the aggregate occupancy for its hospital industry sample set to remain healthy at 62-64 per cent in FY2023 and FY2024, backed by continued healthy demand for elective surgeries, recovery in medical tourism to pre-Covid levels; and continued market share gains for organised players.

The agency said that improving payor mix, growth in surgery volumes, price revisions by companies to offset cost inflation and faster throughput in discharges are expected to aid healthy growth of 8 to 10 per cent in average revenue per occupied bed (ARPOB) for the sample set in FY2023. Predicting that given the high base, ARPOB growth in FY2024 is estimated to moderate to 2 to 4 per cent. 

The agency estimates the revenue growth to be 15 to 17 per cent on year on year basis in FY2023, supported by strong occupancy and higher ARPOB. However, growth is expected to slightly moderate to 4 to 6 per cent in FY2024, given the high base and moderate growth in ARPOB. Despite high input cost inflation, improving operating leverage, supported by the increasing scale of operations and continued cost optimisation measures, are expected to support a healthy OPM of 20 to 22 per cent in FY2023 and FY2024, the credit agency said.  

ICRA maintains its Stable outlook on the Indian hospital industry, which the agency said is led by the rising incidence of non-communicable lifestyle diseases, growing per capita spending on healthcare and awareness levels, increasing penetration of health insurance and revival in medical tourism volumes.  

Commenting on the expansion in the hospital industry, Mythri Macherla, Assistant Vice President & Sector Head, ICRA said, “Covid-related uncertainties resulted in deferment of organic capex plans of industry players over the last two years. Supported by sustained improvement in demand, sample set players have announced a sizeable expansion with 7,000 beds and an upgradation and refurbishment plan for the next three to four years. 

Further Macherla said that some large players in the sector continue to scout for inorganic growth opportunities which could translate into incremental beds being added through mergers and acquisitions. With robust performance expected in FY2023 and FY2024, the debt metrics will remain strong going forward, despite incremental debt funding for supporting expansion plans.” 

While most of the capacities are expected to be set up in metro cities, some of the large players are also entering into operations and management contracts to geographically diversify their presence in unexplored markets on an asset-light basis, the investment information agency said.

The in-patient footfalls for ICRA’s sample set during H1 FY2023 remained high at 1.3x of pre-Covid levels backed by higher elective surgeries and revival in medical tourism coupled with changing patient preference towards large hospitals on the back of increasing insurance coverage. 

The agency said the average length of stay (ALS) in H1 FY2023 at 3.6 days reached pre-Covid levels and is expected to remain low, backed by faster throughput of patients, which is also supported by technological advancements.