Express Healthcare
Home  »  News  »  Higher occupancy to drive recovery for private hospitals

Higher occupancy to drive recovery for private hospitals

0 97
Read Article

Operating margin to recoup to 13-14 per cent; credit quality stable 

Higher occupancy due to a surge in COVID-19 treatments will help private hospitals bounce back with 15-17 per cent growth in revenue this fiscal, a shade above what they attained in the pre-pandemic year of fiscal 2020, according to a statement released by CRISIL. 

The statement also said that this will aid recovery of operating margin by 100-200 basis points (bps) to 13-14 per cent, but still fall short of the fiscal 2020 mark due to a higher proportion of COVID-19 treatments, which are less profitable. 

That said, recovery in operating margins will render stability to credit profiles, even as capital spending is enhanced after the curtailment last year, an analysis of 40 hospital companies (including 36 rated by CRISIL Ratings), with combined revenue of about Rs 32,000 crore, shows, it added.

“To recall, the performance of hospitals was severely impacted in the first quarter of the last fiscal due to postponement of elective surgeries and preventive healthcare (which together account for ~60 per cent of revenue), in addition to travel restrictions and curbs on COVID-19 treatment by private hospitals. The sector clawed back in the second quarter and had recovered completely by the third as elective surgeries and preventive healthcare treatment increased and COVID-19 treatments, too, were permitted for most private hospitals. This helped limit the overall revenue decline to 12 per cent for the full year,” mentioned the statement.

With regard to this, Manish Gupta, Senior Director, CRISIL Ratings, said, “While the second wave lashed again in April, the first quarter this fiscal will be sharply better on-year, with occupancy of ~75 per cent, almost double on-year. This will be largely on account of a surge in COVID-19 treatments more than offsetting the deferral of elective surgeries and outpatient footfalls. As the second wave recedes in the second quarter, we expect pent-up demand for non-COVID-19 treatments to rebound and support occupancies. Overall, higher occupancies of 65-70 per cent this fiscal versus ~58 per cent in the last, would drive rebound in revenue growth.”

The statement further said that higher occupancy should, in turn, drive recovery in operating margin as well, but remain short of the pre-pandemic level of 15 per cent. Much of the revenue increase would be on account of COVID-19 beds, which can realise only 50-60 per cent of average revenue per bed for non-COVID-19 treatments, as state governments cap the charges. Additionally, hospitals have to pay higher incentives to para-medical and support staff amid the second wave of the pandemic. This will weigh on margins. 

Rajeswari Karthigeyan, Associate Director, CRISIL Ratings, said, “Recovery in revenue and margins will nevertheless spur hospitals to resurrect capex, which had almost halved on-year last fiscal. Much of the capex this fiscal is expected to be brownfield in nature, towards bed addition and related infrastructure including oxygen plants, and funded significantly through accruals. The Rs 50,000 crore-liquidity window offered by the RBI to augment healthcare infrastructure is expected to help in this regard – the three-year loan tenure will suit brownfield expansions and low-cost funding will particularly help mid- and small-sized hospitals.”

Leave A Reply

Your email address will not be published.

Attend an exclusive webinar to know more about biomarkers in diagnosis & therapy management of heart failure.
Register Now
close-image
 Introducing Smart Autoinjector: Changing the paradigm of usability, cost & size
Know More?
close-image
Are you looking for ICP-MS which can increase productivity and remove time trap from your analysis?
Know More
close-image
The Radiology Conclave : Embrace the new normal
Register Now
close-image