Will private hospitals’ capex spur medical inflation?
As the number of private sector beds increase, and smaller players are nudged out of the market, will it spur medical inflation? Especially since these hospitals will continue to be wary of serving AB- PMJAY beneficiaries until pending dues worth more than Rs 12000 crores are cleared?
A Right To Information (RTI) query to the Ministry of Health & Family Welfare on the dues payable to empaneled hospitals who have given free treatment to patients under Ayushman Bharat Yojana received a reply dated February 28, that dues of Rs 1,21,61,45,63,617 (approximately Rs 12,161.45 crores) are pending. Is it any wonder that quite a few hospitals are turning away patients under the scheme, until the ministry settles pending dues?
On February 10, 2023, in reply to a Lok Sabha query on the same topic, the health ministry stated that as of February 2, 2023, the overall percentage of the total claims paid against total claims submitted under the Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) scheme is approximately 77 per cent while the percentage of claims paid to private hospitals is 86 per cent.
The query also asked for the measures taken by the Government to deal with such cases. The first of four initiatives listed that were taken to streamline the payment mechanism under AB-PMJAY was close monitoring of claim payments via various monitoring dashboards developed to trace claims pendency, claim payment, turn-around time of claim payment, etc.
Secondly, the National Health Authority (NHA) launched a Green Channel Payment (GCP) wherein the provision to pay 50 per cent of the claim amount automatically at the time of claim submission was integrated into the NHA’s IT system. Thirdly, the NHA deployed e-RUPI vouchers to pay beneficiaries for upfront payment for drugs and diagnostics services under AB-PMJAY and lastly, the claims query workflow was optimised to avoid delay in claims settlement.
The fact that more than Rs 12000 crores of dues are still pending two years after these replies in Parliament, hints that these measures are still not working and are not enough to tackle the problem. These payment glitches do not bode well for private healthcare providers as well as the patients they are obliged to serve.
Meanwhile, fueled by private equity (PE) and initial public offerings (IPOs), private hospitals are on a massive capacity expansion. A Crisil Ratings analysis of 91 private hospitals, with a combined revenue of about ~Rs 64,000 crore last fiscal, shows that private hospitals in India are slated to increase their capacity by over ~4,000 beds next fiscal, at an investment of ~Rs 11,500 crore. This is in addition to an aggressive addition of around ~6,000 beds this fiscal. The bed addition in just these two fiscals will equal those added between fiscals 2020 and 2024.
Half of the new beds will come from greenfield expansions, about 40 per cent will comprise brownfield development, while the remaining 10 per cent will result from large players taking over under-construction hospitals and small and mid-sized hospitals. As the number of private sector beds increase, and smaller players are nudged out of the market, will it spur medical inflation? Especially since these hospitals will continue to be wary of serving AB-PMJAY beneficiaries?
One spoiler for the sector is the dip in medical value travel (MVT) from Bangladesh, given the diplomatic ten- sions between India and our eastern neighbour. A BNP Paribas India Healthcare Services Report dated February 2025 details that the country made up around 70 per cent of India’s MVT. The report quotes monthly data published by the Ministry of Tourism, which states that India’s MVT declined by 43 per cent-59 per cent y-y in Nov/Dec 2024, reaching the lowest monthly level for the year. The analysts expect international patient revenue in 4QFY25 to be similar to the last quarter, based on the current trend of monthly data published by the Ministry of Tourism.
With the recent resumption of freight services between India and Bangladesh, the analysts believe there is a possibility that the Indian government could scale-up visa operations in a gradual manner. Thus MVT from Bangladesh could slowly pick up for national chains like Apollo Hospitals, Manipal Hospitals, Aster DM Healthcare and Fortis Healthcare. Aside from short term pain, this incident has been a wakeup call for such hospitals, to diversify their MVT reach to other countries.
While the healthcare sector copes with these business cycles, we highlight the inspirational thought leadership of women leaders in the healthcare sector. Express Healthcare’s Women’s Day special in the March edition features 14 letters from exceptional yet unsung women leaders with messages to inspire the next generation of women leaders in the sector. As long as we have these torch bearers, India’s healthcare sector is in good hands.
VIVEKA ROYCHOWDHURY, Editor
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