Business Today|August 09, 2020
Why Private Healthcare Is Key
Private hospitals are among the country’s top five employers
Constitute over 60 per cent of total beds (around 8.5-9 lakh) of the sector, 60 per cent of in-patient visits, 80 per cent of doctors
₹2.4 lakh crore Annual revenue estimated
₹31,000 crore Annual EBITDA
₹7,000 crore Annual profit after tax
On July 13, in a rare expression of solidarity, representatives of half-a-dozen Indian private health-care industry associations, at least a dozen heads of leading private hospitals and the Health Services Committee of industry body Ficci announced a virtual press conference. It got postponed at the last minute to July 15, only to get cancelled again, as the central topic of discussion was “sub judice.” The topic, which representatives of top-ranking private hospitals such as Apollo, Fortis, Hinduja, DM Healthcare and Columbia Asia wanted to discuss, was challenging due to the Covid-19 pandemic. The issue most central to this — price caps on Covid tests and treatments by central agencies, state governments and the General Insurance Council — is also being considered by courts.
Though the event got postponed, there is no relief in sight for private healthcare providers, even as the number of Covid-19 patients in India races past the 10 lakh mark. And ‘unsustainable price caps’ is just one of their problems.
“Across India, different states and cities are in various stages of lockdown. If we talk of price caps, prices are different in different states and that is a challenge,” says Ashutosh Raghuvanshi, Managing Director and CEO, Fortis Healthcare. He says 60-70 per cent cost of running a hospital is fixed and cannot be cut even when occupancies are low. Big or small, no hospital will find these prices sustainable, he says. “The caps don’t match the quality of care being given at our hospitals. Our supply chains, medical equipment and hospital systems have also been affected. Manpower is a challenge as for Covid, you need clinicians from critical care, pulmonology, respiratory care. Any hospital will have limited number of these specialists,” he says.
The pricing problem arises due to the huge difference in government rates and that charged by private hospitals. Delhi, on June 20, capped Covid treatment charges (for 60 per cent of total Covid bed capacity) at ₹18,000 per day for severely ill patients in intensive care units. The Covid management package announced by Max Healthcare for the same critical patient was ₹72,500 per day at that time. Similarly, Covid-19 RT-PCR test rates are capped at ₹2,400 in Delhi, as against the ₹4,500 charged by diagnostic labs.
With nine lakh beds, Indian private healthcare is a ₹2.4 lakh crore business, accounting for almost 70 per cent of secondary and tertiary care hospital admissions. It has been growing at 1617 per cent a year for the last five years. The lockdown, and the resultant drop in occupancy in April-June, have broken this growth trajectory. Industry estimates peg operating losses during the three lockdown months at ₹13,40022,000 crore. Price caps have not been the villain here, though. The main reason was absence of private players from fight against Covid-19 during initial months. The period also saw hardly any non-Covid patients in private hospitals due to fear of infection and logistical problems caused by the lockdown.
Just two examples will illustrate the problem. Bengaluru-based Narayana Health, which owns, manages and operates over 20 hospitals, reported an 11 per cent growth in operational revenue in first 11 months of FY20, but ended the year with 8.6 per cent growth as business shrank in March due to spread of Covid and countrywide lockdown. Fortis Healthcare Ltd, with 28 operational facilities, says its average bed occupancy level of 65-75 per cent fell to 29 per cent in April and 35 per cent in May.
To top this, ever changing regulations, guidelines and orders from central and state governments, court orders and price caps and treatment specifications are keeping them on their toes. There are also allegations of overcharging and violation of treatment norms. Then, some of the facilities are being taken over temporarily by governments for treating COVID patients. The net result is loss of revenue, apart from fear and uncertainty, not just among patients but also among private healthcare providers.
You can read up to 3 premium stories before you subscribe to Magzter GOLD
Log in, if you are already a subscriber
Get unlimited access to thousands of curated premium stories and 5,000+ magazines
READ THE ENTIRE ISSUE
August 09, 2020