Hospitals had double-digit revenue growth in second wave of COVID : Report

Most hospitals witnessed a spike in the COVID-19 related occupancies during Q1 FY22, in line with active cases in India that touched an all-time high in May 2021, as COVID cases were more than four times the first wave peak

  • Updated On Sep 1, 2021 at 05:48 PM IST
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Hospital sector witnessed a spike in COVID-19 occupancies during Q1 FY2022 in line with the active cases in India that touched an all-time high in May 2021, peaking at more than 4x the first wave peak. The overall occupancy levels were supported by longer average length of stay for COVID patients even as localised lockdowns resulted in a sequential decline in non-COVID occupancies to a certain extent, ICRA credit rating agency indicated.

The blended occupancy of both COVID and non-COVID patients for ICRA sample set stood higher at 64.2 percent in Q1 FY2022 against 36.9 percent in Q1 FY2021 and 58.8 percent in Q4 FY202. Most multi-speciality hospitals derived 25-30 percent of their Q1 FY2022 footfalls and revenues from COVID-19 treatments and vaccination drives.

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However, higher share of revenues from COVID treatments resulted in a 4.2 percent Q-o-Q contraction in the average revenue per occupied bed (ARPOB) in Q1 FY2022, even as complex nature of infections and higher proportion of patients requiring critical care treatment and oxygen support aided Y-o-Y growth 8.7% ARPOB.

Operating leverage benefits in addition to incremental revenues and margins from vaccination drives and COVID tests resulted in an improvement in OPM for ICRA sample set to 19.3 percent in Q1 FY2022 (against -9.3% in Q1 FY2021 and 18.4% in Q4 FY2021). This was despite absence of revenues from international patients.

The sample set includes Apollo Hospitals Enterprises, Fortis Healthcare, Narayana Hrudayalaya, Aster DM Healthcare (India business only), Max Healthcare Institute, Healthcare Global Enterprises, and Shalby Limited.

Talking about the trend noed in the report, Mythri Macherla, Assistant Vice President and Sector Head, ICRA, “While both in-patient (IPD) and out-patient (OPD) footfalls declined sequentially in Q1 FY2022 on account of COVID 2.0, footfalls were far higher than Q1 FY2021, wherein hospital operations were adversely impacted on account of the nationwide lockdown. Most hospitals have witnessed sequentially higher footfalls in July and August 2021 compared to Q1 FY2022 levels with resumption in elective surgeries and this is expected to support strong revenue growth momentum for FY2022 going forward."

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To assess the on-ground sentiments and understand the outlook for FY2022, ICRA conducted a survey of its rated hospital entities. Key findings suggest that with strong performance in Q1 FY2022 and expected benefits from pent-up demand for electives, respondents expect occupancies in FY2022 to be better than FY2020 levels and ARPOB to remain range-bound in FY2022 despite higher contribution from Covid. More than 2/3rd of the survey respondents expect double-digit growth in revenues in FY2022, and OPM to revive and be higher than FY2020 levels on the back of healthy improvement in occupancy levels.”

The net debt for ICRA sample set increased by Rs 350 crore as on June 30, 2021, compared to March 31, 2021 on account of advance payments for vaccine procurement and higher pharmacy stocking of Covid medicines. In terms of capex, many companies in the sector have gone slow on greenfield expansion in the last few years as the focus was on improving returns on existing facilities. Players are now looking at adding bed capacity within the existing infrastructure, and some of the larger players are actively scouting for inorganic growth opportunities.

  • Published On Sep 1, 2021 at 05:48 PM IST
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