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| Unkindest cut for Indian hospitals |
| Praveen Bose / Chennai/ Bangalore May 22, 2009, 00:19 IST |
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The economic slowdown has had a telling impact on hospital occupancy rates, especially for higher-end rooms. Many of these rooms that often remained full, have been going empty during the last few months. While there are many reasons for these, it is the change in corporate spending patterns on healthcare support for employees and their family members that has led to the situation.
According to R Basil, CEO, Manipal Health Systems, “There has been an impact on expenditure by firms, which in turn has impacted hospitals in general. But, things are starting to pick up, though.”
Corporates have been renegotiating with insurance firms on premia they need to pay for their staff and firms are also cutting down on coverage for the extended families of staff.
In many firms, employees have comprehensive health insurance coverage. Many are even negotiating policies that cover only non-emergency cases and come with caps of Rs 1 lakh or so. Patients are opting for lower standards. The revenues of the healthcare industry could be hit about 10 per cent, said Dr Umapathy Panayala, CEO, Apollo Hospitals — Bangalore.
The healthcare industry, which was supposed to be insulated from the economic slowdown, is now feeling the heat. Hospitals have taken several steps to cope with the slowdown through resource utilisation by organisational restructuring and cost-cutting strategies, including cutting down on expenses like branding.
Measures to improve the bottomline through operational efficiency, include increasing multi-tasking, going slow on recruitments with the exception of extremely important positions, cutting down on new projects and expansion plans and strengthening existing operations.
Many of the newer hospitals are in the process of streamlining existing operations. While there are no major salary or job cuts happening, most of the new hospitals have suspended recruitments and cut down on bonuses and increments. They are now laying stress on multi-tasking.
Hospitals are also focussing more on spending on sales-related activities, re-engineering existing service line, and aggressive one-to-one marketing with corporate, government and semi-government organisations. A majority of planned surgeries has been postponed by patients. Hospitals are expected to get hit on the revenue front in the coming months by approximately 10-15 per cent. For individually managed small hospitals and nursing homes this percentage may go up to 20-25 per cent, say sources.
“Big corporate chains and newer players are now focussing more on cost reduction strategies and maintaining capex. Most hospitals have slowed down expansion plans due to liquidity crunch and non-availability of funds. Many of the newer hospitals are struggling to manage the show and sustain themselves,” said Prateek Jain, industry analyst, Healthcare Delivery Practice and Healthcare IT - South Asia and Middle East, Frost & Sullivan.
Meanwhile, some hospitals claim be partly insulated through their outward-looking strategies. “Wockhardt has been aggressively promoting itself. The fall in demand from domestic patients has been compensated by international patients,” said Vishal Bali, CEO, Wockhardt Hospitals.
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