Corporate hospitals expect double-digit revenue growth in FY22: Icra

Blended occupancy of Covid and non-Covid patients was 64.2% in Q1FY22 as against 36.9% in Q1FY21 and 58.8% in Q4FY21. Therefore, the growth is not just on a low base, but also sequential

The corporate hospital sector, which witnessed a spike in occupancies during the first quarter of the fiscal year thanks to Covid-19 cases, is now banking on elective procedures to achieve a double digit revenue growth in FY22, showed a latest study by credit rating agency Icra.  

What is interesting is that the sector expects to have better operating margins in FY22 compared to FY20.

The blended occupancy level of Covid and non-Covid patients in the Icra sample set was 64.2 per cent in Q1FY22 as against 36.9 per cent in Q1FY21 and 58.8 per cent in Q4FY21. Therefore, the growth is not just on a low base, but also sequential.

The Icra sample set comprises the listed corporate hospitals including Apollo Hospitals Enterprise Limited, Fortis Healthcare Limited, Narayana Hrudayalaya Limited, Aster DM Healthcare Limited (India business only), Max Healthcare Institute Limited, Healthcare Global Enterprises Limited, and Shalby Limited.

During the first quarter, 25-30 per cent of their revenues and footfalls came from Covid19 treatments and vaccination drives. However, industry insiders point out that vaccination revenue will not be a major revenue stream going forward.

With demand for private vaccination falling, as well as a cap on service charges that hospitals can charge, most hospitals do not see this as a major revenue stream.  

This is even as during the second wave (which coincided with the first quarter), one saw strong Covid19 revenues driven by complicated nature of treatment offered.

“While the YoY revenue growth of 129 per cent in Q1 FY2022 for the Icra sample set was optically high, aided by the low base, the QoQ revenue growth was also healthy at 15 per cent. However, higher share of revenues from Covid treatment resulted in a 4.2 per cent QoQ 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 YoY growth of 8.7 per cent in ARPOB,” the ICRA report revealed.

The operating margins for the Icra sample set came in at 19.3 per cent as against 9.3 per cent in the corresponding quarter previous fiscal and 18.4 per cent in the quarter before.

This was despite absence of revenues from international patients.

“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,” Mythri Macherla, Assistant Vice President and Sector Head, Icra said.