Hospital industry revenue growth likely to moderate in FY23: Report

Domestic hospital industry revenue growth is likely to moderate in FY23 due to the large base in the previous fiscal, although income and profit margins are expected to remain healthy ahead, according to rating agency Icra.

While occupancy is expected to slightly moderate in FY23 given the ongoing capacity addition, average revenue per occupied bed (ARPOB) is expected to expand steadily going forward, it said in a statement.

The rating agency said the performance of its sample set of hospital companies remained strong in Q3 FY22 on the back of continued momentum of elective procedures and strong ARPOB.

"With most patients reporting mild infections on account of Omicron, pent-up demand and market share gains for organised players in the high-end/complex surgery space supported healthy occupancy levels for the sample set," it said, adding hospitals also witnessed an additional uptick in patient visits at metro centres on the back of a surge in international patients.

Commenting on the outlook, Icra Assistant Vice President and Sector Head Mythri Macherla said, "Given the strong demand for healthcare and continued patient preference for branded hospital chains, revenues and profit margins are expected to remain healthy for the industry going forward as well. However, given the large base of FY2022, revenue growth of the sample set is likely to moderate to a certain extent in FY2023".

She further said benefits from improving scale and strong ARPOB levels, cost-optimisation efforts, and ancillary revenues from COVID-19 have supported margin improvement for industry players in FY2022.

Given the favourable demand outlook for the industry, Icra said several large hospital players have recently announced sizeable capacity expansion plans across the country. Industry players had slowed down their greenfield expansions during the last two three years as the focus was on improving returns on existing facilities.

Major cities or regions that will witness bed additions over the next few years include Delhi-NCR, Mumbai, Bangalore, and Chennai, among others.

With the threat from the pandemic seemingly over, players are now looking at adding bed capacity within their existing infrastructure, while some players have announced new greenfield projects, it added.