Hospital sector performance significantly hit due to coronavirus pandemic: Icra

The coronavirus pandemic has significantly dented the performance of the hospital sector withoccupancy dropping to 25-30 per cent from the60-70 per cent in weeks preceding the virus outbreak,rating agency Icra said on Thursday.

"The revenues are expected to decline by over 50 per cent.The high operating leverage inherent in the hospital business, coupled with sharp drop in revenues, is expected to translate into losses for the players in Q1 of FY2021," it added.

The travel and visa restrictions have impacted the flow of international patients, the out-patient department visits have been significantly curtailed, elective procedures have been postponed, and in a majority of the private sector hospitals, the infrastructure reserved for COVID-19 patients remains under-utilised, Icra said in a statement.

The performance has taken a hit due to the impact of COVID-19. The short-term outlook for the sector has turned negative due to a sharp fall in volumes - both in the OPD and the IPD,Icra Assistant Vice PresidentKapil Banga said.

"However, we continue to maintain the stable outlook for the long term as we believe the performance of healthcare companies will remain robust over the long run due to favourable supply-demand dynamics, an ageing demographic profile, the rising per capita income, increasing penetration of medical insurance, rising healthcare awareness and double-digit growth in medical tourism (excluding the period of impact of COVID-19)", he added.

The private sector space is dominated by smaller doctor-run facilities, in terms of the number of facilities as well as the number of beds, Banga said adding that these marginal players with limited financial flexibility will be hit the hardest.

In the face of the sharp drop in revenues and high fixed costs inherent in the operating structure, the smaller facilities may find it challenging to make ends meet as the extra cost of the personal protective equipment has also added to the financial woes, he added.

As for the recovery from the current levels, the same is expected to be gradual as it is likely to take a couple of quarters before the footfall and occupancy reverts to the pre-COVID levels, he said.

"The virus outbreak has substantially affected the revenues, profitability and cash flows of the hospital sector and the same is likely to lead to a sharp drop in debt protection indicators in Q1 of FY2021," Banga said.