CRISIL SME tracker: Hospitals to grow in single digits through FY26

The revenue of small and medium (SME) hospitals — with annual revenue of less than Rs 250 crore — is expected grow a sedate 3-5 per cent year-on-year and 5-8 per cent in financial year 2025 and 2026, respectively. 

The key reason is patients continuing to favour large hospital chains on the back of pan-India insurance penetration increasing to 38-40 per cent from 23 per cent in FY15 (according to CRISIL MI&A Research). 

The segment’s operating margin is projected to contract 50-80 bps Y-o-Y 14-15 per cent in FY25, owing to rising employee costs and medicine expenses, and price caps on treatments under Ayushman Bharat. But in FY26, margins are expected to recover 50-100 bps, supported by higher average revenue per occupied bed and bed occupancy levels. 

To improve occupancy levels, SME hospitals are getting themselves empanelled under the Pradhan Mantri Jan Arogya Yojana (PMJAY), the government’s umbrella health assurance scheme, which provides coverage of Rs 5 lakh per family, thereby enhancing access to treatment for economically disadvantaged groups. 

PMJAY, launched in September 2018 and operational in 33 states and Union Territories as of December, has over 30,900 empanelled hospitals, 45 per cent of which are private. Nearly 80 per cent of these hospitals have a capacity of up to 50 beds and are primarily in Tier-II and —III cities. The scheme’s uptake and benefits can also be gauged from the fact that, since April, the number of Ayushman Bharat cards issued has increased 58.5 million, to 362.5 million, and the number of treatments availed under the scheme has risen 3.6 million to 68.6 million, with total claims amounting to Rs 90,204 crore in December 2024. 

Apart from receiving a boost from PMJAY, SME hospitals are shifting their focus towards specialised or niche care. 

Another factor that is likely to increase hospital visits is India’s rising elderly population — those aged above 60 years,  which is projected to grow at 3 per cent CAGR between 2011 and 2036 to 230 million, according to the National Health Profile 2023. This demographic tends to require more frequent and prolonged healthcare services. Also, lifestyle-related diseases have grown from 2010 to 2020, as per the World Health Organization’s Global Burden of Diseases Study. 

Hence, the long-term fundamentals of SME hospitals are intact.