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Rating agency ICRA maintains its Stable outlook on the Indian hospital industry, supported by expectations of healthy revenue growth and strong margins for ICRA’s sample set, led by the rising incidence of non-communicable lifestyle diseases, growing per capita spend on healthcare and awareness levels, increasing penetration of health insurance and higher medical tourism volumes.

ICRA expects the aggregate occupancy for its hospital industry’s sample set to remain strong at 63-65% in FY2024 (65.1% in FY2023), backed by sustained healthy demand for healthcare services and continued market share gains for organized players. The average revenue per occupied bed (ARPOB) is expected to witness moderate growth of 5-7% in FY2024 (after witnessing an expansion of 10% in FY2023), given the high base of the previous year. Improving the specialty mix, better pay or mix (with a focus on cash and insurance patients), and annual price revisions by companies to offset cost inflation will support the ARPOB growth for the sample set. Overall, ICRA estimates revenue growth in FY2024 at 8-10%. Improving operating leverage coupled with continued cost optimization and digitization measures are expected to support a healthy OPM of around 22-23% in FY2024.

According to the report, private equity investments have also witnessed a healthy ramp-up in the Indian hospital industry, with deals worth over Rs 27,000 crore in the last two years. The in-patient footfalls for ICRA’s sample set improved sequentially during every quarter of FY2023 (except Q3 FY2023, due to the deferral of elective surgeries by patients during the festive season), mainly aided by the strong revival in medical tourism, coupled with changing patient preferences towards large hospitals on the back of increasing insurance coverage. The average length of stay (ALOS) in FY2023 stood at 3.6 days and is expected to remain low, backed by faster throughput of patients, which is also supported by technological advancements.