COVID-19 to impact hospital sector in the short term: ICRAApril 4, 2020
Credit rating agency ICRA Ratings has estimated the impact of COVID-19 on the hospital industry to be negative in the short-term. The impact on the sector is multifold. Due to visa cancellations and travel restrictions, the business coming from international patients is likely to dry up.
International patients account for 12-14% of the aggregate revenues of the companies in ICRA’s sample set, going as high as 25% of the revenues of certain super specialty facilities located in the metros and tier-I cities.
Revenue coming from international patients constitute high realisation and high margin business for hospitals.
As citizens become more cautious in visiting hospitals, footfalls in hospitals may drop, impacting OPD revenues, which may, in turn, affect admissions, as the OPD to IPD conversion rate for the industry is 10-12%.
The government of India has, on March 21, 2020, released guidelines for the hospitals to prepare for the coronavirus outbreak. Amongst other things, hospitals are required to reserve beds, create isolation wards, mobilise additional manpower and train staff, in addition to arranging for adequate high-oxygen masks and ventilators.
The infrastructure and the resources required to be created and/or diverted to meet the requirement of coronavirus patients could impact the profitability of the hospitals in the short-term as elective procedures are likely to be postponed.
The resource deployment/diversion is likely to impact near-term cash flows of the players. Nonetheless, in case the facilities see a jump in admissions on account of the virus attack, the volumes will receive a boost, although the ARPOB from the coronavirus treatment will be lower than the existing ARPOB of super-specialty hospitals, ICRA report said.