COVID-19 pandemic impact: Pushing mid- and small-sized hospitals into existential crisis

Dr Shuchin Bajaj, Director and Founder, Ujala Cygnus Healthcare Services, explains how a gloomier picture awaits the future of the healthcare industry

We are standing amidst the myth that the cash registers of hospitals are ringing with business. However, it’s actually the reverse, and the industry is as impacted as anyone, and even more. The impact on revenues started from 15^th March and the trend in June appears to be similar as occupancy has reduced by 50 per cent. The gap between the revenue and cost has widened so much that it will take a good amount of time to fill it and also need government interventions.

Around 60 per cent of the hospitals in the country, 30 per cent of beds in hospitals and 80 per cent of doctors are in private healthcare. Therefore, the government should now seriously look and support the private healthcare financially as it is one of the top five sectors employing people in the country. The Government should provide the priority sector status and allow banks to lend to this sector at lower rate of interest. Most of these hospital’s financial resources are allocated to ensure full preparedness as per the protocols released by the government.

Let the cash conservation take the centre stage

During such unprecedented times, the cash conservation in the mid- and small-sized hospitals is the most appropriate thing to focus on as our doctors, nurses and all frontline hospital staff have been working hard; and we continue to support them by providing them with quality personal protective equipment (PPE) and monetary aid with the support of our investors and board. Currently, we have the liquidity to manage the situation and we are hoping it will start improving from this month onwards as more relaxations have been imposed by the government in lockdown 5.0. We have also put on hold non-essential spends to preserve cash as well.

Hospital earnings have been battered since the COVID-19 pandemic began picking up pace in India. On 22^nd March, an advisory from the government urged private hospitals to forego all non-emergency procedures and shut down Out Patient Departments (OPDs). Instead, they asked to focus for a deluge of COVID-19 cases, even as government hospitals with 500-plus beds in every state were readied as primary centres for admitting COVID-19 patients. Still, in private hospitals, the inflow of patients did not materialise. As a result, private hospitals are mostly vacant. Inpatient occupancy ratios have dropped by as much 80 per cent. With a nationwide lockdown currently in place, outpatient consultations are also practically non-existent. Even the absence of medical tourism has made the situation grimmer.

Revenue falling like never before

According to the Infection Control Risk Assessment (ICRA), the revenues of the entities in healthcare sector are about to fall by 15-20 per cent in FY2021, following the spread of the COVID-19 pandemic. The monthly revenue run rate is expected to reach the pre-COVID-19 levels in H2 FY2021, subject to the return to normalcy and revival of medical tourism. However, the performance in H2 FY2021 will not be adequate to compensate for the drop in H1 FY2021, leading to a full-year drop of 15-20 per cent. Similarly, the occupancies that have currently dropped to 25-30 per cent are likely to inch up gradually as people stay cautious in visiting hospitals and the hospitals themselves remain selective while taking in more patients.

Future prospects

While we might feel that once the nationwide lockdown subsides, it could help improve the outlook of hospitals. However, the situation won’t be as simple as it looks now. The only silver lining in the post-lockdown scenario would be previously postponed non-emergency surgeries and procedures will pick up after the lockdown is lifted. Footfalls, however, are expected to stay low even after the lockdown lift as people will be wary of contracting the infection in a hospital. This, in turn, paves the way for more salary cuts and layoffs. Doctor-entrepreneurs, previously running their own hospitals successfully, may have to seek jobs with large chains. So, a gloomier picture awaits the future of the healthcare industry.