Big Hospitals Bleeding

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Not All is Well

Divya Rajgopal did a story in Economic Times in Aug 2018 which was titled `Not all is well with India's Hospital Chains' where she mentioned that almost all the hospital chains have been going in the downward spiral since 2017. What has caused this. The healthcare in India was primarily based on cash payments whether it was white or black did not matter. The patients who would have to spend a fortune on quality treatment out of their own pocket were happy that none of this expense was required to be reported anywhere and therefore any colour of the money could be used in times of emergency. All of this changed post demonetization. Suddenly the cash went out of the system and the big hospitals were severely hit.

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Negative Media

Healthcare has always been at the receiving end of the media where the slightest of the mishap is projected as negligence on the part of the doctors and the hospital. Any death at the hospital is made a big issue and the relatives who are now influenced with this kind of campaign are ready to make ruckus at the hospital at the drop of a hat. An impression has been created that the private hospitals are minting money which is absolutely rubbish as none of the hospitals in the country rank anywhere close to the top companies by market capitalization. The prices in the healthcare sector have virtually remained stagnant over the last 20 years while the input costs have risen tremendously.

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Rising Costs

An MRI test would cost Rs. 5000 about 25 years back which remains the same even today while the equipment on which this test is done now costs around 4.5 crores as compared to 2.5 crores at that time. A Radiologist whose salary was about 1 lac per month at that time now charges around 3 lacs as salary. Everything has become expensive but the capping on the hospital charges is making sure that healthcare bleeds to death in the country. New investment in healthcare has virtually come to a standstill and most of the promoters of the top hospital chains like Medanta, Fortis, Max, Manipal are in the process of diluting their stake and getting out of the business.

Challenges and Solutions

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Doctors Shortage

While the hospitals are bleeding, the doctors are not. In the last 20 years the number of MBBS seats have remained stagnant at around 50-60 thousand per year while the number of MD/MS seats are close to 20 thousand. India needs atleast 1.5 lacs MBBS students every year and atleast 50 thousand post graduate doctors. The salaries of the doctors over the last 15 years have almost doubled while the prices of the treatments have remained stagnant. This is another drain on the hospital's profitability. On the other hand the high cost of becoming a doctor which is close to a crore of rupees at the private medical colleges is making it less appealing for the students to study medicine as a career.

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Solution

The healthcare facilities need to make an association which will decide on the pricing mechanisms. There should be an annual increase of 7-10 % in the treatment prices on an annual basis to adjust for the inflation and the increasing input costs in terms of manpower. The insurance companies need to adjust their health premiums to take care of the annual increase in prices rather than freezing their packages. If the government wants to see private investment in healthcare then the prices in the government schemes need to be made realistic. Quality treatment requires heavy capital investment and equally heavy expenses in terms of manpower and facility management which will not be possible if the business remains unprofitable.

Big Hospitals are Bleeding, Profits dipping in Indian Big Hospitals

Patient's Interest

Till the mid 80's only a select few were able to get heart surgery done as they could afford to fly to US and get the treatment done. Today Heart Bypass Surgery is available for around 2-2.5 lacs in India while the same treatment would cost the patient more than 1 crore in the US. This has become possible because of the investment coming into private healthcare. Despite this the noise from the government and the patient's has been about Indian healthcare being very expensive. Patient's from all over the world are coming to India due to the high quality and low cost of treatment. If the mindsets do not change then Indian hospitals might have to depend only on the International Patients and Indian patients might have to look at the dilapidated government hospitals.

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