How India’s healthcare sector can deliver post-pandemic economic boost

The country's hospitals remain confident there will be sustained growth despite increasing number of coronavirus infections

A nurse at an isolation ward arranged for Covid-19 patients arriving from high-risk destinations at a hospital in Chennai. Healthcare sector spending in India is expected to more than double from 2017Show more

Hospital chains in India are pushing ahead with expansion plans in an attempt to bolster the country’s healthcare system, as waves of the Covid-19 pandemic continue to put it under extreme pressure.

The move comes as the sector is noting a strong recovery after revenue for a number of private hospitals plummeted during the peaks of the crisis as operations and other areas of treatment were forced to take a back seat.

“If anything, the pandemic has highlighted the critical need for high-quality accessible health care,” says Manju Aggarwal, the chief for medical services and chairwoman of nephrology at Artemis Hospitals in Gurgaon, a satellite city of Delhi.

“Government expenditure on health care in India remains significantly lower than other nations.”

India spends slightly more than 1 per cent of its gross domestic product on public health care, which is among the lowest such budgets in the world. A deadly second wave of Covid-19 infections, which peaked last May, exposed the insufficiencies of the system, as overwhelmed hospitals ran out of beds, oxygen supplies and medicine.

“The biggest holdback for India’s healthcare sector is lack of infrastructure,” says Amol Naikawadi, joint managing director at Indus Health Plus, a preventive healthcare company.

“Also, lack of healthcare workers and poor quality of services are all systemic barriers to access.”

But the market opportunity is enormous. The hospital industry in India, which is dominated by the private sector, is projected to more than double to $132 billion this year from $61.8bn in 2017, due to a growing middle class, the increasing burden of lifestyle diseases, such as diabetes, and an expanding health insurance coverage, the India Brand Equity Foundation says.

Spending for the overall healthcare sector in India is expected to more than double over the same period to $372bn.

Medica Group of Hospitals, a chain based in the east of the country, has invested almost 1bn rupees ($13.4m) during the pandemic as it “beefed up” its facilities, says chairman Dr Alok Roy. It also plans to open a new cancer hospital in the city of Kolkata this year.

The group wants to ready itself amid a rebound in the sector after it “suffered immense loss during the ongoing pandemic”, he says.

“When the first Covid wave hit the country, immediately we experienced a drop in the number of both elective and emergency cases,” says Dr Roy, who is also chairman of industry group Ficci’s health services committee.

“The most immediate drops have been for those paying cash and insurance patients, which often are the most discerning lot and provide the majority of liquidity and revenue for hospitals.”

Although Covid-19 brought an influx of patients into hospitals, some of these fees were subject to government caps.

“The Covid-19 pandemic has adversely impacted the healthcare delivery industry, resulting in decreased revenue and increased costs,” a report by consultancy PwC in December said.

“Increased expenditures on personal protective equipment (PPE) and adherence to infection protocols have increased the overall cost of care,” it said.

But in the current financial year to the end of March, “hospital revenue has recovered well”, says Sumit Goel, managing partner and head of healthcare practice at consulting firm Praxis Global Alliance.

He expects the year to end at levels higher than pre-pandemic owing to factors including “pent-up demand for elective surgeries and resumption in travel to seek medical treatments”.

“The sector is poised for phenomenal growth,” he says.

Amid a rebound in revenue, Max Healthcare, India’s second-largest chain of hospitals, said it will invest $450m over the next four years to boost capacity.

Abhay Soi, the company’s chairman and managing director, told Bloomberg TV that the company is going into “a huge asset creation cycle in two to three years”.

“We are looking at doubling our capacity, we are fortunate to have land banks in our network”, he said.

Max Healthcare’s consolidated net profits increased to 1.44bn rupees in the quarter ended September 2021, compared to 160m rupees in same quarter in 2020. The company said it was due to a pick up in the number of operations and footfall at its outpatient department.

However, the group’s medical tourism business was at a third of its pre-Covid levels, with travel affected by the continuing pandemic.

That segment is likely to be hampered for now by the rapid spread of the Omicron variant globally and within the country, with India recording its highest numbers of daily coronavirus infections in eight months in recent days. On Sunday, the country’s Health Ministry reported 333,533 new cases in the 24-hour period, with hospitalisations relatively low so far during this current wave.

Hospitals remain confident there will be sustained growth.

“Overall, the outlook for private hospital is positive, both in near term as well as long term,” says Dr Dilip Kamat, senior medical administrator at Amrita Hospital in Kochi in the southern Indian state of Kerala.

The company is expanding, with a 2,000-bed hospital under construction in Faridabad in the Delhi region.

“In near term, there is a pent-up demand of patients who have not been able to access the hospitals. Surgeries have been delayed by patients due to fear of contracting Covid-19 in the hospitals,” Dr Kamat says.

There is also scope for a surge in business when international patients return. “Medical tourism, which had come to a standstill due to the travel restrictions across borders, will pick up as the vaccination rates increase and cases recede”, he says, noting an opportunity for hospitals to tap their home markets, too.

“The real opportunity lies in meeting the unmet healthcare demands in the underserved India and that is going to be the real game-changer.”

While many areas of health care have taken a hit, one segment that has benefited from the pandemic is digital solutions, including telemedicine, with more doctor appointments moving online and medical staff overseeing treatment remotely. As they grow, hospitals will focus on digital playing a bigger role, even beyond the pandemic.

“Despite the decline, the private sector soon realised the need and adopted technologies to facilitate the healthcare space with equipment and consultation. Services like telemedicine will keep growing,” says Mr Naikawadi.

“In the past year, investors were interested in the sector, which includes trends like technologies to improve healthcare sector.”

The crisis has also prompted more people to obtain health insurance, which will ultimately benefit hospitals.

“Due to the relatively higher cost of treatment in the private sector and the medical inflation, awareness about health insurance has increased,” says Dr Kamat. “This will act as a driver to the further development of the private healthcare industry.”

The healthcare sector, however, is in need of more support from the government to help with its growth as it aims to cater to an expected rise in demand for treatments, industry sources say.

Private health care “needs fiscal incentives" to boost revenue, says Dr Aggarwal.

“Accordingly, the government’s upcoming budgets should provide adequate incentives for private hospitals to operate and expand their facilities and networks, both physically and digitally”.

With India’s government set to deliver its budget on February 1, the healthcare industry is hopeful of measures to help the sector.

“A specially designed fiscal stimulus can be funnelled into public health and remove policy bottlenecks so that the sector becomes the engine of GDP growth,” says Dr Roy. The private sector and the government should work hand-in-hand in setting up hospitals, he says.

“Subsidised loans, earmarked land, single-window approvals and tax holidays can be used for making medical devices and drugs and setting up hospitals,” Dr Roy says.

With the right support, he believes that the sector can deliver healthy returns for the country’s economy as it recovers from the pandemic.