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India saw a remarkable 33% year-on-year rise in medical tourism in 2023, and it is anticipated to exceed the pre-pandemic visitor numbers of 700,000 from 2019 by the end of 2024, according to credit rating agency ICRA. This surge is largely due to the central government’s initiative to offer e-medical visa facilities to citizens of 167 countries, a move expected to significantly enhance the influx of medical tourists.
India’s rise in medical tourism is driven by its affordable treatment costs, high-quality medical facilities, and relatively short waiting times for procedures. This trend is projected to continue, painting a positive outlook for the Indian hospital industry, according to ICRA.
ICRA forecasts that the overall occupancy rate for its sample set of hospital companies will stabilize at 61-63% in FY25, slightly lower than the 64.7% in FY24. This stability is attributed to the sustained demand for healthcare services and the growing market share of organized players.
The average revenue per occupied bed (ARPOB) is anticipated to increase by 4-6% in FY25, following an 11% rise in FY24. This growth is due to an enhanced specialty mix, a more favorable payor mix focusing on cash and insurance patients, and annual price adjustments to address cost inflation.
ICRA projects a revenue growth of 12-14% for its sampled companies in FY25. This growth is expected to be driven by enhanced operating leverage, cost optimization, and digitization efforts, which will help maintain an operating profit margin (OPM) of around 22-23%, slightly down from 23.1% in FY24. Despite the need for additional debt to support substantial bed capacity expansions in FY25 and FY26, ICRA has maintained a stable outlook for the Indian hospital industry.
The industry’s growth prospects are bolstered by the rising incidence of non-communicable lifestyle diseases, increased per capita healthcare spending, expanded health insurance coverage, and growing volumes of medical tourism.
The steady in-patient footfalls observed in FY24 were bolstered by a resurgence in medical tourism and a growing preference for larger hospitals benefiting from increased insurance coverage. This trend indicates a robust recovery in the healthcare sector, driven by both domestic and international patients seeking quality medical care.
Technological advancements have played a crucial role in maintaining the average length of stay (ALOS) at 3.4 days. These innovations have enabled quicker diagnoses and more efficient treatments, resulting in faster patient turnover and improved bed availability for new admissions. This efficiency is essential for managing patient flow and maximizing hospital resources.
The combination of steady in-patient numbers and technological progress underscores the ongoing evolution of the Indian healthcare industry. As hospitals continue to adopt cutting-edge technologies and expand their capabilities, they are better positioned to meet the growing demand for medical services while maintaining high standards of care and operational efficiency.
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