The onset of Covid-19 in India was always going to stretch the country’s healthcare infrastructure to the limit. What many didn’t see coming, though, was that it would turn the hospital business on its head altogether.

Within the first few months of the pandemic, the sector’s cash cows—large hospitals in India’s major cities—began to dry up. In better days, their secret sauce was simple. They attracted patients from other countries as well as from smaller cities and towns because of their superior technology, talent, and expertise in conducting advanced surgeries.

India’s first wave of Covid-19—from March 2020 to September 2020—put an end to that. International travel was halted, and even those within the country were wary of travelling to big cities, where the virus was more rampant. Elective surgeries were put on hold. While Covid patients occupied a large share of the beds available at these hospitals, the price of treatment was often capped by state governments.

Revenue plummeted, and with it, so did profits.

Bengaluru-headquartered Narayana Health—one of the five largest hospital chains in the country—experienced this first-hand. The hospital chain has 23 hospitals and heart centres, eight of which are situated in the country’s metros. Despite accounting for just over a third of the chain’s locations, they contribute over 80% of its revenue. Their EBITDA margins EBITDA margins EBITDA margin The EBITDA margin is a measure of a company's operating profit as a percentage of its revenue. The acronym EBITDA stands for earnings before interest, taxes, depreciation, and amortisation go as high as 25%, says Viren Shetty, the chain’s chief operating officer. Covid hobbled them, adversely affecting Narayana Health’s revenue and earnings in 2020, says Shetty.

There was a silver lining, though. The Ken spoke to senior executives at six hospital chains, doctor-entrepreneurs, and investors across the country. All of them agreed that while flagship hospitals suffered for the first 4-5 months of Covid’s onset, hospitals in smaller cities did not. These units have traditionally struggled to attract patients, medical talent, or investors at scale. When big hospitals were still reeling from the new, Covid-induced reality, however, these small hospitals bounced back quickly.

Patients who could no longer travel to major cities made do with local options. With Covid’s first wave being largely restricted to India’s metros as well, business went on as usual. According to Narayana Health’s Shetty, the chain’s 150-bed hospital Shimoga, Karnataka, saw earnings and revenue recover to pre-Covid levels as there were limited Covid cases in the city. 

Manipal Hospitals—the country’s second-largest hospital chain—saw a similar phenomenon at its non-metro hospitals, such as those in Udupi, Patiala, and Vijayawada. According to Dilip Jose, managing director and CEO of Manipal Hospitals, some small hospitals in West Bengal actually saw their revenues grow, as patients who would normally travel to South India for treatment used neighbouring healthcare facilities instead.


Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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